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Introduction Since the enactment of the individual income tax in 1913, the appropriate taxation of capital gains income has been a perennial topic of debate in Congress. Every session, numerous bills are introduced that would change the way capital gains income is taxed. Congress has also shown a continuing interest in the tax treatment of capital losses. With the financial turmoil and the volatile stock market, many have proposed increasing the limit on capital losses that can be deducted against ordinary income (the loss limit). Some proposals would increase the loss limit to $10,000 or to $15,000 from its current $3,000. A limit on the deductibility of capital losses against ordinary income has long been imposed, in part because gains and losses are taxed or deducted only when realized. An individual who is actually earning money on his portfolio can achieve tax benefits by realizing losses and not gains (and can hold assets with gains until death when no tax will ever be paid). The loss limit prevents this selective realization of losses from being a significant problem. The problem of losses is further exacerbated by the current tax system, where the treatment of capital gains and losses is asymmetrical. Long-term gains are taxed at a maximum rate of 15%. Long-term losses are deductible without limit against short-term capital gains and net long-term losses are deductible against $3,000 of ordinary income. Both short-term capital gains and ordinary income can be taxed at rates of up to 35%. This differential allows taxpayers to time their gains and losses so as to minimize income taxes. (For example, by realizing and deducting losses in one tax year at 35% while waiting until the next tax year to realize and pay taxes on gains at 15%). Increasing the net capital loss deduction would increase the rewards of gaming the system. The empirical evidence indicates that capital gains income is heavily concentrated in the upper income ranges. It is probable that large capital losses are also concentrated in the same income ranges. Taxpayers in the middle income ranges tend to hold capital gains producing assets as part of tax favored retirement savings plans. The assets in these plans are not affected by the net loss restrictions. As a consequence, the benefits of increasing the net loss deduction would tend to accrue to taxpayers in the upper income ranges. It is also unclear whether increasing the net loss deduction would stimulate the economy. Economic analysis suggests that measures to stimulate the economy should focus on spending or on tax cuts likely to be spent, that will directly increase aggregate demand. An expanded deduction for capital losses has a tenuous connection to expanded spending; thus, presumably, the argument is that such a tax benefit will benefit the stock market. However, it is not at all certain that an increase in loss deduction would increase the stock market; it might increase sales of poorly performing stocks and depress these markets further. This report provides an overview of these issues related to the tax treatment of capital losses. It explains the current income tax treatment of losses, describes the historical treatment of losses, provides examples of the tax gaming opportunities associated with the net loss deduction, examines the distributional issues, and discusses the possible stimulative effects of an increase in the net loss deduction. Current Income Tax Law Under current income tax law, a capital gain or loss is the result of a sale or exchange of a capital asset (such as corporate stock or real estate). If the asset is sold for a higher price than its acquisition price, then the sale produces a capital gain. If the asset is sold for a lower price than its acquisition price, then the sale produces a capital loss. Capital assets held longer than 12 months are considered long-term assets while assets held 12 months or less are considered short-term assets. Capital gains on short-term assets are taxed at regular income tax rates. Gains on long-term assets sold or exchanged on or after May 6, 2003, and before January 1, 2013, are taxed at a maximum tax rate of 15%. For these assets, the maximum long-term capital gains tax rate is 0% for individuals in the 10% and15% regular marginal income tax rate brackets. Losses on the sales of capital assets are fully deductible against the gains from the sales of capital assets. (Losses on the sale of a principal residence are not deductible and losses on business assets are treated as ordinary losses and deductible against business income.) However, when losses exceed gains, there is a $3,000 annual limit on the amount of capital losses that may be deducted against other types of income. Determining the amount of capital losses under the federal individual income tax involves a multi-step process. First, short-term capital losses (on assets held less than 12 months) are deducted from short-term capital gains. Second, long-term capital losses (on assets held for more than 12 months) are deducted from long-term capital gains. Next, net short-term gains or losses are combined with net long-term gains or losses. If the combination of short-term and long-term gains and losses produces a net loss, then that net loss is deductible against other types of income up to a limit of $3,000. Net losses in excess of this $3,000 limit may be carried forward indefinitely and deducted in future years, again subject to the $3,000 annual limit. Historical Treatment of Capital Losses Historically, Congress has repeatedly grappled with the problem of how to tax capital gains and losses. Ideally, a tax consistent with a theoretically correct measure of income would be assessed on real (inflation-adjusted) income when that income accrues to the taxpayer. Conversely, real losses should be deducted as they accrue to the taxpayer. However, putting theory into practice has been a difficult exercise. Since 1913, there has been considerable legislative change in the tax treatment of capital gains income and loss. To provide perspective for the current debate, a brief overview of the major legislative changes affecting capital losses follows. 1913 to World War II Between 1913 and 1916, capital losses were deductible only if the losses were associated with a taxpayer's trade or business. Between 1916 and 1918, capital losses were deductible up to the amount of any capital gains, regardless of whether the gains or losses were associated with a taxpayer's trade or business. From 1918 to 1921, capital losses in excess of capital gains were deductible against ordinary income. The Revenue Act of 1921 significantly changed the tax treatment of capital gains and losses. Assets were divided into short and long-term assets. Short-term gains were taxed at regular income tax rates and excess short-term losses were deductible against ordinary income. Long-term gains were eligible for tax at a flat rate of 12.5%. Net excess long-term losses were deductible against other types of income at ordinary income tax rates which, including surtax rates, went as high as 56%. This system created an asymmetrical treatment of long-term gains and losses. Excess long-term losses could be deducted at much higher tax rates than the rates applied to long-term gains. This asymmetry was rectified by the Revenue Act of 1924, which instituted a tax credit of 12.5% for net long-term losses. This approach remained in effect, with only minor modifications, between 1924 and 1938. The Revenue Act of 1938, however, introduced changes in the tax treatment of gains and losses from the sale of capital assets. Gains and losses were classified as short-term if the capital asset had been held 18 months or less and long-term if the asset had been held for longer than 18 months. Short-term losses were deductible up to the amount of short-term gains. Short-term losses in excess of short-term gains could be carried forward for one year and used as an offset to short-term gains in that succeeding year. The carryover could not exceed net income in the taxable year the loss was incurred. Net short-term gains were included in taxable income and taxed at regular tax rates. For assets held more than 18 months but less than 24 months, 66.66% of the gain or loss was recognized. For assets held longer than 24 months, 50% of the gain from the sale of that asset was recognized and included in taxable income. Net recognized long-term losses could be deducted against other forms of income without limit. This treatment, however, introduced a new inconsistency into the tax system because while only 50% of any long-term capital gain was included in the tax base, 100% of any net long-term loss was deductible from the tax base. World War II through the 1950s The next significant change in the tax treatment of capital losses occurred during World War II. The Revenue Act of 1942 changed the tax treatment of capital losses in two significant ways. First, it consolidated the tax treatment of short- and long-term losses. Second, it established a $1,000 limit on the amount of ordinary income that could be offset by combined short- and long-term net capital loss. Finally, it created a five-year carry forward for net-capital losses that could be used to offset capital gains and up to $1,000 of ordinary income in succeeding years. Once again, this change introduced an inconsistency into the tax treatment of gains and losses because it allowed taxpayers to use $1 in net long-term losses to offset $1 in net short-term gains. Since only 50% of a net long-term gain was included in taxable income, including 100% of a net long-term loss created an asymmetry. For instance, if a taxpayer had a net long-term loss of $100, then it could be used to offset $100 of net short-term gains. Symmetrical treatment of long-term gains and losses, however, would allow only 50% of a net long-term loss to be deducted against net short-term gains ($100 of net long-term loss could only offset $50 of net short-term gain). This asymmetry was corrected in the Revenue Act of 1951 which eliminated the double counting of net long-term losses. The 1960s through the 1970s The Revenue Act of 1964 repealed the five-year loss carryover for capital losses and replaced it with a unlimited loss carryover. Net losses, however, were still deductible against only $1,000 of ordinary income in any given year. The Tax Reform Act of 1969 also removed a dichotomy in the tax treatment of long-term gains and losses that had existed since 1938 by imposing a 50% limitation on the amount of net long-term losses that could be used to offset ordinary income. Under prior law, even though only 50% of net long-term gains were subject to tax, net long-term losses could be deducted in full and used to offset up to $1,000 of ordinary income. The 1969 Act repealed this provision and established a new 50% limit on the deductibility of net long-term losses, subject to the same $1,000 limit on ordinary income (hence, it took $2 of long-term loss to offset $1 of ordinary income). In addition, the law specified that the nondeductible portion of net long-term losses could not be carried forward to be deducted in succeeding years. The Tax Reform Act of 1976 increased the capital loss offset against ordinary income. Under prior law, net capital losses could offset up to $1,000 of ordinary income. The 1976 Act increased the capital loss offset limit to $2,000 in 1977 and $3,000 for tax years starting after 1977. The Revenue Act of 1978 reduced the tax rate on long-term capital gains income by increasing the exclusion from tax for long-term capital gains from 50% to 60%. The 1978 Act, however, did not reduce the limit on the deductibility of net long-term losses. Hence, while only 40% of long-term gains were included in the tax base, 50% of losses were excluded from the tax base. The Tax Reform Act of 1986 to the Present The Tax Reform Act of 1986 repealed the net capital gain deduction for individuals. Both short-term and long-term capital gains income were included in taxable income and taxed in full at regular income tax rates. Regular statutory income rates under the act were reduced from a maximum of 50% to 33% (28% statutory rate plus a 5% surcharge). The tax treatment of capital losses was changed by eliminating the 50% limitation on deductibility of net long-term losses. Losses could be netted against gains and any excess losses, whether short or long term, could be deducted in full against up to $3,000 of ordinary income. Net losses in excess of this amount could be carried forward indefinitely. Gradually changes were made that caused capital gains to be tax favored again. When tax rates were revised in 1990 to eliminate the "bubble" arising from the surcharge, a maximum rate of 28% was set for capital gains, slightly lower than the top rate of 31%. When tax rates were increased in 1993 for very high income individuals (adding a 36% and 39.6% rate), this 28% top tax rate on long-term gains was maintained, causing a wider gap between taxation of ordinary income and capital gains income. The growing asymmetry between taxes on capital gains and losses was not addressed. The Taxpayer Relief Act of 1997 was the latest major change in the tax treatment of capital gains and losses. It established the current law treatment of gains by lowering the maximum tax rate on long-term capital gains income to 20% (and creating a 10% maximum capital gains tax rate for individuals in the 15% tax bracket). The act did not change the tax treatment of capital losses. The Jobs and Growth Tax Relief Reconciliation Act of 2003 reduced the 10% and 20% long-term capital gains tax rates to 5% and 15% for tax years before 2009. The reduced rates were extended through to the end of tax year 2010 by the Tax Increase Preventive and Reconciliation Act of 2005. Neither act changed the treatment of capital losses. Analysis of the Treatment of Capital Losses Under Current Law The tax treatment of capital gains and losses has changed repeatedly over the years. Some of the legislative changes that occurred in the past were attempts to reestablish symmetry between the tax treatment of capital gains and capital losses. Under current law, asymmetries between the tax treatment of capital gains and losses remain. Currently, net long-term losses are deductible against net short-term gains without limit. This rule introduces inconsistencies because net long-term gains are taxed at a maximum rate of 15% while net long-term losses can be deducted against short-term gains which can be taxed at rates up to 35%. Additionally, net long-term losses can be deducted against up to $3,000 of ordinary income even though the maximum rate on ordinary income is 35% while the maximum rate on long-term gains is 15%. The recent downturn in the stock market has prompted some analysts to suggest increasing the net capital loss limitation as a means of softening the downturn for some investors. However, simply increasing the loss limitation would tend to increase the dichotomy between the tax treatment of gains and losses. Given these suggestions, a review of the rationale behind the net loss limitation may prove valuable. The loss limitation was originally enacted because taxpayers have control over the timing of the realization of their capital gains and losses. They can elect to sell assets with losses and hold assets with gains, thus minimizing their capital income tax liabilities. When capital gains income is taxed more lightly than other types of income, allowing capital losses to offset other income without limit increases a taxpayer's ability to minimize income taxes by altering the timing of the realization of gains and losses. For example, consider the case of a taxpayer who, on the last day of a tax year, wishes to sell two assets. The sale of the first asset would produce a long-term gain of $20,000 while the sale of the second asset would produce a long-term loss of $20,000. If the taxpayer sold both assets in the same tax year, then the two sales would net to zero and there would be no taxes owed on the transactions. However, if there were no loss limitation, then the taxpayer could significantly reduce his taxes by realizing the gain this tax year and postponing the realization of the loss until the next tax year (or vice versa). Realization of the $20,000 long-term gain in the current tax year would cost the taxpayer $3,000 in federal income taxes (15% maximum long-term capital gains tax rate times the $20,000 capital gain). By waiting and taking the loss the next tax year, the taxpayer could reduce his federal income taxes by $7,000 (35% maximum tax rate on ordinary income times the $20,000 long-term loss). Hence, with no capital loss limitation, the taxpayer could reduce his net federal income taxes by $4,000 simply by changing the timing of the realizations of gains and losses. It should be noted that current law allows for an unlimited carry forward of excess losses. Hence, taxpayers do not forfeit the full value of excess losses because they can deduct those losses in future years. The actual cost to the taxpayer of forgoing the full loss in the current year is the interest that would have been earned on the additional tax reduction that would have been realized had there been no excess loss limitation. For example, consider a scenario where a taxpayer has a net long-term capital loss of $20,000. If there were no loss limitation, the taxpayer could deduct the entire loss against other income in the first year and, assuming the highest marginal tax rate of 35%, reduce his income tax liability by $7,000 ($20,000 times 0.35). Now consider the situation with a $3,000 annual loss limitation. If the taxpayer had no net capital gains in any subsequent year, then it would take the taxpayer seven years to deduct the full $20,000 capital loss ($3,000 loss deduction for six years and a $2,000 loss deduction in the seventh year). Once again assuming the taxpayer faces the highest marginal tax rate of 35% (and that the rate does not change over the seven year period) the taxpayer will reduce his taxes over the period by $7,000. Since money has a time value, however, the $7,000 in tax savings taken over seven years is not as valuable as the $7,000 in tax savings taken in the first year when there was no loss limitation. If an interest rate of 5% is assumed, then the present value of the $7,000 in tax savings over seven years is $6,118. So under this worst case scenario, in present value terms, the annual capital loss limitation would reduce the tax savings in this example by approximately $882. It is also worth noting that if the tax rate on long-term gains and losses were symmetrical at 15%, then the full deduction of a $20,000 net long-term loss would reduce the taxpayer's income tax liability by only $3,000 ($20,000 loss times 15% tax rate). Hence, even with the annual loss limitation, taxpayers with net long-term capital losses receive more tax savings under the current system than if there were a symmetrical tax rate on long-term gains and losses. (In the preceding example where the $20,000 was deducted at regular income tax rates over seven years the present value of the tax savings was $6,118 versus a $3,000 tax savings if there were a 15% symmetrical tax rate on both capital gains and losses). In most cases, the current system, even without indexing the $3,000 loss for inflation, is more generous than the system that existed in 1978. Distributional Effects The empirical evidence establishes that capital gains are concentrated at the higher end of the income range. In 2006, the top 3% of taxpayers with over $200,000 in adjusted gross income earned 91% of schedule D capital gains. It has also long been recognized that these concentrations are somewhat overstated because large capital gains realizations tend to push individuals into higher brackets and an annual snapshot can overstate the concentration. One way to correct for this effect is to sort individuals by long-term average incomes which requires special tax tabulations. The most recent study to do so (using a somewhat different measure of income, but reporting by population share) indicated that the top 1% who earned over $200,000 from 1979-1988 received 57% of gains, and the top 3% who earned over $100,000 received 73% of the gains. By interpolation, we can see that about two-thirds of gains are received by the top 2% of the income distribution. The distortion relating to gains works in the opposite direction in the case of losses, understates the share of losses going to high income individuals, and may be much more serious. Thus, looking at losses by income class may not be very meaningful. For example, the top 3% accounted for about 30% of losses. However, there are significant losses in very low income classes that are almost certainly people whose incomes are normally high. For example, another 10% of losses are realized by individuals with no adjusted gross income. Since gains are normally much larger than losses, this distortion can be quite serious and calculations such as these probably do not tell us very much. A better calculation is the permanent capital gains share, which suggests, as noted above, that about two-thirds of gains are realized by individuals in the top 2% of the permanent income distribution, and a similar finding is probably appropriate for losses. There are other reasons to expect that lower and middle income taxpayers are unlikely to be much affected by the expansion of capital losses. First, relatively few low and middle income families directly hold stock. About 14% of families with income below $75,000 directly own corporate stock and about 35% of families with income between $75,000 and $100,000 directly own stock. Secondly, many of their assets are held (and are increasingly being held) in tax favored forms. In 2001, 29% of equities held by individuals were held in pensions (either private or state and local); moreover about of 8% of stock is held in individual retirement accounts. Assets held in these accounts are not affected by loss restrictions because in the case of traditional IRAs and pension plans the original contributions have already been deducted from income. Hence, any possible loss on the original investment has been pre-deducted from taxable income. In the case of Roth IRAs, since gains on investments are not subject to tax upon withdrawal, losses on investments should not be deducted from income. Another 7% are held in life insurance plans which are also not subject to tax. Altogether, these assets account for over 40% of equities and they are likely to be proportionally much more important for the middle class. In addition, moderate income taxpayers are more likely to hold equities in mutual funds that have mixed portfolios and typically do not report losses because they hold so many types of stocks. Only about 25% of distributions from mutual funds are reported on tax returns because the remainder of distributions occur in pension and retirement accounts. The major sources of realized capital losses for 1999 (the latest year for which this information is available) are shown in Table 1 . The largest source of losses is the sale of corporate stock, which accounts for 61% of losses reported in 1999. Other securities (for example, mutual fund shares and options) accounted for another 15%. In general, most of the capital losses are realized on assets that are predominantly owned by higher income taxpayers. Most taxpayers with incomes below $200,000 do not file a schedule D and thus have no capital losses (see Table 2 ). In contrast, over 90% of taxpayers with income over $1 million file a schedule D. Direct evidence from tax returns does suggest that only a small fraction of taxpayers experience a net capital loss (less than 7% in total). Excluding the "No Income" class, about 6% have any loss at all. Even among very high income taxpayers, less than 20% report a net capital loss on their schedule D. These shares would probably be even smaller for population arrayed according to lifetime income. Taxpayers with net capital losses can deduct up to $3,000 against ordinary income, but about 60% are subject to the loss limit and have to carryover the excess losses to subsequent years. Evidence indicates that of individuals who could not deduct their losses in full, two thirds were able to fully deduct losses within two years and more than 90% in six years. One study concluded that in 2003 more than half of the benefit of raising the exclusion to $6,000 would be received by tax filers with incomes over $100,000, who account for 11% of tax filers. Thus, the evidence suggests that raising the capital loss limit would benefit a relative small proportion of high income individuals. Economic Effects The primary objective of recent economic proposals is to stimulate the economy. Normally a tax benefit that favors individuals with high permanent incomes (as does a capital gains tax cut) is a relatively ineffective way to stimulate the economy because these individuals tend to have a higher propensity to save, and it is spending, not saving, that stimulates the economy. The most effective economic stimulus is one that most closely translates dollar for dollar into spending. Direct government spending on goods and services would tend to rank as the most effective, followed by transfers and tax cuts for lower income individuals. One argument that might be made for providing capital gains tax relief is that it would increase the value of the stock market and thus investor confidence. Indeed, such an argument has been made for a capital gains tax cut in the past. Such a link is weaker and more uncertain than a direct stimulus to the economy via spending increases or cuts in taxes aimed at lower income individuals. Indeed, it is not altogether certain that capital gains tax relief would increase stock market values—the evidence is mixed. Stock markets rise when increases in offers to buy exceed increases in offers to sell. Capital gains tax revisions may be more likely to increase sales than purchases in the short run through an unlocking effect, and this effect could be particularly pronounced in the case of an expanded capital loss deduction. Although these benefits may stimulate the stock market because they make stocks more attractive investments, they also create a short-term incentive to sell—and an incentive to sell the most depressed stocks. Thus, if the method of stimulating the economy is expected to work via an increase in stock prices, such a tax revision whose effect is expected via a boost in the stock market could easily depress stock prices further. Overall, it is a uncertain method of stimulating the economy. Policy Options Several reasons have been advanced to increase the net capital loss limit against ordinary income: as part of an economic stimulus plan, as a means of restoring confidence in the stock market, and to restore the value of the loss limitation to its 1978 level. An increase in the net capital loss limit may not be an effective device to stimulate aggregate demand. In the short run, an increase in the loss limitation could produce an incentive to sell stock, which could depress stock prices and erode confidence even further. Furthermore, the empirical evidence suggests that the tax benefits of an increase in the net capital loss limitation would be received by a relatively small number of higher income individuals. The restoration of the value of the loss limitation to its 1978 level is more complicated to address, but two important comments may be made. First, there is no way to determine that a particular time period had achieved the optimal net capital lost limitation, although historically, the loss limit has been quite small. Second, while correcting the $3,000 loss limit to reflect price changes since 1978 would increase its value to about $10,000 in 2010 dollars, net long-term capital losses are generally treated more preferentially than they were prior to 1978 because of the asymmetry between loss and gain, which was never addressed during recent tax changes. Restoration of historical treatment would also require an adjustment for asymmetry. This problem with asymmetry has been growing increasingly important through the tax changes of 1990, 1993, 1997, and 2003. Raising the limit on losses without addressing asymmetry will expand opportunities to game the system. Achieving full symmetry in the system requires that the tax rate differential between short and long-term gains and losses be accounted for during the netting process. The current rate differential is approximately two to one (35% maximum tax rate on ordinary income and short-term capital gains versus an 15% maximum tax rate on long-term capital gains). Given this rate differential, symmetry could be achieved in the netting process through the following steps: In the case of a net short-term gain and a net long-term loss, $2 of net long-term losses should be required to offset $1 of short-term gain. If a net loss position remains, $2 of long-term losses should be required to offset $1 of ordinary income up to the net loss limitation. Any remaining net loss would be carried forward. In the case of a net short-term loss and a net long-term loss the simplest way is to begin with short-term losses which can be used on a dollar for dollar basis to offset ordinary income. If short-term losses exceed the limit they would be carried forward along with all long-term losses. If net short-term losses are less than the loss limitation, then $2 of net long-term loss can be used to offset each $1 remaining in the net loss limitation. Any remaining net long-term loss would be carried forward. In the case of a net short-term loss and a net long-term gain each $1 of net short-term loss should offset $2 of net long-term gain. Any net loss remaining should offset ordinary income on a dollar for dollar basis up to the net loss limitation. Any remaining net loss would be carried forward. Although the netting principles outlined above may appear complicated, they are no more complicated to implement on tax forms than the current netting procedures. Another method for achieving symmetry would be to institute a tax credit of 15% (or whatever the maximum capital gain tax rate is) for capital losses. The tax credit could be capped and the cap could be indexed to inflation. This will benefit taxpayers in the 10% and 15% tax brackets because the maximum capital gains tax rate is 0% for these taxpayers (until 2013). But these taxpayers mostly do not report capital gains and losses. This is the basic approach taken between 1924 and 1938.

Several reasons have been advanced for increasing the net capital loss limit against ordinary income: as part of an economic stimulus plan, as a means of restoring confidence in the stock market, and to restore the value of the loss limitation to its 1978 level. Under current law, long-term and short-term losses are netted against their respective gains and then against each other, but if any net loss remains it can offset up to $3,000 of ordinary income each year. Capital loss limits are imposed because individuals who own stock directly decide when to realize gains and losses. The limit constrains individuals from reducing their taxes by realizing losses while holding assets with gains until death when taxes are avoided completely. Current treatment of gains and losses exhibits an asymmetry because long-term gains are taxed at lower rates, but net long-term losses can offset income taxed at full rates. Individuals can game the system and minimize taxes by selectively realizing gains and losses, and for that reason the historical development of capital gains rules contains numerous instances of tax revisions directed at addressing asymmetry. The current asymmetry has grown as successive tax changes introduced increasingly favorable treatment of gains. Expansion of the loss limit would increase "gaming" opportunities. In most cases, this asymmetry makes current treatment more generous than it was in the past, although the capital loss limit has not increased since 1978. Capital loss limit expansions, like capital gains tax benefits, would primarily favor higher income individuals who are more likely to hold stock. Most stock shares held by moderate income individuals are in retirement savings plans (such as pensions and individual retirement accounts) that are not affected by the loss limit. Statistics also suggest that only a tiny fraction of individuals in most income classes experience a loss and that the loss can usually be deducted relatively quickly. One reason for proposing an increase in the loss limit is to stimulate the economy, by increasing the value of the stock market and investor confidence. Economic theory, however, suggests that the most certain method of stimulus is to increase spending directly or cut taxes of those with the highest marginal propensity to consume, generally lower income individuals. Expanding the capital loss limit is an indirect method, and is uncertain as well. Increased capital loss limits could reduce stock market values in the short run by encouraging individuals to sell. Adjusting the limit to reflect inflation since 1978 would result in an increase in the dollar limit to about $10,000. However, most people are better off now than they would be if the $3,000 had been indexed for inflation if capital losses were excludable to the same extent as long-term capital gains were taxable. For higher income individuals, restoring symmetry would require using about $2 in long-term loss to offset each dollar of ordinary income. Fully symmetric treatment would also require the same adjustment when offsetting short-term gains with long-term losses. This report will be updated to reflect legislative developments.

Most Recent Legislative Action On March 21, 2013, Congress sent to the White House H.R. 933, the Consolidated and Continuing Appropriations Act, which the President signed into law (P.L. 113-6) on March 26, 2013. Division C of that legislation was a fully detailed DOD appropriations act for FY2013 that provided $597.1 billion for programs funded by that bill. Including funds provided for military construction in Division E of H.R. 933, the bill provided a total of $607.7 billion in discretionary budget authority for DOD. This is $323.8 million less than the Administration's request, but exceeds the funding cap set by the BCA and thus triggers a sequestration of up to $35.0 billion. The Administration had not allocated that reduction among specific DOD appropriations accounts as of May 15, 2013. Status of Legislation FY2013 Defense Budget Overview The Obama Administration's FY2013 budget request, submitted to Congress on February 13, 2012, included $646.97 billion for the so-called "national defense" function of the federal budget (budget function 050). This included funding for global operations of the Department of Defense (DOD), defense-related nuclear programs conducted by the Department of Energy (DOE), and other defense-related activities. For discretionary DOD budget authority, the request included $613.93 billion, of which $525.45 billion is for "base" defense budget costs—that is, day-to-day operations other than war costs—and the remaining $88.48 billion was for "Overseas Contingency Operations" (OCO)—that is, military operations in Afghanistan and elsewhere. The function 050 total also included discretionary budget authority of $17.98 billion for DOE defense-related programs (dealing with nuclear weapons and warship powerplants), $4.75 billion for FBI national security programs, and $2.42 billion for a number of smaller accounts, including selective service and civil defense ( Table 3 ). The Administration's proposed DOD budget called for the third consecutive annual decrease in total DOD funding (including OCO) since FY2010. Most of that decline reflected the decrease in OCO spending for operations in Iraq and Afghanistan. However, while the decline in war costs accounted for most of this reduction, the President's FY2013 request also would have reduced the base budget (in current dollars) for the first time since 1996. The base budget request was $5.2 billion less than was appropriated for the base budget in FY2012 and $45.3 billion less than the FY2013 request the Administration had projected in February 2011 ( Figure 1 ). That reduction from the previously planned FY2013 request—and additional planned reductions of more than $50 billion per year compared to DOD's February 2011 budget projections through FY2021—reflected the Administration's plan to reduce federal spending as required by the Budget Control Act (BCA) of 2011, enacted on August 2, 2011 ( P.L. 112-25 ). Compared with the long-range spending plan published by DOD in February 2011, the February 2012 plan reduced DOD base budgets by $259.4 billion from FY2012 through FY2017 ( Figure 2 ). For the 10-year period covered by the BCA (FY2012-FY2021), the Administration's revised spending plan reduced DOD budgets by a total of $486.9 billion. Further reductions in DOD base budgets over the next 10 years may be in store as a result of the BCA. In addition to the $900 billion worth of deficit reduction in FY2012-FY2021 (counting both defense and non-defense spending) that results from the BCA, the act also requires additional deficit reduction measures totaling $1.2 trillion through FY2021 (which would result in a total deficit reduction through FY2021 of $2.1 trillion). In FY2013, the BCA requires an across the board cut in budget authority (or "sequester") that would be levied against almost all discretionary spending. For the National Defense budget function (of which the DOD budget comprises more than 95%), some $59 billion—about 10%—would be cut from the Administration's budget request, with equal percentages cut from each program, project and activity. In subsequent years, the BCA sets lowered spending caps to achieve the required savings. Each year, to the extent that Congress appropriates more than the caps allow, the Administration would sequester funds through across-the-board cuts to ensure that the required savings are achieved. If the sequestration process and the lowered spending caps remain law, the Administration's February 2012 projection for defense budgets over the next 10 years would be cut by an additional $515 billion—about 9%. Base Budget Highlights The Obama Administration presented its FY2013 DOD budget plan both as an effort to address the long-term spending limits set by the BCA and as an opportunity to refocus U.S. defense planning as DOD winds down large-scale deployments of U.S. troops in Iraq and Afghanistan. The Administration preceded the announcement of its FY2013 budget request with the publication on January 5, 2012, of new "strategic guidance," which, it said, took account of both the new budgetary and strategic environments. New Strategic Guidance The January 2012 strategic guidance postulates that active-duty ground forces no longer will be sized to conduct large-scale, prolonged stability operations such as those in Iraq and Afghanistan, which required an Army and Marine Corps capable of maintaining a constantly rotating overseas deployment of upwards of 100,000 troops. Under this approach, U.S. forces will be shaped and sized to conduct a campaign to defeat a major aggression—a combined arms campaign involving air, sea, and land forces and including a large-scale ground operation—and, simultaneously, another campaign intended to block an attack in some other area by a second adversary. The January 2012 strategic guidance also calls for DOD to put a higher priority on deploying U.S. forces to the Pacific and around Asia while scaling back deployments in Europe. For example, the Administration planned to withdraw and disband two of the four Army brigade combat teams currently stationed in Germany while maintaining a rotating force of up to 2,500 Marines in northern Australia. It also planned to station littoral combat ships in Singapore and smaller patrol craft in Bahrain. Because of the distances from land bases to which U.S. forces have access, operations in the Asia-Pacific region would rely heavily on air and naval forces. Accordingly, many observers expect a shift of DOD resources toward naval and air forces at the expense of ground formations. Some question the Administration's claim of a "pivot" toward Asia, citing its plan to retire some older, long-range cargo planes and to cut a total of $13.1 billion from projected shipbuilding budgets for FY2013-FY2017. But the Administration cites its decisions to retain in service 11 aircraft carriers and to add other ships to its shipbuilding plan as proof of its refocused commitment on the Pacific region, where long operational distances are the rule. Force Structure, Readiness Pursuant to the Administration's January 2012 strategic guidance, DOD plans to eliminate or retire several major combat units and weapons systems by FY2017. Among these are At least 8 of the Army's 45 active-duty brigade combat teams; Six of the Marine Corps's 41 battalion landing teams; Seven cruisers from among the Navy's current fleet of 101 surface warships; Two of the Navy's 30 amphibious landing ships; Six of the 61 fighter and ground-attack squadrons in the Air Force, Air Force Reserve, and Air National Guard; 27 early-model C-5A cargo planes out of a total fleet of 302 long-range, wide-body C-5 and C-17 cargo jets; The entire fleet of C-27 mid-sized cargo planes, currently operated by the Air Force but desired by the Army to deliver supplies to troops in forward positions; and The entire fleet of "Block 30" Global Hawk surveillance drones, which DOD officials said had proven to be more expensive than the U-2 aircraft they had been slated to replace. On the other hand, the Administration says its plan would maintain the remaining force at a high level of readiness. Compared with the February 2011 plan, the Operation and Maintenance request for FY2013 was reduced by 3%, one-fifth as large as the 15% reduction imposed on the Procurement accounts ( Table 4 ). Military Personnel Issues The Administration plans to reduce the size of the active-duty force—slated to be 1.42 million at the end of FY2012—by 21,600 personnel in FY2013 and by a total of 102,400 by the end of FY2017. Consistent with the new policy of avoiding prolonged, large-scale peacekeeping operations, most of that multi-year reduction—92,000 out of the 102,400—would come from the Army and Marine Corps. In effect, this plan would remove from the force the 92,000 personnel that were added to the Army and Marine Corps beginning in 2007 to sustain deployments to Iraq and Afghanistan. However, in 2017—when the proposed reductions would be complete—each of those two services still would be larger than it had been before the terrorist attacks of September 11, 2001 ( Table 5 ). Pay Raise The FY2013 budget request included a 1.7% increase in service members' "basic pay," an amount based on the Labor Department's Employment Cost Index (ECI), which is a survey-based estimate of the rate at which private-sector pay has increased. After providing an equal increase in basic pay for FY2014, the Administration plan would provide basic pay raises less than the anticipated ECI increase in the following three years: 0.5% below ECI for FY2015, 1.0% below for FY2016, and 1.5% below for FY2017. The Administration maintained that budgetary limits require some reduction in the rate of increase of military compensation in order to avoid excessive cuts in either the size of the force or the pace of modernization. However, it promised that no service member would be subjected to either a pay freeze or a pay cut. Moreover, proposed reductions in the size of the annual military pay raise would not begin until FY2015, thus allowing service members and their families to plan for the change. Over the five-year period (FY2013-FY2017), the Administration projected that savings from its planned schedule of military compensation would total $16.5 billion. According to DOD officials, although military compensation accounts for about one-third of DOD's budget, the savings that would result from the proposed changes in compensation would account for less than 10% of the total that the Administration's budget would slice from the February 2011 DOD budget projection for FY2012-FY2021 ( Table 4 ). TRICARE Pharmacy Fees The Administration also proposed a variety of fee increases for the 9.65 million beneficiaries of TRICARE, DOD's medical insurance program for active-duty, reserve-component, and retired service members and their dependents and survivors. According to DOD, the overall cost of the Military Health Program, which totaled $19 billion in FY2001, had more than doubled to $48.7 billion in FY2013. The FY2013 request assumes $1.8 billion in savings as a result of the Administration's proposed fee increases, which are controversial and which Congress would have to approve in law. Many of the proposed fees and fee increases would apply only to working-age retirees and would be "tiered" according to the retiree's current income. The package also includes pharmacy co-pays intended to provide an incentive for TRICARE beneficiaries to use generic drugs and mail-order pharmacy service. Future changes in some of the propose fees and in the "catastrophic cap" per family would be indexed to the National Health Expenditures (NHE) index, a measure of escalation in medical costs calculated by the federal agency that manages Medicare. Modernization Compared with the FY2013 budget that DOD projected in February of 2011, the actual FY2013 request for procurement and R&D accounts was 12.5% lower. Proportionally, that reduction is more than twice as large as the reduction in the combined accounts for military personnel and operation and maintenance (down 4.7%). Measured in constant dollars, DOD's combined procurement and R&D budget in FY2010 was 60% higher than it had been in FY2001. Accordingly, some argue that DOD can afford to rein in its spending on acquisition while it lives off the capital stocks built up and modernized during the decade of budget increases that followed the terrorist attacks of 2001. But others contend that much of the procurement spending during that decade was for (1) items peculiarly relevant to the wars in Iraq and Afghanistan; (2) items needed to replace equipment destroyed in combat or worn out by the high tempo of operations in a region that is particularly stressful on machinery and electronics; or (3) modifications to existing planes, tanks, and ships. While modifications can improve the effectiveness of existing platforms, they cannot nullify in the long run the impact of age and design obsolescence. The Administration emphasizes that it is prioritizing among weapons programs in deciding where to make cuts in previously planned spending and that it is sustaining funding for high-priority programs, such as the development of a new, long-range bomber for which its plan budgets $292 million in FY2013 and more than $5 billion over the FY2014-FY2017 period. Compared with DOD's February 2011 plan for procurement and R&D funding, the program announced in February 2013 would save $24 billion in FY2013 and a total of $94 billion over FY2013-FY2017. Procurement of some items would be terminated outright, before the originally planned total number was acquired (e.g., the Army's new 5-ton trucks—designated FMTV—terminated for a total savings of $2.2 billion over five years, and a new Air Force weather satellite, terminated for a total savings of $2.3 billion). But DOD plans to achieve most of the savings in procurement from "restructuring" programs, that is, from slowing the timetable for moving from development into production or slowing the rate of production. The department justifies some of its proposed reductions on grounds of fact-of-life delays in specific programs. In other cases, it contends that it is an "acceptable risk" to forego (or delay) acquisition of a particular capability. Overseas Contingency Operations Highlights The Administration's $88.5 billion request for FY2013 war costs (OCO) amounts to $26.6 billion less than Congress appropriated for war costs in FY2012. This reduction reflects: the cessation of U.S. combat operations in Iraq by the end of the first quarter of FY2012; and the reduction of the number of U.S. troops in Afghanistan, by the end of FY2012, to 68,000 personnel, thus ending the "surge" into that country of 33,000 additional U.S. troops announced by President Obama on December 1, 2009. The OCO budget request assumed that 68,000 U.S. troops will remain in Afghanistan through the end of FY2013, although President Obama has said that, after the number had been drawn down to 68,000 by the summer of 2012, it would continue to decline "at a steady pace." On September 20, 2012, then-Defense Secretary Leon Panetta announced that the President's goal of reducing the number of U.S. troops in Afghanistan to 68,000 had been met. Bill-by-Bill Analysis FY2013 National Defense Authorization Act The compromise final version of the FY2013 NDAA, signed by the President on Jan. 2, 2013 ( P.L. 112-239 ), authorized $648.7 billion for DOD and defense-related nuclear activities of DOE, which amounts to $1.7 billion more than the administration requested. For DOD's base budget, the final bill would authorize $527.5 billion, practically splitting the difference between the $528.6 billion that would have been authorized by the House-passed version of the bill, and the $525.8 billion that would have been authorized by the Senate-passed version. The final bill made a slight reduction to the amount requested for war costs and larger—though still relatively small—reduction to the amount requested for Energy Department nuclear programs ( Table 6 ). NDAA: The Broad Outlines Compared with annual defense authorization bills enacted in the previous decade, both H.R. 4310 as passed by the House and S. 3254 as passed by the Senate would make relatively few additions to the authorization levels proposed by the Administration for specific programs. This reflects the stringent bars against "earmarks" currently observed in both the House and the Senate. Proposed Administration Savings The House-passed version of H.R. 4310 would have added to the request more than $4 billion to cover the cost of overturning some of the Administration's more high-profile efforts to reduce DOD spending. The Senate-passed bill would have taken similar action to reverse two of the initiatives—disbanding several squadrons of airplanes in the Air Force, Air Force Reserve, and Air National Guard; and deferring production of an attack submarine. However, the Senate bill supported, wholly or in part, several of the Administration's other proposed DOD spending cuts. As enacted, the enacted FY2013 NDAA steered a middle course between the House and Senate versions. (See Table 7 . ) Other Increased Weapons Spending The House-passed version of the FY2013 NDAA would have authorized $2.1 billion more than was requested for several programs for which Congress typically adds to the annual budget request. The Senate-passed version would have added about one-fifth as much. (See Table 8 . ) Funding Offsets As is customary in annual NDAAs, both the House-passed H.R. 4310 and the Senate committee's S. 3254 would offset some or all of their proposed additions to the budget request with some relatively large proposed reductions within certain programs. Moreover—as usual—the House and Senate Armed Services Committees that drafted the two bills said that some of their proposed reductions would have no adverse impact on DOD. For example, each bill would reduce the total amount authorized by upwards of $1.5 billion on the grounds that funds appropriated in prior years but not spent could be used in lieu of the same amount of new budget authority to cover part of the FY2013 budget. (See Table 9 . ) Military Personnel Issues (Authorization)7 Like the version of H.R. 4310 passed by the House and S. 3254 as passed by the Senate, the enacted version of H.R. 4310 authorizes a 1.7% military pay raise, as requested. Proposed Reductions in Personnel and Force Structure In their respective reports on the FY2013 NDAA, the Armed Services Committees of the House and Senate each expressed concern that the Administration's plan to reduce the Army and Marine Corps by a total of 92,000 by the end of FY2017 may cut too deep. However, both bills approved the Administration's proposed reductions in the number of active-duty personnel for the Army, Navy, and Marine Corps in FY2013 and the final version of the bill did the same. ( Table 10 ). Air Force Cuts The House and Senate versions of the bill each contained provisions that would block the Administration's proposal to disband several Air Force units and retire more than 300 aircraft. In testimony before the Senate Defense Appropriations Subcommittee on March 14, 2012, Air Force Secretary Michael Donley said he would defer the proposed changes. In a June 22, 2012, letter to then-Senate Defense Subcommittee Chairman Daniel K. Inouye, Defense Secretary Panetta went further, saying he would defer any changes to the force structure of the Air Force—including some that had been authorized and funded in prior budgets—until Congress completes work on the FY2013 budget. The House-passed bill authorized 7,030 personnel more than requested for the Air Force and its associated reserve components in order to staff units that had been slated for disbanding. H.R. 4310 would add to the request $699.2 million to continue operating those units, plus $400.4 million to continue purchasing C-27 cargo planes and RQ-4 Block 30 Global Hawk reconnaissance drones. The Administration had proposed mothballing the C-27s and Block 30 Global Hawks already in hand and terminating plans to buy more of each. The Senate-passed bill authorized 8,246 more personnel than had been requested for the Air Force and associated reserve components. S. 3254 also includes provisions that would add to the budget request a total of $1.40 billion to maintain the status quo pending recommendations by a National Commission on the Structure of the Air Force that the bill would establish (Sections 1701-1709). However, the Senate bill did not challenge the Administration's proposal to dispose of the C-27s and Global Hawk Block 30s. In fact, it rescinded $544 million appropriated for Global Hawk in prior years, using those funds instead to cover some of the cost of the FY2013 budget. The conference report on H.R. 4310 adds to the budget request a total of $636 million and 5,040 personnel (active duty and reserve components) to retain the current force structure and to continue operating C-27s and Global Hawk Block 30s. However, the enacted version of the bill would not flatly prohibit changes to the current force structure. It also mandated creation of a commission to make recommendations about USAF force structure over the long-term (Sections 361-367). Ship Retirements The House-passed version of H.R. 4310 would have barred the Navy from laying up six of the seven Aegis cruisers and either of the two amphibious landing ships slated for earlier-than-planned retirement as a cost-saving measure in the budget request. It would allow the Navy to retire, as requested, the one cruiser, the USS Port Royal , although that ship—commissioned in 1994—is the newest of the Aegis cruisers and one of the few that has been modified to shoot down ballistic missiles. The ship sustained structural damage when it ran aground off Honolulu in 2009. The House bill also would have authorized an additional $638 million to continue operating and upgrading the three cruisers slated for retirement in FY2013. However, the bill would approve a reduction in Navy end-strength from 325,700 to 322,700, as requested. The Armed Services Committee said the Navy could man the three ships even after absorbing that reduction. The Senate version of the bill included a provision expressing the sense of Congress that the "operational capability" of all the ships slated for early retirement should be retained. However, the Senate bill added no funds to the request. The conference report on H.R. 4310 included a provision (Section 354) barring the use of funds to retire (or prepare for retirement) any of the cruisers or amphibious ships. It also added to the requested authorization $629 million for the operation and upgrade of all four of the cruisers, including the Port Royal and directed the Navy to prepare a detailed report on the how the damaged ship could be brought up to par. Army and Marine Corps Drawdown9 The Armed Services Committees of both the House and Senate, in their reports on their respective versions of the defense authorization act, expressed concern over the Administration's plan to cut a total of 92,000 active-duty personnel from the Army and Marine Corps by the end of FY2017. Although both the House and Senate versions of the bill authorized the portion of that long-term reduction that the Administration proposed for FY2013 (approving cuts of 9,900 from the Army and 4,800 from the Marine Corps), the two committees expressed concern about the pace of the reductions while U.S. ground forces still are deployed in combat operations in Afghanistan. The Senate committee warned that the reduction could undermine morale by reducing "dwell-time"—that is, the period during which soldiers and Marines are stationed at their home bases between overseas deployments. The House bill included a provision (Section 403) that would have limited the number of personnel that could be cut in any one year from 2014 through 2017 to 15,000 from the Army and 5,000 from the Marine Corps. In its Statement of Administration Policy (SAP) on the bill, the Office of Management and Budget (OMB) said this provision would slow its planned drawdown in ground forces, thus increasing military personnel and health care costs by more than $500 million in 2014 and by a total of $1.9 billion through 2019. S. 3254 included no such provision, but in its report to accompany the bill, the Senate Armed Services Committee directed DOD to include with each of its annual budget requests for FY2014-FY2017 two items relevant to this issue: A prediction of the ratio of "dwell time" to deployment time for active and reserve component personnel that would result from the personnel reductions proposed in that budget; and An assessment of whether the proposed reductions could be reversed within one year, if unforeseen contingencies led to the deployment of more forces than the budget request had assumed. The conference report on H.R. 4310 reiterated the Armed Services Committees' concern about the wisdom of cutting the size of the Army and Marine Corps while troops remain engaged in Afghanistan. The final version of the bill also included a provision (Section 403) mirroring the House provision that allows a the active-duty manpower of the Army and Marine Corps to be reduced by no more than 15,000 and 5,000 respectively in each fiscal year from 2014 through 2017. TRICARE Neither the House-passed H.R. 4310 nor the Senate-passed S. 3254 would have authorized most of the Administration's proposed new fees and fee increases for TRICARE beneficiaries and for retirees who benefit from the so-called TRICARE-for-Life program. Specifically, neither chamber's version of the FY2013 NDAA would have authorized proposals to raise TRICARE-for-Life premiums for military retirees using a three-tier model linking the size of each beneficiary's increase to the amount of his or her military retired pay; link increases in TRICARE's so-called "catastrophic cap"—the maximum amount a family would have to pay in a single year—to increases in the federal government's National Health Expenditure index; and increase the annual enrollment fees for the TRICARE Prime plan and introduce enrollment fees for the other TRICARE plans, including TRICARE-for-Life. The House bill (Section 718) would have allowed increases in the TRICARE pharmacy co-payments for brand-name and non-formulary drugs, but at a lower rate than current law would allow. This section of the bill further provided that, beginning in 2014, pharmacy co-payments would be indexed to the annual retiree cost-of-living adjustment. It also directed the Secretary of Defense to conduct a pilot program that would use the national mail-order pharmacy program to refill prescription maintenance medications for each TRICARE-for-Life beneficiary (Section 717). All told, the House-passed bill would have added $1.21 billion to the amount requested in the budget to compensate for savings the Administration had anticipated would result from the proposed TRICARE changes the House bill would not make. S. 3254 would have allowed the proposed increase in TRICARE pharmacy co-payments at the rate allowed by current law. It also would have authorized $452 million more than was requested for DOD's health care program to compensate for savings projected to have resulted from TRICARE changes the bill would not authorize. The conference report on H.R. 4310 , as enacted, Section 712 would set new cost-sharing rates under the TRICARE pharmacy benefits program for fiscal year 2013 in statute, and would in fiscal years 2014 through 2022 limit any annual increases in pharmacy copayments to increases in retiree cost of living adjustments. Beyond fiscal year 2022, the Secretary of Defense would be authorized to increase copayments as the Secretary considers appropriate. Abortion As enacted, the conference report included (Section 704) a provision of the Senate-passed bill authorizing the use of DOD funds to provide abortions in the case of pregnancies resulting from rape or incest. Same-Sex Marriage The House bill included a provision (Section 537) that would prohibit the use of DOD facilities for any marriage or "marriage-like" ceremony unless the ceremony involves the union of one man and one woman. The bill also included a provision (Section 536) that would prohibit any military chaplain from being required to perform any duty or religious ceremony contrary to the chaplain's conscience or religious beliefs. The provision also would have barred any adverse personnel action against a chaplain on the basis of his refusal to comply with any order prohibited by the section. The enacted version of H,R, 4310 dropped the prohibition on same-sex marriages in DOD facilities, but included in Section 533 a modified version of the House provision allowing chaplains to refuse to officiate at such ceremonies on grounds of conscience or religious belief. Women in Combat Roles14 In a February 2012 report mandated by Section 535 of the Ike Skelton National Defense Authorization Act for FY2011, DOD announced its intention to relax several policies that restricted women from assignment to ground combat units and their associated support units. One of those announced changes was the development of "gender-neutral physical standards for occupational specialties closed [to women] due to physical requirements." The enacted version of H.R. 4310 included a provision (Section 524), incorporated from the House-passed version of the bill, requiring DOD to report to Congress on the feasibility of developing such "gender-neutral" standards. The House Armed Services Committee noted, in its report on the bill, that counterinsurgency operations in Iraq and Afghanistan "place female service members in direct combat action with the enemy." Noting that some women who had been deployed in that theater were critical of the body armor currently issued to U.S. troops (which was designed for male body morphology), the committee directed the Secretary of the Army to assess the need for body armor tailored to female body types. The Senate Armed Services Committee, in its report on S. 3254 , called the policy changes announced in DOD's February 2012 report "a small step in the right direction," but urged DOD to further relax current restrictions on the assignment of female service personnel, saying: "By limiting their use of the talents of female service members, the Department [of Defense] and the services are handicapping efforts to field the highest quality force possible." The Senate committee directed the Secretary of Defense to report by February 1, 2013, on its implementation of the policy changes announced in the February report and to "make recommendations for regulatory and statutory change that the Secretary considers appropriate to increase service opportunities for women in the armed forces." Ground Combat Equipment (Authorization)18 Congressional action on authorization of funding for selected ground force equipment is summarized in Table A -3 . Following are highlights: M-1 Tanks, Bradley Troop Carriers, Hercules Tank Recovery Vehicles As part of DOD's strategic reorientation, the Army plans to dissolve at least 8 of its 47 active-duty brigade combat teams (BCTs), including at least 2 of its 15 so-called "heavy" BCTs—units equipped with dozens of M-1 Abrams tanks and Bradley armored troop carriers. The Army has not decided the final number of active BCTs it wants to retain; how many of that number will be heavy BCTs; or the number of tanks, Bradleys, and other armored combat vehicles in each heavy unit. In its report on H.R. 4310 , the House committee expressed concern that budget pressures might induce the Army to eliminate too many heavy BCTs (which cost more to equip and operate than other units). The panel also objected to DOD's plan to shut down, from 2013 through 2016, the production lines that upgrade M-1 tanks (in Lima, OH) and Bradleys (in York, PA). Under the Administration's plan, the two lines would reopen in 2017 to further modify tanks and Bradleys. The House committee maintained that it was not clear either (1) that the planned temporary shut-downs would save very much, or (2) that the network of suppliers needed to support planned future upgrades could be reconstituted after a three-year break. The panel also contended that there was a need for additional upgraded combat vehicles and that pending Army decisions might further increase the requirement. Accordingly, the House bill increased above the budget request the amounts authorized for three of the Army's heavy combat vehicles, authorizing $255.4 million (an increase of $181.0 million) to convert older M-1As to the M-1A2 SEP configuration, with improvements to night-vision equipment and other components; $288.2 million (an increase of $140.0 million) to upgrade Bradleys; and $169.9 million to buy 51 Hercules tank recovery vehicles, designed to tow damaged tanks to safety (an increase of $62.0 million and 20 vehicles). The House committee also urged the Army to accelerate a program to equip its 1980s-vintage Paladin mobile howitzers with a new chassis and a drive train adapted from the Bradley troop carrier. S. 3254 would have mirrored the House bill's authorization of $255.4 million to convert older tanks to the M-1A2 SEP configuration and also would have authorize the amount requested to upgrade Bradleys but also would have authorized a total of $230.9 million for Hercules tank recovery vehicles. The enacted version of H.R. 4310 added a total of $338.0 million to the requested authorization, providing additional funding for Abrams upgrades and Bradley upgrades and for tank recovery vehicles. New Generation of Tactical Vehicles The enacted version of the FY2013 NDAA, like the House and Senate versions, all approved the amounts requested to develop a new generation of Army vehicles: $639.9 million for the Ground Combat Vehicle, intended to replace the Bradley; $74.1 million for the Armored Multi-Purpose Vehicle (AMPV), intended to replace the Vietnam War-vintage M-113 troop carrier now used in various roles, including battlefield ambulance and supply hauler; and $116.8 million for the Joint Light Tactical Vehicle (JLTV), intended to succeed the jeep-like "Humvee" (HMMWV). Naval Systems (Authorization)23 Congressional action on authorization of funding for selected naval systems is summarized in Table A -5 . Following are highlights. Attack Submarines24 As requested, the enacted version of H.R. 4310 —like the House and Senate versions of the NDAA—authorized $3.22 billion for two Virginia-class attack submarines. But all three versions of the NDAA also authorized $1.65 billion—about $778 million more than requested—for long lead-time components to be used for an additional submarine to be procured in FY2014. (The House bill would have added $778.0 million while the Senate bill and the enacted version of H.R. 4310 added $777.679 million.) The increase would allow the Navy to budget for two submarines in FY2014—as had been assumed in DOD's February 2011 budget projection—rather than one, as is assumed in the budget projection published in February 2012. Like the House and Senate bills, the final version of H.R, 4310 includes a provision (Section 122) that would permit the use of a multi-year contract for procuring up to 10 Virginia -class attack submarines in FY2014-FY2018, and the use of incremental funding  in such a contract. The Navy had requested authority for a multi-year contract to buy nine submarines during that period. The service did not request authority to use incremental funding in the contract, but testified that it wanted to find a way, if possible, to buy a second Virginia -class boat in FY2014 (which would be the 10 th boat in the multi-year contract), and that doing so would likely require the use of incremental funding. DDG-51 Aegis Destroyers26 Like the House and Senate versions of the NDAA, the enacted version of H.R. 4310 contains a provision (Section 123) authorizing the Navy to sign a multi-year contract to buy 10 Aegis destroyers in FY2013-FY2017. The Navy had requested authority for a multi-year contract to procure nine of the ships in that period, but indicated in testimony that it hoped that bids submitted for that contract might come in low enough to finance the procurement of a 10 th ship. As requested, all three versions of the NDAA would authorize $3.05 billion for two destroyers in FY2013. The House bill would have authorized $581.3 million—$115 million more than requested—for long lead-time components to be used for the additional (10 th ) ship. However the Senate bill and the enacted version of H.R. 4310 authorized $466.3 million, as requested, for long lead-time destroyer components. Ballistic Missile Submarines27 In February 2011, DOD projected a FY2013 budget request totaling $1.20 billion to continue developing a new class of 12 missile-launching submarines, designated SSBN(X). These ships are intended to replace the 14 Ohio -class subs built in the 1980s and 1990s, which are slated to begin retiring in 2027. The first of the new subs was slated to begin construction in FY2019. The Administration's FY2013 budget request, unveiled in February 2012, would provide less than half of the amount earlier projected for FY2013—$564.9 million—and would defer construction of the first of the new ships until FY2021. In its report on H.R. 4310 , the House committee objected that, under the new schedule, the number of missile subs in service would drop to 10 or 11 ships for a dozen years (2029-2041). It added to the bill a provision (Section 121) requiring the Navy to maintain a force of at least 12 ballistic missile submarines. The House passed bill would have added $374.4 million to the authorization requested to design the planned new sub, thus increasing that authorization to the level that had been projected in 2011. The House bill would authorize the amount requested to develop the new missile sub's nuclear powerplant. Like the Senate bill, the enacted version of H.R. 4310 authorized the amounts requested for SSBN(X). Aircraft and Long-Range Strike Systems (Authorization)28 Congressional action on authorization of funding for selected aircraft and long-range strike programs is summarized in Table A -9 . Following are some highlights. Long-Range Bombers, Strike Weapons As requested, the House-passed, Senate-passed and enacted versions of the NDAA authorized $291.7 million to continue developing a new, long-range bomber the Air Force wants to begin procuring in the 2020s. The House rejected by a vote of 112-308 an amendment to its bill that would have delayed the program by 10 years and eliminated the authorization for FY2013 funds (see H.Amdt. 1109 in Table 12 ). The enacted version of H.R. 4310 incorporated a provision of the House-passed bill (Section 211) requiring that the new bomber be equipped to carry nuclear weapons. According to the conference report on the bill, the Senate accepted the House provision, "with the understanding that the provision is consistent with the current Air Force plans." The enacted bill, like the House-passed and Senate-passed versions, also authorizes, as requested, $110.4 million for development of a "conventional, prompt global strike" system designed to place a precision-guided, non-nuclear warhead on a target anywhere in the world within minutes. Like the House-passed version, the enacted version of H.R. 4310 authorized, as requested, a total of $628.3 million to develop and install various modifications in B-52, B-1, and B-2 bombers currently in service. The Senate-passed bill, S. 3254 , also would have authorized the requested bomber modification funds except for $15.0 million cut from the $327.4 million B-2 request on grounds of unspecified "efficiencies." Carrier-Based UAVs The enacted version of H.R. 4310 , like the House-passed and Senate-passed NDAAs, authorized a total of $264.7 million for two programs aimed at developing a long-range, stealthy drone aircraft to fly reconnaissance and attack missions from carriers. As requested, the Senate bill and the enacted version authorized $142.3 million for the Unmanned Combat Air Vehicle (UCAV) project, which is intended to test the feasibility of the project, and $142.5 million for the Unmanned Carrier-launched Airborne Surveillance and Strike (UCLASS) project, which is intended to produce an operational weapon. The House-passed version of H.R. 4310 would have cut $75 million from the amount requested for UCLASS and added the same amount to the request for UCAV, requiring the Navy (in Section 212) to slow the former, more operationally oriented program while it conducts additional research in the UCAS program. Ballistic Missile Defense (Authorization)29 Congressional action on authorization of funding for selected missile defense programs is summarized in Table A -1 . Following are some highlights. The enacted version of H.R. 4310 authorized $8.13 billion for programs managed by the Missile Defense Agency (MDA), which is $394.1 million more than the Administration requested. The bulk of the increase reflects authorization of additional funding for several Israeli defense systems and for the Ground-based Midcourse Defense (GMD), currently deployed in Alaska and California which is intended to protect U.S. territory against a small number of missiles launched from North Korea. The House-passed version of H.R. 4310 would have added to the $7.74 billion MDA request an authorization for an additional $1.31 billion. More than half that increase ($680 million) would be authorized (Section 227) to be spent over several years to support Israel's purchase and operation of "Iron Dome" system, designed to intercept short-range rockets and artillery shells. Another major component of the House bill's increase was a proposed addition of more than 50% ($460 million) to the $903.2 million requested for GMD, of which $103.0 million was to be spent adding to the current missile defense sites in Alaska and California a third site, located on the East Coast. The Senate-passed version of the NDAA would have added $410 million to the MDA request, including no additional funds for GMD and $210.0 million for Iron Dome in FY2013. The final bill added to the request authorizations of $211.0 million for Iron Dome, $168.0 million for other Israeli missile defense programs, and $75.0 million for GMD. Ground-based Midcourse Defense (GMD) Enhancement The House-passed version of the NDAA would have required DOD to begin developing a plan and a supporting environmental impact statement for putting into service by the end of 2015 an anti-missile interceptor site on the East Coast. The plan was supposed to evaluate the effectiveness from the proposed new site of various interceptor missiles including the three-stage weapon currently deployed at the existing GMD sites in Alaska and California, a two-stage version of the GMD missile, and several versions of the Navy's SM-3 Standard missile. The enacted version of H.R. 4310 includes a provision that is generally similar, but drops the 2015 deadline. Section 224 of the bill requires that DOD evaluate, and prepare an environmental impact statement on three potential locations for a third GMD site, at least two of which are on the East Coast. The provision also requires DOD to submit with its FY2014 budget request a contingency plan for deploying GMD at one of the three sites evaluated. The final version of the bill dropped a House provision that would have required GMD to be tested against a target ICBM during 2013. Currently, such a test is scheduled for late 2015. However, the enacted bill included a provision (Section 231) requiring DOD to report to Congress on the feasibility and cost-effectiveness of (1) testing the defense against an ICBM sooner than currently planned and (2) conducting GMD flight tests at the rate of at least three every two years. MEADS (Medium Extended Air Defense System) Authorization Neither the House-passed, Senate-passed nor final versions of the bill authorized any of the $400.9 million requested to continue development of the Medium Extended Air Defense System (MEADS), a program jointly funded by the United States, Germany, and Italy to develop a mobile air and missile defense system for combat units in the field. The system would incorporate the Patriot PAC-3 missile. Plans to procure MEADS as an operational system have been shelved, but the three partner countries plan to continue the development program in hopes of harvesting technologies that could be incorporated into other systems. Under the tri-national agreement governing the program, the United States could incur significant costs if the program were terminated. In addition, Section 221 of the enacted version of H.R. 4310 included a provision, which had been included in both the House and Senate versions of the bill, barring DOD from obligating or expending funds for MEADS. Commercial Satellite Export Rules The enacted version of H.R. 4310 contains a provision that would give the President more flexibility than current law in deciding how to regulate the export of communications satellites pursuant to the Arms Export Control Act. Section 1261 of the FY2013 NDAA repeals a provision of the FY1999 NDAA that had put "satellites and related items" on the U.S. Munitions List (administered by the State Department) and thus prohibited their export to countries toward which the United States maintains an arms embargo. By repealing that provision of the earlier bill, H.R. 4310 gives the President discretion to designate satellites and related items, as "dual use" items—i.e., equipment that could be used either for civilian or military purposes—which are listed on the Commerce Control List and subject to less restrictive export controls administered by the Commerce Department. The new law would retain the prohibition on satellite sales to or launches by China, North Korea, and countries designated as state sponsors of terrorism (Cuba, Iran, Sudan, Syria). Under the new law, a license application to export satellites and related items to a country in which the United States maintains a comprehensive arms embargo will face a presumption of denial, although not an outright prohibition. Provisions Relating to Wartime Detainees The House-passed and Senate-passed versions of the FY2013 NDAA each contained provisions relating to persons captured in the course of hostilities against Al Qaeda and associated forces, including those detained at the U.S. Naval Station at Guantanamo Bay, Cuba. Several of the provisions in the House bill aimed to extend the effect or clarify the scope of detainee provisions contained in the FY2012 NDAA while other provisions would have established new restrictions on the transfer or release of detainees held by the United States in Afghanistan. The Senate bill included provisions extending certain expiring restrictions on the handling of detainees that had been enacted as part of the FY2012 bill. Following are summaries of selected detainee-related provisions of H.R. 4310, as enacted> Military Trials for Foreign Terrorist Suspects The enacted version of the bill did not include a provision, adopted during House consideration of H.R. 4310 , that would have required that a foreign national who (1) "engages or has engaged in conduct constituting an offense relating to a terrorist attack" on a U.S. target, and who (2) is subject to trial for the offense before a military commission, must be charged before a military commission rather than in federal court. Detainee Held at Guantanamo Many provisions in the 2012 NDAA affecting detainees at Guantanamo were scheduled to expire at the end of the fiscal year (though similar restrictions concerning the transfer of Guantanamo detainees are found in appropriations enactments in effect beyond that date). The enacted version of H.R. 4310 effectively extended several of these provisions through FY2013, including: a blanket funding bar on the transfer of Guantanamo detainees into the country (Section 1027); a prohibition on using funds to construct or modify facilities to house these detainees in the United States (Section 1022); and restrictions on the transfer of Guantanamo detainees to foreign countries (Section 1028). A provision from the House bill (Section 1035) that was not retained would have barred any Guantanamo detainee who is "repatriated" to the former U.S. territories of Palau, Micronesia, or the Marshall Islands from traveling to the United States. Detainees Held Elsewhere Abroad The enacted version of H.R. 4310 establishes would new certification and congressional notification requirements relating to the transfer or release of non-U.S. or non-Afghan nationals held at the detention facility in Parwan, Afghanistan (Section 1025). It requires a report to be filed within 120 days describing the "estimated recidivism rates and the factors that appear to contribute to the recidivism of individuals formerly detained at the Detention Facility at Parwan, Afghanistan, who were transferred or released, including the estimated total number of individuals who have been recaptured on one or more occasion" (Section 1026). The enacted version of the bill also requires the Secretary of Defense to submit a report regarding the use of naval vessels to detain persons pursuant to the Congressionally passed Authorization of the Use of Military Force (AUMF), and to notify Congress whenever such detention occurs (Section 1024). In 2011, a Somali national reportedly was detained on a U.S. vessel for two months and interrogated by military and intelligence personnel before being brought into the United States to face criminal trial. Detention of Persons in the United States: Although the President has stated that the Administration would not indefinitely detain Americans in the United States pursuant to the detention authorization in the FY2012 NDAA, that provision has been controversial. A provision of the Senate-passed FY2013 NDAA—which was not retained in the enacted version of the bill—would have stipulated that authorizations to use force are not to be construed to permit detention of U.S. citizens or lawful permanent residents in the United States unless Congress passes a law expressly authorizing such detention. An amendment to remove military detention as an optional "disposition under the law of war" for persons in the United States was proposed during the House debate on H.R. 4310 but was not adopted. Instead, the enacted version of H.R. 4310 includes (Section 1029) a modified version of a provision in the House-passed bill providing that nothing in the AUMF or in the 2012 NDAA is to be construed as denying "the availability of the writ of habeas corpus" or denying "any Constitutional rights in a court ordained or established by or under Article III of the Constitution" with respect to persons who are inside the United States who would be "entitled to the availability of such writ or to such rights in the absence of such laws." The original provision from the House-passed bill, as amended on the floor,172 would have covered only persons who are lawfully present in the United States when detained pursuant to the AUMF. Under the floor amendment, the provision would also have required the President to notify Congress within 48 hours of the detention of such a person, and established a requirement that such persons be permitted to file for habeas corpus "not later than 30 days after the person is placed in military custody." The bill does not contain substantive clarification of which U.S. persons are lawfully subject to detention under the AUMF. Sections from the House bill setting forth congressional findings with respect to detention authority under the AUMF and 2012 NDAA and with respect to habeas corpus were omitted from the final version. Consequently, ambiguity with respect to who can be lawfully detained in the United States appears to have been preserved, but the enacted version of the bill provides reassurance that access to a court to petition for habeas corpus will remain available to those who are detained in the United States pursuant to the AUMF. Smith-Mundt Act34 Section 1078 of the enacted version of the authorization bill incorporates a modified version of a provision in the House-passed bill (Section 1097) amending and restating Section 501 of the United States Information and Educational Exchange Act of 1948 ("Smith-Mundt Act"; P.L. 80-402, 22 U.S.C. §1461) as well as Section 208 of the Foreign Relations Authorization Act, Fiscal Years 1986 and 1987 ( P.L. 99-93 ; 22 U.S.C. §1461-1a). Prior to enactment of H.R. 4310 , those two provisions of law authorized the Secretary of State to conduct public diplomacy programs that provide information about the United States, its people, and its culture to foreign publics, but prohibited the dissemination of that information within the United States until 12 years after the initial dissemination or preparation for dissemination of such information. Before 12 years have elapsed, Members of Congress, media organizations, and research students and scholars were allowed to examine such information, however media organizations and researchers were permitted to do so only at the Department of State. In addition, the two provisions prohibited the use of funds authorized and appropriated for State Department public diplomacy programs to influence public opinion in the United States. The amendments incorporated in Section 1028 of the enacted bill removed the prohibition on domestic dissemination of public diplomacy information produced by the Department of State and the Broadcasting Board of Governors (BBG) intended for foreign audiences, while maintaining the prohibition on using public diplomacy funds to influence U.S. public opinion. Proponents of these changes argued that the ban on domestic dissemination of public diplomacy information was impractical given the global reach of modern communications, especially the Internet, and that it unnecessarily prevented valid U.S. government communications with foreign publics due to U.S. officials' fear of violating the ban. They asserted as well that lifting the ban would promote the transparency in the United States of U.S. public diplomacy and international broadcasting activities conducted abroad. Critics of lifting the ban stated that it might open the door to more aggressive U.S. government activities to persuade U.S. citizens to support government policies, and might also divert the focus of State Department and the BBG communications from foreign publics, thus reducing their effectiveness. House Floor Amendments Following are selected amendments on which the House took action during consideration of H.R.  4310 . Senate Floor Amendments Following are selected amendments on which the House took action during consideration of S.  3254 . FY2013 DOD Appropriations Bill DOD Appropriations Overview The FY2013 DOD appropriations bill reported by the House Appropriations Committee May 25, 2012 ( H.R. 5856 ), would provide a total of $599.89 billion for DOD activities other than military construction, $3.09 billion more than the President requested. Amendments to the bill, adopted by the House on July 18-19, 2012, reduced the appropriation to $597.71 billion. In exceeding the President's budget request—and in many of its details—the House-passed version of the DOD appropriations bill parallels H.R. 4310 , the House-passed version of the companion FY2013 National Defense Authorization Act (NDAA). By the same token, the House-passed appropriation is consistent with the defense funding cap set by H.Con.Res. 112 , the FY2013 budget resolution adopted by the House on March 29, 2012. Thus, it exceeds defense spending cap set by the Budget Control Act of August 2011. On those grounds, the Administration warned that the President's senior advisors would recommend that he veto the house-passed bill in its current form. The version of H.R. 5856 reported by the Senate Appropriations Committee on August 2, 2012, would provide $596.64 billion—$155.0 million less than the Administration's request and $1.06 billion less than the House-passed version ( Table 14 ). Proposed Administration Savings and Congressional Response The House-passed and Senate committee-reported versions of H.R. 5856 would each add billions of dollars to the Administration's budget request—$5.5 billion in the case of the House bill—reversing some of the Administration's DOD budget reduction initiatives, summarized in Table 15 . In each version of the bill, that gross increase, along with other congressional initiatives summarized in Table 16 , is partly offset by funding reductions summarized in Table 17 . Congressional Initiatives As reported by the House Appropriations Committee, H.R. 5856 also would add to the budget request upwards of $6.0 billion for certain programs for which Congress typically increases funding above the proposed level. Funding Offsets As is customary in annual DOD appropriations bills, the House-passed and Senate committee-reported versions of H.R. 5856 would offset some of its proposed additions to the budget request with a small number of relatively large funding reductions (in addition to dozens of smaller cuts justified in terms of specific problems with specific programs). Following are additional highlights of H.R. 5856 as passed by the House and reported by the Senate Appropriations Committee. Military Personnel and Force Structure (Appropriations)39 H.R. 933 as enacted funds the 1.7% increase in "basic pay" for military personnel proposed by the Administration, as the versions of H.R. 5856 passed by the House and reported by the Senate Appropriations Committee would have done. That rate is based on the Labor Department's Employment Cost Index (ECI), which is a survey-based estimate of the rate at which private-sector pay has increased. Army, Marine Corps End-Strength Reductions The enacted bill, as well as the versions that had been passed by the House and reported by the Senate Appropriations Committee each accepted the Administration's proposal to reduce the active-duty end-strength of the Army (reduced by 9,900) and Marine Corps (reduced by 4,800) during FY2013. In its report on the FY2013 defense bill, the House Appropriations Committee expressed concern that the Administration's plan to reduce those two services by an additional 77,300 spaces by the end of FY2017 was based on budgetary pressures rather than military requirements. Navy Ship Retirements The enacted bill, like the version reported by the Senate committee, added to the budget request $2.38 billion to continue manning, operating and modernizing as previously had been scheduled in FY2013 and FY2014 all seven of the Aegis cruisers and both of the amphibious landing ships the Administration had planned to retire during that time. The funds are in a newly created "Ship Modernization, Operations and Sustainment Fund" that would remain available through FY2014 (Section 8105 of H.R. 933 ). The House bill would have added to the request only the funds needed to modernize and continue operating during FY2013 three of the four Aegis cruisers that would have been retired during that year under the administration's plan. The House bill would have allowed the retirement of a fourth cruiser—USS Port Royal , which was severely damaged in 2009 when it grounded on a coral reef off Honolulu. The House bill would have added $124.6 million for operation and maintenance of the three other cruisers and $426.7 million to upgrade their equipment (including the purchase of five MH-60R helicopters). Air Force Cuts Rejected The final version of the appropriations bill added to the Administration's request nearly $900 million dollars to sustain several flying squadrons that the budget would have disbanded and to continue acquiring and operating two types of aircraft that would have been disposed of under the budget request. Like the House and Senate Armed Services Committees, the House and Senate Appropriations Committees both rejected a proposal to disband seven Air Force squadron and mothball or dispose of nearly 300 F-16s and A-10s operated by those units. In its report H.R. 5856 , the House Appropriations Committee said the planned cutbacks would fall disproportionately on the Air Force Reserve and Air National Guard. Together, those two reserve components would absorb 85% of the planned reduction in airplanes and 60% of the planned manpower cuts, the committee said. As enacted, H.R. 933 includes a provision (Sec. 8115) that prohibits both the proposed dissolution the squadrons and disposal of their aircraft. It also adds to the amount requested $557.2 million to continue operating those squadrons and to fund the nearly 7,000 Air Force, Air Force Reserve and Air National Guard personnel assigned to them. In its report to accompany H.R. 5856 , the House Appropriations Committee had directed the Air Force to submit by October 1, 2012, a cost-benefit analysis of the proposed retirements and reorganizations that was to be reviewed by the Government Accountability Office (GAO). Conferees on H.R. 933 explicitly dropped the requirement, but said they expected that any future proposals to change the Air Force's force structure would be "transparently and comprehensively justified." The final defense bill also adds to the request $341.3 million to for the previously planned procurements of "Block 30" Global Hawk long-range surveillance drones and small cargo planes designated C-27s and to continue operating Block 30s and C-27s that already had been acquired. It also includes a provision (Sec. 8118) requiring the Air Force to spend funds appropriated in earlier budgets for Block 30s and C-27s. Reduction in Personnel Transfers The enacted version of FY2013 DOD appropriations bill ( H.R. 933 ) cut the $2.94 billion requested by the four services for routine personnel transfers by 5% ($146.8 million). This amounted to half the reduction that would have been made by the version of the bill reported by the Senate Appropriations Committee ( H.R. 5856 ), which would have cut transfer costs by 10% ($293.6 million). In its report on the defense bill, the Senate committee said DOD rotates an average of one-third of military personnel from one duty station to another in any year and that the average time between such reassignments is about two years. The Joint Explanatory Statement accompanying H.R. 933 directed the Under Secretary of Defense for Personnel and Readiness to report to Congress (within 180 days of enactment) on potential budget savings that could be realized by longer tours of duty at any one station as well as potential improvements in service members' job performance and in the quality of life for service members and their families. Depot Maintenance 'Carryover' The enacted version of the FY2013 defense appropriations bill—like the versions passed by the House and reported by the Senate Appropriations Committee - cut the Administration's budget request in an effort to reduce what the committees described in their reports as an excessive backlog of scheduled maintenance work by the services' depots, which perform major overhauls of aircraft, ground vehicles, engines, electronic equipment and other major items. Essentially, the Appropriations Committees took the position that they would reduce the amount of additional funds appropriated for overhauls in FY2013 while the depots would keep working at their regular tempo performing work that had been paid for in prior budgets, thus drawing down the backlogs. The issue, which the GAO has been scrutinizing for years, is referred to as "excess carryover" and is described by a July 2008 GAO report on Army depots: The five Army depots operate under the working capital fund concept, where customers are to be charged for the anticipated full cost of goods and services. To the extent that the depots do not complete work at [sic–apparently means "by"] year-end, the funded work will be carried into the next fiscal year. Carryover is the reported dollar value of work that has been ordered and funded (obligated) by customers but not completed by working capital fund activities at the end of the fiscal year. The congressional defense committees recognize that some carryover is needed to ensure a smooth flow of work during the transition from one fiscal year to the next. However, past congressional defense committee reports raised concerns that the level of carryover may be more than is needed. Excessive amounts of carryover financed with customer appropriations are subject to reductions by the Department of Defense (DOD) and the congressional defense committees during the budget review process. The House-passed version of H.R. 5856 would have cut a total of $2.46 billion from the amounts requested for Army Operation and Maintenance (O&M) and for the Army's Other Procurement accounts, explaining the action in a summary table as, "Excess Working Capital Fund Carryover." Citing the same rationale, the Senate committee-reported version of the bill would have cut a total of $331.7 million from the amounts requested for the O&M accounts of the four armed services. H.R. 933 as enacted cuts $332.3 million from the O&M requests. TRICARE Fee Increases and Cost Savings43 Proposed TRICARE Fee Increases The Administration's $16.15 billion request for DOD's TRICARE medical insurance program assumed certain increases in various fees paid by participants. While some of those proposed increases were allowed by current law, most of them would have required legislative changes, most of which were rejected by the House and Senate Armed Services Committees in drafting the enacted version of the FY2013 National Defense Authorization Act. As reported by the House Appropriations Committee, H.R. 5856 incorporated the TRICARE cost savings that would result from the Administration's proposed fee hikes. In its report on the bill, the House Committee said it would "continue to evaluate the proposed changes," pending enactment of the companion defense authorization bill. H.R. 933 as enacted—like the Senate Appropriations Committee-reported version of H.R. 5856 —added to the budget request $273.0 million to cover higher than budgeted costs expected to result from Congress's rejection of some of the proposed TRICARE fee increases. TRICARE Savings Assumed Following the lead of the Senate Appropriations Committee, the enacted version of H.R. 933 cuts $807.4 million from the FY2013 TRICARE request, a reduction of 5% which—conferees said—should have no adverse impact on the program. Citing the Government Accountability Office (GAO) as its source, the Senate Committeee said in its report on H.R. 5856 that the TRICARE program had "underexecuted" its budget (i.e., had spent less than was appropriated) by $771.6 million in FY2010 and by $1.36 billion in FY2011, and that it was on track to spend $1.04 billion less than had been appropriated for FY2012. Similarly, the House-passed version of H.R. 5856 would have cut $400.0 million from the TRICARE request on the assumption that this pattern of "historic underexecution" would continue in FY2013. Ground Combat Systems Appropriations44 Congressional action on appropriation of funds for selected ground combat systems is summarized in Table A -4 . Following are some highlights. Abrams Tank and Bradley Upgrades; Hercules tank recovery vehicles H.R. 933 as enacted incorporates $383.0 million worth of House-passed additions to the amounts requested for three armored vehicle programs, as follows: The budget requested $74.4 million for to support the fielding of M-1 tanks that had been upgraded to the so-called "M-1A2SEP" version, which incorporates improvements to the power train, communications gear, and night-vision equipment. The final appropriations bill would add $181.0 million to upgrade additional tanks. H.R. 933 would nearly double—to $288.2 million, from $148.2 million requested—funding to upgrade Bradley armored troop carriers with improved night vision equipment, digital communications gear, and power train modifications. The bill would add $62.0 million to the $107.9 million requested for M-88A2 Hercules tank recovery vehicles—tracked vehicles designed to tow to safety a disabled 70-ton Abrams tank. Ground Combat Vehicle46 The enacted version of the appropriations bill—like the House-passed and Senate committee-reported versions of H.R. 5856 —would provide $639.9 million, as requested, to continue development of the Army's Ground Combat Vehicle (GCV), which is intended to replace the Bradley armored troop carrier. In its report on H.R. 5856 , the Senate Appropriations Committee had questioned the emphasis the Army was placing on the GCV, considered in the context of its overall spending plans for modernization of its armored combat vehicle fleet. Under current Army plans, the Senate committee said, the GCV would account for about 10% of the Army's entire fleet of combat vehicles. In the FY2013 budget request, it accounts for more than 70% of the total amount requested for modernization of the ground combat fleet. Over the five-year period FY2013-FY2017, GCV would absorb more than 80% of the service's projected spending on combat vehicle modernization. The committee directed the Army to provide to Congress the results of a business case analysis—currently underway—of its combat vehicle fleet modernization plans. Naval Systems Appropriations48 In their respective reports on H.R. 5856 , the Appropriations Committees of both the House and Senate decried the Administration's plan to reduce the number of warships projected for funding in FY2013-FY2017 compared with the Navy's previous five-year plan. Both committees warned that the projected reduction in shipbuilding would increase costs and weaken the nation's shipbuilding industrial base. The House committee also contended that the Administration's plan was inconsistent with its increased emphasis on U.S. military power in the Pacific region, where naval forces would play a particularly significant role. Congressional action on appropriation of funds for selected naval systems is summarized in Table A -6 . Following are highlights. Submarine and Destroyer Production Like the Armed Services Committees of the House and Senate, the House and Senate Appropriations Committee had objected to the Administration's plan to buy one Virginia -class attack submarine and one Aegis destroyer in FY2014, rather than two ships of each type, as had been planned. H.R. 933 as enacted—like the Senate committee-reported versions of H.R. 5856 —adds nearly $1.8 billion to the amount requested for Navy shipbuilding in FY2013 to support multi-year contracts to procure 10 submarines and 10 destroyers in FY2013 through FY2017, with the aim of achieving cost-cutting efficiencies. Like the Senate committee version of H.R. 5856 , H.R. 933 adds to the budget request: $778 million for long lead-time funding to buy components that would allow the Navy to start work on two submarines rather than one in FY2014; and $1.0 billion to fund a third destroyer in FY2013, in addition to the two ships requested. The House-passed version of H.R. 5856 added $723 million for the submarine components as well as $1 billion for a third destroyer. USS Miami Fire Damage Repair The final bill—like the Senate committee version of H.R. 5856 —added to the amount requested $150 million for the repair of the Virginia -class submarine USS Miami , damaged by fire on May 23, 2012, and undergoing an overhaul at the Portsmouth Naval Shipyard in Kittery, Maine. On August 22, 2012, the Navy announced that it plans to repair the ship, at an estimated cost of $450.0 million, by April 30, 2015, after which the ship would be good for an additional 10 years of service. The anticipated unit-cost of a new Virginia -class submarine in the FY2013 budget is $2.55 billion. Amphibious Transport Dock (LPD-17) The enacted appropriation, like the Senate committee version of the bill, added $263.3 million for long lead-time components that would allow funding in FY2014 of an LPD-17 class amphibious transport dock ship. In its report on the H.R. 5856 , the Senate Appropriations Committee noted that the Navy has fewer amphibious landing transports than current DOD plans call for and that the number of such ships is slated to decline further. Aircraft Appropriations51 Congressional action on appropriation of funds for selected aircraft and long-range strike programs is summarized in Table A -10 . Following are some highlights: F-35 Joint Strike Fighter H.R. 933 appropriates $8.29 billion—95% of the amount requested—to continue development and production of the F-35 Joint Strike Fighter. Several reductions totaling $404.0 million reflected what the House and Senate conferees described as funding requests the were premature or that incorporated unjustified price increases. The House-passed and Senate committee-reported versions of H.R. 5856 each would have made generally similar reductions. The final bill would provide $5.59 billion to buy a total of 29 F-35s of three types: a carrier-based version for the Navy, a short-takeoff version for the Marine Corps, and a conventional, land-based version for the Air Force. It also would provide $2.68 billion to continue development of the plane. F-22 Oxygen System The enacted bill would add $21.5 million to the amount requested for modifications to the Air Force's F-22 fighters, with the additional funds intended to install a backup oxygen supply for the pilots in each aircraft. The Air Force has been investigating complaints by some F-22 pilots that they have experienced symptoms similar to those caused by hypoxia (oxygen deprivation). On August 1, 2012, an Air Force official said that a faulty pressurization program in the F-22's oxygen system was responsible for hypoxia-like symptoms its pilots were suffering. The faulty pressurization programming caused a pressurized vest—designed to protect pilots' lungs in case of rapid decompression—to inflate, restricting the pilots' ability to breathe, Maj. Gen. Charles Lyons USAF, told reporters. C-130 Cargo Planes Instead of the 7 C-130 cargo planes requested in the FY2013 budget (most of which would be equipped for specialized missions such as mid-air refueling and search-and-rescue), the enacted defense bill would provide 14 of the planes plus a down-payment on 18 additional C-130 to be funded in future fiscal years. For procurement of new C-130s (of various types) and modifications to existing planes, the budget requested $1.12 billion and H.R. 933 provides $1.73 billion. The enacted bill also adds a total of $20.0 million to the Air Force's procurement and R&D accounts to continue the C-130 Avionics Modernization Program (AMP), a project to upgrade the cockpit electronics of older planes. The Administration's budget would have scrapped the program. Missile Defense Appropriations53 The enacted version of H.R. 933 appropriates $8.30 billion for programs of the Missile Defense Agency, an increase of 6.6% above the $7.79 billion request. The largest single component of the net increase is the House committee's addition of $280.0 million for four Israeli missile defense systems, which includes $211.0 million for the Iron Dome system designed to intercept short-range rockets and artillery shells. Another component of the net increase for MDA in the bill is the addition of $75.0 million to the $903.2 million requested for the Ground-Based Missile Defense (GMD) system currently deployed at sites in Alaska and Hawaii. Congressional action on appropriation of funds for selected missile defense programs is summarized in Table A -2 . Medium Extended Air Defense System (MEADS) Following the lead of the Senate Appropriations Committee, the enacted bill appropriates $380.9 million for the Medium Extended Air Defense System (MEADS), a joint U.S.-German-Italian effort to develop a mobile air and missile defense system that incorporates the Patriot PAC-3 missile, which is designed to protect combat units in the field. Plans to deploy MEADS have been shelved, but the three partner countries are continuing work on the system in hopes of developing components and technologies that could be used in other systems. The Administration maintains that, under the tripartite Memorandum of Understanding governing the program, the United States would incur significant cash penalties if it unilaterally pulled out of the program. The House-passed version of the appropriations bill would have denied the entire $400.9 million requested for MEADS in the FY2013 budget. The FY2013 National Defense Authorization Act ( H.R. 4310 ; P.L. 112-235 ) had authorized no funds for MEADS and included a provision (Section 221) prohibiting the use of funds for the program. However, DOD holds that the funds appropriated for MEADS by H.R. 933 can be used for that purpose since, by the usual rule of legislative construction, any particular piece of legislation can be superseded by subsequent legislation. H.R. 933 allows DOD to use the fund appropriated either to complete the MEADS development program or to pay the fee the U.S. government would incur through termination. In its report on H.R. 5856 , the Senate Appropriations Committee said the costs would be about the same in either case. OCO Funding: Afghanistan and Related Activities As enacted, H.R. 933 would provide $86.95 billion for Overseas Contingency Operations (OCO) —basically, operations in Afghanistan and Iraq and supporting activities—which is $1.26 billion less than was requested. The House-passed version of H.R. 5856 would have provided $87.11 billion for OCO costs, while the Senate committee-reported version of that bill would have provided $93.03 billion. Following are OCO funding highlights in the FY2013 DOD Appropriations Bill. Aid to Pakistan As enacted, H.R. 933 would provide $1.20 billion of the $1.30 billion requested for payments to Pakistan from DOD's Coalition Support Fund. The payments from the fund—for which the Administration requested $1.75 billion in FY2013—are intended to reimburse Pakistan, Jordan and other U.S. coalition partners for expenses they incur from supporting U.S. military operations in Afghanistan and Iraq. As reported by the House Appropriations Committee, H.R. 5856 would have provided the $1.75 billion requested for CSF. However, Section 9015 of that bill would have barred any payments from the fund to Pakistan unless the Secretaries of Defense and State certify that the government of Pakistan is cooperating with U.S. policy in certain respects, including supporting counterterrorism operations against al Qaeda and certain other groups with bases in Pakistan. An amendment adopted during House debate on H.R. 5856 cut $650 million from the CSF request, with the intent of cutting Pakistan's payment by 50% to $650 million. (See H.Amdt. 1412 , Table 19 .) The final version of the bill restores $550 million of the House cut and retains the House restriction on aid to Pakistan but would allow the Administration to waive that requirement on national security grounds (Section 9014). Detainee Issues The enacted version of H.R. 933 contained three provisions, substantially the same as provisions of previous defense appropriations bills and provisions in the House-passed and Senate committee-reported versions of H.R. 5856 , that restrict the transfer to any other location of detainees held at the U.S. facility at Guantanamo Bay, Cuba who are neither U.S. citizens nor members of the U.S. Armed Forces. Three provisions of H.R. 933 are Section 8109, which would prohibit the transfer to (or release within) U.S. territory of any such detainee; Section 8110, which would prohibit the transfer to any other country of any such detainee except to a country where the host government would likely retain the detainee in custody and render him unable to threaten U.S. interests; and Section 811, which would prohibit the use of any funds to build, acquire, or modify any facility in U.S. territory to house Guantanamo detainees. House Floor Amendments Following are selected amendments on which the House took action during consideration of H.R. 5856 . Senate Floor Amendments Table 20 summarizes selected amendments on which the Senate took action during consideration of H.R. 933 . Appendix A. Selected Program Funding Tables

President Obama requested $613.9 billion in discretionary budget authority for the Department of Defense in Fiscal Year 2013, which is $31.8 billion less than had been appropriated for the agency in FY2012. The end of U.S. combat in Iraq and the declining tempo of operations in Afghanistan accounted for the bulk of the overall reduction: The budget request for Overseas Contingency Operations (OCO)—DOD activities in those two countries—was $88.5 billion, which is $26.6 billion less than was provided for those operations in FY2012. However, the Administration's $525.4 billion request for DOD's so-called "base budget"—funds for all DOD activities other than OCO—was $5.2 billion less than was provided for FY2012 and $45.3 billion less than the FY2013 base budget the Administration had projected a year earlier, in February of 2011. The proposed reduction in the base budget—and planned reductions of more than $50 billion per year through FY2021, compared with the FY2011 projection—reflected the Administration's effort to reduce federal spending as required by the Budget Control Act (BCA) of 2011, enacted on August 2, 2011 (P.L. 112-25). All told, the Obama Administration's February 2012 projection would reduce DOD budgets by $486.9 billion over a 10-year period (FY2012-FY2021), compared with its February 2011 plan. (See " FY2013 Defense Budget Overview.") According to the Administration, the FY2013 DOD budget request was consistent with the initial spending caps set by the BCA. However, both H.R. 4310, the version of the FY2013 National Defense Authorization Act (NDAA) passed by the House on May 18, 2012, and H.R. 5856, the companion DOD appropriations bill for FY2013, reported by the House Appropriations Committee on May 25, 2012, exceeded the Administration request for those bills —by $3.7 billion in the case of the authorization bill and by $3.1 billion in the case of the appropriation bill. On the other hand, S. 3254, the version of the NDAA reported June 4, 2012, by the Senate Armed Services Committee, and the version of the DOD appropriations bill (H.R. 5856) reported by the Senate Appropriations Committee on August 2, 2012, kept FY2013 DOD funding within the initial BCA caps. Neither the House nor the Senate considered either an NDAA or a DOD appropriations bill for FY2013 that conformed to the lowered BCA caps on defense spending. The compromise version of the authorization bill (H.R. 4310), enacted on January 2, 2013 as P.L. 112-239, would authorize $544.9 billion for DOD's base budget—roughly splitting the difference between the House and Senate bills—and would authorize $88.5 billion for war costs. In general terms, the House-passed and Senate committee-reported versions of the first DOD appropriations bill for FY2013 (H.R. 5856) paralleled the House and Senate versions of the FY2013 NDAA, respectively. However, the Senate did not act on that bill. For nearly the first six months of FY2013, DOD and other federal agencies had been funded by a continuing resolution (H.J.Res. 117; P.L. 112-175). On March 21, 2013, Congress sent to the White House H.R. 933, the Consolidated and Continuing Appropriations Act, which the President signed into law (P.L. 113-6) on March 26, 2013. Division C of that legislation is the Department of Defense Appropriations bill for FY2013 (See "DOD Appropriations Overview"). Although the amount provided by that section of the bill was $287.4 million more than the Administration's request for programs covered by that division of H.R. 933, the overall level of DOD funding provided by H.R. 933 (including funds provided for military construction in Division E) exceeded the request by $323.8 million. Since the total DOD funding level for FY2013 of $607.7 billion exceeds the BCA spending cap, that law requires that DOD funds be reduced (or "sequestered) by $35.0 billion before the end of the fiscal year. As of May 15, 2013, the Administration has not allocated the required reduction among specific DOD programs. All FY2013 appropriations amounts cited in this report reflect the amounts appropriated by H.R. 933 prior to sequestration.

Background Child nutrition programs and the WIC program provide cash, commodity, and other assistance (including funds for nutrition services and food packages in the WIC program and technical assistance and administrative cost aid in child nutrition programs) under three major federal laws: the Richard B. Russell National School Lunch Act (originally enacted as the National School Lunch Act in 1946), the Child Nutrition Act (originally enacted in 1966), and Section 32 of the Act of August 24, 1935 (7 U.S.C. 612c). The Agriculture Departments Food and Nutrition Service (FNS) administers the programs at the federal level; most funding is included in the annual Agriculture Department appropriations laws; and congressional jurisdiction over the underlying three laws is exercised by the Senate Agriculture, Nutrition, and Forestry Committee; the House Education and Labor Committee; and, to a limited extent (relating to commodity assistance and Section 32 issues), the House Agriculture Committee. Congress periodically reviews and reauthorizes expiring authorities under these laws. The most recent reauthorization was in 2004 ( P.L. 108-265 ); the next reauthorization is scheduled for 2009. Child nutrition and WIC programs are operated by a wide variety of local public and private providers, and the degree of direct state involvement varies by program and state. For example, in the WIC program, state health agencies exercise substantial control; in the school meal programs, local educational agencies (LEAs) and local "school food authorities" most often have the major role; in a very few instances, the federal government (FNS) takes the place of state agencies (e.g., where a state has chosen not to operate a specific program or where there is a state prohibition on aiding private schools). At the state level, education, health, social services, and agriculture departments all have roles; at a minimum, they are responsible for approving and overseeing local providers such as schools, summer program sponsors, and child care centers and day care homes, as well as making sure they receive the federal support they are due. At the local level, program benefits are provided to more than 40 million children and infants, and some 2 million lower-income pregnant and post-partum women, through some 100,000 public and private schools and residential child care institutions, about 200,000 child care centers and family day care homes, approximately 30,000 summer program sites, and (in the case of the WIC program) about 10,000 local health care clinics/sites operated by nearly 2,000 health agencies. All programs are available in the 50 states and the District of Columbia. Virtually all operate in Puerto Rico, Guam, and the Virgin Islands (and, in differing versions, in the Northern Marianas and American Samoa), and there are no restrictions on eligibility related to citizenship or legal residence status. In addition, WIC-like benefits are available to overseas military personnel, and Defense Department overseas dependents schools participate in the school meal programs. In the meal service programs like the School Lunch and Breakfast programs, summer programs, and assistance for child care centers and day care homes, federal aid is in the form of legislatively set subsidies ("reimbursements") paid for each meal/snack served that meets federal nutrition guidelines. Most subsidies are cash payments to schools or other providers, but about 10% of the total value of all aid is in the form of federally donated food commodities. Although all meals/snacks served by participating providers are subsidized, those served free or at a reduced price to lower-income children are supported at higher rates. All federal meal/snack subsidy rates are indexed annually (each July) for inflation, as are the income standards of eligibility for free and reduced-price meals/snacks. However federal subsidies do not necessarily cover the full cost of the meals and snacks offered by providers, and states and localities contribute to cover program costs—as do childrens families (by paying charges for nonfree or reduced-price meals/snacks). Required nonfederal cost sharing is relatively minimal states must expend at least an amount totaling some $200 million a year nationally in order to receive federal school lunch funds. Federal per-meal/snack child nutrition subsidies may cover local providers' administrative/operating costs, but separate direct federal payments for administrative/operating costs are limited to expense grants to state oversight agencies, a small set-aside of funds for state audits of child care sponsors, and special administrative payments to sponsors of summer programs and family day care homes. Under the WIC program, federal appropriations pay the cost of specifically tailored food packages and include legislatively set amounts for costs of administrative and nutrition services. Other relevant CRS reports include CRS Report RL33829, Domestic Food Assistance: The Farm Bill and Other Legislation in the 110 th Congress and CRS Report RL33299, Child Nutrition and WIC Legislation in the 108 th and 109 th Congresses . In addition, CRS Report RL33307, Child Nutrition and WIC Programs: Background and Recent Funding provides historical background. Extensive information about child nutrition and WIC programs also may be found at the Agriculture Department's Food and Nutrition Service website, http://fns.usda.gov . School Lunch and School Breakfast Programs The School Lunch and School Breakfast programs provide federal cash and commodity support for meals meeting minimum federally set nutrition standards. The meals are served by public and private nonprofit elementary and secondary schools and residential child care institutions (RCCIs) that opt to enroll and guarantee to offer free or reduced price meals to eligible low income children. Both programs are "entitlement" programs, and both subsidize participating schools and RCCIs for all meals served that meet federal nutrition standards at specific, inflation-indexed rates for each meal; food items not served as part of a meal meeting nutrition standards (e.g., a la carte offerings) are not eligible for subsidies. Each program has a three-tiered system for cash per meal federal reimbursements to schools and RCCIs. 1. It allows children to receive free meals if they have family income below 130% of the federal poverty guidelines ($27,580 for a four-person family in the 2008-2009 school year); these meals receive the highest subsidy rate. 2. Children may receive reduced price meals (no more than 40 cents for a lunch or 30 cents for a breakfast) if their family income is between 130% and 185% of the poverty guidelines (between $27,580 and $39,220 for a four-person family in the 2008-2009 school year); these meals receive a subsidy rate either 40 cents (for lunches) or 30 cents (for breakfasts) below the free meal rate. 3. A small per meal subsidy is provided for "full-price" or "paid" meals (the price is set by the school or RCCI) served to children whose families do not apply, or whose family income does not qualify them, for free or reduced price meals. Children in Temporary Assistance for Needy Families (TANF) programs and the Supplemental Nutrition Assistance Program (the SNAP, formerly the Food Stamp program) may automatically qualify for free school meals. Information across these programs can be shared to facilitate this through direct certification and other means. The School Lunch Program subsidizes lunches (5.1 billion in FY2007) to children in about 6,000 RCCIs and almost all schools (95,000). During FY2007, average daily participation was 30.5 million students (61% of the 50 million children enrolled in participating schools and RCCIs); of these, 49% received free lunches, and 10% ate reduced-price lunches ( Table 1 ). The remainder were served full-price (but still subsidized) meals. More than 90% of federal funding is used to subsidize free and reduced-price lunches served to low income children. For the 2008-2009 school year, inflation-indexed per lunch federal subsidies (cash payments, plus a required, and inflation-indexed, 21 cents a meal in entitlement commodity support) range from 45 cents for full price lunches to $2.78 and $2.38 for free and reduced price lunches, respectively. FY2007 federal school lunch costs (including commodity assistance) totaled some $8.7 billion ( Table 1 ). The School Breakfast program serves fewer students than does the School Lunch program; about 1.7 billion breakfasts in 80,000 schools (and 6,000 RCCIs) were subsidized in FY2007. Average daily participation was 10.1 million children (23% of the 43 million students enrolled in participating schools and RCCIs). Unlike the School Lunch program, the great majority received free or reduced price meals: 70% received free meals, and 10% purchased reduced price meals. In the 2008-2009 school year, inflation-indexed per breakfast federal subsidies (cash only) range from 25 cents for full price meals to $1.40 and $1.10 for free and reduced price breakfasts, respectively. FY2007 federal school breakfast funding totaled about $2.2 billion ( Table 2 ). In addition to federal cash subsidies, participating schools receive donations of federally acquired food commodities . Schools are "entitled" to a specific, inflation-indexed value of federally provided commodities for each lunch they serve (20.75 cents a meal for the 2008-2009 school year); they also may receive "bonus" commodities acquired by the Agriculture Department in support of the farm economy. In recent years, the value of federal commodity aid to schools has totaled well over $1 billion a year, and, by law, commodity assistance must represent at least 12% of the total value (cash + commodities) of aid given under the School Lunch program. Cash and commodity support to participating schools is based on the number and type of meals served (e.g., lunch or breakfast, free or full price). However, once the aid is received by the school, it is used to support the overall school meal service budget, as determined appropriate by the school. Special Supplemental Nutrition Program for Women, Infants, and Children (The WIC Program) The WIC Program provides food assistance, nutrition risk screening, and related services (e.g., nutrition education and breastfeeding support, medical care referral) to low-income pregnant and postpartum women and their infants, as well as to children up to age 5 from low-income families. Participants in the program generally must have family income at or below 185% of poverty, and must be judged to be nutritionally at risk. Nutrition risk is defined as detectable abnormal nutritional conditions; documented nutritionally related medical conditions; health impairing dietary deficiencies; or conditions that predispose people to inadequate nutrition or nutritionally related medical problems. Most income-eligible applicants meet the WIC program's nutrition risk criteria. Beneficiaries of the WIC Program receive monthly vouchers for the purchase of a "package" of specifically prescribed food items in participating retail stores (or, in some cases, actual monthly food packages of supplemental foods directly provided by state agencies). The range of permissible food items is set by federal regulation, although administering state agencies have some latitude in how federal standards are carried out (e.g., specifying "store" brands, decisions as to what types of infant formula are covered, what food may be provided for those with special dietary needs). Among the items that may be included are milk, cheese, eggs, infant formula, cereals, fruit or vegetable juices, and fresh fruits and vegetables. The program requires that vouchers—or food packages—be tailored (by food type and amount) by category of recipient (e.g., infants, children; pregnant, postpartum and nursing mothers). In addition to food benefits, recipients also must receive nutrition education and breast-feeding support (where called for) and may receive other services like referral to medical care providers. The federal cost of providing WIC benefits varies widely depending on the recipient and the foods prescribed in recipients vouchers, as well as differences in retail prices (vouchers are denominated in food amounts, not dollars) and administrative and nutrition services expenses (like those for nutrition risk screening, breastfeeding support, and nutrition education). Moreover, the programs food costs are significantly influenced by the degree to which states gain rebates from infant formula (and, in some cases, juice or other) manufacturers under a requirement to pursue "cost containment" strategies; these rebates recently have totaled to over $1.8 billion a year nationwide and pay for the cost of serving a significant portion of the WIC population. In FY2007, the national average federal cost of a WIC food package (after rebates) was $39 a month for each participant. The program also provides states with funding for administrative costs and nutrition services (like nutrition education). In FY2007, the average monthly "nutrition services and administrative" ("NSA") cost, including regular administrative expenses and nutrition risk assessments and nutrition education, was about $16 per case. The WIC Program has categorical, income, and nutrition risk requirements for eligibility. Only pregnant and postpartum women, infants, and children under age 5 may participate. As noted above, WIC applicants must show evidence of health or nutrition risk, medically verified by a health professional, in order to qualify. They also must have family income below 185% of the most recent annually indexed federal poverty guidelines ($32,560 a year for a three person family for the period July 2008June 2009; state WIC agencies may (but virtually never) set lower income eligibility cutoff points. Receipt of TANF, SNAP benefits (formerly, food stamps), or Medicaid assistance also can satisfy the WIC Programs income test, and states may consider pregnant women meeting the income test "presumptively" eligible until a nutritional risk evaluation is made. In 2006, 60% of WIC enrollees had family income below the federal poverty guidelines, 9% of WIC enrollees were cash welfare (TANF) recipients, 22% received food stamps, and 63% were covered by Medicaid. WIC participants receive benefits for a specified period of time, and in some cases must be recertified during this period to show continuing need (e.g., pregnant women may continue to receive benefits throughout their pregnancy and for up to 6-12 months after childbirth). Although it is federally funded, the WIC program actually is administered by some 2,000 state and local health agencies (and more than 30 Indian tribal organizations participating as separate grantees and treated like states). Over 10,000 local clinics/sites carry out the program. State administrative responsibilities extend to certifying eligibility, distributing benefits, issuing benefits, redeeming vouchers, and approving retail stores for participation. Unlike most other federal nutrition assistance programs, the WIC program is not an "entitlement" program; it is "discretionary" and participation and benefits are limited by the amount of federal funding appropriated, whatever state supplementary funding is provided, and the extent of manufacturers rebates. However, Congress has historically provided funding at levels that meet participation and food cost requirements—so-called "full funding." In FY2007, federal spending was $5.4 billion, and the program served a monthly average of 8.3 million women, infants, and children: 25% women, 27% infants, and 51% children. In addition to the regular WIC program (which includes special vouchers for fruits and vegetables), annual Agriculture Department appropriations (in a budget account separate from WIC appropriations) fund a small ($20 million a year) WIC farmers ' market nutrition program under which WIC applicants and recipients receive additional vouchers for the purchase of fresh produce at farmers' markets. Table 3 summarizes WIC participation and federal spending. Spending is made up of food costs, just over 70% of the total in recent years, and nutrition services and administrative (NSA) expenses (of which approximately two-thirds are typically for service activities like nutrition education and nutrition risk evaluations and one-third is for traditional administrative activities like eligibility determinations and issuing and redeeming vouchers). Day Care, Summer, and After-School Programs In addition to the school-day-based lunch and breakfast programs, child nutrition laws include provisions for federal subsidies and commodity support for schools and other institutions/ organizations offering meals and snacks to children in outside-of-school program settings. This assistance is provided to (1) schools and other governmental institutions, (2) private for-profit and nonprofit day care centers, (3) family/group day care homes, and (4) nongovernmental institutions/organizations that offer outside-of-school programs for children. In addition, day care centers for chronically impaired adults and elderly persons are eligible for assistance under the same general terms as centers caring for children. Federal support for day care, summer, and outside-of-school meal/snack programs totaled some $2.5 billion in entitlement funding (including a small amount of commodities) for FY2007. More than 5 million children (and 100,000 adults) participated. Child and Adult Care Food Program (CACFP) The large majority of assistance for meals and snacks served in outside-of-school settings is provided under the CACFP. This program pays subsidies for meals and snacks served in participating nonresidential child care centers (average attendance 40-50 children) and family day care homes (typically caring for 5-10 children). It also supports assistance for meals and snacks in adult day care centers (averaging 40-45 chronically ill or elderly adults), as well as those offered in participating after-school programs (which are discussed later). The CACFP provides federal payments for breakfasts, lunches, suppers, and snacks served in participating centers or homes. In many cases, sponsors giving administrative support to providers also are paid limited amounts for their costs. Subsidized meals and snacks must meet minimum federal nutrition standards, and providers must fulfill any state or local licensing/approval requirements or minimum alternative federal requirements (or otherwise demonstrate that they comply with government established standards for other child care programs). Federal assistance is made up overwhelmingly of cash subsidies based on the number of meals/snacks served and federally set indexed per-meal/snack subsidy rates; about 3% is in the form of federally donated food commodities. CACFP subsidies are available for meals and snacks served to children age 12 or under, migrant children age 15 or under, handicapped children of any age, and (in the case of adult care centers) chronically impaired and elderly adults; but preschool children form the overwhelming majority of those served by the program. Federal CACFP payments flow to individual providers either directly from the administering state agency (this is the case with many child/adult care centers able to handle their own administrative responsibilities) or through "sponsors" who oversee and provide support for a number of local providers (this is the case with some child/adult care centers and all day care homes). Child care centers in the CACFP can be: (1) public or private nonprofit centers, (2) Head Start centers, (3) for-profit proprietary centers (if they meet minimum requirements as to the proportion of low-income children they enroll), and (4) shelters for homeless families. Adult day care centers include public or private nonprofit centers and for-profit proprietary centers (if they meet minimum requirements related to serving low-income disabled and elderly adults). In FY2007, some 48,000 child care centers, with average daily attendance of 2.2 million children, participated in the CACFP. Adult care centers totaled 2,500, with an average daily attendance of 105,000 persons. Participating day care centers may receive daily subsidies for up to two meals and one snack or one meal and two snacks for each child, so long as they meet federal nutrition standards. All meals and snacks served in centers are federally subsidized to at least some degree; different subsidies are provided for breakfasts, lunches/suppers, and snacks, and subsidy rates are set in law and indexed for inflation annually. However, cash subsidies vary according to the family income of each child's family, and the income demographics of the centers' recipients is periodically evaluated. Subsidies are annually indexed, and the largest subsidies are paid for meals and snacks served to children with family income below 130% of the federal poverty income guidelines (the income limit for free school meals): for July 2008-June 2009, these subsidies are 71 cents for each snack, $1.40 for each breakfast, and $2.57 for each lunch/supper. Smaller subsidies are available for meals and snacks served at a reduced price (no more than 15 cents for snacks, 30 cents for breakfasts, and 40 cents for lunches/suppers) to children with family income between 130% and 185% of the poverty guidelines (the income range for reduced-price school meals) and for meals and snacks served to children who do not qualify for free or reduced-price meals/snacks. "Independent" centers (those without sponsors handling administrative responsibilities) must pay for administrative costs associated with the CACFP out of non-federal funds or a portion of their meal subsidy payments. In other cases, center sponsors may retain a proportion of the meal subsidy payments they receive on behalf of their centers to cover their costs. Finally, federal commodity assistance is available to centers, valued at some 21 cents a meal for July 2008-June 2009 (the same commodity value provided for school meals). CACFP subsidized day care homes serve an average of 5-10 children; just under 30% of children in the CACFP (860,000 in FY2007) are served through day care homes, and about one-third of the money spent under the CACFP supports meals and snacks served in homes. In FY2007, 143,000 home sites (with some 900 sponsors) received subsidies. As with centers, payments to day care homes are provided for no more than two meals and one snack (or one meal and two snacks) a day for each child. Unlike centers, day care homes must participate under the auspices of a public or (most often) private nonprofit sponsor that typically has 100 or more homes under its supervision; CACFP day care home sponsors receive monthly administrative payments (separate from meal subsidies) based on the number of homes for which they are responsible. Also unlike centers, day care homes receive cash subsidies (but not commodities) that generally do not differ by individual children's family income. Instead, there are two distinct, annually indexed subsidy rates. "Tier I" homes (those located in low-income areas or operated by low income providers) receive higher subsidies for each meal/snack they serve: for July 2008-June 2009, all lunches and suppers are subsidized at $2.18 each, all breakfasts at $1.17, and all snacks at 65 cents. "Tier II" homes (those not located in low-income areas or without low income providers) receive smaller subsidies: for July 2008-June 2009, these are $1.31 for lunches/suppers, 43 cents for breakfasts, and 18 cents for snacks. However, Tier II providers may seek the higher Tier I subsidy rates for individual low income children for whom financial information is collected and verified. Although federal subsidies for day care centers differ by family income, there is no requirement that meals/snacks specifically identified as "free" or "reduced-price" be served. Centers may adjust their regular fees (tuition) to account for federal payments, but the CACFP itself does not regulate these fees; in addition, centers can charge separately for meals/snacks, so long as there are no charges for children meeting free-meal/snack income tests and limited charges for those meeting reduced-price income tests. Federal subsidies for family day care homes differ by the type of home and homes may adjust their tuition to account for federal payments; as with centers, there is no requirement that meals/snacks specifically identified as "free" or "reduced-price" be offered. However, unlike centers, federal rules prohibit any separate meal charges. In FY2007, the CACFP provided $2.1 billion in cash subsidies for meal costs and $77 million worth of commodities. In addition, it paid $137 million for sponsors administrative costs and expenses related to auditing local operators. Summer Food Service Program The Summer Food Service program provides assistance to local public and private nonprofit "service institutions" running summer youth/recreation programs, summer feeding projects, and camps. Assistance is primarily in the form of cash subsidies for each meal or snack served; however, federally donated commodities also are offered. Participating service institutions (also called sponsors) often, but not of necessity, are entities that provide ongoing year-round service to the community and include schools, local governments, camps, colleges and universities in the National Youth Sports program, and private nonprofit organizations like churches. Sponsors of three types of summer programs can be approved: (1) "open" sites operating in lower-income areas where 50% or more of the children have family income that would make them eligible for free or reduced-price school meals, (2) "enrolled" sites where at least half of the children enrolled in the sponsor's program are eligible for free or reduced-price school meals, and (3) summer camps. Summer meals/snacks are provided free to all children at open or enrolled sites and to lower-income children in camps. Summer sponsors get operating (food, storage, labor) cost subsidies for all meals/snacks they serve—one meal and one snack, or two meals (three meals for children in programs for migrant children) per child per day. In addition, sponsors receive payments for administrative costs, and states are provided with subsidies for administrative costs and health and meal-quality inspections. For the summer of 2008, the combined (operating and administrative cost) subsidies under the summer program were approximately $3 for each lunch/supper, $1.70 for each breakfast, and 70 cents for each snack. Actual payments vary slightly (e.g., by about 5 cents for lunches) depending on the location of the site (e.g., rural vs. urban) and whether meals are prepared on-site or by a vendor. In FY2007, some 3,600 sponsors (with 30,000 food service sites) participated in the summer program and served an average of 1.9 million children daily. Program costs totaled to about $300 million, including cash, commodities, administrative cost assistance, and health inspection costs. After-School Programs Federal assistance for snacks (and, in some cases, meals) served through after-school programs is provided through two basic alternatives. The CACFP offers subsidies to sponsors (schools or community-based nonprofit sponsoring entities) for snacks served during the school year to at-risk children in after-school programs located in lower-income areas where at least half the children are eligible for free or reduced-price school meals. In a few states (eight in FY2009), these CACFP payments also are available for meals (typically suppers) through after-school programs. All snacks/meals generally are served free. A second, less-used, avenue is open only to schools as an extension of the School Lunch program. They may operate after-school snack-only programs during the school year that provide free snacks in lower-income areas (like the CACFP component) or offer free, reduced-price, or fully paid-for snacks (differentiated by family income like the School Lunch program) in non-needy areas. Although non-school sponsors may receive after-school nutrition assistance, the overwhelming majority of sites (more than 80%) are operated by schools. Federal cash subsidies for snacks (and, where available, meals) generally are the same as those paid for snacks and lunches/suppers in the regular CACFP. In FY2007, average daily participation in after-school snack/supper programs was approximately 1.2 million children. Spending on this type of assistance is not separately tracked at the federal level, but is included in the figures for the School Lunch program and the CACFP, noted above. Other Child Nutrition Programs, Initiatives, and Support Activities Child nutrition laws also support a range of smaller programs, initiatives, and activities. States are entitled to federal grants to help cover administrative and oversight/monitoring costs associated with child nutrition programs. The national amount each year is equal to about 1.5% of child nutrition cash support. The majority of this money is allocated to states based on their share of spending on the covered programs; about 15% is allocated under a discretionary formula granting each state additional amounts for the CACFP, commodity distribution, and "coordinated review" efforts. In addition, states receive payments for their role in overseeing summer programs (about 2.5% of their summer program aid). States are free to apportion their federal administrative expense payments among child nutrition initiatives (including commodity distribution activities) as they see fit. State administrative expense funding in FY2007 totaled to more than $160 million. States receive grants for a Fresh Fruit and Vegetable program , under which selected schools in each state get money to purchase and distribute fresh fruits and vegetables to all children in attendance (regardless of family income). Money is distributed by a formula under which about half the funding is distributed equally to each state and the remainder is allocated by state population; states select participating schools (with an emphasis on those with a higher proportion of low-income children) and set annual per student grant amounts (between $50 and $75). Funding is set by law at $40 million for the 2008-2009 school year, $65 million for the 2009-2010 school year, $101 million for the 2010-2011 school year, $150 million for the 2011-2012 school year, and inflation-indexed for later years. Schools and institutions like summer camps and child care facilities not otherwise participating in federally subsidized meal service programs, along with schools with split (part-day) sessions for kindergartners or pre-kindergartners where children do not have access to regular school meal programs, can participate in the Special Milk program . Under this program, they provide milk to all children at a reduced-price or free. Each half-pint served is federally subsidized at a slightly different rate, depending on whether it is served free or not, but the provision of free milk to needy children is not required. In FY2007, about 90 million half-pints were subsidized at about 15 cents each (7% were served free) to roughly 500,000 children. Federal costs for this program typically run about $15 million a year. Under a coordinated review effort (CRE) , the FNS, in cooperation with state agencies, conducts periodic school compliance and accountability evaluations to improve management and identify administrative, subsidy claim, and meal quality problems. This $5 million-a-year effort is the major ongoing initiative related to maintaining the integrity of child nutrition programs. The Agriculture Department's Economic Research Service (ERS) and the FNS conduct nutrition research, studies, surveys, and program evaluations (typically totaling about $10 million a year). A national Food Service Management Institute (FSMI) provides technical assistance, instruction, and materials related to nutrition and food service management; it is funded at $4 million a year. An information clearinghouse provides information to support community-sponsored food assistance initiatives, using funding of about $250,000 a year. Special FNS projects —"Team Nutrition" nutrition education initiatives, a food safety project, technical assistance to program operators, food service training grants, aid with electronic food resource systems, "program integrity" efforts—are aimed at helping schools and other providers with nutrition education materials, assisting them to improve their meal service operations and the quality of meals, and ensuring that federal support is spent correctly; they are typically funded at $15-$20 million a year.

Federally supported child nutrition programs and initiatives, along with the Special Supplemental Nutrition Program for Women, Infants, and Children (the WIC program) reach more than 40 million children and some 2 million lower-income pregnant/post-partum women. In FY2007, federal spending on these programs totaled over $19 billion. The basic goals of federal child nutrition programs are to improve children's nutrition, increase lower-income children's access to nutritious meals and snacks, and help support the agricultural economy. Child nutrition programs are "entitlements." Federal cash funding and commodity support is "guaranteed" to schools and other providers based on the number of meals/snacks served, who is served (e.g., free meals for poor children get higher subsidies), and legislatively established (and inflation-indexed) per-meal subsidy rates. On the other hand, the WIC program is a "discretionary" grant program where specific annual appropriations to pay for benefits and nutrition services and administration are distributed by formula. In addition to the WIC program (and its ancillary farmers' market program), the child nutrition programs covered in this report include the School Lunch and Breakfast programs (providing federal subsidies for meals served in schools), day-care, summer and other outside-of-school programs assisting sponsors in providing meals/snacks, and payments to states covering administrative oversight costs, expenses for a Fresh Fruit and Vegetable program, the Special Milk program, and various support activities (e.g., various administrative oversight and nutrition education activities). The underlying laws covering child nutrition and WIC programs were last reauthorized in 2004 in the Child Nutrition and WIC Reauthorization Act (P.L. 108-265). The next reauthorization is scheduled for 2009. The Administration's FY2010 budget calls for increased funding of approximately $1 billion a year for child nutrition programs (for "program reforms aimed at improving program access, enhancing the nutritional quality of school meals, expanding nutrition research and evaluation, and improving program oversight"). This report will be updated as warranted by significant changes in the programs covered and major legislative initiatives.

Introduction On March 20, 2012, Representative Paul Ryan, the Chairman of the House Budget Committee, released the Chairman's mark of the FY2013 House budget resolution. Additional detail on budgetary objectives and justifications was provided in Chairman Ryan's report entitled "The Path to Prosperity: A Blueprint for American Renewal," issued the same day. The House Budget Committee considered the Chairman's mark on March 21, 2012, and voted 19-18 to report the budget resolution to the full House. H.Con.Res. 112 was introduced in the House March 23, 2012, and was accompanied by the House Budget Committee report ( H.Rept. 112-421 ). The House agreed to H.Con.Res. 112 on March 29, 2012, by a vote of 228 to 191. The House budget resolution sets general budgetary parameters. Among other things, it expresses the desired levels of spending for government health programs over 10 years (FY2013-FY2022), creates two health care-related reserve funds, and presents a policy statement regarding assumptions about future Medicare reforms. The budget resolution includes instructions for reconciliation to six committees, which are instructed to identify specified dollar amounts of deficit reduction. A budget resolution is not intended to establish details of spending or revenue policy and does not provide levels of spending for specific agencies or programs; it is not a law and is not signed by the President. Rather, the budget resolution provides the framework for the consideration of other legislation. While the House budget resolution suggests and assumes certain health care-related policy changes, separate legislation would need to be developed (by the committees of jurisdiction) and passed to actually modify federally funded health care programs. The Congressional Budget Office (CBO) was asked to provide an analysis of the long-term budgetary impact of Chairman Ryan's budget proposal, and issued its report on March 21, 2012. CBO was provided additional detail by the staff of the House Budget Committee regarding assumptions that should be made while conducting the analysis that were not included in the budget resolution language or the accompanying report. CBO's analysis, however, does not provide an official cost estimate for legislation that might implement the proposal, as it did not conduct its analysis using actual legislative language and was asked to provide an impact analysis beyond the 10-year budgetary window. To conduct its analysis, CBO used its most recent long-term projections, which are based on an extension of CBO's baseline forecasts issued in March 2012. In general, the budget proposal, as outlined in Chairman Ryan's "Path to Prosperity" report, in the committee report, and in CBO's analysis, suggests a change in the structure of the Medicare and Medicaid programs; the repeal of many of the provisions in the Patient Protection and Affordable Care Act as amended by the Health Care and Education Reconciliation Act of 2010 (ACA, P.L. 111-148 , P.L. 111-152 ), including those that establish insurance exchanges; and changes to tort law governing medical malpractice. This report provides a synopsis of the health care-related changes in Chairman Ryan's FY2013 budget proposal. This summary is based on the text of the Concurrent Resolution, the committee report, the FY2013 "Path to Prosperity" report, and the CBO analysis of the proposal. The collective details are referred to in this report as the "budget proposal" or Chairman Ryan's proposal. CRS provided a similar summary of the proposed health care changes included in the FY2012 House Budget in CRS Report R41767, Overview of Health Care Changes in the FY2012 Budget Offered by House Budget Committee Chairman Ryan . Medicare Medicare is the nation's federal insurance program that pays for covered health services for most persons 65 years old and older and for most permanently disabled individuals under the age of 65. Generally, individuals are eligible for Medicare if they or their spouse worked for at least 40 quarters in Medicare-covered employment, are 65 years old, and are a citizen or permanent resident of the United States. Individuals under the age of 65 may also qualify for coverage if they have a permanent disability, have End-Stage Renal disease, or have amyotrophic lateral sclerosis (ALS). In FY2012, the program will cover an estimated 50 million persons at an estimated total cost of $576 billion, accounting for approximately 3.6% of GDP. CBO estimates that federal Medicare spending (after deduction of beneficiary premiums and other offsetting receipts) will be about $492 billion in FY2012, accounting for about 13.7% of total federal spending. Medicare is an entitlement program, which means that it is required to pay for covered services provided to eligible persons so long as specific criteria are met. Spending under the program (except for a portion of the administrative costs) is considered mandatory spending and is not subject to the appropriations process. The Medicare program has four parts, each responsible for paying for different benefits, subject to different eligibility criteria and financing mechanisms. Part A (Hospital Insurance, or HI) covers inpatient hospital services, skilled nursing care, and home health and hospice care. The HI trust fund is mainly funded by a dedicated payroll tax of 2.9% of earnings, with employers and workers each paying 1.45%. (The self-employed pay 2.9%.) ACA added an additional 0.9% hospital insurance tax on high-income taxpayers beginning in 2013. Part B (Supplementary Medical Insurance, or SMI) covers physician services, outpatient services, and some home health and preventive services. The SMI trust fund is funded through beneficiary premiums (set at 25% of estimated program costs for the aged) and general revenues (the remaining amount, approximately 75%). High-income enrollees pay higher premiums, and certain low-income enrollees receive assistance with their premiums from Medicaid. Enrollment in Part B is voluntary, with over 90% of Medicare beneficiaries choosing this option. Part C (Medicare Advantage, or MA) is a private plan option for beneficiaries that covers all Part A and B services, except hospice. Individuals choosing to enroll in Part C must also enroll in Part B. Part C is funded through both the HI and SMI trust funds. About 12 million (25%) of Medicare beneficiaries are enrolled in MA. Part D covers outpatient prescription drug benefits. Funding is included in the SMI trust fund and is financed through beneficiary premiums (set to cover 25.5% of costs), with the rest paid for out of general revenues and state transfer payments. High-income enrollees pay higher premiums, and low-income enrollees may receive assistance from Medicare with premiums and cost sharing. This portion of the program is also voluntary; about 60% of eligible Medicare beneficiaries are enrolled in a Part D plan, while another 13% are enrolled in an employer plan subsidized by Medicare. Under traditional Medicare, Parts A and B, services are generally paid directly by the government on a "fee-for-service" basis, using different prospective payment systems or fee schedules. Under Parts C and D, private insurers are paid a monthly "capitated" amount to provide enrollees with at least a minimum standard benefit. Premium amounts may vary depending on which plan the enrollee selects. The capitated payment is adjusted to reflect the higher relative cost of older or sicker beneficiaries. Since its establishment in 1965, the Medicare program has undergone considerable change. Most recently, ACA made numerous changes to the Medicare program that modify provider reimbursements, provide incentives to improve the quality and efficiency of care, and enhance certain Medicare benefits. Short-Term Medicare Changes (FY2013-FY2022) Under CBO's Medicare baseline, net Medicare outlays are expected to total approximately $6.6 trillion over the next 10 years (FY2013-FY2022). The House budget resolution suggests total Medicare outlays of about 2% less than CBO's baseline over the same period. Because CBO's spending baseline is based on current law, its figures are based on the assumption that physician payment reductions and the 2% reduction in Medicare spending under Budget Control Act of 2011 sequestration requirements will both occur starting in 2013. Therefore, any reductions that are assumed under the proposed budget would be in addition to spending reductions already scheduled to occur (or to equivalent alternative spending reductions). The proposal did not suggest specific program changes that would reduce Medicare spending to this level over the 10-year period. The budget proposal also assumes a repeal of the Independent Payment Advisory Board (IPAB) created by the ACA (Section 3403, as modified by 10320). Under current law, beginning in 2014, the IPAB is required to develop proposals to reduce the Medicare per capita expenditure growth rate if Medicare spending is projected to exceed a certain target. CBO estimates that the repeal of IPAB would cost $3.1 billion over 10 years. No other ACA Medicare provisions were explicitly mentioned. In addition, the committee report ( H.Rept. 112-421 ) notes that the budget accommodates legislation that fixes the Medicare physician payment formula for the next 10 years. Specifically, Section 403 of H.Con.Res. 112 would provide procedural flexibility to allow for the consideration within the framework of the budget resolution of legislation that would reform the sustainable growth rate system (SGR), as long as the legislation did not increase the deficit for the period FY2013-FY2022. As a result of these reductions (and changes that begin in FY2023), CBO estimates that Medicare spending as a portion of GDP in 2023 would decrease from 3.75% under CBO's baseline to 3.50% under the budget proposal. Long-Term Medicare Changes (FY2023 and Beyond) Starting in 2023, the Ryan budget proposal would phase in an increase in the age of eligibility for Medicare and would convert the current Medicare defined benefits program to a fixed federal contribution. Assumptions regarding the broad parameters of the new system are outlined in Section 601, the "Policy Statement on Medicare," of H.Con.Res. 112 . The "Path to Prosperity" document and the House report offer more specificity on suggested changes. However, as previously noted, while a budget resolution may suggest broad policy changes, separate legislation would need to be developed by the committees of jurisdiction and enacted into law to effect such changes. Age of Medicare Eligibility The budget proposal would gradually increase the Medicare eligibility age to 67. Beginning in 2023, the age of eligibility for Medicare would increase by two months each year until it reached 67 in 2034. Younger individuals could still qualify on the basis of disability. Conversion of Medicare to a Premium Support System Under the Ryan budget proposal, current Medicare beneficiaries and individuals who become eligible for Medicare prior to 2023 (i.e., those who turn 55 in 2012), would remain in the current Medicare program (described earlier). Individuals who become eligible (based either on age or disability) for Medicare beginning in 2023 would be given the option of enrolling in a private insurance plan or a traditional fee-for-service option through a newly established Medicare exchange. These plans would be required to offer standard benefits that are at least actuarially equivalent to traditional fee-for-service benefits, and to accept all people eligible for Medicare who apply regardless of age or health status. All of the plans, including the traditional fee-for-service option, would engage in an annual competitive bidding process. The lower of the second-lowest approved plan bid or fee-for-service Medicare would be used to establish the amount of the subsidy (premium support) provided by Medicare and the base premium paid by Medicare beneficiaries. The amount of the subsidy would generally be the same regardless of the cost of the plan; so, for instance, if a beneficiary selects a plan whose bid is higher than the second lowest bid, the beneficiary would pay a higher premium to make up the difference between the subsidy and the base premium. Similarly, if the beneficiary enrolls in a plan that bid lower than the second-lowest approved bid, the beneficiary would be provided a rebate in the amount of the difference. The payments to plans would be geography-rated and risk-adjusted for health status. Additionally, based on annual risk reviews conducted by the Centers for Medicare and Medicaid Services (CMS), fees would be imposed on plans that enrolled a higher-than-average number of low-risk beneficiaries; those that enrolled a higher-than-average number of high-risk (expensive) enrollees would receive incentive payments funded by the fees from the low-risk plans. In 2023, the premium subsidy would be set at $7,500, on average. The amount of premium support provided to high-income individuals would be reduced. Low-income beneficiaries would be provided a dedicated savings account to be used to pay premiums, co-pays, and other out-of-pocket costs. The proposal suggests that program cost growth would be mitigated through the competitive bidding process; however, should that not occur, the proposal would limit annual per capita premium support increases to nominal GDP growth plus 0.5%. Should actual costs exceed this amount, Medicare beneficiaries would pay increased premiums to make up the difference. The proposal would limit the impact of these increases for low-income enrollees, with Medicaid continuing to pay for the out-of-pocket expenses for dual-eligibles (those who qualify for both Medicare and Medicaid), and additional funding would be provided in savings accounts for those who meet certain low-income limits but do not qualify for Medicaid. Under this premium support model, CBO estimates that by 2030, 39% of Medicare beneficiaries would be enrolled in this new system and thus subject to these new spending constraints, and by 2050, this number would increase to 91%. While average spending per Medicare beneficiary is still expected to increase through time, it would do so at a slower rate. For example, in 2050, under the new system, spending for new enrollees (67 years old) would be $11,100 per year (in 2011 dollars) compared with $17,000 under CBO's baseline scenario. Under this proposal, net federal Medicare spending as a share of GDP would be expected to grow from 3.25% in 2011 to 4.75% in 2050, compared with 6.50% in 2050 under CBO's baseline scenario (see Table 1 ). Those who support converting the current system to a premium support model note that it sets a limit for the federal portion of Medicare spending and that an overhaul of the Medicare program is needed in order to avoid a debt crisis. Supporters also suggest that the new system would add price incentives at the consumer level and plans would be incentivized to control costs in order to be competitive. Those who oppose the model express concerns over the potential for increased out-of-pocket spending for health care for the elderly, the potential for the erosion of benefit coverage, and reduced access to health care services. Some also maintain that the proposal does not address the main reason for the growth in Medicare spending (i.e., excessive costs in the health care delivery system). The impact of the proposed Medicare changes on the federal government, beneficiaries, and health care plans and providers would ultimately depend on how such a premium support system is designed and implemented. Numerous decisions, ranging from fundamental social policy decisions about the appropriate nature and level of federal financial support of the elderly to detailed administrative decisions, would need to be made before such a model could become operational. For example, decisions would need to be made regarding which parts of Medicare would be financed through premium subsidies, for example, would Parts A and B (and possibly D) and their trust funds be combined; would changes be made to the voluntary nature of Parts B and D (or could one opt out of Medicare entirely); and would beneficiary premiums be based on expected per capita Part B and D costs, or would they include the costs of Part A (which is now premium free for most enrollees). Decisions would also need to be made regarding whether Medicare Advantage would still be an option after 2023 for those currently age 55 and older or whether private plans would only be available through the exchanges, and whether the financial risk to private plans participating in the exchanges would be mitigated to encourage participation (e.g., Part D provides reinsurance for catastrophic costs and has risk corridors to limit losses). Additionally, as a final example, an administrative structure, including appropriate information technology systems, would need to be designed and established to support both traditional Medicare options and new options under the exchanges. Medicaid Medicaid is a means-tested entitlement program that finances the delivery of primary and acute medical services as well as long-term care. Medicaid is jointly funded by the federal government and the states. In FY2012, the Medicaid program will cover an estimated 67 million people at any point during the fiscal year, and federal Medicaid payments to states are estimated to reach $275 billion in FY2012. In a typical year, the federal government covers roughly 57% of the total cost for Medicaid. Federal Medicaid spending is expected to reach about 1.7% of GDP in FY2012. Each state designs and administers its own version of Medicaid under broad federal rules. While states that choose to participate in Medicaid must comply with all federal mandated requirements, state variability is the rule rather than the exception in terms of eligibility levels, covered services, and how those services are reimbursed and delivered. ACA makes changes along these dimensions for the Medicaid program. Some of the changes are mandatory for states, and others may be implemented at state option. Most notable of these provisions is the expansion of Medicaid eligibility for individuals under the age of 65 with income up to 133% of the federal poverty level. The unofficial estimate provided in Chairman Ryan's "Path to Prosperity" report states that the proposed budget would reduce federal outlays for Medicaid by about $810 billion over 10 years. When compared to CBO's baseline projection for federal Medicaid spending, the proposal would reduce federal Medicaid outlays by 17.6% from FY2013 to FY2022. According to CBO's long-term analysis of the proposal, when compared with long-term estimates of current law, combined federal spending for Medicaid, the State Children's Health Insurance Program (CHIP), and the exchange subsidies will be 76% to 78% lower in FY2050. Since spending on CHIP and exchange subsidies is expected to be small relative to federal spending on Medicaid over this time period, most of the reduction will come from the Medicaid program. Table 2 shows a comparison of projected federal spending on Medicaid, CHIP, and exchange subsidies as a percentage of GDP under CBO's extended baseline scenario, CBO's extended alternative fiscal scenario, and Chairman Ryan's proposal. By 2023, under Chairman Ryan's proposal, Medicaid and CHIP spending would comprise 1.25% of GDP, while under both CBO scenarios federal spending on Medicaid, CHIP, and exchange subsidies would total 3.00% of GDP. Repeal of Certain Medicaid Provisions in ACA The Medicaid provisions of ACA represent the most significant reform to the Medicaid program since its establishment in 1965. In general, ACA (1) raises Medicaid income eligibility levels for nonelderly individuals up to 133% of the federal poverty level, (2) adds both mandatory and optional benefits to Medicaid, (3) increases the federal matching payments for certain groups of beneficiaries and for particular services provided, (4) provides new requirements and incentives for states to improve quality of care and encourage more use of preventive services, and (5) makes a number of other Medicaid program changes. The major expansion and reform provisions in ACA are slated to take effect in 2014. One of the "illustrative policy options" offered in the House Budget Committee report ( H.Rept. 112-421 ) includes repealing the Medicaid expansion included in ACA. Conversion of Medicaid to a Block Grant System Another "illustrative policy option" included in the House Budget Committee report ( H.Rept. 112-421 ) is restructuring Medicaid from an individual entitlement program to a block grant program. Few details are available regarding the specific design of the proposed block grant. The proposal indicates that (1) federal funding to states would increase annually according to inflation (CPI-U) and population growth, and (2) states would be provided additional flexibility to design and administer their Medicaid programs. Proponents of the block grant model suggest that this design would make federal Medicaid spending more predictable and provide states with stronger incentives to control the cost of their Medicaid programs. Additionally, this design could relieve some of the cost burden to states by removing certain federal Medicaid requirements. According to CBO, the implications of converting Medicaid to a block grant program would depend on how states respond to the change. With the added flexibility provided under Chairman Ryan's proposal, states could improve the efficiency of their Medicaid programs. However, even with significant efficiency gains, the magnitude of the federal Medicaid spending reductions under this proposal would make it difficult for states to maintain their current Medicaid programs. As a result, states would have to weigh the impact of maintaining current Medicaid service levels against other state priorities for spending. They could choose to constrain Medicaid expenditures by reducing provider reimbursement rates, limiting benefit packages, and/or restricting eligibility. These types of programmatic changes could also affect the access to and the quality of medical care for Medicaid enrollees. For example, if states reduce the Medicaid reimbursement rates to providers, such as hospitals, physician, and nursing homes, these providers may be less willing to participate in Medicaid at all or accept new Medicaid patients. Private Health Insurance Private health insurance covers over 195 million people in the United States. Workers and their families often receive health insurance as a fringe benefit from their employers. Some individuals and families purchase private insurance on their own, where premiums and benefits may be based on health status and may be more limited than in the employer market. Reflecting the attributes of these different "customers" for insurance (larger firms, smaller firms, and individuals), the private health insurance market is made up of three different segments: the large group market, the small group market, and the nongroup (individual) market. Each of these market segments offer distinct insurance products, and each is subject to different regulatory standards. Traditionally, the primary regulators of private insurance have been the states. However, overlapping federal requirements complicate the regulation of this industry and enforcement of insurance standards. ACA's private market provisions were designed to expand federal standards applicable to the private health insurance market, and increase access to coverage, such as establishment grants for the creation of state-based exchanges to offer private health insurance options to individuals and small employers. The law also increases access to health insurance coverage by subsidizing private insurance premiums and cost-sharing for certain lower-income individuals enrolled in exchange plans, among other provisions. These costs are projected to be offset by reduced spending for public coverage, and by increased taxes and other revenues. ACA creates several programs to increase access and funding for targeted groups, including establishment of temporary high-risk pools for uninsured individuals with preexisting conditions, and funding for non-profit organizations offering coverage to small businesses and individuals. Other private insurance provisions include those that build on the state-based regulatory system, such as the review of proposed increases of health insurance premiums, and programs to mitigate risk across health plans (such as risk adjustment and reinsurance). Repeal of Certain Private Health Insurance Provisions in ACA H.Con.Res. 112 contains a reserve fund (Section 401) that would provide procedural flexibility to allow for the consideration of legislation that would repeal ACA as amended. Moreover, one of the "illustrative policy options" included in the House Budget Committee report is repeal of the "exchange subsidies created by the new health care law." The unofficial estimate provided in the "Path to Prosperity" report states that more than $800 billion would be saved over 10 years (beginning FY2013) due to the repeal of the exchange subsidies and other implementation-related funding. More specifically, the repeal of funding would extend beyond the premium tax credits and cost-sharing subsidies established under ACA for certain exchange enrollees. The savings estimate also includes the grants to states for the establishment of exchanges and review of proposed premium increases, temporary high risk pools, funding program for non-profit health organizations, and payments for risk adjustment and reinsurance. Other Health Care Proposals Medical Malpractice Medical malpractice has attracted congressional attention numerous times over the past few decades, particularly in the midst of three "crisis" periods for medical malpractice liability insurance in the mid-1970s, the mid-1980s, and the early 2000s. These periods were marked by sharp increases in medical liability insurance premiums, difficulties in finding any liability insurance in some regions and among some specialties as insurers withdrew from providing coverage, reports of providers leaving areas or retiring following insurance difficulties, and a variety of public policy measures at both the state and federal levels to address the market disruptions. In each case, attention receded to some degree after a few years as premium increases moderated and market conditions calmed. The overall medical liability insurance market is not currently exhibiting the same level of crisis as in previous time periods. Nonetheless, problems with the affordability and availability of malpractice insurance persist, especially in particular regions and physician specialties (e.g., obstetricians). In addition, concern about claims for medical malpractice may affect individual provider decisions, particularly through increased use of tests and procedures to protect against future lawsuits ("defensive medicine"), which may affect health care costs. The malpractice system also experiences issues with equity and access. For example, some observers have criticized the current system's performance with respect to compensating patients who have been harmed by malpractice, deterring substandard medical care, and promoting patient safety. According to the Ryan "Path to Prosperity" report, the budget proposal assumes reforms to tort law governing medical malpractice, including a cap on awards for noneconomic damages and deterrents to frivolous lawsuits. Other Health Reforms The "Path to Prosperity" report also suggests that the budget proposal assumes the following changes: individuals would be allowed to buy health insurance across state lines, the availability of consumer-directed health plans would be expanded, and employees would be provided with the option to use their employer's health coverage contribution toward other coverage options.

On March 20, 2012, House Budget Committee Chairman Paul Ryan released the Chairman's mark of the FY2013 House budget resolution together with his report entitled "The Path to Prosperity: A Blueprint for American Renewal," which outlines his budgetary objectives. On the same day, CBO issued an analysis of the long-term budgetary impact of Chairman Ryan's budget proposal based on specifications provided by House Budget Committee staff. The House Budget Committee considered and amended the Chairman's mark on March 21, 2012, and voted to report the budget resolution to the full House. H.Con.Res. 112 was introduced in the House March 23, 2012, and was accompanied by the committee report H.Rept. 112-421. H.Con.Res. 112 was agreed to by the House on March 29, 2012. A budget resolution provides general budgetary parameters; however, it is not a law. Changes to programs that are assumed or suggested by the budget resolution would still need to be passed by separate legislation. Chairman Ryan's budget proposal, as outlined in his report and in the CBO analysis, suggests short-term and long-term changes to federal health care programs including Medicare, Medicaid, and the health insurance exchanges established by the Patient Protection and Affordable Care Act as amended (ACA, P.L. 111-148, P.L. 111-152). Within the 10-year budget window (FY2013-FY2022), the budget proposal assumes that certain ACA provisions would be repealed, including those that expand Medicaid coverage to the non-elderly with incomes up to 133% of the federal poverty level, and those provisions that establish health insurance exchanges. The proposal would also restructure Medicaid from an individual entitlement program to a block grant program. Beyond the 10-year budget window, beginning in 2023, the budget proposal assumes an increase in the age of eligibility for Medicare and the conversion of Medicare to a fixed federal contribution program. This report summarizes the proposed changes to Medicare, Medicaid, and private health insurance as described in H.Con.Res. 112, the accompanying committee report, Chairman Ryan's "Path to Prosperity" report, and the CBO analysis. Additionally, it briefly examines the potential impact of the proposed changes on health care spending and coverage.

Introduction Companies turn to a variety of sources to access the funding they need to grow. Capital markets are the largest source of financing for U.S. nonfinancial companies, representing 65% of all financing for such companies in 2016 ( Figure 1 ). Capital markets are segments of the financial system in which funding is raised through equity or debt securities. Equity, also called stocks or shares, refers to ownership of a firm. And debt, such as bonds, refers to the indebtedness or creditorship of a firm. In addition to capital markets, companies obtain funding from bank loans (13%) and other financing (23%). U.S. capital markets are considered the deepest and most liquid in the world. U.S. companies are more reliant on capital markets for funding than companies in the euro area, Japan, or China, which rely more on bank loans (see Figure 1 ). Access to capital allows businesses to fund their growth, to innovate, to create jobs, and to ultimately help raise society's overall standard of living. Given the importance of U.S. capital markets and their role in allocating funding, issues affecting the markets generally warrant policy attention. Some of the most discussed recent trends include the decline in the number of public companies and the increased tendency of public capital to concentrate in larger companies. In addition, there are indications that private capital—which has less regulation and information disclosure—is growing in usage. Also of concern is the emergence of financial technology that both enables new methods of capital formation and poses significant regulatory challenges. To address some of the trends mentioned above, Congress passed the Jumpstart Our Business Startups Act of 2012 (JOBS Act; P.L. 112-106 ; see text box below), which established a number of new options for expanding capital access especially for smaller companies. As discussed later in this report, some of the changes made by the JOBS Act have been successful in facilitating capital formation, but in other areas the same concerns remain. In response, the 115 th Congress has considered many proposals to boost capital markets, including S. 488, a capital formation package that consists of 32 titles that have mostly already passed the House with bipartisan support as standalone bills. Originally a relatively narrow bill, S. 488 was passed by the Senate before being amended significantly and passed by the House. The package has been referred to as JOBS Act 3.0, taking into account the initial JOBS Act in 2012 and the financial services provisions signed into law as part of the Fixing America's Surface Transportation Act (P.L. 114-94; parts of which are referred to as JOBS Act 2.0). Seven provisions in S. 488 are discussed in this report and were previously introduced as standalone legislation: H.R. 1585, H.R. 1645, H.R. 3903, H.R. 3972, H.R. 5970, H.R. 6324, and H.R. 6380. This report provides background and analysis on proposals related to capital formation through the two main ways of raising capital—public and private offerings—and the regulatory environment in which they operate. The report also explores key policy issues and their connection to legislative discussions. It provides general background for more than a dozen current legislative proposals, allowing for discussion of each proposal within its own policy context as well as providing a framework for viewing the proposals in aggregate. For easy navigation, legislative proposals are highlighted in text boxes within each relevant policy issue section. Raising Capital Through Securities Offerings As the principal regulator of U.S. capital markets, the Securities and Exchange Commission (SEC) requires that offers and sales of securities—whether debt or equity—either be registered with the SEC or be undertaken with an exemption from registration. Companies seeking funding through securities offering are referred to as issuers . Registered offerings, often called public offerings , are available to all types of investors and are not limited in the amount of funds that can be raised or resold. Registered offerings include a significant amount of disclosure about the company (the issuer), its financial status, and the funds that are being raised. A key attribute of public securities offerings is investors' ability to resell the securities on public secondary markets through national exchanges to all investor types. By contrast, securities offerings that are exempt from SEC registration are referred to as private offerings , private placements , or unregistered offerings . They are mainly available to those perceived to be more sophisticated financial institutions or individual investors thought to be better positioned to absorb the risk and make informed decisions with the reduced information disclosed in a private offering. Because of the restrictions on who may purchase them, private offerings generally do not trade on stock exchanges. In general, private offerings provide firms with more control over their internal affairs and lower compliance costs, whereas public offerings provide broader access to potential investors. Public Offerings Public offerings consist of initial public offerings (IPOs), the first time a company offers its shares of stock to the general public in exchange for cash, and subsequent public offerings. The IPO process, which is the source of much of the policy debate surrounding public offerings, is commonly regarded as the turning point for companies "going public." By going public, a company's shares can be owned by the public at large rather than just by the original owners, venture capital funds, and the relatively small pool of those perceived to be more sophisticated investors. SEC registration, which is a key requirement for going public, enables public disclosure of key company financial information. Companies may choose to go public to access capital that would allow founders to cash out their investments, to provide substantial stock and stock options to employees and through management incentive plans, and to fuel the company's future growth. Public companies may also benefit from a "liquidity premium," which translates into better share pricing compared with stock from comparable private offerings. Other potential benefits include publicity and brand awareness. There are also a number of drawbacks to going public. From an issuer's perspective, two of the most discussed drawbacks are compliance costs and certain changes to business operations. Compliance Costs. Some believe the costs of registration are disproportionately burdensome for small and medium-sized businesses, including startup firms. The direct costs include underwriting, external auditing, legal fees, and financial reporting fees. Business Operations. Public companies are often perceived to face incremental market pressure to perform well over the short term, to reduce insider control and decisionmaking flexibility, and to contend with increased shareholder activism (which sometimes can benefit a firm financially). Some research has indicated that going public can adversely affect corporate innovation; however, there are also many examples of innovative public companies. Initial Public Offering An IPO is the first time a company offers its shares of capital stock to the general public. An IPO gives the investing public the opportunity to own and participate in the growth of a formerly private company. The process begins with the company's selection of underwriters, lawyers, and accountants to prepare for the issuance of the securities, and, along with the company's top executives, they form an IPO working group. The process generally consists of three phases. P re f iling P eriod . As part of an IPO, a company must file a registration statement and other documents that contain information about the company and the funds it is attempting to raise. During the prefiling period, the public filings are prepared and the planning begins with a thorough review of the company's operations, procedures, financials, and management, as well as its competitive positioning and business strategy. The disclosure documents serve the dual purpose of satisfying SEC registration requirements and communicating with investors. W aiting P eriod . Once the key disclosures are filed, the company waits for the SEC to review and provide approval of its draft registration statements. The company then concurrently addresses SEC comments and prepares roadshow presentations as well as legal documents. Roadshows are presentations made by an issuer's senior management to market the upcoming securities offering to prospective investors. Roadshows can commence only after the filing of registration statements because Section 5(c) of the Securities Act prohibits public offers of securities prior to the filing of a registration statement. P os t effective P eriod . The actual sales to investors take place after the SEC declares that the IPO registration is effective. The posteffective period extends from the effective date of the registration statements to the completion of distribution of the securities. With the completion of the IPO, a security generally continues to trade on a stock exchange. IPO On-Ramp and Emerging Growth Company Title I of the JOBS Act established streamlined compliance options for companies that meet the definition of a new type of issuer, called an emerging growth company (EGC). The streamlined process available to an EGC is also referred to as the "IPO On-Ramp," because it is a scaled-down version of a traditional IPO. This new process reduces regulatory requirements for companies to go public. To qualify as an EGC, an issuer must have total annual gross revenues of less than $1 billion during its most recently completed fiscal year. EGCs maintain their status for five years after an IPO or when their gross revenue exceeds $1 billion, whichever occurs first, among other conditions. Relative to a standard IPO, EGCs' IPOs can take advantage of the following forms of relief: Scaled disclosure requirements in which EGCs (1) need to provide two years of financial statements certified by independent auditors, instead of three years for a traditional IPO; and (2) are not required to provide compensation committee reports, among other things. EGCs are exempted from auditor attestations of internal control over financial reporting that are required by Sarbanes-Oxley Act Section 404(b). "Test-the-waters" communications mean EGCs may meet with qualified institutional buyers and institutional accredited investors to gauge their interest in a potential offering during the registration process, an activity prohibited during a normal IPO. A confidential SEC review process allows companies to submit draft registration statements to the SEC for a confidential review prior to making the filings public. While initially limited to EGCs, the SEC expanded this benefit to all companies as of July 10, 2017. Whereas the first two compliance-related forms of relief would appear to generate cost savings for all EGC status holders, the test-the-waters and confidential review features may be especially valuable for companies in industries where valuation is uncertain and the timing of the IPO depends on regulatory or other approval (e.g., the biotech and pharmaceutical industries). The ability to submit confidentially and to "test-the-waters" with prospective investors can provide additional flexibility to company issuers. EGCs that take advantage of these can either continue the IPO process or withdraw after receiving feedback from the SEC and prospective investors, prior to making public disclosures. Following the SEC's expansion of the confidential review option to all companies, most companies now use the process to incorporate feedback prior to public disclosure and announcement. IPO processes that used to take up to seven months from announcement to trading now take less than 50 days, with the reduced time due mostly to shifting of the review time to prior to announcements. Private Offerings Both public and private companies could conduct private offerings to offer or sell securities in accordance with registration exemptions under the Securities Act. To raise capital through a private offering, a company must use one of the key registration exemptions under federal securities laws, including the following: Regulation D is the most frequently used exemption to sell securities in unregistered offerings. Companies relying on a Regulation D exemption do not need to register their offerings with the SEC, but they face limitations regarding investor type and resale restrictions of their offerings. Regulation D includes two SEC rules—Rules 504 and 506, which provide different maximum offering amounts, among other conditions. Regulation A facilitates capital access for small to medium-sized companies. It has fewer disclosure requirements than the conventional securities registration process. Due to the JOBS Act, Regulation A was updated in 2015 with a two-tiered structure (Regulation A+) to exempt from registration offerings of up to $50 million annually, if specified requirements are met. Regulation Crowdfunding permits companies to offer and sell securities through crowdfunding, which generally refers to the use of the internet by small businesses to raise capital through limited investments from a large number of investors. Rule 144 A is for resale transactions only. Issuers generally use it in a two-step process to first facilitate an offering on an exempt basis to financial intermediaries, and then resell to qualified institutional buyers, or QIBs (corporations deemed to be accredited investors). Rule 147 A permits companies to raise money from investors within their home state by registering at the state level, without concurrently having to register the offers and sales at the federal level. Regulatory Framework for Capital Markets Regulatory Entities and Approaches U.S. capital markets are mainly regulated by the Securities and Exchange Commission (SEC), state securities regulators, self-regulatory organizations (SROs), and the Commodity Futures Trading Commission (CFTC), which generally regulates derivatives markets. As the principal regulator of capital markets, the SEC is responsible for overseeing significant parts of the nation's securities markets and certain primary participants such as broker-dealers, investment companies, investment advisors, clearing agencies, transfer agents, credit rating agencies, and securities exchanges, as well as SROs such as the Financial Industry Regulatory Authority (FINRA), Municipal Securities Rulemaking Board (MSRB), and Public Company Accounting Oversight Board (PCAOB). The SEC uses a combination of rules, enforcement, and examinations to construct a three-pronged regulatory approach that focuses on (1) disclosure-based rules, (2) an antifraud regime, and (3) rules governing securities market participants (for example, exchanges, broker-dealers, and investment advisors). Securities Disclosure Through Registration One of the cornerstones of securities regulation—the Securities Act of 1933—is often referred to as the "truth in securities" law. As the phrase suggests, disclosures pertaining to securities allow investors to make informed judgments about whether to purchase specific securities by ensuring that investors receive financial and other significant information on the securities being offered for public sale. The SEC does not make recommendations as to whether to invest. The disclosure-based regulatory philosophy is consistent with Supreme Court Justice Louis Brandeis's famous dictum that "sunlight is said to be the best of disinfectants; electric light the most efficient policeman." As mentioned previously, the types of disclosure vary based on whether a company is making a public or private offering. For public companies, the registration process requires companies to file with the SEC essential facts, including financial statements certified by independent accountants, information about the management of the company, a description of the security to be offered for sale, and a description of the company's properties and business. Registration statements generally become public shortly after the company files them with the SEC. As such, registering an offering with the SEC would make a company a public company. Private offerings also involve a registration process, but the process is scaled back, and these offerings are generally limited to more sophisticated investors who are perceived as better positioned to comprehend or tolerate the risks associated with less disclosure. For more on disclosure, see the " Disclosure Requirements " section of this report. Securities and Banking Regulation Compared Capital market regulation differs from banking regulation in its regulatory philosophy and structural setup. Stocks, bonds, and other securities are not guaranteed by the government and can lose value for investors. As such, the SEC's primary concerns are promoting the disclosure of important market-related information, maintaining fair dealing, and protecting against fraud. This is designed to help investors make informed investment decisions. Although the SEC requires that the information provided be accurate, it does not guarantee it. Investors who purchase securities and suffer losses have recovery rights if they can prove incomplete or inaccurate disclosure of important information. Banking regulation's prudential regulatory approach, on the other hand, emphasizes risk control and mitigation for the safety and soundness of individual institutions as well as the financial system as a whole. One rationale behind banking regulation is that, because bank deposits are guaranteed by the federal government, banks may have an incentive to take additional risks that they would not take in the absence of insurance on deposits. The government examines the operations of banks to safeguard taxpayer money and ensure that banks are not taking excessive risks. These two different approaches have led to different agency designs and budget allocations. For example, banking regulators are heavily focused on examination programs that closely monitor and oversee financial institutions' operations and risk mitigation methods. One of the major banking regulators, the Federal Deposit Insurance Corporation, allocates half of its annual budget toward mostly examination-based supervision and consumer protection programs. SEC regulation, in contrast, relies less on examinations. The SEC cedes certain examinations to SROs like FINRA and focuses its own examinations on selected priority areas, instead of a broader examination coverage of all securities issuers. Policy Issues Some in Congress have called for modifying capital market regulations to make it easier for companies to raise capital. They argue that the existing regulatory structure unnecessarily restricts access to capital markets, making it more difficult for companies to grow and create jobs. Others have argued that certain approaches to expanding capital market access could put investors at risk of making uninformed decisions or becoming victims of fraud and other abuses. This section analyzes key policy issues in public and private capital markets and assesses proposals to facilitate access to capital in each segment. In addition, emerging financial technology ("fintech") issues related to crowdfunding and initial coin offerings are also analyzed. Crosscutting Themes For many of the proposals discussed below, two themes apply—the relationship between capital formation and investor protection, and a scaled regulatory approach. The section starts with an explanation of each. Capital Formation and Investor Protection The policy debate surrounding efforts to promote capital access illustrates the perceived tradeoffs between investor protection and capital formation, two of the SEC's statutory mandates. Expanding capital access promotes capital formation and arguably "democratizes" capital markets by allowing for greater access to investment opportunities for more investors. Investor protection is considered to be important for healthy and efficient capital markets because some research suggests that investors would be more willing to provide capital, and even at a lower cost, if they have faith in the integrity and transparency of the underlying markets. Maintaining a balance between these two goals can pose challenges for policymakers. For example, capital formation needs may be better met if issuers could choose their preferred methods of fundraising without regard to SEC registration. This is because the registration process raises the costs of accessing securities markets, which could potentially deter investment activities and reduce funding to businesses. At the same time, the reduced disclosure may expose retail investors of limited financial means to additional risks if they are not aware of key risk factors prior to making investment decisions (see " Investor Access to Private Offerings " for a discussion of "accredited investors"). A Scaled Regulatory Approach The relationship between public and private offerings used to be more clearly defined; registration requirements were generally more substantial for public offerings than for private offerings prior to the 2012 JOBS Act. The public and private offering dichotomy started to blur following the JOBS Act, offering a more scaled regulatory approach. The act created a number of "hybrid" offerings that incorporate design features of both public and private offerings. The most obvious example is Regulation A+, a private offering that could potentially trade on public exchanges to a greater extent. As such, capital access regulation is less "one size fits all" than before, though the debate about whether regulation has been appropriately tailored is ongoing. Table 1 highlights a number of key attributes that determine each securities offering's capital access capacity. These attributes should not be viewed in isolation, as they work together to form a holistic design for meeting each offering's policy goal. Below are examples of key attributes of major offering programs. Maximum O ffering A mount . This is the upper limit of the offering program. For example, Regulation Crowdfunding currently has a size limit of around $1 million for any given year, limiting the program to smaller firms. In contrast, public offerings have no maximum amount, but issuers must undergo full disclosure. Filing R equirements . As mentioned previously, disclosure is at the core of securities regulation and is also the dividing point between public and private offerings. Generally, a higher level of disclosure (which may be associated with higher costs) leads to larger offering size limits and broader investor access, as well as reduced resale restrictions. Nonaccredited I nvestor A ccess . This attribute limits the kinds of investors allowed to participate in an offering. Generally, the higher the amount of disclosure, the more open an offering is to nonaccredited investors, who are perceived as less sophisticated. Resale R estrictions . R esale pertains to owners of securities transferring ownership to others for cash. Resale restrictions determine whether the instruments could enter secondary markets. Resale capability is a given for publicly traded shares, but for private offerings, resale is generally restricted. For example, the private offering with the largest volume—Regulation D—faces resale restrictions, meaning investors have fewer exit options. Preemption of S tate R egistration or Q ualification . States impose certain securities regulations concurrent with SEC regulations. Certain offering programs—for example, Regulation A-Tier 1—face requirements to register securities with the states, which have regulatory responsibility and expertise over small and local securities. This could be challenging and costly for issuers if the offering operates in multiple states, each with different registration requirements. In contrast, Regulation A-Tier 2, Regulation D-Rule 506, and Regulation Crowdfunding preempt state laws. The various attributes are structured so as to create a relatively tailored system in which smaller companies have available to them less burdensome approaches to raising capital. In a 2017 public speech, SEC Chairman Jay Clayton emphasized the importance of a scaled regulatory approach in securities regulation. Recently, Congress and the SEC have taken significant steps to further develop a capital formation ecosystem that includes a scaled disclosure regime. Now, for example, a small company may begin with a Regulation A mini-public offering of up to $50 million, then move to a fully registered public offering as a smaller reporting company (EGC), and eventually develop into a larger, more seasoned issuer (Full-disclosure IPO). This is a potentially significant development and I believe there remains room for improving our approach to the regulation of capital formation over the life cycle of a company—to be clear, improvements that also serve the best interests of long-term retail investors. Reflecting the same consideration for companies of different sizes and needs, the 115 th Congress is considering a number of legislative proposals to further expand this scaled approach, building on existing JOBS Act measures. Many of the proposals either modify the attributes listed in Table 1 so as to expand a particular type of offering or to create new types of offerings. Examples of these proposals are presented in text boxes throughout the remainder of this report. Facilitating Public Offerings Once a company goes through SEC registration and public disclosure, it is generally referred to as a public company. A public offering was traditionally viewed as a significant funding source for growing companies, but its importance has generally deteriorated in the last two decades. The number of U.S.-listed domestic public companies has declined by half from the previous peak in the mid-1990s, as seen in Figure 2 , whereas listings rose by half in other developed countries over the same time period. According to data provider Dealogic, U.S. IPOs raised $49.3 billion through 189 offerings in 2017, more than double 2016's level of $24.2 billion raised through 111 offerings. Nevertheless, 2017's number of IPOs remains far below the pre-1999 average of 547 IPOs per year ( Figure 3 ), though there is some debate as to whether the period around the dot-com bubble of the late 1990s is the best comparison. The companies that fundraise through public offerings are increasingly large companies. The average size of public companies has grown four-fold between 1996 and 2017. As of early 2017, more than half of all U.S. market capitalization was held by around 140 companies with $50 billion or more in market value. Around 29% of total market capitalization was held by the largest 1% of public companies. The average market capitalization of a U.S.-listed company was $7.3 billion as of early 2017, compared to $1.8 billion (inflation adjusted) in 1996. In addition, aggregate market capitalization in 2014 and 2015 remained close to the all-time high ( Figure 2 ). These trends indicate that although the absolute number of publicly listed companies has decreased, their average size has increased (through mergers, acquisitions, organic growth, or delisting of smaller public companies), aggregating to a total market capitalization that has showed no signs of decline in recent years. Research indicates that smaller-company IPOs were down substantially prior to the JOBS Act ( Figure 3 ), and that smaller firms are particularly likely to experience losses and earn lower returns. Following enactment of the JOBS Act, smaller companies' relative difficulty accessing capital through public offerings improved somewhat through the EGC program (as discussed in the " Expansion of "IPO On-Ramp"—Emerging Growth Company Status " section of this report). However, some argue that the total number of IPOs has not increased significantly following enactment of the JOBS Act and is still below its long-term average, suggesting that improvements are not meaningfully reflected in the number of IPOs. Although there is a general consensus that regulatory relief could reduce entry barriers and the costs of going public, disagreement persists regarding the nature of the decline in the number of IPOs and whether the issue warrants regulatory intervention. Some argue that companies' decisions to shift from public offerings to private offerings are a structural change within the economy that does not require a regulatory fix. Others argue that the IPO decline is a consequence of the high costs of disclosure—an issue that could be remedied by policy. The main arguments concerning the IPO decline are summarized below. Regulatory Explanations Regulatory Compliance. Some argue that increased regulation can have unintended consequences for companies trying to access capital. Specifically, critics of securities regulation point to laws and regulations enacted during the past two decades that have significantly affected the amount of public company compliance requirements. These laws and regulations include National Association of Securities Dealers (NASD) order-handling rules (1996); the 1999 passage of the Gramm-Leach-Bliley Act ( P.L. 106-102 ); the Regulation Fair Disclosure (2000); the launch of decimalization (2001); the Sarbanes-Oxley Act (2002; P.L. 112-106 ); the 2003 Global Settlement ruling restricting conflicts of interest between equity research and investment banking; the Regulation National Market System (2005); and the Dodd-Frank Act (2010; P.L. 111-203 ), among others. ( Figure 3 ). Costs of Going Public . According to the IPO Task Force, public companies in 2011 faced a one-time initial regulatory compliance cost of around $2.5 million and annual ongoing compliance costs of $1.5 million. These costs may outweigh the benefits and discourage some companies from going public. "Deregulation" of Private Offerings. Some argue that the increased disclosure obligations for public companies coupled with the "unleashing" of investors in the "disclosure-lite" private markets have contributed to the increased use of private offerings as an alternative to public offerings, resulting in a decline in the number of public companies.  According to the Wall Street Journal and data provider Dealogic, U.S. companies raised $2.43 trillion privately in 2017, around $0.36 trillion or 17% higher than the $2.06 trillion raised from public markets. The 2017 volumes represent the widest differential between the two methods since private capital reportedly surpassed public capital in 2011 ( Figure 4 ). Structural Explanations Economies of " Scope . " Economies of scope may exist when it is more efficient for smaller companies to be acquired than to operate as standalone entities. Some argue that long-term structural changes in product markets have led to declining profitability for smaller companies, whether public or private. In addition, even after going public, smaller companies are said generally to have low liquidity and limited analyst coverage, leaving them unable to reap the full benefits of public listing. These interpretations coincide with increased merger and acquisition activities, which some observers identify as being largely responsible for the delisting of public companies over the last decade. Market Infrastructure . Some observers argue the market infrastructure needed to support smaller IPOs—such as specialized investment banks and analyst coverage of smaller public companies—is lacking, especially when compared to the market infrastructure for larger IPOs. Agency Conflict. Agency conflict refers to the conflict between owners and managers over the control and use of corporate resources—conflicts that can potentially undermine corporate financial health and efficiency. In corporate finance, the owners of firms are generally referred to as stockholders . Some argue that some organizations may choose to rely more heavily on public and private debt, rather than public equity, thus potentially avoiding certain agency conflict issues because of the absence of public stockholders. As such, capital funding through private offerings could reduce agency conflicts for those companies and generate operational efficiency and productivity. Financial Globalization. Financial globalization refers to the ease by which capital can flow around the world to find its most valued use. Financial globalization has increased significantly as countries have removed barriers to capital flows and new tools have facilitated cross-border investments. Several recent studies show that although the rest of the world has witnessed more IPOs due to greater financial globalization, U.S. IPO activity has not similarly benefited. A related study does not directly attribute U.S. IPO decline to financial globalization; however, it explains U.S. decline in relative terms when compared to the rest of the world. It is also evident that the global capital flow could affect the demand and supply dynamics of the U.S. domestic capital markets, thus impacting IPO-related capital needs. In response to issues relating to public offerings, the 115 th Congress is considering further expansion of EGC benefits as well as other regulatory-relief proposals, including amendments to disclosure requirements and the expansion of certain preemptions to state "blue sky" laws. The following sections analyze several of these proposals. Expansion of "IPO On-Ramp"—Emerging Growth Company Status As noted previously, to address the decline in the number of IPOs over the last two decades and to reduce barriers preventing smaller companies from accessing public offerings, the bipartisan JOBS Act of 2012 created a scaled-down alternative to standard IPOs for smaller companies that meet the criteria to be deemed emerging growth company (EGC) issuers. This streamlined process is referred to as an IPO On-Ramp. The IPO On-Ramp is a widely used JOBS Act provision. Around 87% of firms filing for an IPO after April 2012 were EGCs, meaning that only 13% of all IPOs since April 2012 were still subject to the conventional IPO process. Key EGC features—for example, the option to obtain confidential SEC review prior to public disclosure and elect for reduced disclosure of audited financials—are features adopted by the majority of IPO firms through the EGC status ( Figure 5 ). Following the rapid adoption of EGC status, new proposals in the 115 th Congress would further expand the length of time an EGC could maintain its status, and would also expand certain EGC benefits to all IPOs. Proponents of regulatory relief stated that the EGC regime has enabled deeper capital formation without sacrificing investor protection, arguing that many private companies are still reluctant to go public, and suggesting further action. Some proponents believe the EGC program serves as a model for additional capital-formation-related regulation. As mentioned in the " Raising Capital Through Securities Offerings " section of the report, the test-the-waters and confidential-review features of the EGC framework can be particularly valuable for companies in industries where stock valuation is uncertain and the timing of the IPO depends on regulatory or other approval. For example, biotechnology and pharmaceutical industries reportedly have especially benefited from the EGC status. An executive from one biotechnology company that went public as an EGC testified in support of further expanding the EGC program, noting that 212 emerging biotech companies went public under EGC status as of March 2017, relative to 55 biotech IPOs in the five years leading up to the JOBS Act. The company argued this makes the EGC framework a significant capital access tool for biotechnology innovation. Critics point to the lighter regulatory standards under EGC, on top of other disclosure-related investor protection risks. They believe EGC is a regulatory label indicating lighter standards for listing. The EGC regime, they argue, appears to have enabled many relatively financially weak companies to conduct IPOs. The opponents believe that EGC companies tend to be lower in quality from a listing and investment perspective. In addition, these companies experienced underpricing relative to similarly sized companies prior to the JOBS Act. Underpricing refers to IPOs that are issued at below market value, leaving less money to fund company growth. Disclosure Requirements SEC registration and disclosure are at the core of securities regulation. They are also central components of securities valuation and price discovery. Firms need capital and investors need information to evaluate investment conditions. Issuers have incentives to disclose information if they are to compete successfully for funds against alternative investment opportunities. Consistent with this understanding, early research shows that voluntary disclosure reduces firms' cost of capital. Early evidence also shows that firms voluntarily disclose significant amounts of information beyond what is mandated by securities regulators. Despite the strong support of required and even voluntary disclosure identified in earlier research, current debates about disclosure are more focused on disclosure costs and information overload. As discussed previously, issuers currently have to provide a significant amount of disclosure of company information throughout the SEC registration process. The SEC requires that offers and sales of securities either be registered with the SEC or be undertaken with an exemption from registration. Different levels of filings and disclosures are required for both public and private offerings. Column three of Table 1 presents these disclosure requirements. The disclosure-based approach is not without drawbacks. Some question the efficacy of disclosures and suggest they could be so exhaustive as to be counterproductive. Concerns also exist regarding whether both retail and institutional investors could comprehend the disclosed information. Disclosure "Materiality" Some companies struggle to determine precisely what information must be disclosed as part of the registration process. A general standard governing information to be disclosed under the securities laws is the concept of "materiality." Materiality pertains generally to the likely importance of a disclosure to a reasonable investor. SEC Rule 405 states, "When used to qualify a requirement for the furnishing of information as to any subject, [materiality] limits the information required to those matters to which there is a substantial likelihood that a reasonable investor would attach importance in determining whether to purchase the security registered." There is also significant case law concerning the concept of "materiality" in the courts, and it is generally defined in terms of whether a reasonable investor would have viewed the undisclosed information as having "significantly altered the total mix of information available." Ideally, from an economic perspective, the securities disclosures would neither be so restrictive that they omit essential information, nor so voluminous that they create information overflow or exhaust resources on irrelevant information. The concept of materiality has always posed challenges for regulators and issuers, as it is often difficult to apply consistent standards for determining materiality at the level of individual companies. Certain discretion has been given to companies through a principle-based approach, which means the companies would have some flexibility to provide disclosures that they believe are material to reasonable investors. A principle-based approach may provide additional flexibility for companies to make decisions about materiality on a case-by-case basis, which is also how the courts generally assess materiality, but the lack of a "bright line" about what exactly must be disclosed can make it difficult for both investors and companies. One recent example is that different companies interpreted the threshold for disclosing material cyber breaches vastly differently. There is generally no bright-line approach on materiality. It is difficult, if not impossible, to provide a clean-cut approach as to materiality for all situations; thus, companies reportedly struggle to know when to disclose and when to hold back. Disclosure Costs and Readability Public offerings generally face more rigorous and costly disclosure requirements relative to private offerings. Public company disclosure starts with an initial registration statement that includes a detailed description of the business, the security offered, and the management team, as well as audited financial statements, among other things. The reporting continues with the ongoing disclosure of quarterly and annual financials as well as the disclosure of key operational changes and corporate-governance-related information and events for shareholder voting. Public company regulatory compliance costs were estimated in 2011 to average about $2.5 million, with annual ongoing compliance costs of $1.5 million. Although disclosure requirements and related costs have increased over time, readability of disclosed information has become a regulatory concern in recent years. One of the most-cited examples is the size of Walmart's IPO prospectus in 1970, which totaled less than 30 pages. This compares to the hundreds of pages commonly expected of today's IPO filings. Studies show that the median text length of certain key SEC filings doubled between 1996 and 2013, yet the readability and the mix of "hard" information, which refers to the informative numbers in the text, have decreased. According to former SEC Chair Mary Jo White, most of this evolution was due to increased SEC rules and guidance that have required increasingly specific and detailed disclosures. This development eventually triggered regulatory discussions regarding "information overload," a term for the high volume of disclosure that can make it difficult for investors to find the most relevant information. The issue is further complicated when considering the types of investors to which the disclosed information is tailored. The majority of outstanding publicly traded U.S. company stocks are held by institutional investors. Their information needs and preferences may differ from those of retail investors. For example, more sophisticated institutional investors may find detailed reporting useful, whereas retail investors may have a harder time navigating the "information overload" and find "plain English" an easier way to comprehend investment disclosures. Some of these divergent preferences could be too costly to reconcile, because the current disclosure regime does not require different versions of disclosure by investor type. As such, the investor type that should serve as the benchmark for disclosure and reporting requirements continues to be a topic of debate. Current Congressional and SEC Actions Several current legislative proposals and agency actions would ease disclosures. Recent agency actions include SEC's rulemaking initiatives on Regulation S-K, which concerns disclosure of information not found on financial statements. As required by Congress through Section 108 of the JOBS Act and Section 72003 of the Fixing America's Surface Transportation (FAST) Act, the SEC completed two studies on disclosure requirements, aiming to "modernize and simplify" disclosures. The SEC subsequently proposed amendments to Regulation S-K on October 11, 2017, incorporating recommendations from the studies. Regulation S-K is a key part of the integrated disclosure regime. Issuers of securities offerings, especially public offerings, must file various disclosure documents that include, but are not limited to, Regulation S-K, Regulation S-X (financial statement disclosure requirements), and Regulation S-T (electronic filing regulations). The first version of Regulation S-K included only two disclosure requirements—a description of business and a description of properties. Over time, new disclosure requirements were added to Regulation S-K, and now it is the repository for the nonfinancial statement disclosure requirements under the Securities Act and the Exchange Act. As one law firm points out, the SEC rulemaking proposal to amend Regulation S-K includes approximately 30 discrete changes. Although none of the changes are likely to have a significant impact individually, taken together they could affect the preparation and presentation of disclosure documents, potentially reducing costs associated with disclosures. In addition to the agency initiatives, Congress has proposed a number of bills to further amend disclosure requirements (see text box below). Most of these amendments relate to the exemption of issuers from specific registration and reporting requirements. There is also a proposal to expand eligibility for smaller companies to use a more simplified registration form. Some may argue that these proposals could circumvent the previously discussed tradeoff between capital formation and investor protection by increasing readability and usefulness of disclosures without coming at the expense of the exclusion of material information. Others argue that any decrease in regulation or disclosure would affect the effectiveness of investment decisionmaking and increase the risks facing investors. Preemption of State "Blue Sky" Laws Another source of compliance costs for issuers is the fact that certain securities offerings have to navigate both federal- and state-level regulations. Although the SEC regulates and enforces federal securities laws, each state has its own securities regulator who enforces "blue sky" laws. These laws cover many of the same activities the SEC regulates, such as the sale of securities and those who sell them, but are confined to securities sold or persons who sell them within each state. The SEC and the states differ in their approach to securities regulation. SEC securities regulation requires disclosure of information about securities and their issuers, whereas the majority of states adopt "merit-based" securities regulation. Merit-based regulation generally refers to the authority to deny registration to an offering on the ground that it is substantively unfair or presents excessive risk to investors. In other words, merit regulation prohibits specific conduct upon review. The issuers would have to convince the states that the offerings are fair to investors. State securities laws predate the first federal securities statute, the Securities Act of 1933, by a couple of decades. Although some federal statutes preempt state securities laws, state regulators retain the ability to police their own jurisdictions. In addition, there is said to be a separate line of tension between federal securities laws and state corporate law. For example, companies' bylaws of incorporation, which affect their corporate governance practices, are traditionally regulated through state corporate law. Some argue that certain federal provisions relating to executive compensation and shareholder voting, among other provisions, have challenged the decisionmaking authority of state regulation. Public offerings trading on one of the national exchanges—New York Stock Exchange (NYSE), American Stock Exchange (AMEX), and Nasdaq—received preemption of state registration through the enactment of the National Securities Markets Improvement Act of 1996 (NSMIA; P.L. 104-290 ). NSMIA was a milestone for "covered securities," which are preempted from blue sky laws' registration and qualification requirements. Under NSMIA, covered securities generally include securities (1) listed, or from a listed issuer, on certain national securities exchanges; (2) issued by a registered investment company; (3) sold only to SEC-defined qualified purchasers; or (4) that meet certain exemptions. Public offerings that do not meet the criteria for covered securities may have to comply with certain state-level regulations. Some argue that state laws adversely affect the deployment of securities offerings that are not part of the covered securities universe. States have regulatory responsibility and expertise over small and local securities. However, an issuer operating in multiple states without preemption of state regulation would have to meet different regulatory requirements in each state, increasing operational complexity and costs. On the other hand, proponents argue state regulations prevent fraud or manipulation of securities offerings locally, and are unlikely to be eliminated because of various political reasons. The National Securities Exchange Regulatory Parity Act (see text box below) is an example of a current legislative proposal that would affect blue sky laws. Under current law, a security, generally through public offering, must be listed, or authorized for listing, on one of the three specified national securities exchanges as discussed above, in order to be exempt from state registration requirements. The bill instead would require that a security be listed, or authorized for listing on any national securities exchanges that have been approved by the SEC. This amendment would allow public offerings to trade on other exchanges, in addition to the currently specified three, to be potentially exempt from state registration. Although the bill was generally considered a technical fix, opponents believe that it creates confusion and encourages a race to the bottom, as exchanges could potentially lower listing standards to compete for business. Facilitating Private Offerings Private offerings have outpaced public offerings in recent years to become the more frequently used option for raising capital, as measured by aggregate capital raised ( Figure 6 ). According to an SEC staff white paper, private debt and equity offerings for 2012 through 2016 combined exceeded public offerings by about 26%. Going public is arguably less of a necessity for certain private companies to raise capital, at least up to a certain size. Institutional investors, including mutual funds, hedge funds, and sovereign-wealth funds, are contributing to the trend of capital markets' increased reliance on private offerings as one of the key factors. For example, although these investors are not traditionally known for investing in startups, they are now allocating capital toward private offerings of high-tech "unicorns." The term "unicorn" refers to startup companies that have achieved a valuation of at least $1 billion, while remaining privately funded. However, concerns persist that smaller companies face difficulties accessing capital. Private offerings are especially important for smaller companies, since they are traditionally viewed as the funding tool for smaller, pre-IPO firms. Some argue that the JOBS Act has not revived public capital access for smaller companies with market capitalization of less than $75 million. The SEC's Advisory Committee on Small and Emerging Companies stated in May 2017 that "identifying potential investors is one of the most difficult challenges for small businesses trying to raise capital." Smaller companies' relative difficulty accessing capital through public offerings has encouraged the use of private offerings as an alternative funding source. All else equal, the increased use of private offerings could reduce companies' need to go public. It is within this context that Congress has initiated a number of policy changes and legislative proposals focusing on a scaled regulatory approach that would ease firms' access to private offerings. These proposals fall into three categories: (1) the expansion of investor access to private offerings, (2) the increase in the upper limit and issuer eligibility for Regulation A+, and (3) the creation of a new exemption for micro offerings. Investor Access to Private Offerings As shown in Table 1 , private offerings are often limited in the kinds of investors to which they can be offered. One approach to expanding capital access for private offerings is to expand investor availability. As explained below, policymakers could expand (1) the type of eligible investors by widening the accredited investor definition, (2) the number of eligible investors by increasing the number of nonaccredited investors allowed to participate in private offerings, or (3) the communication to eligible investors by allowing broader outreach. A number of legislative proposals in the 115 th Congress (listed in the text box below) would increase investors' access to private offerings along these lines. As mentioned in the " Capital Formation and Investor Protection " section of the report, investor protection concerns are generally viewed alongside capital formation needs in a policy context. Some have argued that increasing investor access would improve capital formation by creating a larger eligible investor pool for certain securities offerings and would "democratize" investment opportunities by permitting a wider array of investors to participate. However, there are concerns regarding investor protection. Unlike offerings registered with the SEC, certain unregistered offerings lack disclosure of material information, thus exposing investors to higher risk. Accredited Investors As mentioned earlier, generally only "accredited" investors are allowed to invest in private offerings. According to federal securities regulations, accredited investors are institutional investors or individual investors who (1) are financially sophisticated, (2) have the wherewithal to sustain financial losses, and (3) have the ability to fend for themselves if faced with adverse circumstances. The purpose of the accredited investor concept is to identify entities and persons who can bear the economic risk of investing in unregistered securities and to protect ordinary investors from excess risk and potential fraud. According to the SEC, an accredited investor, in the context of an individual, is defined using a number of income and net worth measures: (1) earned income that exceeded $200,000 (or $300,000 together with a spouse) in each of the prior two years, and can reasonably be expected to be the same for the current year; or (2) net worth over $1 million, either alone or together with a spouse (excluding the value of the person's primary residence). Around 10% of U.S. households qualified as accredited investors in 2013. An accredited investor, in the context of an institution, includes certain entities with over $5 million in assets, as well as regulated entities such as banks and registered investment companies that are not subject to the assets test. Qualifying as an accredited investor is significant because accredited investors may participate in investment opportunities that are generally not available to nonaccredited investors, such as investments in private companies and offerings by hedge funds, private equity funds, and venture capital funds. The income- and net-worth-based definition of an accredited investor has generated criticism, as it arguably suggests that higher net worth equates to investing sophistication. The definition also generates concerns about its sufficiency in capturing those who need investor protection. Some question, for example, whether a widow who relies on her existing net worth for financial security should be eligible for higher-risk investing. The application of the accredited investor definition faces additional challenges. A definition relying on numeric thresholds provides a clear criterion or guideline for implementation that could produce predictable and consistent results in application. By reading the definition, investors would know if they are accredited investors or not. This approach, however, poses a challenge because certain measures of financial sophistication cannot be easily tracked through standardized numerical approaches or be determined based on income or wealth. This has led some to object to the current accredited investor definition, which is solely based on income and net worth measures. Threshold Rule The SEC Threshold Rule (§12(g) of the Securities Exchange Act of 1934) restricts the maximum number of nonaccredited investors allowed to participate in private securities offerings. It establishes the thresholds at which an issuer is required to register a class of securities with the SEC. Prior to the JOBS Act, the Securities Exchange Act of 1934 required a private company to register securities with the SEC if it had total assets exceeding $10 million and shares held by 500 or more shareholders, without regard to nonaccredited investor status. Effective in 2012, the JOBS Act raised the shareholder registration threshold to either 2,000 persons, or 500 persons who are nonaccredited investors. In addition, to address the "Facebook problem"—when companies were forced to go public because the number of shareholders triggered threshold requirements for registration—employee compensation plan holders were no longer considered holders of record. General Solicitation Issuers often market their private offerings at promotional events. The events are often sponsored by angel investors (early-stage investors, mostly high-net-worth individuals), venture capital associations, nonprofits, or universities and are used to communicate that a company is interested in, if not actively seeking, investor financing. Certain types of general promotion or advertising were banned for Regulation D private offerings prior to the JOBS Act to prevent nonaccredited investors from inadvertently investing. The JOBS Act created a new private offering category under Regulation D, wherein issuers are allowed to engage in general solicitations to accredited investors while taking "reasonable steps" to verify their accredited status. Some market participants have advocated for a further removal of certain general solicitation restrictions, a move welcomed by trade groups that would benefit from reduced compliance costs and reduced uncertainty. Critics of these efforts, however, raise concerns about investor protection, especially given the potential participation of nonaccredited investors in promotional events intended for accredited investors. "Mini-IPO"—Regulation A+ Another way that some propose to facilitate capital formation is the further expansion of Regulation A+. Regulation A+, or "Mini-IPO," is a private exemption to facilitate private offering capital access for small- to medium-sized companies. A mini-IPO is like a regular IPO in the sense that it has no resale restrictions and could potentially list on public stock exchanges. But unlike an IPO, it is subject to offering size limits and certain investment limits on nonaccredited investor access, as summarized in Table 1 . Regulation A+, which expanded the existing Regulation A, became effective on June 19, 2015, a few years after the signing of the JOBS Act in 2012. Regulation A was a little-used regulatory regime prior to the JOBS Act; starting from the enactment of Regulation A+, the offerings have significantly expanded as measured by the number of total qualified offerings and the aggregate qualified offerings amounts sought ( Figure 7 ). Regulation A+ provides two tiers of offerings: Tier 1, which allows securities offerings of up to $20 million in a 12-month period, with not more than $6 million in offers by selling to security-holders that are affiliates of the issuer. Tier 1 is subject to both state and federal registration and qualification requirements. Tier 2, which allows securities offerings of up to $50 million in a 12-month period, with not more than $15 million in offers by selling to security-holders that are affiliates of the issuer. Certain qualified purchasers of Tier 2 offerings are exempt from state securities law registration and qualification requirements. Despite the regime's perceived high potential and upward trend, some contend it has fallen short of expectations for the following reasons: Capital R aised I s R elatively L ow . Regulation A+'s aggregate capital raised in qualified offerings, less than $2 billion as of 2016, seems low compared to the total private market debt and equity issuance of $1.68 trillion in 2016. Pub l ic T rading I s R are . Although securities issued under Regulation A+ have traded on public exchanges in a few cases, the entering of Regulation A+ into public trading platforms is still uncommon. According to the Wall Street Journal , there were eight listed mini-IPOs in 2017. Seven of the eight were trading at an average of 42% below their offer prices (relative to average price rise of 22% for a traditional IPO in 2017). On average, around 15% of mini-IPO companies' total stock was available to trade in 2017, relative to 34% for all U.S.-listed IPOs, making the stocks harder to trade and more volatile ( Figure 8 ). Financial I ndustry I s the H eaviest U ser S o F ar . The program is not broadly adopted; around 37% of Regulation A+ filings and half of proceeds go to finance, insurance, and real estate companies. There are legislative proposals in the 115 th Congress to further expand Regulation A+'s upper limit ( H.R. 4263 ) and to broaden its eligible issuer base ( H.R. 2864 ). Some have proposed expanding the upper limit of Regulation A+, arguing that in its current form it still faces hurdles in gaining market acceptance because such offerings cost more than a traditional private placement, but tend not to attract major underwriters, broker-dealers, and research coverage, because the deal sizes are small relative to a traditional IPO. Some believe that further lifting the upper limit would potentially alleviate size-related concerns for market intermediaries. Proponents of a proposal to broaden the Regulation A+ eligible issuer base also argue that thousands of SEC reporting companies are currently not able to access Regulation A+. By allowing more companies to use Regulation A+, it would enhance capital formation. Others consider the expansion of Regulation A+ to potentially reduce incentives for companies to go public, thus undermining public securities markets. This could be to the detriment of both investors and markets, as public offerings provide greater investor protection and liquidity for trading. Some observers argue against immediate expansion, raising concerns that the regime is still in its early stages, and that demand and participation have not yet stabilized. In 2015, the upper limit for Regulation A+ was increased 10 times, to $50 million from $5 million. The program's long-term effects have not been observed in full, leading some to question whether now is the optimal time to extend the program, especially given that the SEC already has the discretion to change the size limit under the current rule. Micro Offering There is considerable demand for seed and startup capital for U.S. small businesses, some of which may be at the forefront of technological innovation and job creation. Yet some companies may be too small to realistically issue private offerings under existing exemptions. For example, an official from the U.S. Small Business Administration stated that 25% of startups report having no startup capital, while 20% cite lack of access to capital as a primary constraint to their business health and growth. Proposals related to what are referred to as m icro offering s are intended to assist small businesses that are deemed to have insufficient capital access. Specifically, the Micro Offering Safe Harbor Act proposes a new private offering that would exempt certain micro funding from federal registration as well as state blue sky laws. The exempted micro offerings would also be required to meet each of the following requirements: Each investor has a substantive preexisting relationship with an owner. There are 35 or fewer purchasers. The amount does not exceed $500,000. Proponents believe it would more easily allow small businesses and startups to raise limited amounts of capital from their personal network of family and friends without running afoul of federal and state securities laws. Business trade groups have stated that the micro offering legislation would "appropriately scale" federal rules and regulatory compliance for small businesses. Opponents, however, raise investor protection concerns stemming from reduced disclosures and the absence of provisions to disqualify "bad actors" with criminal records, among other things. One point of contention is that micro offerings would not be subject to resale restrictions, meaning they could be immediately sold off to other qualified investors. The lack of a resale restriction for unregistered securities could expose investors to potential "pump and dump" schemes, a form of securities fraud that involves artificially boosting the price of a security in order to sell it for more. The Congressional Budget Office (CBO) has estimated that only a relatively small number of securities transactions would be covered under the expanded exemption that are not currently covered by other existing exemptions. Facilitating Fintech Offerings The development of financial technology ("fintech") has disrupted industries and led to new capital access options not previously overseen by the SEC regulatory regime. Policymakers are now considering whether these new innovations fit well within the existing regulatory framework, or whether the framework should be adapted to address the risks and benefits that they pose. This development affects not only the SEC, but also other financial regulators within the United States and across various global jurisdictions. Crowdfunding and initial coin offerings (ICOs) are two of the most popular fintech capital access tools that are regulated by the SEC, if they fall within the definition of being securities. Securities-Based Crowdfunding Crowdfunding generally refers to a financing method in which money is raised through soliciting relatively small individual investments or contributions from a large number of people. Four kinds of crowdfunding exist: (1) donation crowdfunding, where contributors give money to a campaign and receive in return, at most, an acknowledgment; (2) reward crowdfunding, where contributors give to a campaign and receive in return a product or a service; (3) peer-to-peer lending crowdfunding, where investors offer a loan to a campaign and receive in return their capital plus interest; and (4) equity crowdfunding, where investors buy stakes in a company and receive in return company stocks. Generally, equity crowdfunding and certain peer-to-peer lending crowdfunding could be subject to SEC regulation if they conform to the definition of securities. Title III of the JOBS Act created a new exemption from registration for internet-based securities offerings of up to $1 million (inflation-adjusted) over a 12-month period. Title III intends to help small and startup businesses conduct low-dollar capital fundraising from a broad and mostly retail investor base over the internet. The JOBS Act includes a number of investor protection provisions, including investment limitations, issuer disclosure requirements, and a requirement to use regulated intermediaries. The crowdfunding final rule became effective on May 16, 2016. New Capital Access Venue and the "Wisdom of the Crowd" Crowdfunding allows investors and entrepreneurs to connect directly, potentially creating access to new investment opportunities and allowing investors to tap into the collective opinions of a large group, often referred to as "the wisdom of the crowd." These new opportunities could provide much-needed seed capital to entrepreneurs who would otherwise lack capital access. To illustrate this point, one SEC staff white paper indicates that the issuers of securities-based crowdfunding tend to be small, young, prerevenue, and not profitable. The effects of crowdfunding facilitating business growth are illustrated by a study that indicated around 70% of reward-based crowdfunding projects resulted in the creation of startups. The total amount of reported securities-based crowdfunding is small relative to the estimated global crowdfunding volume. During the first approximately seven months that the rule was in effect (May 16, 2016, to December 31, 2016), there were 163 unique securities-based crowdfunding offerings by 156 issuers, seeking a total of $18 million (based on the target amount). The median (average) offering targeted approximately $53,000 ($110,000). During a similar time period, a smaller amount was actually raised, with approximately $10 million in proceeds reportedly raised for 33 offerings. These amounts may appear low, but could be partially due to underreporting. The SEC tracks crowdfunding volume using data taken from issuers filing Regulation Crowdfunding Forms C-U, but not all securities issuers initiated the filings. Securities-based crowdfunding is a relatively small part of the crowdfunding total. As a point of comparison, the estimated global crowdfunding volume for all types of crowdfunding was $139 billion in 2015. A large portion of current online peer-to-peer funding activities are generally not considered "securities-based" crowdfunding subject to SEC regulation. Non-securities-based crowdfunding campaigns do not necessarily involve a profit-seeking business, and ones that do may have a project-specific nature, thus not conforming to the SEC's definition of securities. Peer-to-peer lending, if not considered a security, may still be under the oversight of banking regulators for consumer banking and related regulations. Potential Benefits and Drawbacks Crowdfunding's expansion of capital access and "wisdom of the crowd" characteristics are widely cited as benefits of the funding method. Some academic research of selected types of crowdfunding finds that crowdfunding democratizes access to funding, allows the crowd to look for signals of quality, and is "remarkably free" from fraud, even though over 75% of projects ultimately deliver but typically past the date on which it was expected. Others argue that crowdfunding, perhaps more than any other funding method, shows real-world demand for a company's product or service. Crowdfunding signals may reduce the need for disclosures, some have argued, because a successful crowdfunding campaign itself could be a positive signal of company quality, thus making the process more affordable to entrepreneurs. On the other hand, the disclosure process clarifies and codifies terms and conditions of an offering. Regulation Crowdfunding (see Table 1 ), for example, lists the financial statements and other information required for SEC filings. Regarding equity crowdfunding's balance between capital access and investor protection, some caution that investor protection that is too strong "may harm small firms and entrepreneurial initiatives." Yet others fear investor protection is too weak, given low levels of compliance among many early companies that raised money through crowdfunding and offered "bad terms" to investors. There are also a number of perceived regulatory concerns, including the following: High R isk and L ow L iquidity . Crowdfunding's securities-based offerings generally have high risk, given the types of prerevenue businesses seeking capital, the possibility of fraud, and the need for disclosure and transparency. Other concerns include the lack of liquidity through secondary markets, the professional guidance and corporate governance structure, investor protection, and platform operations and due diligence. Simple Agreement for Future Equity (SAFE) S ecurities . SAFE was developed in 2013 by Y Combinator, a technology accelerator, for investing in startups that expect to raise institutional capital at a later date. SAFE investors receive deferred equity entitling them to future shares. SAFE is the second-most-popular securities-based crowdfunding offering type, representing 26% of total offerings (equity is the most popular, accounting for 36% of offerings). Startups welcome SAFE because of its simplicity and generous terms, including, for example, the capability to potentially cap the upside payout in the event that SAFE investors receive shares. But researchers and regulators are concerned about SAFE's risk to retail investors. These concerns are typically associated with investor protection regarding how informed investors are of the risks and whether they are compensated accordingly. The SEC issued an investor bulletin in May 2017 to explain SAFE to retail investors. Some observers argue that SAFE is valuable to the holder only if the company that issues it raises a subsequent round of financing or is sold. However, the vast majority of companies raising capital through SAFE are said to be unlikely to ever raise institutional venture capital. Funding P ortals . The JOBS Act established an exemption to permit securities-based crowdfunding as well as a new type of entity—funding portals. The act allows these internet-based platforms or intermediaries to facilitate the offer and sale of securities without having to register with the SEC as brokers. As of February 20, 2018, there were 38 funding portals that were registered with the SEC and that were members of the Financial Industry Regulatory Authority (FINRA). Funding portals also draw investor protection concerns. An SEC official noted that from May 2016 to January 2017, 27 crowdfunded offerings were withdrawn, and of these, 16 were hosted by a funding portal that was recently expelled by FINRA. This may challenge the conception of funding portals as reliable gatekeepers for these transactions. A number of legislative proposals would lessen crowdfunding restrictions for both issuers and funding portals. Proponents of the bills state the intention of the bills is to further improve small businesses' access to capital and to provide more investment opportunities for investors of all kinds. Opponents assert that the proposals would "deregulate" crowdfunding offerings that are funding riskier startups, and in so doing would increase investor access while reducing investor protections, such as public disclosures. State securities regulators have asserted that it is too early to determine what changes are needed to improve the crowdfunding law. Initial Coin Offerings A relatively new approach to raising capital is the initial coin offering (ICO). ICOs as a fundraising tool have gained popularity in recent months. ICOs are crowdfunding processes conducted on distributed ledger or blockchain technology. Similar to crowdfunding, ICOs allow for solicitation of relatively small individual investments or purchases from a large number of participants. But instead of traditional crowdfunding's return of investments in the form of products, acknowledgments, interest payments, or a piece of ownership of the firm, ICOs offer supporters digital coins. These coins or tokens are new digital currencies each company creates and sells to the public. Coin purchasers could redeem the coins for goods or services, or hold them as investments in the hope that if the company is successful, the coins would increase in value. ICO investors generally exchange cryptocurrencies (e.g., Bitcoin, Ethereum) or fiat currencies (e.g., U.S. dollars) for the tokens issued pursuant to ICOs. Although every crypto enterprise is different, they generally provide publicly verifiable transactions, lower transaction costs, and the ability to make transfers without an intermediary or any geographic limitation. Regulatory Treatment Some ICOs are securities and are subject to securities regulation. ICOs are generally considered securities if they promise a return based on the management practices of those offering them. For example, the cryptocurrency Bitcoin is not an ICO because it is not issued by a profit-seeking business. In the United States, if an ICO qualifies as a security, its promoters would have to either register with the SEC (as a public offering) or obtain an exemption from registration (as a private offering), similar to the treatment of all other securities. But in practice, many ICOs have not conformed with the restrictions traditionally imposed on private offerings (see Table 1 ); instead, their characteristics include an unlimited offering amount, wide access by both accredited and nonaccredited investors, ability to trade in secondary markets, and limited investor disclosure. Based on these characteristics, an ICO could theoretically comply with securities laws by registering as the type of security shown in Table 1 that best fits its characteristics, and complying with the requirements of that type. For example, because ICOs are generally considered a combination of crowdfunding (see the section above) and blockchain, they could potentially seek a private offering exemption through Regulation Crowdfunding. However, as of March 6, 2018, only one ICO has filed for registration with the SEC, even though ICOs have largely been considered offers and sales of securities. This has led the SEC to acknowledge that many promoters of ICOs are not following securities laws. To address this issue, the SEC has increased ICO enforcement efforts, including establishing a new cyber unit. It has also issued investor bulletins and alerts to warn retail investors to proceed with caution. State securities regulators have also issued warnings about ICOs. The SEC recently halted a number of ICOs and issued dozens of subpoenas and information requests to parties engaged in ICOs. Some of the SEC's enforcement efforts have reportedly focused on ICOs that involve simple agreements for future tokens (SAFTs). Similar to SAFEs, SAFTs offer investors the right to receive tokens at a future date. Investors receive the actual token only in the event the future network they are funding becomes genuinely functional in producing tokens. The SEC reportedly has concerns that some ICOs, both those with and without SAFTs, could be funding businesses that are nonexistent. In addition, the SEC intervened to keep public companies from changing their names or business models to capitalize on the hype surrounding ICOs and blockchain technology. These SEC interventions are in reaction to the market response associated with simple name changes that are not backed by substantive track records, which have raised investor protection concerns. Two of the most cited examples are Long Island Iced Tea and Eastman Kodak. Eastman Kodak's stock price more than doubled after it announced the launching of a digital currency, "KodakCoin," for an ICO. Similarly, the stock price of Long Island Iced Tea spiked five-fold after it announced its name change to Long Blockchain ( Figure 9 ). These incidents reportedly led to SEC's intervention in certain name changes, resulting in some companies erasing the word "blockchain" from their names. As to Long Blockchain, it received a notice from Nasdaq Stock Market indicating the exchange's intention to delist the company based on its misleading public statements relating to bitcoin and blockchain technology. Regulatory actions concerning ICOs are mixed globally. For example, ICOs have received warning notices by U.S. and European regulators and outright bans in China and South Korea, but have found more support in Switzerland. Current Volume and Potential According to CoinDesk ICO Tracker, ICO funding activities started to escalate in 2017. The all-time cumulative ICO funding totaled $19.4 billion as of June 30, 2018, compared to $0.2 billion in mid-2016. Although ICOs are at present generally considered a method for young private startups to fundraise, some expect the ICO to transform capital formation for large companies as well. One former commissioner of the Commodity Futures Trading Commission (CFTC) speculated that certain large private companies considering IPOs could delay the process with an ICO. In fact, crypto assets created through ICO and other processes have emerged as a new asset class. According to International Monetary Fund (IMF), crypto asset refers to "digital currencies that rely on encryption techniques to regulate the generation of units and verification of transfers … ICOs are issuances of digital currencies sold via auction or investor subscription in return for crypto assets." This new asset class has received significant attention through rapid growth, maturing practices, and regulatory acknowledgement. For example, the Financial Stability Board (FSB) issued a report in July of 2018 to publicize metrics for monitoring the crypto-asset market risk, market capitalization, and institutional exposures, among other factors. The report identifies other asset classes, such as gold and equities, as comparators to crypto assets. Regulatory Issues During a testimony in February 2018, SEC Chairman Jay Clayton stated that "the recent proliferation and subsequent popularity of cryptocurrency markets creates a question for market regulators as to whether our historic approach to the regulation of sovereign currency transactions is appropriate for these new markets."  The SEC has not yet promulgated ICO-specific rules or exemptions. Some of the most salient ICO-related policy issues are as follows: Regulatory O versight . Current U.S. ICO and virtual currency regulation is fragmented, with multiple regulatory approaches at the federal and state levels. The nature of ICO regulation may differ from agency to agency. For example, the SEC has indicated that ICOs may qualify as offerings of "securities," the CFTC treats certain virtual currencies as "commodities," the Internal Revenue Service treats certain virtual currencies as "property," state regulators oversee virtual currencies through state money transfer laws, and the Treasury Department's Financial Crimes Enforcement Network monitors virtual currencies for anti-money-laundering purposes. Enforcement A ction . ICOs may qualify as securities offerings subject to federal regulation. SEC Chairman Clayton was quoted as saying, "I believe every ICO I've seen is a security." Yet no ICOs have been registered as of February 2018 (the first ICO registration was reportedly filed in March 2018), meaning the vast majority of ICO issuers may be violating securities laws. Issuers and investors face a steep learning curve in comprehending the regulatory landscape and in determining how or if securities laws apply to them. Investor P rotection . ICO investors include less-sophisticated retail investors, who may not be positioned to comprehend or tolerate high risks. Investor protection concerns are seen in several areas. First, the high levels of scams and business failures have been a source of concern. One study found that 81% of ICOs are scams and another 11% fail for operational reasons, estimating a 92% combined failure rate for ICO firms. Second, the failure of many ICO companies to comply with registration and disclosure associated with traditional securities has been cited as an issue. Without sufficient disclosure, investors would face difficulty understanding the amount of risks they are exposed to. Third, the high volatility of cryptocurrencies' valuations creates large gains and losses. Fourth, the lack of protection through the traditional financial system has also been a concern. The ICO investors are especially prone to new types of fraud and manipulation. For example, although banks have the option to halt or reverse suspicious transactions and associate transactions with user identity, a blockchain transaction is generally irreversible through intermediaries. In addition, cryptocurrencies could be transferred to anonymous criminal accounts. These characteristics were reported as having incentivized new waves of theft involving cryptocurrencies. T rading . Many cryptocurrency trading platforms are registered as money-transmission services (MTS) instead of national securities exchanges. MTS are money transfer or payment operations that are mainly subject to state instead of federal regulations. Because MTS were not designed for cryptocurrency trading activities, they are said to be inefficient when operating across state lines. In addition, these services raise major investor protection concerns because they are not subject to the same level of regulatory oversight as national securities exchanges. The SEC recently issued a statement clarifying that the online platforms for trading digital assets could be potentially unlawful. In response to increased regulatory attention, numerous crypto exchanges have become federally regulated as of July 2018. For example, one of the largest crypto exchanges, Coinbase, has obtained multiple licenses through acquisitions and is now under SEC and FINRA oversight. Cyber s ecurity . Investors risk losing their investments as well as personal information through hacker attacks. One study estimates that more than 10% of ICO proceeds are lost as a result of attacks. Scalability . Current blockchain networks are said to have limited capacity and scalability. For example, major network congestion occurred in November 2017, when the trading of virtual cats, "CryptoKitties," clogged Ethereum. This has led to discussions regarding the fundamental design of blockchain technology, which requires that every transaction be processed by all network nodes, limiting the number of concurrent transactions. New blockchain solutions that could potentially circumvent network congestions have gained traction as measured by the amount of investments attracted. For example, proposed solutions provided by Oasis Labs and Block.one (the developer of the EOS platform) have attracted $45 million through a private token presale and $4.2 billion through an ICO, respectively. But the new blockchains' scalability has not yet been demonstrated in full.

U.S. capital markets are the largest and considered to be the most efficient in the world. Companies rely heavily on capital access to fund growth and create jobs. As the principal regulator of U.S. capital markets, the Securities and Exchange Commission (SEC) requires that offers and sales of securities either be registered with the SEC or be undertaken with an exemption from registration. Registered securities offerings, often called public offerings, are available to all types of investors and have more rigorous disclosure requirements. By contrast, securities offerings that are exempt from SEC registration are referred to as private offerings and are mainly available to more sophisticated investors. Some policymakers have concluded that changes in market trends require updated regulations governing capital access. Specifically, the number of publicly listed U.S. companies has declined by half over the last two decades, and small- to medium-sized companies are said to have more difficulty accessing capital relative to larger companies. Additionally, new capital access tools not previously part of the SEC regulatory regime, such as crowdfunding and initial coin offerings, have emerged. These new tools are especially helpful for small businesses and startups. The bipartisan Jumpstart Our Business Startups Act of 2012 (JOBS Act; P.L. 112-106) scaled regulation for smaller companies and reduced regulations in general for certain types of capital formation. It established a number of new options to expand capital access through both public and private offerings, including a new provision for crowdfunding. Parts of the Fixing America's Surface Transportation Act (JOBS Act 2.0; P.L. 114-94) provided additional relief. Following the JOBS Act, the public and private offering dichotomy has started to blur, and securities regulation has become increasingly tailored to suit companies of different sizes and with different needs. However, concerns over capital formation have persisted, given that the number of IPOs remained at far below long-term average levels post-JOBS Act and smaller businesses continue to face capital access pressure. To address these concerns, Congress has considered numerous legislative proposals to further expand the scaled approach, with some proposals building on existing JOBS Act provisions. The most notable of these proposals is S. 488, a capital formation package referred to as JOBS Act 3.0. Originally a relatively narrow bill, S. 488 was passed by the Senate and then was amended significantly and passed by the House in a 406-4 vote on July 17, 2018. The package includes 32 titles, many of which have previously passed the House with bipartisan support as standalone bills. The policy debate surrounding capital formation proposals often focuses on expanding capital access and protecting investors, two of the SEC's core missions. Expanding capital access promotes capital formation and allows for greater access of investment opportunities for more investors. Investor protection is considered to be important for healthy and efficient capital markets because many investors would be more willing to provide capital, and even at a lower cost, if they could expect enforceable contracts for their investments through a transparent process. At times, expanding capital access can come at the expense of investor protection. For example, proposals that reduce the registration and disclosures that a company must make can decrease the company's compliance costs and increase the speed and efficiency of capital formation. But the reduced disclosures may expose a company's investors to additional risks if they are not receiving information that is important to making informed investment decisions. This report analyzes legislative proposals that would generally affect the terms and amounts of capital provided to companies by investors. It analyzes a number of current legislative proposals and agency actions to expand both public and private securities offerings through amendments to program design, investor access, and disclosure requirements, among other provisions.

Introduction This report provides an overview of the process for filling positions to which the President makes appointments with the advice and consent of the Senate (PAS positions). It also specifies, for the 111 th Congress (January 2009-January 2011), all nominations to full-time PAS positions on 33 regulatory and other collegial boards and commissions that have such positions (e.g., the Consumer Product Safety Commission, the Federal Reserve Board, and the Election Assistance Commission). A profile of each board and commission provides information on its organizational structure, membership as of the end of the 111 th Congress, and appointment activity during that Congress. The Appointment Process for PAS Positions High-ranking appointed leadership positions in the federal government are filled through a process that involves both the President and the Senate. The Constitution empowers the President to nominate and, by and with the advice and consent of the Senate, to appoint the principal officers of the United States, such as Secretaries and agency heads. Secondary leadership positions—those of so-called "inferior officers"—also may be filled in this manner, where so provided by Congress through law. The term "officer of the United States" encompasses "any appointee exercising significant authority pursuant to the laws of the United States." Three distinct stages mark the appointment process: selection, clearance, and nomination by the President; consideration by the Senate; and appointment by the President. Selection, Clearance, and Nomination4 In this stage, the White House selects and clears a candidate for a position before sending the formal nomination to the Senate. There are a number of steps in this stage of the process for most Senate-confirmed positions. First, with the assistance of, and preliminary vetting by, the White House Office of Presidential Personnel, the President selects a candidate for the position. Members of Congress and other interested parties have sometimes recommended candidates for specific positions. They have offered their suggestions by letter, for example, or by contact with a White House liaison. In general, the White House is under no obligation to follow such recommendations. Some have argued, however, that Senators are constitutionally entitled, by virtue of the advice and consent requirements of the appointments clause, to provide advice to the President regarding his selection. The scope of this entitlement is a matter of some debate. As a practical matter, in instances in which Senators have perceived that insufficient pre-nomination consultation has occurred, they have sometimes exercised their procedural prerogatives to delay or, effectively, block consideration of a nomination. Most boards and commissions are required, by statute, to have a political balance among their members (i.e., no more than a simple majority may be from the same political party), so the White House has often negotiated over nominations to these positions with leaders of the opposition party in Congress. These negotiations involve questions not only of patronage but of policy, especially when the board or commission is involved in areas that, at the time, may be particularly sensitive. This has sometimes resulted in a packaging process in which the President has submitted several nominations together for positions on a particular board or commission, and the Senate has then considered and confirmed them as a group. During the White House clearance process, candidates for nomination to the positions discussed in this report usually are required to prepare and submit several forms: the Public Financial Disclosure Report (Standard Form (SF) 278), the Questionnaire for National Security Positions (SF 86), the supplement to SF 86 (SF 86 Supplement), and sometimes a White House Personal Data Statement. The vetting process often includes a background investigation conducted by the Federal Bureau of Investigation (FBI), which prepares a report that is delivered to the White House. It also includes a review of financial disclosure materials by the Office of Government Ethics (OGE) and an ethics official for the agency to which the candidate is to be appointed. If conflicts are found during the financial disclosure process, OGE and the agency ethics officer may work with the candidate to mitigate the conflicts. At the completion of the vetting process, the nomination is ready to be submitted to the Senate. The selection and clearance stage has often been the longest part of the appointment process. There have been, at times, lengthy delays, particularly when many candidates have been processed simultaneously, such as at the beginning of an Administration, or if conflicts needed to be resolved. Candidates for higher-level positions are often accorded priority in this process. In an effort to reduce the elapsed time between a new President's inauguration and the appointment of his or her national security team, provisions added in 2004 to the Presidential Transition Act of 1963 encourage Presidents-elect to submit, for security clearance, potential nominees to high-level national security positions as soon as possible after the election. A separate provision of law, enacted as part of the Federal Vacancies Reform Act of 1998, lengthens, during presidential transitions, the potential duration of a temporary appointment by 90 days. This provision does not apply to members of collegial boards and commissions, however. Inasmuch as many board and commission members often serve across presidential terms and administrations, provisions intended to speed the appointment process during transitions might not do so for the positions listed in this report, as a whole. The chairmanships of these bodies often do turn over at these times, however. A nominee has no legal authority to assume the duties and responsibilities of the position; the authority comes with Senate confirmation and presidential appointment. A nominee who is hired by the agency as a consultant while awaiting confirmation may serve only in an advisory capacity. If circumstances permit and conditions are met, the President may give the nominee a recess appointment to the position (see below). Recess appointments may have political consequences, however, particularly if Senators perceive that an appointment is an effort to circumvent their constitutional role. Some Senate-confirmed positions, such as many of those in the executive departments, may also be temporarily filled under the Federal Vacancies Reform Act of 1998. As just noted, however, positions on most boards and commissions are not covered by this act. Senate Consideration During the second stage, the Senate alone determines whether or not to confirm a nomination. The way the Senate acts on a nomination depends largely on the importance of the position involved, existing political circumstances, and policy implications. Generally, the Senate has shown particular interest in the nominee's views and how they are likely to affect public policy. Two other factors have sometimes affected the examination with which a nominee's personal and professional qualities are examined: whether or not the President's party controls the Senate and the degree to which the President becomes involved in supporting the nomination. Much of the Senate confirmation process occurs at the committee level. Administratively, nominations are received by the Senate executive clerk, who arranges for the referral of the nominations to committee, according to the Senate rules and precedents. Committee nomination activity has generally included investigation, hearing, and reporting stages. As part of investigatory work, committees have drawn on information provided by the White House, as well as information they themselves have collected. Hearings provide a public forum to discuss a nomination and any issues related to the program or agency for which the nominee would be responsible. Even where confirmation has been thought by most to be a virtual certainty, hearings have provided Senators and the nominee with opportunities to go on the record with particular views or commitments. Senators have used hearings to explore nominees' qualifications, articulate policy perspectives, or raise related oversight issues. Some committees hold hearings on nearly all nominations that are referred to them; others hold hearings for only some. A committee may decline to act on a nomination at any point—upon referral, after investigation, or after a hearing. If the committee votes to report a nomination to the full Senate, it has three options: it may report the nomination favorably, unfavorably, or without recommendation. A failure to obtain a majority on the motion to report means the nomination will not be reported to the Senate. If the committee declines to report a nomination, the Senate may, under certain circumstances, discharge the committee from further consideration of the nomination in order to bring it to the floor. The Senate historically has confirmed most, but not all, executive nominations. Rarely, however, has a vote to confirm a nomination failed on the Senate floor. Usually, unsuccessful nominations fail to be reported or discharged from committee. Failure of a nomination to make it out of committee has occurred for a variety of reasons, including opposition to the nomination, inadequate amount of time for consideration of the nomination, or factors that may not be directly related to the merits of the nomination. Senate rules provide that "[n]ominations neither confirmed nor rejected during the session at which they are made shall not be acted upon at any succeeding session without being again made to the Senate by the President." In practice, such pending nominations have been returned to the President at the end of the session or Congress. Pending nominations also may be returned automatically to the President at the beginning of a recess of more than 30 days, but the Senate rule providing for this return is often waived. Appointment In the final stage, the confirmed nominee is given a commission, which bears the Great Seal of the United States and is signed by the President, and is sworn into office. The President may sign the commission at any time after confirmation, at which point the appointment becomes official. Once the appointee is given the commission and sworn in, he or she has full authority to carry out the responsibilities of the office. Recess Appointments The Constitution also empowers the President to make limited-term appointments without Senate confirmation when the Senate is in recess. Such recess appointments expire at the end of the next full session of the Senate. Seven recess appointments were made to positions on regulatory or other collegial boards or commissions during the 111 th Congress. Presidents have occasionally used the recess appointment power to circumvent the confirmation process. In response, Congress has enacted provisions that restrict the pay of recess appointees under certain circumstances. Because most prospective appointees to full-time positions cannot serve without a salary, the President has an incentive to use his recess appointment authority in ways that permit them to be paid. Under one such statute, if the position to which the President makes a recess appointment falls vacant while the Senate is in session, the recess appointee may not be paid from the Treasury until he or she is confirmed by the Senate. However, the salary prohibition does not apply if (1) the vacancy arose within 30 days before the end of the session of the Senate; (2) a nomination for the office, other than the nomination of an individual given a recess appointment during the preceding recess of the Senate, was pending when the Senate recessed; or (3) if a nomination to the office was rejected by the Senate within 30 days of the end of the session and another individual was given the recess appointment. A recess appointment falling under any one of these three exceptions must be followed by a nomination to the position not later than 40 days after the beginning of the next session of the Senate. For this reason, when a recess appointment is made, the President generally submits a new nomination for the appointee even when an earlier nomination is still pending. This statute has been interpreted by the Department of Justice to preclude payment of an appointee who is given successive recess appointments to the same position. In addition, although a recess appointee whose nomination to a full term is subsequently rejected by the Senate may continue to serve until the end of his or her recess appointment, a provision of the FY2008 Financial Services and General Government Appropriations Act might prevent an appointee from being paid after his or her rejection. From the 110 th Congress on, Congress has periodically used specific scheduling practices in an attempt to prevent the President from making recess appointments. The evolution of these practices, the President's response to them, and associated controversies are beyond the scope of this report. Detailed information may be found in other CRS reports. Notably, these practices were used only once during the 111 th Congress. Characterization of Regulatory and Other Collegial Bodies The boards and commissions discussed in this report share, among other characteristics, the following: (1) with the exception of one agency—the United States Sentencing Commission—they are executive branch bodies; (2) they are located, with four exceptions, outside executive departments; (3) several members head each entity, and at least one member serves full time; (4) the members are appointed by the President with the advice and consent of the Senate; and (5) the members serve fixed terms of office, and, except in a few bodies, the President's power to remove them is restricted. For most of the boards included in this report, the fixed terms of office for the member positions have set beginning and end dates, irrespective of whether the posts are filled or when appointments are made. The end dates of the fixed terms of a board's members are staggered, so that the terms do not expire all at once. The use of terms with fixed beginning and end dates is intended to minimize the occurrence of simultaneous board member departures and thereby increase leadership continuity. Under such an arrangement, an individual is nominated to a particular position and a particular term of office. An individual may be nominated and confirmed for a position for the remainder of an unexpired term in order to replace an appointee who has resigned (or died). Alternatively, an individual might be nominated for an upcoming term with the expectation that the new term will be underway by the time of confirmation. Occasionally, where the unexpired term has been for a very short period, the President has submitted two nominations of the same person simultaneously—the first to complete the unexpired term and the second to complete the entire succeeding term of office. On some commissions, the chair is subject to Senate confirmation and must be appointed from among the incumbent commissioners. If the President wishes to appoint, as chair, someone who is not on the commission, two nominations are submitted simultaneously for the nominee—one for member and the other for chair. As independent entities with staggered membership, executive branch boards and commissions typically have more political independence from the President than do executive departments. Nonetheless, the President can sometimes exercise significant influence over the composition of the membership when he designates the chair or has the opportunity to fill a number of vacancies at once. For example, President George W. Bush had the opportunity to shape the Securities and Exchange Commission during the first two years of his presidency because of existing vacancies, resignations, and the death of a member. Likewise, during the same time period, President Bush was able to submit nominations for all of the positions on the National Labor Relations Board because of existing vacancies, expiring recess appointments, and resignations. Simultaneous turnover of board or commission membership may result from coincidence, but it may also be the result of a buildup of vacancies after extended periods during which the President fails to nominate, or the Senate fails to confirm, members. Even where the President has the opportunity to make appointments to all positions on a board, however, where statute or custom requires politically balanced membership, his ability to shape the board might be tempered. Two other notable characteristics apply to appointments to some of the boards and commissions. First, for 25 of the boards and commissions in this report, the law limits the number of appointed members who may belong to the same political party, usually to no more than a simple majority of the appointed members (e.g., two of three, or three of five). Second, advice and consent requirements also apply to inspector general appointments in four of these organizations and general counsel appointments in three. Appointments During the 111th Congress During the 111 th Congress, President Barack Obama submitted nominations to the Senate for 77 of the 148 full-time positions on 33 regulatory and other boards and commissions. (Most of the remaining positions were not vacant during that time.) A total of 99 nominations were submitted for these positions, of which 76 were confirmed, 4 were withdrawn, and 19 were returned to the President. The number of nominations exceeded the number of positions being filled because the President submitted multiple nominations for some positions. In some cases, for example, the President submitted one nomination for the end of a term in progress and a second nomination of the same person to the same position for the succeeding term. In other cases, the President submitted a second nomination after his first choice failed to be confirmed. The President also submitted an "extra" nomination of the one individual to whom he had given a recess appointment in order to comply with a law affecting the payment of that appointee (see " Recess Appointments ," above). Table 1 summarizes the appointment activity for the 111 th Congress. At the end of the Congress, 24 incumbents were serving past the expiration of their terms. In addition, there were 10 vacancies among the 148 positions. 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 have been confirmed within a few days; others have been confirmed within several months; and some have never been confirmed. In the board and commission profiles following this opening narrative, this report provides, for each board or commission nomination that was confirmed in the 111 th Congress, the number of days between nomination and confirmation ("days to confirm"). For those nominations that were confirmed, an average of 128.5 days elapsed between nomination and confirmation. The median number of days elapsed was 97.0. The difference between these two numbers suggests that the average was pulled upward by a small number of unusually high numbers. The calculations of nomination-to-confirmation intervals provided in this report counted all the days within such intervals, including those during summer recesses and between sessions of the Senate. The inclusion of all days differs from the methodology used in CRS reports similar to this one that covered Congresses prior to the 110 th . In these earlier reports, days during August and intersession recesses were not included in calculations of nomination-to-confirmation intervals. These changes may reduce the comparability of statistics provided in this report with those provided in those earlier reports. Organization of the Report Board and Commission Profiles Each of the 33 board or commission profiles following the narrative portion of this report is organized into three parts: a paragraph discussing the body's organizational structure, a table identifying its membership as of the end of the 111 th Congress, and a table listing nominations and appointments to its positions during the 111 th Congress. The organizational sections discuss the statutory requirements for the appointed positions, including the number of members on each board or commission, their terms of office, whether or not they may continue in their positions after their terms expire, whether or not political balance is required, and the method for selection of the chair. Data on appointment actions during the 111 th Congress appear under both the sections entitled "Membership as of the End of the 111 th Congress" and those entitled "Appointment Action in the 111 th Congress." The former identify the agencies' positions requiring Senate confirmation and the incumbents in those positions as of that time. Incumbents whose terms have expired are italicized. Most of the incumbents serve fixed terms of office and are removable only for specified causes. They generally remain in office when a new administration assumes office following a presidential election. For those agencies requiring political balance among their members, the party affiliation of an incumbent is listed as Democrat (D), Republican (R), or Independent (I). The section also includes the pay levels of the positions. For presidentially appointed positions requiring Senate confirmation, the pay levels fall under the Executive Schedule, which ranges from level I, for Cabinet-level offices, to level V, for the lowest-ranked positions. Most of the chair positions are at level III, and most of the other positions are at level IV. The "Appointment Action" section provides information about each nomination, in chronological order, including the name of the nominee, the position to which he or she was nominated, the date of submission, the date of confirmation (if any), and the number of days that elapsed between submission and confirmation. Actions other than confirmation (i.e., nominations rejected by the Senate, nominations returned to or withdrawn by the President, and recess appointments) are also noted. Occasionally, where a position was vacant and the unexpired term of office was to end within a number of weeks or months, two nominations for the same nominee were submitted: the first to complete the unexpired term, and the second for a full term following completion of the expired term. Also, where the President gave a recess appointment to a nominee for a position covered by this report while the nomination was awaiting Senate action, a second, follow-up nomination was submitted to comply with the requirements of 5 U.S.C. § 5503(b). In tables that show more than one value in the "Days to confirm" column, the mean number of days to confirm a nomination is provided. This figure was determined by calculating the number of days between the nomination and confirmation dates, adding these numbers for all confirmed nominations, and dividing the result by the number of nominations confirmed. For tables in which one individual was confirmed more than once (to be a chair and a member, for example), the mean was calculated by averaging all values in the "Days to confirm" column, including the values for both confirmations. Additional Appointment Information Appendix A provides two tables. Table A-1 includes information on each of the nominations and appointments to regulatory and other collegial boards and commissions during the 111 th Congress, alphabetically organized, and following a similar format to that of the "Appointment Action" sections just discussed. It identifies the board or commission involved and the dates of nomination and confirmation. The appendix also indicates if a nomination was withdrawn, returned, or rejected, or if a recess appointment was made. The mean and median number of days taken to confirm a nomination are also provided. Table A-2 provides summary information on appointments and nominations by organization. For each of the 33 independent boards and commissions discussed in this report, the appendix provides the number of positions, vacancies, incumbents whose term has expired, nominations, individual nominees, positions to which nominations were made, confirmations, nominations returned to the President, nominations withdrawn, and recess appointments. A list of organization abbreviations can be found in Appendix B . Chemical Safety and Hazard Investigation Board (CSB) The CSB is an independent agency consisting of five members (no political balance is required), including a chair, who serve five-year terms. The President appoints the members, including the chair, with the advice and consent of the Senate. When a term expires, the incumbent must leave office. (42 U.S.C. § 7412(r)(6)) Commodity Futures Trading Commission (CFTC) The CFTC consists of five members (no more than three may be from the same political party) who serve five-year terms. At the end of a term, a member may remain in office, unless replaced, until the end of the next session of Congress. The chair is also appointed by the President, with the advice and consent of the Senate. (7 U.S.C. § 2(a)(2)) Consumer Product Safety Commission (CPSC) The statute establishing the CPSC calls for five members, who serve seven-year terms. No more than three of the members may be from the same political party. A member may remain in office for one year at the end of a term, unless replaced. The chair is also appointed by the President, with the advice and consent of the Senate. (15 U.S.C. § 2053) Defense Nuclear Facilities Safety Board (DNFSB) The DNFSB consists of five members (no more than three may be from the same political party), who serve five-year terms. After a term expires, a member may continue to serve until a successor takes office. The President designates the chair and vice chair. (42 U.S.C. § 2286) Election Assistance Commission (EAC) The EAC consists of four members (no more than two may be from the same political party), who serve four-year terms. After a term expires, a member may continue to serve until a successor takes office. The chair and vice chair, from different political parties and designated by the commission, change each year. (42 U.S.C. § 15323) Equal Employment Opportunity Commission (EEOC) The EEOC consists of five members (no more than three may be from the same political party), who serve five-year terms. An incumbent whose term has expired may continue to serve until a successor is appointed, except that no such member may continue to serve (1) for more than 60 days when Congress is in session, unless a successor has been nominated; or (2) after the adjournment of the session of the Senate in which the successor's nomination was submitted. The President designates the chair and the vice chair. The President also appoints the general counsel, with the advice and consent of the Senate. (42 U.S.C. § 2000e-4) Export-Import Bank Board of Directors (EXIMBANK) The Export-Import Bank Board of Directors comprises the bank president, who serves as chair; the bank first vice president, who serves as vice chair; and three other members (no more than three of these five may be from the same political party). All five members are appointed by the President, with the advice and consent of the Senate, and serve for terms of up to four years. An incumbent whose term has expired may continue to serve until a successor is qualified, or until six months after the term expires—whichever occurs earlier (12 U.S.C. § 635a). The President also appoints an inspector general, with the advice and consent of the Senate. (5 U.S.C. App., Inspector General Act of 1978, § 3, 12) Farm Credit Administration Board (FCA) The FCA consists of three members (no more than two may be from the same political party), who serve six-year terms. A member may not succeed himself or herself unless he or she was first appointed to complete an unexpired term of three years or less. A member whose term expires may continue to serve until a successor takes office. One member is designated to serve as chair for the duration of the member's term. (12 U.S.C. § 2242) Federal Communications Commission (FCC) The FCC consists of five members (no more than three may be from the same political party), who serve five-year terms. When a term expires, a member may continue to serve until the end of the next session of Congress, unless a successor is appointed before that time. The President designates the chair. (47 U.S.C. § 154) Federal Deposit Insurance Corporation Board of Directors (FDIC) The FDIC board of directors consists of five members, of whom two—the comptroller of the currency and the director of the Office of Thrift Supervision (OTS)—are ex officio . The three appointed members serve six-year terms. An appointed member may continue to serve after the expiration of a term until a successor is appointed. Not more than three of the members of the board of directors may be from the same political party. The President appoints the chair and the vice chair, with the advice and consent of the Senate, from among the appointed members. The chair is appointed for a term of five years. (12 U.S.C. § 1812) The President also appoints the inspector general, with the advice and consent of the Senate. (5 U.S.C. App., Inspector General Act of 1978, §§ 3, 12) Federal Election Commission (FEC) The FEC consists of six members (no more than three may be from the same political party), who may serve for a single term of six years. When a term expires, a member may continue to serve until a successor takes office. The chair and vice chair, from different political parties and elected by the commission, change each year. Generally, the vice chair succeeds the chair. (2 U.S.C. § 437c) Federal Energy Regulatory Commission (FERC) The FERC, an independent agency within the Department of Energy, consists of five members (no more than three may be from the same political party), who serve five-year terms. When a term expires, a member may continue to serve until a successor takes office, except that such commissioner may not serve beyond the end of the session of the Congress in which his or her term expires. The President designates the chair. (42 U.S.C. § 7171) Federal Labor Relations Authority (FLRA) The FLRA consists of three members (no more than two may be from the same political party), who serve five-year terms. After the date on which a five-year term would expire, a member may continue to serve until the end of the next Congress, unless a successor is appointed before that time. The President designates the chair. The general counsel is also appointed by the President, with the advice and consent of the Senate. (5 U.S.C. § 7104) Federal Maritime Commission (FMC) The FMC consists of five members (no more than three may be from the same political party), who serve five-year terms. When a term expires, a member may continue to serve until a successor takes office. The President designates the chair. (46 U.S.C. § 301) Federal Mine Safety and Health Review Commission (FMSHRC) The FMSHRC consists of five members (no political balance is required), who serve six-year terms. When a term expires, the member must leave office. The President designates the chair. (30 U.S.C. § 823) Federal Reserve System Board of Governors (FRS) The FRS consists of seven members (no political balance is required), who serve 14-year terms. When a term expires, a member may continue to serve until a successor takes office. The President appoints the chair and vice chair, who are separately appointed as members, for four-year terms, with the advice and consent of the Senate. (12 U.S.C. §§ 241, 242) Federal Trade Commission (FTC) The FTC consists of five members (no more than three may be from the same political party), who serve seven-year terms. When a term expires, the member may continue to serve until a successor takes office. The President designates the chair. (15 U.S.C. § 41) Foreign Claims Settlement Commission (FCSC) The FCSC, located in the Department of Justice, consists of three members (political balance is not required), who serve three-year terms. When a term expires, the member may continue to serve until a successor takes office. Only the chair, who also is appointed by the President with the advice and consent of the Senate, serves full-time. (22 U.S.C. §§ 1622, 1622c) Merit Systems Protection Board (MSPB) The MSPB consists of three members (no more than two may be from the same political party), who serve seven-year terms. A member who has been appointed to a full seven-year term may not be reappointed to any following term. When a term expires, the member may continue to serve for one year, unless a successor is appointed before that time. The President appoints the chair, with the advice and consent of the Senate, and designates the vice chair. (5 U.S.C. §§ 1201-1203) National Credit Union Administration Board of Directors (NCUA) The NCUA consists of three members (no more than two members may be from the same political party), who serve six-year terms. When a term expires, a member may continue to serve until a successor takes office. The President designates the chair. (12 U.S.C. § 1752a) National Labor Relations Board (NLRB) The NLRB consists of five members, who serve five-year terms. Political balance is not required, but, by tradition, no more than three members are from the same political party. When a term expires, the member must leave office. The President designates the chair. The President also appoints the general counsel, with the advice and consent of the Senate. (29 U.S.C. § 153) National Mediation Board (NMB) The board consists of three members (no more than two may be from the same political party), who serve three-year terms. When a term expires, the member may continue to serve until a successor takes office. The board annually designates a chair. (45 U.S.C. § 154) National Transportation Safety Board (NTSB) The NTSB consists of five members (no more than three may be from the same political party), who serve five-year terms. When a term expires, a member may continue to serve until a successor takes office. The President appoints the chair, from among the members, for a two-year term, with the advice and consent of the Senate, and designates the vice chair. (49 U.S.C. § 1111) Nuclear Regulatory Commission (NRC) The NRC consists of five members (no more than three may be from the same political party), who serve five-year terms. When a term expires, the member must leave office. The President designates the chair. The President also appoints the inspector general, with the advice and consent of the Senate. (42 U.S.C. § 5841 and 5 U.S.C. App., Inspector General Act of 1978, §§ 3, 12) Occupational Safety and Health Review Commission (OSHRC) The OSHRC consists of three members (political balance is not required), who serve six-year terms. When a term expires, the member must leave office. The President designates the chair. (29 U.S.C. § 661) Postal Regulatory Commission (PRC) The PRC consists of five members (no more than three may be from the same political party), who serve six-year terms. After a term expires, a member may continue to serve until his successor takes office, but the member may not continue to serve for more than one year after the date upon which his term otherwise would expire. The President designates the chair, and the members select the vice chair. (39 U.S.C. § 502) Privacy and Civil Liberties Oversight Board (PCLOB) The board consists of five members (no more than three members of the board may be from the same political party), who serve six-year terms. When a term expires, the member may continue to serve until a successor takes office. Only the chair, who also is appointed by the President with the advice and consent of the Senate, serves full-time. (42 U.S.C. § 2000ee) The Implementing Recommendations of the 9/11 Commission Act of 2007, P.L. 110-53 , Title VIII, § 801 (121 Stat. 352) established the Privacy and Civil Liberties Oversight Board as an independent agency, and the first new nominations to the board were made in the 110 th Congress. Previously the Privacy and Civil Liberties Oversight Board had functioned as part of the White House Office in the Executive Office of the President. That board ceased functioning on January 30, 2008. As of the end of the 111 th Congress, the new board had not been constituted. Railroad Retirement Board (RRB) The board consists of three members (political balance is not required), who serve five-year terms. When a term expires, the member may continue to serve until a successor takes office. The President appoints the chair, and an inspector general, with the advice and consent of the Senate. (45 U.S.C. § 231f and 5 U.S.C. App., Inspector General Act of 1978, §§ 3, 12) Securities and Exchange Commission (SEC) The commission consists of five members (no more than three may be from the same political party), who serve five-year terms. When a term expires, the member may continue to serve until the end of the next session of Congress, unless a successor is appointed before that time. The President designates the chair. (15 U.S.C. § 78d) Surface Transportation Board (STB) The STB, located within the Department of Transportation, consists of three members (no more than two may be from the same political party), who serve five-year terms. When a term expires, the member may continue to serve until a successor takes office, but not for more than one year after expiration. The President designates the chair. (49 U.S.C. § 701) United States International Trade Commission (USITC) The USITC consists of six members (no more than three may be from the same political party), who serve nine-year terms. A member of the commission who has served for more than five years is ineligible for reappointment. When a term expires, a member may continue to serve until a successor takes office. The President designates the chair and vice chair for two-year terms of office, but they may not belong to the same political party. The President may not designate a chair with less than one year of continuous service as a member. This restriction does not apply to the vice chair. (19 U.S.C. § 1330) United States Parole Commission (USPC) The USPC is an independent agency in the Department of Justice. The commission consists of five commissioners (political balance is not required), who serve for six-year terms. When a term expires, a member may continue to serve until a successor takes office. In most cases, a commissioner may serve no more than 12 years. However, Section 11017(c) of P.L. 110-273 , enacted on November 2, 2002, provides that this limitation does not "apply to a person serving as Commissioner" when the act took effect. The President designates the chair (18 U.S.C. § 4202). The commission was previously scheduled to be phased out, but its life has been extended several times by Congress. Under P.L. 110-312 , § 2 (122 Stat. 3013), it was extended until November 2011. Under P.L. 112-44 , §2 (125 Stat. 533), it was extended to November 2013. (18 U.S.C. § 3551) United States Sentencing Commission (USSC) The USSC is a judicial branch agency that consists of seven voting members, who are appointed to six-year terms, and two non-voting members. The seven voting members are appointed by the President, with the advice and consent of the Senate. Only the chair and three vice chairs, selected from among the members, serve full-time. The President appoints the chair, with the advice and consent of the Senate, and designates the vice chairs. At least three members must be federal judges. Not more than four members may be of the same political party. No more than two vice chairs may be of the same political party. No voting member may serve more than two full terms. When a term expires, an incumbent may continue to serve until he or she is reappointed, a successor takes office, or Congress adjourns sine die at the end of the session that commences after the expiration of the term, whichever is earliest. The Attorney General (or designee) serves ex officio as a non-voting member. (28 U.S.C. § 991-992) The chair of the United State Parole Commission is also an ex officio non-voting member of the commission. (18 U.S.C. § 3551 note) Appendix A. Summary of All Nominations and Appointments to Collegial Boards and Commissions Appendix B. Board/Commission Abbreviations

The President makes appointments, with the advice and consent of the Senate, to some 148 full-time leadership positions on 33 federal regulatory and other collegial boards and commissions. This appointment process consists of three distinct stages: selection, clearance, and nomination by the President; consideration by the Senate; and appointment by the President. These advice and consent positions can also temporarily be filled by the President alone through a recess appointment. Membership positions on this set of collegial bodies often have fixed terms, and incumbents are often protected from arbitrary removal by the President. The enabling statutes for most of these boards and commissions require political party balance in their membership. During the 111th Congress, President Barack Obama submitted nominations to the Senate for 77 of these 148 positions. (Most of the remaining positions on these boards and commissions were not vacant during that time.) A total of 99 nominations were submitted, of which 76 were confirmed, 4 were withdrawn, and 19 were returned to the President. The number of nominations exceeded the number of positions being filled because the President submitted multiple nominations for some positions. In some cases, for example, the President submitted one nomination for the end of a term in progress and a second nomination of the same person to the same position for the succeeding term. In other cases, the President submitted a second nomination after his first choice failed to be confirmed. President Obama made seven recess appointments to boards covered by this report during the 111th Congress, and he submitted an "extra" nomination of those individuals in order to comply with a law affecting the payment of recess appointees. At the end of the 111th Congress, 24 incumbents were serving past the expiration of their terms. In addition, there were 10 vacancies among the 148 positions. This report specifies, for the 111th Congress, all nominations to full-time positions on 33 regulatory and other collegial boards and commissions. Profiles of each board and commission provide information on their organizational structures, membership as of the end of the 111th Congress, and appointment activity during that Congress. The organizational section discusses the statutory requirements for the appointed positions, including the number of members on each board or commission, their terms of office, whether or not they may continue in their positions after their terms expire, whether or not political balance is required, and the method for selection of the chair. Membership and appointment activity are provided in tabular form. The report also includes tables summarizing the collective appointment activity for all 33 bodies. Information for this report was compiled from data from the Senate nominations database of the Legislative Information System at http://www.congress.gov/nomis/, telephone discussions with agency officials, agency websites, the United States Code, and the 2008 edition of United States Government Policy and Supporting Positions (more commonly known as the "Plum Book"). This report will not be updated.

Legislative Background During the 107th Congress, Representative Don Young and Representative John Micaintroduced the Arming Pilots Against Terrorism Act ( H.R. 4635 , 107th Congress). Atthat time, the Bush administration voiced initial opposition to the concept of arming pilots withlethal weapons. As amended by the Aviation Subcommittee of the House Committee onTransportation and Infrastructure on June 19, 2002 (and as ordered reported by the full committeeon June 26, 2002), the bill contained a provision that capped participation in the program at 2% ofeligible pilots and limited the program to a two-year test period. On July 10, 2002, RepresentativePeter DeFazio offered an amendment on the floor to remove the 2% cap on the number of pilots whocould participate in the program and also deleted the 2-year sunset provision contained in the bill. The amendment was adopted twice by large majorities and H.R. 4635 passed by a voteof 310-113. On May 25, 2002, Senator Robert Smith introduced the Arming Pilots AgainstTerrorism and Cabin Defense Act of 2002 ( S. 2554 , 107th Congress) which containedsimilar language to the final version of H.R. 4635 (107th Congress) passed by the House. On September 4, 2002, Senator Smith offered an amendment to the Senate version of H.R. 5005 (107th Congress), a bill introduced to create a Department of HomelandSecurity, that included provisions for arming pilots similar to those contained in H.R. 4635 (107th Congress). On November 12, 2002, Representative Richard Armey introduced H.R. 5710 (107th Congress) as a new vehicle for establishing the Department ofHomeland Security and for other purposes which contained provisions for arming pilots. However,in response to lobbying efforts by the air cargo industry, the language in this legislation limitedparticipation in the program to pilots of passenger air carrier aircraft. On November 19, 2002, theSenate amended H.R. 5005 (107th Congress), incorporating provisions virtually identicalto H.R. 5710 (107th Congress). The House agreed to the Senate amendment to H.R. 5005 (107th Congress) on November 22, 2002, and it was signed by President Bushon November 25, 2002 becoming P.L. 107-296 . Debate over the issue of arming pilots focused on the benefits, risks, and costs associated with implementing the program. Proponents, principally pilots and pilot unions, argued that the potentialbenefits of deterring or thwarting terrorist and criminal acts against passenger aircraft outweighedthe inherent risks associated with arming pilots. Opponents of policy allowing pilots to be armedwith lethal weapons, including the airlines and several prominent aviation safety experts, argued thatsuch a program's safety risks and monetary costs outweighed these potential benefits. Key riskscited by critics of the program include: Added workload and responsibilities associated with participation in the program that may distract pilots from primary flying duties and safety-relatedfunctions; Risks of a firearm discharge to innocent passengers or aircraft structure andsystems; and A proliferation of firearms on aircraft and in secured areas of the aviationsystem that is counter to other security objectives. (4) Many of these concerns raised by critics of the plan to arm pilots have been recognized by bothCongress and proponents of the plan as key issues to be addressed in program implementation. In the first session of the 108th Congress, debate focused on whether pilots of all-cargo aircraft should be included in the Federal Flight Deck Officer Program. All-cargo pilots were initiallyexcluded from the program in the final wording of the Homeland Security Act of 2002 ( P.L.107-296 ). In the first session of the 108th Congress, several legislative vehicles were introduced toexpand the program to cargo pilots as well as to other flight crew members, such as flight engineers. On February 13, 2003, Rep. John Mica introduced H.R. 765 , and on March 5, 2003 Sen.Bunning introduced S. 516 . Both bills sought to include cargo pilots in the FederalFlight Deck Officer Program, while S. 516 sought to also include other flight crewmembers such as flight engineers. A separate stand-alone bill ( S. 1657 ) introduced bySenator Bunning was passed by the Senate on November 10, 2003. Similar legislation( H.R. 1049 and H.R. 3262 ,) was also introduced in the House. Also, theAir Cargo Security Act ( S. 165 ), passed by the Senate on May 9, 2003, contained aprovision that sought to include all-cargo pilots in the Federal Flight Deck Officers Program. AnAmendment offered by Senator Bunning ( S.Amdt. 903 to S. 824 ) wasincluded in the FAA reauthorization legislation ( P.L. 108-176 ) and was enacted into law onDecember 12, 2003. This provision expands the Federal Flight Deck Officer Program to includeother flight crew members such as flight engineers and to flight crew members flying for all-cargoair carriers. Implementation Issues Implementation of the Federal Flight Deck Officer Program requires assessments of thestandards and guidelines for: 1) pilot selection and screening; 2) equipment; 3) training; 4)operational procedures; and 5) costs. To implement the program, the TSA formed a task force toaddress these issues and developed a plan for implementation of the program. While Congress hasnoted that the TSA's decisions regarding the methods for implementing procedural requirements ofthe program shall be subject to review only for abuse of discretion, continued legislative oversightof the program is likely to be an issue for the 108th Congress. Furthermore, the 108thCongressdebated and passed legislation ( P.L. 108-176 ) allowing pilots of all-cargo air carriers and flightengineers to participate in the program. Pilot Selection and Screening What types of screening and selection criteria are needed for volunteer pilots prior to and while participating in the program. Issues considered during implementation of the program include the process for selecting and screening of volunteer pilots seeking to become Federal flight deck officers. The legislation requiresfurther assessment to determine whether additional background checks should be required beyondthat specified by section 44936(a)(1) of Title 49, Code of Federal Regulations. (5) Additional selectionand screening criteria could help to ensure that pilots selected to participate are physically andpsychologically capable of carrying out the duties and responsibilities associated with participationin the program and maintain the standards set forth by the program while serving as Federal flightdeck officers. Screening measures could be used to assess whether a pilot poses a security or safetythreat by possessing a firearm on the flight deck or by being trained in the use of lethal force. Proponents of this new law point out that pilots already undergo rigorous pre-employment evaluations and screening throughout their careers with an air carrier. Captain Stephen Luckey,chairman of the National Fight Security Committee of the Air Line Pilots Association (ALPA),International noted that: Pilots are undoubtedly the most highly scrutinizedemployees in the work force, submitting to a battery of pre-employment evaluations, a flight physicalevery six months, random drug and alcohol testing, and a criminal history records check, amongother formal examinations. Additionally, pilots are constantly interacting with and undergoing defacto monitoring by their airline's management, their peers, FAA personnel, andothers. (6) On the other hand, despite pre-existing measures for screening and evaluating pilots, recent examplesof confirmed and suspected suicides and sabotage of aircraft by flight crew personnel suggest apotential need for more detailed background checks of pilots wishing to participate in the FederalFlight Deck Officer Program. (7) However, there islittle agreement on whether additional screeningincluding psychiatric evaluation of pilots would be able to detect pilots who would pose a risk byparticipating in the program. Some argue that current screening and peer monitoring of pilots areinsufficient, and detailed psychiatric screening and psychological testing is needed to adequatelyassess the mental health of pilots. (8) Others argue thatmany common mental health conditions canbe masked during these evaluations. They assert that the costs of implementing such elaboratescreening measures would far outweigh the marginal improvement in assessing the mental healthof pilots beyond that obtained through the scrutiny pilots already undergo. Proponents for armingpilots also argue that by having access to the flight deck, a pilot intent on causing harm alreadypossesses the means to do so, and introducing a firearm on the flight deck does little to add to thatalready existing capability. They argue that, historically, incidents of deliberate acts by pilots toharm the airplane and its occupants are extremely unusual and current background checks, screening,and evaluations of pilots are more than adequate for assessing their fitness to participate in theFederal Flight Deck Officer Program. The Arming Pilots Against Terrorism Act specifies that pilots who are former military or law enforcement personnel should be given preference to participate in the Federal Flight Deck OfficerProgram. This could be one way to mitigate the risks identified above, at least among the initialcadre of deputized Federal flight deck officers by giving preference for participation in the programto persons that were already deemed fit to carry a firearm. It is also of note that the law does notlimit participation to U.S. citizens. Therefore, another implementation issue is whether additionalbackground checks will be required for non-U.S. citizen pilots volunteering to participate in thisprogram. While provisions for waiting periods and background checks have been established forforeign pilots seeking certain types of advanced flight training in the United States since September11, 2001, it is uncertain whether additional background checks and waiting periods would be neededfor foreign pilots seeking to participate in the Federal Flight Deck Officer Program, particularly ifthe pilot has an extensive employment record flying for U.S. air carriers. Currently, TSA procedures require that pilots applying for the program undergo additional psychological screening, background checks, and a medical examination beyond those alreadyrequired of airline pilots. The Airline Pilots Security Alliance (APSA), a grass-roots organizationsupporting efforts to arm pilots, has called the TSA screening requirements unacceptable andredundant with many existing FAA and airline screening requirements. (9) However, the TSA assertsthat the proposed screening measures are similar to those used in selection of federal lawenforcement officers, including federal air marshals, to determine an individual's fitness to carry afirearm and act in a law enforcement capacity and are necessary to ensure that participating pilotsmeet these same standards. (10) According to TSA,about 6 percent of the applicants for the programare screened out prior to initial training - 2 percent fail to meet the qualifications specified by law,3 percent are eliminated through psychological screening, and 1 percent have problems identifiedby the background check. (11) Equipment What are the tradeoffs between firearms effectiveness and risk tothe aircraft? The legislation identifies the selection of firearms and ammunition as an issue to be addressed in developing procedural requirements for the program. The legislation also specifies that ananalysis shall be conducted to assess the risk of catastrophic failure of an aircraft as a result of thedischarge (including an accidental discharge) of a firearm into the avionics, electrical systems, orother sensitive areas of the aircraft. The legislation further specifies that information developed inthis analysis shall be treated as classified information and not disclosed. If significant risks aredetermined to exist, the Under Secretary shall take actions to minimize these risks. The selection of firearms and ammunition for use in the program is an important consideration because the unique environment of the flight deck and the fact that pilots are not primarily lawenforcement officers make this program quite different than other law enforcement applications offirearms. Opponents of arming pilots have argued that a stray bullet could cause serious damage toaircraft systems and structures and jeopardize flight safety. Speaking before the Senate Committeeon Commerce, Science and Transportation, Captain Edward M. Davidson, Director of Flight Safetyand Quality Assurance for Northwest Airlines, cautioned that bullets could pierce flight deckwindows creating a potentially catastrophic cockpit decompression, could strike one of the flightdeck's many multi-functional instruments putting at risk numerous safety critical systems, or couldstrike critical electronic navigation equipment located beneath the flight deck. (12) A depressurizationof the airplane at altitude would necessitate that the flight crew use supplemental oxygen andcomplete checklist procedures in response to the depressurization. Similarly, loss of critical aircraftsystems may require a flight crew's immediate attention. Accomplishing required safety-related tasksmay prove difficult during a struggle with intruders in the cockpit. However, in testimony before the House Subcommittee on Aviation, Mr. Ron Hinderberger, Director of Aviation Safety for the Boeing Company stated that "[t]he risk of loss of the aircraft dueto a stray round from a handgun is very slight. Boeing commercial service history contains cases ofgunfire onboard in-service airplanes, all of which landed safely." Hinderberger further noted that"[c]ommercial airplane structure is designed with sufficient strength, redundancy, and damagetolerance that single or even multiple handgun bullet holes would not result in loss of the aircraft. A single bullet hole in the fuselage skin would have little effect on cabin pressurization." (13) It has been reported that the weapon initially chosen for the program was a Smith & Wesson .40-caliber semiautomatic pistol that is commonly used by law enforcement agencies. (14) Morerecently, it was announced that German weapons manufacturer Heckler & Koch who makes a similar.40-caliber handgun was awarded the TSA contract to supply up to 9,600 guns for the program. (15) This award was questioned, particularly by other bidders and supporters of "buy American"principles. This prompted TSA to reevaluate the contract bids, but Heckler & Koch again came outon top in the reevaluation process. The company is building a manufacturing facility in Columbus,Georgia that will eventually supply guns for the Federal Flight Deck Officer program and createabout 200 U.S. manufacturing jobs. (16) As the program evolves, further research and development of firearms and ammunition more specifically tailored to the needs of Federal Flight Deck officers and the unique environment of theflight deck may be needed. Factors to be examined include enhancement of firearm effectivenessin the flight deck environment and mitigation of the risks of accidental discharges, inadvertentshootings of innocent passengers, and possible depressurization of the cabin or disabling of aircraftsystems from a firearm discharge. The law provides for temporary suspension of the program if thefirearm of a Federal flight deck officer accidentally discharges due to a shortcoming in standards,training, or procedures until the shortcoming is corrected. Training Who should conduct the training? The law specifies that training of Federal flight deck officers was to begin within three months after enactment. Following enactment, the TSA convened a task force to define the training programand address other implementation issues. The law provides that the training program may beadministered either by the Under Secretary or by a firearms training facility approved by the UnderSecretary. This leaves to the Under Secretary's discretion whether the training will be provided byTSA facilities and staff, by facilities and staff of other Federal law enforcement agencies ororganizations, or by contractor facilities. One advantage of using TSA facilities is that doing socould maximize standardization of training for pilots and compliance with the standards andguidelines established by the Under Secretary. It could also improve coordination of training andprocedures between Federal flight deck officers and Federal air marshals who will need to coordinateand communicate effectively when dealing with in-flight situations that may arise. However, TSAtraining facilities may become overburdened if large numbers of pilots wish to participate in theprogram. TSA facilities and staff may lack the ability to administer training in a timely manner thatmeets scheduling constraints of the pilots, especially given that the pilots will need to complete thistraining during their time off. One alternative that has been considered is to use Federal Bureau of Investigation (FBI) training facilities. In December 2001, the FBI released its proposal for training airline pilots termed the"Cockpit Protection Program." The advantage of this plan is that it is already well defined andincludes assessments of the facility and staff requirements needed to administer the training. Thedisadvantage of this program is that it removes the training from the direct control of the TSA, whowould instead assume an oversight role to ensure that training standards established by the UnderSecretary are maintained. Also, this arrangement may not offer the opportunity for specific trainingregarding the coordination of duties and responsibilities between Federal flight deck officers andFederal air marshals. Another federal entity named as possible provider of training for Federal flightdeck officers is the Federal Law Enforcement Training Center (FLETC) which has facilities inGlynco, Georgia; Charleston, South Carolina; and Artesia, New Mexico. These facilities mayprovide capabilities to train larger groups of pilots at locations that may be more convenient to some,but like the FBI facilities, these facilities may have limited oversight by TSA and may not offer theopportunity for training on coordination with Federal air marshals. Using contractor facilities and/or contractor staff to administer training to Federal flight deck officers are also options, but ones that pose several challenges. Extensive oversight of contractorprovided training may be necessary to ensure that established curriculum and qualifications standardsare maintained. If multiple contracts are used to train Federal flight deck officers, standardizationof training across vendors may be difficult to maintain. One advantage of using contract training forthe program might be the reduction of capital investment for facilities and personnel. A prototype training program was held in April, 2003 used FLETC facilities in Glynco, Georgia to train an initial group of 48 pilots. Full implementation of the program began in July 2003 at theGlynco facilities as well as facilities in Artesia, New Mexico. In September 2003, the program wasmoved in its entirety to the Artesia, New Mexico facilities because that site has aircraft mockups fortraining that were not available at Glynco and other law enforcement training at Glynco, Georgia waslimiting facilities available for the program there. Some pilot groups have complained that theTSA's reliance on a single site, and the remote location of the Artesia, New Mexico facility (269miles from the nearest major airport in Albuquerque) creates a considerable inconvenience forattending the training. (17) Admiral Loy noted that while the initial training is being conducted at federal facilities, as the program evolves "...there very well may be a private sector opportunity..." to provide the training. (18) More recently, the TSA has indicated that they view initial training of the pilots as a federal function,so that trainees can be appropriately evaluated before being deputized, but remain open to thepossibility that private firms can provide for recurrent training and re-qualification of federal flightdeck officers. However, TSA has indicated that it will make no decision on whether re-qualificationtraining should take place at federal facilities or TSA-approved private facilities or somecombination thereof until they have more experience with the program. (19) What will the training consist of ? The Act specifies that the training of a Federal flight deck officer shall include: Training to ensure that the Federal flight deck officer attains a level of proficiency with a firearm comparable to the level of proficiency required of Federal airmarshals; Training to ensure that the officer maintains exclusive control over the officer'sfirearm at all times, including training in defensive maneuvers; and Training to assist the officer in determining when it is appropriate to use theofficer's firearm and when it is appropriate to use less than lethal force. The Act specifies that the Under Secretary shall base the requirements for training Federal flight deck officers on the training standards applicable to Federal air marshals, taking into account thediffering roles and responsibilities of Federal flight deck officers and Federal air marshals. Whilemany of the details of the Federal air marshal training program are classified and cannot bedisclosed, it has been reported that the program consists of 10 � weeks of progressive trainingstarting with basic marksmanship, followed by reactive firearms training scenarios, followed byadvanced firearms techniques specific to the aircraft cabin environment, followed by scenario-basedexercises using wide-body and narrow-body aircraft mockups. (20) Pilot groups including ALPA and the Allied Pilots Association (APA) have suggested that initial training for Federal flight deck officers could be completed in a 48-hour training program. Such a training program was derived from details released in December 2001 regarding the FBICockpit Protection Program that proposed a five-day, 48-hour training course in firearms handling,legal aspects, tort law, and policies regarding use of lethal force. The current TSA program similarlyconsists of a 48-hour curriculum of classroom instruction, firearms training, and tactical drills. The legislation also specifies that Federal flight deck officers will have to re-qualify at an interval required by the Under Secretary. The FBI Cockpit Protection Program specified an annualre-qualification interval. The selection of a re-qualification interval will need to strike a balancebetween adequately ensuring that qualification standards are maintained while ensuring that theprocess does not overburden TSA resources or place an undue schedule burden on Federal flightdeck officers who will need to re-qualify during time away from their flying jobs. How will the effectiveness of the training be evaluated? The law does not specify any criteria or guidelines for assessing the effectiveness of the program or the training provided under the program. Given that the primary objective of theprogram is deterrence of terrorism and criminal acts against the flight deck, effectiveness of theprogram in this regard will be difficult if not impossible to assess. Successful deterrence may beindicated by statistics regarding security incidents aboard aircraft. However, it will be difficult toattribute any reduction in security incidents directly to this program. This is especially true inconsideration of the fact that the Federal flight deck program is but one component of a larger effortto heighten aviation security in response to terrorist threats that also includes enhanced passengerand baggage screening and the deployment of Federal air marshals. Nonetheless, the effectivenessof certain elements of the program can be assessed. For example, the effectiveness of training canbe assessed through evaluation of performance during re-qualification. Also, effectiveness of theprogram with regards to risk management can be assessed though analysis of data on incidents offirearms mishandling, accidental discharges, lost and stolen weapons, and so on. Operational Procedures Storage and Transportation of the Firearm. Should the weapon be stored at secure airport facilities or carried by the Federal flight deck officer traveling to and from duty? The legislation identifies storage and transportation of firearms as an issue to be addressed in establishing the procedural requirements for the program. The legislation specifies that particularattention should be given to storage and transportation of firearms on international flights and whenthe pilot leaves the airport to remain overnight away from the pilot's base airport. Pilot groups haveargued for allowing Federal flight deck officers to retain the firearm, particularly at the pilot's homebase, and further advocate that Federal flight deck officers be given the opportunity to train with thefirearm to maintain proficiency in its use. (21) Opponents of such a plan argue that pilots carryingweapons both in airports and to and from work could be the target of terrorists and criminals seekingto steal their firearms and increases the potential for mishandling of the firearm and accidentaldischarges. In February 2003, a TSA task force studying the implementation issues for the Federal Flight Deck Officer Program recommended the use of lock boxes for transporting the firearms. Pilot groupshave voiced concerns that the use of lock boxes undermines the intent of the legislation which theybelieve specifies that "...the officer maintains exclusive control over his or her firearm at alltimes..." (22) The TSA has indicated that itsdecision is based on the very specific nature of themission outlined in the legislation which permits pilots to use their weapons only in defense of theflight deck. The TSA considers the lock box as a means to minimize the risk that the firearms willbe used in other situations. However, the Airline Pilots' Security Alliance (APSA) is concerned thatthe use of lock boxes to transport firearms may make pilots particularly vulnerable targets for thievesseeking to steal their weapons and provides pilots with no means for personal security to protectagainst this threat. (23) Currently, TSA requires thefirearm to be carried in a secured lock box and onlyopened inside a secure cockpit. Should the firearm be concealed? Concealment of the issued firearm is not specifically addressed in the legislation but was a significant issue considered in establishing the procedural requirements of the program. Carryinga concealed firearm would prevent the flying public from determining which pilots were Federalflight deck officers. Doing so could prevent Federal flight deck officers from becoming targets ofattempts to seize or steal firearms. Concealing the firearms could also benefit pilots who are notparticipants in the program since individuals intending criminal acts against a flight deck will nothave foreknowledge of whether the pilots on the flight deck are armed or not. On the other hand,carrying a concealed weapon in the airport terminal, outside controlled access areas of airports, andduring travel to and from work could complicate security screening and law enforcement efforts toestablish a pilot's status as a Federal flight deck officer authorized to carry a concealed firearm. Pilotgroups have also raised the issue of whether Federal flight deck officers will be permitted to carrybackup firearms. (24) It is common practice amonglaw enforcement officers to carry concealed backupfirearms. Currently, the flight deck officers are only issued one weapon which must be transportedin a secured lock box that is concealed in pilots cases, but not readily accessible to the pilot whenoutside the secured cockpit. Airport Security Screening. What identification will verify that a pilot is a deputized Federal flight deck officer authorized to possess a firearm? The legislation identifies methods for ensuring that security personnel will be able to identify whether a pilot is authorized to carry a firearm under the program as an issue that was addressed inestablishing the procedural requirements for the program. Adequate methods for preventing forgeryof identification and accounting for misplaced or stolen identification are needed to ensure thatterrorists and criminals cannot breach security checkpoints by impersonating Federal flight deckofficers. The Aviation and Transportation Security Act (ATSA, P.L. 107-71 ; 115 Stat. 597)mandated the establishment of a uniform system of identification for all State and local lawenforcement personnel for use in obtaining permission to carry weapons in aircraft cabins and inobtaining access to a secured area of an airport, if otherwise authorized to carry such weapons. TheTSA also currently has several research efforts examining technologies for establishing astandardized Transportation Worker Identification Card (TWIC) and for exploring the use ofbiometric technologies for identification. Future deployments of systems using these technologiesmay provide enhanced capability to assure positive identification of Federal flight deck officers. Federal flight deck officers are identified by credentials issued by TSA, but specific procedures forverifying these credentials is considered security sensitive information. Where should screening and identification checking of Federal flight deck officers take place? If it is determined that concealing the identity of Federal flight deck officers would be a desirable aspect of the program, then security screening of Federal flight deck officers and otherflight crew at security checkpoints in open public spaces may diminish the effectiveness of theprogram. As previously noted, public identification of Federal flight deck officers may havenegative consequences for both Federal flight deck officers who may be targeted in attempts to seizefirearms and for pilots not participating in the program whose flights may be targeted if it isdetermined that a Federal flight deck officer is not on board. Screening of pilots in open view mayalso compromise specific security procedures to validate the identity of Federal flight deck officers. However, alternative arrangements for screening of flight crew may be impractical, particularly atsmaller airports where employee and passenger screening are collocated. Flight Deck Operational Procedures. Where should the firearm be placed during flight operations? The legislation identifies the placement of a Federal flight deck officer's firearm on board the aircraft to ensure security and ease of retrieval as an issue to be addressed in developing theprocedural requirements of the program. A holstered weapon may present a safety hazard as it mayinterfere with the pilots full range of motion and prevent performance of normal flight deck duties. A holstered weapon may also be difficult to access from a seated position. However, alternativeoptions involving aircraft modifications for securing firearms on the flight deck would requireindustry retrofitting of flight decks for all affected transport category airplanes and FAA certificationof these designs. Simple designs may be easily approved and implemented. However, moreelaborate designs for housing firearms on the flight deck may require more detailed test andevaluation as part of the certification process. Due to significant differences in flight deck layoutsamong transport category aircraft, standardization across aircraft types in a manner that optimizespositioning of the firearm may be difficult to achieve. These designs may also have difficultyaccommodating differences in physical dimensions and handedness among Federal flight deckofficers. What coordination of flight crew and law enforcement personnel is needed? The legislation identifies interaction between a Federal flight deck officer and a Federal air marshal on board the aircraft and methods for ensuring that pilots are able to identify lawenforcement officers authorized to carry a firearm aboard the aircraft as issues to be addressed inestablishing the procedural requirements of the program. Such coordination will need to addressconcerns over concealing the identity of Federal air marshals while allowing sufficient coordinationbetween them and Federal flight deck officers. Airlines have procedures in place for identifyingarmed law enforcement officers and making these individuals known to flight crews. Theseprocedures may need to be enhanced and further standardized by TSA to ensure that flight crews caneasily recognize armed law enforcement officers on board and coordinate with them if needed. The legislation also identifies the division of responsibility between pilots in the event of an act of criminal violence or air piracy for instances where either one or both of the flight crew are Federalflight deck officers as an additional issue to be addressed in implementing the program. This raisesa question of what, if any, training and educational materials regarding the Federal flight deck officerprogram will be made available to non-participating flight crew and cabin crew members. Currently,only very limited information about the program is available to them. While, flight crews and cabincrews already receive initial and recurrent training in FAA mandated crew resource management(CRM) training programs that facilitates coordination of duties and responsibilities, airlines areunlikely to address the subject of division of responsibility when a pilot must perform duties as aFederal flight deck officer, citing that this is a Federal function and possibly fearing liability issuesif such matters are addressed in training. (25) Furthermore, there is no requirement in the legislationfor training or education of non-participating flight crew personnel regarding the program and mostdetails of the program have not been released because of their security sensitive nature. Thus, it hasbeen largely left up to individual Federal flight deck officers to brief non-participating flight crewon the coordination of flight duties if the flight deck were attacked. The coordination amongmultiple flight crew members who are deputized Federal flight deck officers is likely much lesstroublesome as they have undergone the same standard training and thus have a better understandingof the division of responsibilities during an attack. How should disturbances in the passenger cabin be handled? The legislation specifies procedures for ensuring that the firearm of a Federal flight deck officer does not leave the cockpit if there is a disturbance in the passenger cabin as an issue to be addressedin establishing the procedural requirements of the program. Current guidelines and proceduresprohibit Federal flight deck officers from intervening in cabin disturbances. Rather, Federal flightdeck officers are instructed to use their weapons and training only in the defense of the flight deckwhich is consistent with the intent of the law establishing this program. Disturbances in the passenger cabin are left to be handled by flight attendants, federal air marshals, or any other law enforcement personnel on the aircraft. Federal flight deck officers areinstructed to use their judgment and any available information they can ascertain from flightattendants and so on to determine the best course of action for diverting the aircraft to a locationwhere ground based law enforcement can intervene if needed. While the Aviation andTransportation Security Act ( P.L. 107-71 ) specifies that the FAA may develop and implementmethods, such as video monitors or other surveillance technologies, to alert pilots in the flight deckto activity in the cabin, such devices are not yet available, but are being developed. What procedures should be established for opening the cockpit door and leaving the cockpit? Additionally, the legislation specifies procedures for ensuring that the firearm of a Federal flight deck officer does not leave the cockpit if the pilot leaves the cockpit for personal reasons as an issueto be addressed in establishing the procedural requirements of the program. Procedures relating toopening the cockpit door for other reasons are not specifically addressed in the legislation but wereexamined in the implementation of the program. Reasons for opening the cockpit door and leavingthe cockpit during flight include flight crew meal and beverage service, flight crew changes onlong-duration flights, use of the lavatory, and abnormal or emergency situations that require actionsoutside of the cockpit. Such events may result in a physical separation between the Federal flightdeck officer and his or her firearm if the firearm is to be secured on the flight deck at all times. Occasions when the cockpit door is opened and when the flight crew is moving about may in factbe the most risky times with regard to a potential attack. Procedures may be needed to address thesevarious scenarios and mitigate the risks associated with opening the cockpit door. Costs What will the costs to the Federal government be? The law specifies that the Under Secretary shall be obligated to provide all training, supervision, and equipment needed for the program at no expense to the pilot or the air carrier employing thepilot. Thus, direct training costs will be the obligation of the Federal Government. This will includeinitial training and qualification as well as recurrent training and re-qualification of pilots in theprogram. The Federal Government is also obligated to provide equipment needed for the program. These equipment expenses will primarily consist of issued firearms and ammunition as well as anyequipment needed to maintain the firearms. This may also include facilities to house firearms atairports. The Federal Government will also incur the costs of additional background checks orscreening that may be necessary to determine the fitness of a pilot to participate in the program. Total costs to the Federal Government for the program will be highly dependent on the number of pilots that volunteer and qualify to participate in the program as well as the rate at which pilotsare trained and deputized. Congressional Budget Office (CBO) cost estimates for the program werebased upon earlier proposed legislation (107th Congress, H.R. 4635 ) that limitedparticipation to 2 percent of pilots employed by air carriers. In this estimate, the CBO assumed thatit would cost about $8,000 per pilot annually to cover the costs of equipment, training, and travel. (26) This figure does not include costs required to manage the program. In preparing to implement theprototype program, TSA has indicated that it will cost about $10,400 per pilot for training andequipment. The TSA budgeted a total $500,000 to conduct the prototype program. (27) In theConsolidated Appropriations Resolution for FY2003 ( P.L. 108-7 ), the TSA was given $8 millionto startup the Federal Flight Deck Officer program and begin full scale implementation of theprogram which began in July, 2003. The Homeland Security Appropriations for FY 2004 ( P.L.108-90 , 117 Stat. 1137) gave the TSA $25 million for continuing the program. At this funding level,more than 2,000 pilots could be deputized as Federal Flight Deck Officers by the end of FY 2004assuming TSA is able to conduct the background screening and training for this number of pilotsover the course of the fiscal year. Currently, TSA is conducting weekly initial training classes of 48pilots each. (28) What will the costs to participants and airlines be? The law specifies that pilots participating in the program shall not be eligible for compensation from the Federal Government for services provided as a flight deck officer. The law further statesthat the Federal Government and the air carriers shall not be obligated to compensate the pilots forany training, qualification, or re-qualification to carry firearms under this program. Consequently,pilots are not compensated by the Federal Government while attending training. While the aircarriers employing pilots participating in this program are not obligated to compensate pilots, suchcompensation may be a topic for negotiations between air carriers and pilot unions. Consequently,policies may vary from one air carrier to another. Similarly, indirect costs of training, such as travelto and from the training site and lodging and per diem while in training, could either be paid by theindividual pilots participating in the program or by the air carriers employing these pilots. Whilepilots may use their access to free airline transportation on a space available basis for travel to andfrom the training site, it is likely that most other indirect costs arising from participation in theprogram will be the responsibility of the pilots themselves. Given the airlines' early opposition tothis program, it is unlikely that compensation for pilots and payment of their indirect costs associatedwith participation in this program would be a concession that airlines are likely to make innegotiations with pilots unions. This is especially true in light of the economic difficulties facingmany airlines that prompted them to request tax relief from the Federal Government and ask forconcessions from pilot unions and other labor groups rather than vice versa. Consequently, in thecurrent economic environment, pilots will most likely have to complete training, qualification, andre-qualification during their own time and are likely to pay the indirect costs for training andparticipating in the program out of pocket. One issue that may arise is whether these out of pocketexpenses incurred by pilots participating in the program will be tax deductible. While the law specifies that equipment cost is a Federal obligation, it is uncertain who would pay for cockpit modifications if it is determined that such modifications are needed to store or securefirearms used in the program onboard the aircraft. Even if the direct costs for making suchmodifications are covered by the Federal Government, air carriers may be burdened by indirect costsassociated with removing aircraft from service to make any needed modifications. The currentprogram does not require any cockpit modifications. Scope of the Federal Flight Deck Officer Program The Arming Pilots Against Terrorism Act initially limited participation in the Federal Flight Deck Officer Program to volunteer pilots of air carriers providing passenger air transportation orintrastate passenger air transportation. The legislation defines a pilot as a pilot-in-command (i.e.,a captain), or a second-in-command (i.e., first officer) when a second pilot is required, and does notinclude flight engineers or other members of the flight crew not meeting this definition. From thetime the legislation was introduced, pilot organizations have argued that the program should beexpanded to include other pilots and flight crew members, principally pilots of cargo air carriers andflight engineers. Should the Federal flight deck officer program be expanded toinclude other pilots? Proponents for arming pilots voiced concerns that the legislative language of the Arming Pilots Against Terrorism Act did not include all air carrier pilots. Specifically, the language limitsinclusion to pilots providing passenger air transportation or intrastate passenger air transportation. Consequently, pilots of cargo flights initially could not participate in the program. Nor could flightengineers or other flight crew members who are not formally considered pilots. However, aprovision in the FAA reauthorization legislation ( P.L. 108-176 ) expanded the program to includeall flight crew members of both passenger and all-cargo air carrier aircraft. Proponents for including cargo pilots among the cadre of Federal flight deck officers note that layers of security protection similar to those in place to protect passenger air carrier aircraft are notrequired for air cargo operations. They argue that this leaves cargo flight crews vulnerable topotential terrorist threats against cargo aircraft, including large and heavy aircraft that could be usedin an attack similar to that launched on September 11, 2001. They suggest that this vulnerability canbe mitigated by allowing cargo air carrier pilots to participate in the program. In a statement issuedNovember 15, 2002, Captain David Webb chairman of Air Line Pilot Association's FedEx unit,expressed the following view: A cargo aircraft is devoid of cabin attendants and air marshals. However, at airlines such as FedEx, employees and vendors are routinely boarded.Political maneuvering by the cargo industry has shielded them from the level of security screeningmandated for the passenger terminal. The entire burden for the security of the aircraft rests on thetwo or three pilots in the cockpit. There is little we can do to defend the aircraft against a terroristattack. Stripping us of the ability to carry firearms in the post-9/11 environment is an appallinglyirresponsible act. And the worst part is that it is our own managements that did this to us, with nodiscussion, no warning, no justification whatsoever. (29) Opponents argued that the general public does not have authorized access to cargo aircraft and therefore, enhanced ground-based security measures to better protect cargo aircraft and improvescreening of employees authorized to access these aircraft would make deputizing cargo pilots asFederal flight deck officers unnecessary. Some also argued that costly training for Federal flightdeck officers is not needed for cargo pilots, because the operational environment of cargo aircraftdoes not introduce the same risks associated with arming pilots of passenger aircraft. (30) Consequently, a separate program, with separate standards, training, and guidelines was consideredby some to be more suitable for implementation in the air cargo industry. Besides cargo air carrier pilots, other pilots, such as on-demand air charter pilots and pilots flying for fractional-ownership programs, may also seek participation in the program, although thishas not happened to date. Proponents for including these pilots in the Federal Flight Deck OfficerProgram may argue that currently there are few, if any, security protections to guard against threatsof air piracy and criminal violence in these types of aviation operations. Arming these pilots, theyargue, may serve as the most viable means for providing security in these highly varied operationswhere control of access to the aircraft and flight deck is more difficult. Opponents of such aproposal argue that the inclusion of these pilots in the Federal flight deck officer program wouldsignificantly increase the costs of the program and would lead to further proliferation of firearms inthe aviation environment that may compromise other security initiatives. Thus far, there have beenno legislative initiatives to include these types of pilots in the FFDO program.

The Homeland Security Act of 2002 ( P.L. 107-296 , 116 Stat. 2135) contains provisions to arm pilots of passenger aircraft and gives deputized pilots the authority to use force,including lethal force, to defend the flight deck against criminal and terrorist threats. Participationin the Federal Flight Deck Officer Program, established under the Arming Pilots Against TerrorismAct contained in P.L. 107-296 , was initially limited to pilots of passenger aircraft. However, aprovision in the FAA reauthorization act (Vision 100; P.L. 108-176 , 117 Stat. 2490) expanded theprogram to include flight engineers as well as flight crews of all-cargo aircraft. During debate over legislation to arm pilots, proponents argued that the potential benefits of deterring or thwarting terrorist and criminal acts against passenger aircraft outweighed the inherentrisks associated with arming pilots. However, opponents of policy allowing pilots to be armed withlethal weapons argued that such a program's safety risks and monetary costs significantlyoutweighed these potential benefits. Risks cited included potential distraction to the flight crew,dangers that a weapon discharge could pose to the aircraft or its occupants, and security concernsassociated with carrying firearms in secured areas of the aviation system. Proponents countered thatthese risks could be effectively mitigated, but recognized that these are important issues to beaddressed for successful implementation of the policy to arm pilots. With enactment of this legislation, focus on the issue of arming pilots has turned to implementation of the Federal Flight Deck Officer Program. These implementation issues fall intofour broad categories: 1) pilot selection and screening; 2) equipment (i.e., firearms and ammunitionand the risks they may pose to aircraft and passengers); 3) training; and 4) operational procedures. This report describes several implementation issues within each of these areas that may requirecontinued legislative oversight and possible clarification regarding the intent of the legislation. TheTSA has fully implemented the program over the last year. However, continued concerns voiced bypilot groups over the implementation of the program include: the extensive background checksrequired of applicants; the requirement to transport issued firearms in lock boxes; and theinconvenient location of training facilities. These issues, along with the possibility of using privatecontractors to provide recurrent training for deputized pilots may be the topics of continuedcongressional oversight. This report will not be updated.

Introduction On June 25, 2012, the Supreme Court issued its much-anticipated decision in Arizona v. United States , ruling that some aspects of an Arizona statute intended to deter unlawfully present aliens from remaining in the state were preempted by federal law, but also holding that Arizona police were not facially preempted from running immigration status checks on persons stopped for state or local offenses. In reaching these conclusions, the Supreme Court made clear that opportunities for states to take independent action in the field of immigration enforcement are more constrained than some had previously believed. In recent years, several state and local governments have adopted measures intended to deter the presence of unauthorized aliens within their jurisdiction. The nature of these measures has varied considerably. In some instances, jurisdictions have sought to enter cooperative agreements with federal immigration authorities, under which state or local officers are delegated authority to perform specific immigration enforcement functions. In other instances, state and local governments have acted independently to deter unauthorized immigration. Some states and localities, for example, have sought to limit unlawfully present aliens' access to housing and municipal services. Some have authorized or required the suspension or termination of the licenses of businesses that knowingly or intentionally hire unauthorized aliens, and have also required that employers within their jurisdiction use the federal government's E-Verify database to check certain employees' work authorization. Others have imposed criminal sanctions, separate and apart from any imposed under federal law, for activities believed to promote unauthorized immigration. Still others have adopted laws or policies intended to facilitate the identification and apprehension of unlawfully present aliens by state and local law enforcement—even in the absence of a cooperative agreement with federal authorities—so that they may be transferred to the custody of federal immigration officers. An Arizona measure enacted in 2010, commonly referred to as S.B. 1070, arguably represents the vanguard of recent attempts to test the legal limits of greater state involvement in immigration enforcement. Potentially sweeping in effect, S.B. 1070 declared Arizona's intent to establish a state-wide policy of "attrition through enforcement." Among other things, S.B. 1070 required state and local law enforcement to facilitate the detection of unauthorized aliens in their daily enforcement activities. The measure also established criminal penalties under state law, in addition to those already imposed under federal law, for alien smuggling offenses and failure to carry or complete federal alien registration documents. Further, it made it a crime under Arizona law for an unauthorized alien to apply for or perform work in the state, either as an employee or an independent contractor. Before S.B. 1070, as amended, was scheduled to go into effect, the Department of Justice (DOJ) brought suit in federal district court seeking to preliminarily enjoin many (but not all) of the provisions of the Arizona measure, arguing that they were likely preempted by federal immigration law and therefore unenforceable under the Supremacy Clause. The district court granted the DOJ's motion to preliminarily enjoin four of the Arizona law's provisions (though it did not enjoin all the provisions of S.B. 1070 that had been challenged by the DOJ, including a provision modifying a preexisting Arizona statute which penalizes alien smuggling). A three-judge panel of the U.S. Court of Appeals for the Ninth Circuit ("Ninth Circuit") upheld the injunction, unanimously with respect to certain provisions, but splitting 2-1 on others. Arizona petitioned the Supreme Court to hear an appeal of the panel's decision and, on December 12, 2011, the Court granted certiorari. This report discusses the Supreme Court's ruling in Arizona v. United States , and considers the implications that the decision may have for immigration enforcement activity by states and localities. The Arizona ruling and its implications are also discussed, in a more truncated form, in a series of posts of the CRS Legal Sidebar. For discussion of lower court litigation on S.B. 1070, see CRS Report R41221, State Efforts to Deter Unauthorized Aliens: Legal Analysis of Arizona's S.B. 1070 , by [author name scrubbed], [author name scrubbed], and [author name scrubbed]. The Court's Decision in Arizona Arguments at the Supreme Court centered on four major provisions of the Arizona statute, which can be divided into two categories: (1) those provisions seeking to bolster direct enforcement of federal immigration law by Arizona law enforcement, including through the identification and apprehension of unlawfully present aliens; and (2) those provisions that criminalize conduct which may facilitate the presence of unauthorized aliens within the state. The eight Justices who decided the case (Justice Kagan had recused herself) were asked only to consider whether the four enjoined provisions of S.B. 1070 were facially preempted by federal law (that is, whether the provisions necessarily conflicted with or frustrated federal immigration policy). The Court did not consider whether specific interpretations or applications could be preempted once in place. The Court also did not consider the validity of other provisions of S.B. 1070 that were not preliminarily enjoined as a result of the DOJ's preemption challenge (though some of these provisions are the subject of ongoing litigation). Nor did it consider other constitutional challenges to the validity of the Arizona law, including claims that enforcement of S.B. 1070 would lead to impermissible racial profiling. Justice Kennedy wrote the majority opinion (joined by Chief Justice Roberts and Justices Breyer, Ginsburg, and Sotomayor) for the Court, finding that three of the four provisions at issue were facially preempted. Justice Alito dissented in part, agreeing that S.B. 1070's alien registration provision was facially preempted, but not the other challenged provisions. In separate opinions, Justices Scalia and Thomas would have upheld all of the challenged provisions of the Arizona law. Both viewed the states as having broad sovereign authority to act against unauthorized immigration, and claimed that this authority (at least as exercised under S.B. 1070) had not been encumbered by federal law. Immigration Regulation and Preemption Before analyzing the individual provisions of S.B. 1070, the Court briefly addressed the federal legal framework governing immigration, as well as the potentially preemptive effect this framework may have upon state and local activity. The Supremacy Clause of the Constitution establishes that federal law, treaties, and the Constitution itself are "the supreme Law of the Land." Accordingly, one essential aspect of the federal structure of government is that states can be precluded from taking actions that are otherwise within their authority if federal law is thereby thwarted. The Court noted prior jurisprudence had established that an act of Congress may preempt state or local action in a given area in any one of three ways: (1) the statute expressly indicates its preemptive intent (express preemption); (2) Congress intended to wholly occupy the regulatory field, thereby implicitly precluding supplemental action by a state or local government in that area (field preemption); or (3) state or local action conflicts with or otherwise frustrates the purpose of the federal scheme (conflict preemption). Against this legal backdrop, Justice Kennedy's majority opinion emphasized the federal government's "broad, undoubted power over the subject of immigration and the status of aliens," a power based in part upon the federal government's authority to establish rules of naturalization, as well as "its inherent power as sovereign to control and conduct relations with foreign nations." Federal authority to establish the immigration policy of the nation is "well-settled," according to the majority, and Congress has established an "extensive and complex" system regulating immigration and alien status, including with respect to aliens who are removable (deportable) on account of being present in the country in violation of federal immigration law. Moreover, the Court characterized the system established by Congress as affording considerable discretion to the executive branch in setting immigration enforcement priorities, including deciding whether "it makes sense to pursue removal" of a particular alien who is believed to be unlawfully present. While the majority opinion acknowledged the "importance of immigration policy" to the states, and in particular those, like Arizona, which "bear[] many of the consequences of unlawful immigration," it nonetheless viewed state and local laws to be permissible only to the extent that they are not "in conflict or at cross-purposes" with the immigration framework created by the national government. In contrast, writing in partial dissent, Justice Scalia disputed the majority's characterization of the allocation of federal and state authority on matters of immigration. Justice Scalia argued that states have authority to regulate immigration matters, at least in certain instances where state involvement neither conflicts with federal regulation nor is expressly prohibited by a valid federal law. Justice Scalia characterized state authority to act in the field of immigration as being pursuant to a state's inherent power, as a sovereign entity, "to exclude persons from its territory, subject only to those limitations expressed in the Constitution or constitutionally imposed by Congress." State measures which target aliens who are present in the United States in violation of federal immigration law, according to Justice Scalia, constitute valid exercises of state authority which have not been displaced by federal law. State Alien Registration Requirements The Court next turned to Section 3 of S.B. 1070, which made it a misdemeanor under Arizona law to fail to comply with federal requirements that aliens complete and carry registration documents. The Court held that Section 3 was preempted, as Congress intended to occupy the regulatory field when it established rules for alien registration. The Court's analysis largely turned on application of its decision in the 1941 case of Hines v. Davidowitz , where the Court had found that a Pennsylvania statute requiring aliens to register with the state was preempted by the Federal Alien Registration Act of 1940. While recognizing that the current federal registration requirements were different from those at issue in Hines , the majority nonetheless viewed these requirements as remaining "comprehensive" since they provide a "full set of standards governing alien registration, including the punishment for noncompliance." Thus, it concluded that the federal government had "occupied the field of alien registration," preempting any further state regulation, including that—like Section 3 of S.B. 1070—which largely adopts federal standards. In reaching this conclusion, the majority expressly rejected Arizona's argument that Section 3 shared the same aim and standards as federal law on the grounds that this argument "ignores the basic premise of field preemption." The majority also noted that, were Section 3 upheld, there could be situations where states pursued criminal charges against persons whom the federal government had declined to prosecute, and that the penalties for violations of the alien registration requirements under Arizona law differed slightly from those under federal law. While dissenting from other aspects of the majority's decision, Justice Alito agreed that Section 3 was preempted in light of the Court's prior decision in Hines , which he viewed as foreclosing "Arizona's attempt here to impose additional, state-law penalties for violations of the federal registration scheme." In separate dissents, Justices Scalia and Thomas argued that Hines only applied when states adopted alien registration requirements distinct from those of the federal government, and not to state measures which mirror federal law. Justice Scalia, in particular, disagreed with the majority's reading of Hines as being decided on field preemption grounds. Rather, he characterized Hines as finding that states are preempted from adopting alien registration rules that differ from federal requirements. Justice Scalia also differentiated the instant case from other cases where states were found to be precluded from criminalizing violations of federal law, by arguing that the federal alien registration system is not of "uniquely federal interest," and that the state's reliance on the federal registration system in other contexts constitutes an "adequate basis" for making this a violation of state law. Justice Thomas similarly took the view that Section 3 did not entail "additional requirements" of the sort prohibited by Hines . He further rearticulated his general view that preemption analysis should be an "inquiry into whether the ordinary meanings of state and federal law conflict," and found no such conflicts here, where Arizona sought to enforce federal standards. State Penalties upon Unauthorized Aliens Who Seek or Obtain Employment The Court then considered Section 5(c) of S.B. 1070, which imposed criminal penalties upon unauthorized aliens who seek or obtain employment within Arizona. The majority found that this provision is facially preempted because it upsets the balance that Congress struck when it enacted the Immigration Reform and Control Act (IRCA) of 1986. IRCA imposed criminal sanctions upon certain employers of unauthorized aliens, but not upon unauthorized aliens who seek or perform work as employees (although such aliens may be subject to removal or ineligible to have their status adjusted to that of a lawful permanent resident). Prior to the enactment of IRCA, federal law provided no such sanctions for employers of unauthorized aliens, and the Supreme Court had noted the absence of federal regulation in this field when rejecting a preemption challenge to a California law that prohibited the knowing employment of unauthorized aliens in its 1976 decision in DeCanas v. Bica . In so doing, the DeCanas Court recognized states' "broad authority under their police powers to regulate the employment relationship to protect workers within the State," and indicated that it would "not presume" that Congress intended to oust state authority to regulate this relationship absent a demonstration that doing so was the "clear and manifest purpose of Congress." The DeCanas Court found such a demonstration lacking, given the absence of federal regulation regarding the employment of aliens. The majority in Arizona , in contrast, noted that federal law now is "substantially different" from the regime prevailing when DeCanas was decided, since IRCA imposes penalties on employers of unauthorized aliens. The majority also viewed the legislative history of IRCA as reflecting a deliberate choice by Congress not to impose criminal penalties upon unauthorized aliens who seek or perform work, and IRCA's express preemption of state and local sanctions (other than through licensing or similar laws) upon those who employ unauthorized aliens, coupled with its silence as to sanctions for unauthorized employees, as supporting an inference of preemption. Here, the Court particularly noted that conflicts "in technique can be fully as disruptive to the system Congress enacted as conflict in overt policy," thereby rejecting Arizona's argument that Section 5(c) serves the same purpose as federal law by deterring employment of unauthorized aliens. Justices Scalia, Thomas, and Alito each dissented on the grounds that regulation of employment is within states' traditional police powers, and IRCA does not expressly preempt state penalties for unauthorized aliens who seek or obtain employment. Justice Scalia, in particular, emphasized that Congress's choice not to impose criminal penalties upon unauthorized aliens at the federal level "is not the same as a deliberate choice to prohibit the States from imposing criminal penalties." Justice Alito similarly disagreed with the inference of preemptive intent that the majority drew from the absence of criminal penalties in federal law for unauthorized aliens who seek or perform work. In addition, he faulted the majority for giving "short shrift" to the presumption against preemption in areas traditionally regulated by the states, such as the employment relationship, and would have upheld Section 5(c) under the precedent of DeCanas . Warrantless Arrests of Aliens Removable for Criminal Activity A five-Justice majority also ruled that Section 6 of S.B. 1070, which authorized the warrantless arrest of aliens who have committed certain criminal offenses that constitute grounds for removal under federal law, is facially preempted. Writing for the majority, Justice Kennedy found that Section 6 would grant Arizona police broader authority to arrest aliens on the basis of removability than federal law grants to immigration officials. The majority also deemed it significant that the arrest authority conferred on Arizona police could be "exercised without any input" from federal authorities, which would "allow the State to achieve its own immigration policy" and potentially lead to unnecessary harassment of certain aliens who were unlikely to be removed by federal authorities. More broadly, the majority recognized that federal law permits state police to perform the functions of immigration officers only in "limited circumstances," such as pursuant to the terms of a "formal agreement[]" with federal immigration authorities or in certain other situations specifically authorized by federal statute. While acknowledging that federal law permits states to "cooperate" with federal authorities in the identification, apprehension, and detention of removable aliens (even in the absence of a written agreement), the majority stated that "no coherent understanding of the term [cooperate]" would permit state officers to make the "unilateral decision" to arrest aliens for removal in the absence of the approval or instruction of federal immigration authorities. The majority also found that by authorizing state officers to decide whether an alien should be detained for being removable, Section 6 would "violate the principle that the removal process is entrusted to the discretion of the Federal government." Justices Scalia, Thomas, and Alito each dissented from the majority's ruling, and would have recognized that state and local police are generally not precluded from assisting in the enforcement of federal immigration law. Justice Scalia, in particular, would also have affirmed the authority of states, as sovereigns, to have their "own immigration policy," so long as it does not conflict with federal law, and suggested that limitations on the arrest authority of federal officers should have no bearing on the authority that a state may grant to its officers. Justice Alito was of the opinion that Section 6 added "little to the authority that Arizona officers already possess," and would involve circumstances that rarely arise. Immigration Status Determinations by State Police Finally, the sitting Justices unanimously agreed that federal immigration law does not facially preempt Section 2(b) of S.B. 1070, which required Arizona police, whenever practicable, to investigate the immigration status of persons reasonably suspected of being unlawfully present when such persons are stopped, detained, or arrested pursuant to the enforcement of state or local law. S.B. 1070 prescribes that status verifications are to be made through communications with federal immigration authorities, and the controlling five-Justice opinion emphasized that federal law encourages the sharing of immigration status information among federal, state, and local authorities even in the absence of a formal agreement between them. In so doing, the controlling opinion expressly rejected the federal government's argument that, by requiring state and local officers to verify the immigration status of those stopped, arrested or detained, Section 2(b) "interferes with the federal immigration scheme" since it precludes officers from taking federal priorities into account when making inquiries. Specifically, the federal government had asserted that, while individual state and local officers may, in their discretion, inquire into persons' immigration status, requiring them to make such inquiries "stands as an obstacle to … the full effectuation of the enforcement judgment and discretion Congress has vested in the Executive Branch." However, the Court found this attempt to distinguish between discretionary inquiries and inquiries required under state or local law unpersuasive in light of Congress's consistent encouragement of the sharing of information regarding immigration violations. The controlling opinion further noted that several "limits" were built into Section 2(b) that could serve to constrain its application, and emphasized that the Court's ruling was based on the belief that Section 2(b) could be interpreted in manner that was consistent with federal immigration law (and the Court's reasoning with respect to Section 6)—particularly if an immigration status check by Arizona police was completed in the course of an authorized, lawful detention for a state offense or after a suspect was released from custody. However, the Court left the door open for future challenges to the provision depending upon how it is interpreted and applied (e.g., if Arizona police delayed the release of persons in their custody "for no reason other than to verify their immigration status"). The Court also left open the question of whether reasonable suspicion of illegal entry or another immigration crime would constitute a legitimate basis for prolonging detention, or whether this, too, may be preempted by federal immigration law. Implications of Arizona Decision While the full implications of the Supreme Court's decision in Arizona v. United States are yet to be determined, it seems clear that the ruling will have profound implications for state activity in the field of immigration. In recent years, several states and localities have attempted to play a greater role in the area of immigration enforcement, in many cases due to perceptions that the federal government had not taken adequate steps to deter the presence of unauthorized immigrants within their jurisdiction. In ruling that three provisions of Arizona's S.B. 1070 were facially preempted by federal immigration law, and suggesting that a fourth provision could be susceptible to as-applied challenges, the Supreme Court clarified that the opportunities for states to take independent action in the field of immigration enforcement are more constrained than some had previously believed. In particular, the Court suggested that some types of state action to deter unauthorized immigration may be impliedly preempted by federal law, even though the state sanctions target conduct already proscribed by federal statute. Further, while the Court found that measures requiring or authorizing immigration status checks by state and local police are not facially preempted, the Court's decision suggests that such measures could be vulnerable to as-applied challenges, particularly if these status checks unreasonably prolong the detention of persons in state or local custody. The Arizona decision specially addresses only particular types of state and local action to deter unauthorized immigration. Some measures that have recently been adopted by states—such as requirements that schools determine whether enrolling students are either unlawfully present themselves or the children of unauthorized aliens, or measures barring unlawfully present aliens from entering into certain transactions with government agencies—were not directly at issue in the Arizona decision, and may not raise identical legal issues. For example, a key question that courts reviewing these measures have been asked to consider is whether they violate affected persons' constitutional guarantee of equal protection, an issue which the Supreme Court did not assess in its review of S.B. 1070. Moreover, reviewing courts have had to consider whether these state measures are compatible with federal laws that were not at issue in the Arizona case. Accordingly, the Arizona ruling may not provide definitive guidance to courts considering the permissibility of state immigration laws which differ significantly from S.B. 1070. On the other hand, it is possible that certain aspects of the Arizona ruling may, at least indirectly, inform subsequent litigation concerning a broad range of immigration-related measures by the states. The Arizona Court's discussion of federal supremacy in establishing immigration policy, and its recognition that Congress has afforded the executive branch a good deal of discretion in its implementation of federal immigration law, may be pertinent whenever a court reviews state measures that are not wholly consistent with federal immigration enforcement priorities. Facial Challenges to State and Local Measures The Court's opinion in Arizona suggests that measures which impose criminal penalties under state law for violations of federal immigration law may be vulnerable to facial challenges on preemption grounds, even when state sanctions mirror those found in federal law. Some commentators had previously suggested that such measures were unlikely to be found preempted if Congress had not expressly barred complementary state legislation and the relevant state sanctions closely tracked those imposed by federal law. However, in rejecting S.B. 1070's alien registration requirements, which largely tracked those of the federal government, the Supreme Court emphasized the impermissibility of any state or local activity in fields where the federal government has comprehensively regulated: Where Congress occupies an entire field ... even complementary state regulation is impermissible. Field preemption reflects a congressional decision to foreclose any state regulation in the area, even if it is parallel to federal standards. The Court in Arizona found that regulation of alien registration requirements was such a field because Congress "provided a full set of standards governing alien registration, including the punishment for noncompliance." The Court's decision suggests that, where the provisions of federal law are deemed to be comprehensive by a reviewing court, state and local measures could be found to be preempted even if they parallel the provisions of federal law and are motivated by similar objectives. The August 2012 decisions by the U.S. Court of Appeals for the Eleventh Circuit ("Eleventh Circuit") regarding Alabama and Georgia immigration laws enacted after S.B. 1070 would appear to reflect this understanding of the scope of the Arizona decision. There, the Eleventh Circuit found that provisions common to both the Alabama and Georgia laws, which imposed criminal penalties for the transport or harboring of unlawfully present aliens within the states' jurisdiction, were likely preempted. The Eleventh Circuit concluded that federal laws concerning alien smuggling provided a "comprehensive framework" penalizing this conduct, and that this framework precluded states from imposing their own criminal sanctions upon such activity. On September 9, 2012, the federal district court for Arizona issued an order in litigation brought by private parties against S.B. 1070. These parties raised many of the same arguments that the DOJ had brought in its separate lawsuit against Arizona, but also raised additional preemption and other constitutional challenges. The district court rejected the plaintiffs' request for a preliminary injunction of S.B. 1070's immigration status check requirements, finding that the Supreme Court's ruling in Arizona foreclosed any further preenforcement challenges to the provision. However, the court enjoined the enforcement of the provision of S.B. 1070 which makes it unlawful for a person who is in violation of a criminal offense to transport or harbor unlawfully present aliens within Arizona. Although the district court had previously rejected a preemption challenge made by the United States against this provision, it adopted the reasoning that the Eleventh Circuit had employed with respect to analogous provisions enacted by Alabama and Georgia, and found that the Arizona law was field and conflict preempted. It remains to be seen, however, whether other reviewing courts will reach similar conclusions regarding state laws penalizing the harboring or transport of unlawfully present aliens, or the degree to which other state activities intended to deter unlawful immigration will be subject to field preemption challenges. Indeed, while striking down portions of the Georgia and Alabama laws on preemption grounds, the Eleventh Circuit found other aspects to be permissible. For example, the appellate court ruled against a facial preemption challenge to an Alabama law which imposed sanctions upon an unauthorized alien who applies for a drivers' license, after concluding that federal law "giv[es] room for the states to adopt different policies concerning this subject." Balancing Objectives and Executive Discretion The Court's decision in Arizona could also signal greater consideration of congressional "balancing" of competing objectives in assessing preemption than was evidenced in the Court's 2011 decision in Chamber of Commerce v. Whiting . There, in upholding another Arizona law, which authorized or required the suspension or termination of the licenses of businesses that knowingly or intentionally hired unauthorized aliens, the majority largely based the ruling on a textual analysis of IRCA. While IRCA contains a provision expressly preempting certain kinds of state sanctions on employers of unauthorized aliens, it expressly excludes licensing measures from the list of preempted sanctions. In contrast, the majority in Arizona , in finding that federal law preempted states from imposing criminal sanctions upon unauthorized aliens who seek employment, looked beyond the text of IRCA (which is silent on the permissibility of such sanctions), and focused heavily upon IRCA's legislative history. The Court concluded that S.B. 1070's sanctions against unauthorized alien employees were inconsistent with the framework Congress had established: The legislative background of IRCA underscores the fact that Congress made a deliberate choice not to impose criminal penalties on aliens who seek, or engage in, unauthorized employment. A commission established by Congress to study immigration policy and to make recommendations concluded these penalties would be 'unnecessary and unworkable.' Proposals to make unauthorized work a criminal offense were debated and discussed during the long process of drafting IRCA. But Congress rejected them. In the end, IRCA's framework reflects a considered judgment that making criminals out of aliens engaged in unauthorized work—aliens who already face the possibility of employer exploitation because of their removable status—would be inconsistent with federal policy and objectives. The different approaches taken in Whiting and Arizona could, in part, be due to the nature of the challenged provisions. The Whiting Court construed IRCA's text as expressly permitting states to revoke the licenses of businesses that hired aliens who were unauthorized to work under federal law. On the other hand, IRCA's text is silent on whether states may impose sanctions upon unauthorized alien workers. In any event, the Arizona ruling suggests that certain immigration-related measures adopted by states might be susceptible to preemption challenge if they are "inconsistent with federal policy and objectives," even if they focus on matters not specifically addressed by federal law. When assessing whether Congress has impliedly preempted state immigration activity in a particular area, a reviewing court will likely consider the comprehensiveness of federal regulation of such matters. In striking down Arizona's alien registration requirements and its sanctions upon unauthorized aliens seeking employment, the Supreme Court emphasized the comprehensive nature of federal regulation in these areas. In contrast, in refusing to preliminarily enjoin Alabama's sanctions against unlawfully present aliens who attempt to obtain drivers' licenses with the state, the Eleventh Circuit emphasized that the federal government had not comprehensively regulated the issuance of drivers' licenses to unlawfully present aliens, "giving room for the states to adopt different policies concerning this subject." The Arizona decision's treatment of the executive branch's discretion in enforcing federal immigration law may also have implications for the review of state and local immigration measures intended to bolster enforcement of federal immigration laws. The majority in Arizona repeatedly emphasized the broad discretion that immigration officers have in determining which unauthorized aliens may remain within the United States. The Arizona Court did not hold that state and local measures are preempted whenever they are inconsistent with the executive branch's current enforcement priorities. However, its reasoning as to why certain provisions of S.B. 1070 were preempted was based, in part, upon concern that state and federal enforcement priorities would not necessarily be consistent. The Eleventh Circuit relied upon similar reasoning when ruling that an Alabama statute barring the harboring or transport of unlawfully present aliens was likely preempted. While the Alabama law covered similar conduct as the federal alien smuggling statute, the circuit court expressed concern over potential disharmony between the enforcement priorities of state and federal authorities. States' "Inherent Authority" to Enforce Federal Immigration Law Aspects of the Arizona Court's ruling could be construed as an implicit rejection of certain arguments regarding states' "inherent authority" to enforce federal immigration law. The degree to which states may enforce federal immigration law, absent an express delegation of authority by the federal government, has been the subject of considerable debate. For several decades, the prevailing view appeared to have been that state and local law enforcement were not preempted from making arrests for criminal violations of federal immigration law, but were generally precluded from stopping or detaining aliens on the grounds that they could potentially be subject to removal from the United States. More recently, however, a number of scholars and reviewing courts, as well as the DOJ's Office of Legal Counsel in a 2002 memorandum, have taken the position that states have authority, as sovereign entities, to make arrests for violations of federal immigration law, including on the basis of removability, and that federal law should not be construed to preempt states from exercising such authority. Although the controlling opinion in Arizona did not expressly address the concept of "inherent authority," it recognized that the sweep of federal immigration law left room for state and local law enforcement personnel to "perform the functions of an immigration officer" only in "limited circumstances" specified by federal law. In particular, the Supreme Court held that states are generally preempted from arresting and detaining persons for suspected immigration status violations, except when acting pursuant to (1) a written agreement with federal immigration authorities conferring such authority (i.e., an agreement under INA Section 287(g)); (2) some other specific federal statutory authorization; or (3) pursuant to a "request, approval, or instruction from the Federal Government." The scope of activities permitted under the third category seems likely to be the subject of continued debate. It is important to note that the Arizona Court's discussion of states' limited authority to enforce federal immigration law was in reference to arrests for immigration status violations, which are non-criminal in nature. The Court did not opine as to whether state law enforcement officials are also precluded from making arrests for criminal violations for federal immigration law. As previously mentioned, reviewing courts have generally recognized that state and local police are not preempted from making such arrests. Still, the Arizona Court appeared to leave the door open to a possible preemption challenge in the event that a person is arrested or detained by state authorities based on "reasonable suspicion of illegal entry or another immigration crime." As-Applied Challenges to Immigration Status Checks While the Arizona decision seems to indicate that state laws authorizing immigration status checks by state and local officers are not facially preempted by federal immigration law, the ruling left the door open for possible as-applied challenges. Notably, a majority of the Arizona Court appeared to take the view that, while state police may ask the federal government about the immigration status of stopped individuals, this inquiry may not serve as a basis for detaining a person beyond the period necessary to resolve the non-immigration-related matters that initially justified the person's stop or detention. The Court also expressly left open the possibility of "other preemption and constitutional challenges to the law as interpreted and applied after it goes into effect." Subsequently, the Eleventh Circuit applied similar logic when considering preemption challenges to state laws establishing immigration status check requirements similar to those at issue in Arizona . One argument that has been raised in a legal challenge brought by private groups against S.B. 1070 is that the required immigration status checks may lead to constitutionally impermissible racial profiling. The federal government did not assert racial profiling in its challenge to S.B. 1070, although it reportedly left open that possibility when it filed suit. Arizona, on the other hand, has taken steps to prevent racial profiling in the implementation of S.B. 1070. For example, S.B. 1070 expressly provides that officers may not consider an individual's race, color, or national origin in determining whether there is reasonable suspicion to believe the person is an unlawfully present alien, "except to the extent permitted by the United States or Arizona Constitution." In addition, on the same day she signed S.B. 1070 into law, Arizona Governor Jan Brewer issued an executive order requiring state law enforcement officers to undergo training that would "provide clear guidance … regarding what constitutes reasonable suspicion, and … make clear that an individual's race, color or national origin alone cannot be grounds for reasonable suspicion." Whether it is constitutionally permissible to consider race, ethnicity, or national origin when determining whether to inquire into a person's immigration status may depend upon a number of factors. On several occasions, courts have decided cases involving law enforcement authorities stopping persons for suspected immigration violations on account of those persons' suspected Mexican ancestry. Supreme Court jurisprudence holds that race or ethnicity cannot be the sole factor giving rise to a law enforcement stop for a suspected immigration violation, but that at least in cases near the U.S.-Mexican border, stops may be partially based on the suspect's apparent racial or ethnic background. Nevertheless, the Court has suggested that a different conclusion might be reached if stops based partially on Mexican ancestry occur in places farther removed from the U.S.-Mexican border. For its part, the Ninth Circuit (the circuit in which Arizona is located) ruled in a 2000 en banc decision that the Border Patrol could not take Hispanic origin into account when making stops in Southern California, concluding that in areas "in which the majority—or even a substantial part—of the population is Hispanic," as was the case in Southern California, the probability that any given Hispanic person "is an alien, let alone an illegal alien, is not high enough to make Hispanic appearance a relevant factor in the reasonable suspicion calculus." This ruling may preclude Arizona law enforcement, at least in areas with similar demographics as Southern California, from using Hispanic origin as a factor in assessing whether there is "reasonable suspicion" for believing that a stopped individual is an unlawfully present alien. While immigration status checks by state and local officers could potentially raise preemption concerns if they result in prolonged detention beyond that contemplated by federal law, they might be susceptible to Fourth Amendment challenges as well. The Fourth Amendment prohibits "unreasonable searches and seizures," and some commentators have expressed concern that checks of persons' immigration status could result in suspects being held for longer than they would otherwise have been held for the state or local offense for which they were stopped. Under Supreme Court precedents, such prolonged detentions could potentially be found to be unreasonable. The DOJ did not challenge S.B. 1070 on Fourth Amendment grounds, and in its arguments to the Supreme Court, Arizona averred that any status checks would conform with the requirements of the Fourth Amendment. A majority of the Court found it significant that there were "limits … built into the state provision" that would protect the "civil rights of all persons" when finding that this provision of S.B. 1070 was not facially preempted. However, the majority also indicated that "[d]etaining individuals solely to verify their immigration status would raise constitutional concerns," as well as "disrupt the federal framework." The Court further noted that the extent of delay permissible in an attempt to verify a person's immigration status could depend upon the circumstances, with shorter delays permissible in cases where persons are stopped for minor offenses than in cases where they are arrested and held for more serious offenses. Conclusion While the full implications of the Supreme Court's decision in Arizona v. United States are yet to be determined, it seems clear that the ruling will have profound implications for state activity in the field of immigration. In recent years, several states and localities have attempted to play a greater role in the area of immigration enforcement, in many cases due to perceptions that the federal government had not taken adequate steps to deter the presence of unauthorized immigrants within their jurisdictions. In ruling that three provisions of Arizona's S.B. 1070 were facially preempted by federal immigration law (while leaving the door open to future challenges to the sole provision that was upheld), the Supreme Court made clear that the opportunities for states to take independent action in the field of immigration enforcement are more constrained than some had earlier believed. The Court's consideration of S.B. 1070 turned almost entirely upon its relationship to federal law. It did not find that Arizona was per se precluded from engaging in the activities authorized under S.B. 1070; rather, the Court's analysis turned on whether such activities conflicted with or otherwise impeded the objectives of federal immigration law. If Congress disagrees with the Court's decision, it may amend federal law to reflect its preferences regarding the role that states and localities may play in immigration enforcement, including by expressly authorizing (or barring) state laws like S.B. 1070.

On June 25, 2012, the Supreme Court issued its much-anticipated decision in Arizona v. United States, ruling that some aspects of an Arizona statute intended to deter unlawfully present aliens from remaining in the state were preempted by federal law, but also holding that Arizona police were not facially preempted from running immigration status checks on persons stopped for state or local offenses. In reaching these conclusions, the Supreme Court made clear that opportunities for states to take independent action in the field of immigration enforcement are more constrained than some had previously believed. In recent years, several states and localities have adopted measures intended to deter the presence of unauthorized aliens within their jurisdiction. An Arizona measure enacted in 2010, commonly referred to as S.B. 1070, arguably represents the vanguard of these attempts to test the legal limits of greater state involvement in immigration enforcement. The major provisions of S.B. 1070 can be divided into two categories: (1) those provisions seeking to bolster direct enforcement of federal immigration law by Arizona law enforcement, including through the identification and apprehension of unlawfully present aliens; and (2) those provisions that criminalize conduct which may facilitate the presence of unauthorized aliens within the state. Before S.B. 1070 was scheduled to go into effect, the Department of Justice (DOJ) brought suit to preliminarily enjoin many (but not all) of S.B. 1070's provisions, arguing that they were likely preempted by federal immigration law and therefore unenforceable under the Supremacy Clause. The district court granted the DOJ's motion to preliminarily enjoin four of the Arizona law's provisions, and the injunction was upheld by the U.S. Court of Appeals for the Ninth Circuit. The Supreme Court thereafter granted certiorari to review the case. The eight Justices who decided the case (Justice Kagan recused herself) were asked only to consider whether the four enjoined provisions of S.B. 1070 were facially preempted by federal law. They did not consider other constitutional challenges to the validity of the Arizona law, including claims that enforcement of S.B. 1070 could lead to impermissible racial profiling. A majority of the Court found that the Arizona measure's criminal sanctions for alien registration violations and upon unauthorized aliens who seek employment in the state were preempted by federal law. The Court also ruled invalid a provision authorizing the warrantless arrest of aliens who have criminal offenses that constitute grounds for removal under federal immigration law. However, the sitting Justices unanimously agreed that federal law did not facially preempt a provision which requires Arizona police whenever practicable, to investigate the immigration status of persons reasonably suspected of being unlawfully present when such persons are stopped, detained, or arrested pursuant to the enforcement of state or local law—at least so long as the investigation does not extend these persons' detention by state or local law enforcement. In ruling that three provisions of S.B. 1070 were facially preempted, and suggesting that a fourth provision could be susceptible to as-applied challenges, the Court clarified that opportunities for independent state action in the field of immigration enforcement are limited. In particular, the Court's decision would suggest that mirroring federal law when imposing criminal penalties upon conduct that could facilitate the presence of unauthorized aliens within a jurisdiction does not suffice to avoid preemption. Similarly, while finding that measures requiring or authorizing immigration status checks by state and local officers are not facially preempted, the Court suggested that the application of such measures could lead to new constitutional challenges.

Introduction New sources of crude oil from the Bakken region of North Dakota, the Eagle Ford and Permian basins in Texas, and western Canada have induced new routes for shipping crude oil to U.S. and Canadian refineries. While pipelines have traditionally been the preferred method of moving crude overland, especially to or from landlocked locations, they either are not available or have insufficient capacity to move all the crude from these new sources of production. Although much of this oil is now moving to refineries by rail, waterborne transportation is playing an increasing role in moving crude oil within North America. The quantity of oil moving by barge on the Mississippi River and its tributaries increased ten-fold from 2009 to 2013, and tanker shipments between the Gulf Coast and Atlantic Canada have grown at an even faster rate ( Figure 1 ). There are no current data on the amount of domestic crude oil moving by barge or tanker to refineries along the Gulf Coast, but it is believed to have increased significantly since 2012. Two aspects of the oil industry critically influence shipping patterns: (1) not all crude oil is the same and (2) each refinery is currently equipped to refine a certain blend of crude oils. Refineries in the Northeast are predominantly configured to handle crudes from the Bakken, Eagle Ford, and Permian regions, but cannot efficiently refine oil sands crude from western Canada. There is greater variety in the capabilities of refineries on the Gulf and West Coasts. Reconfiguring a refinery to handle a different type of crude is possible but may be costly. The feasibility of doing so depends on the relative costs of various types of crude, the projected availability of the various crude oils, and the price spread between crude oil and refined petroleum products such as gasoline and diesel fuel. The sudden shift toward domestic sourcing of crude oil raises issues regarding the safety and efficiency of the maritime component of this new supply chain. These fall into two main categories. One concerns the Coast Guard's role in preventing oil spills by regulating the safety of vessels and the training and working conditions of crews. The other has to do with the impact of the Jones Act, a 1920 law that restricts domestic waterborne transport to vessels built in the United States and crewed by U.S. citizens, which may now be affecting U.S. producers' decisions about how to ship crude oil and whether to send it to refineries in the United States or in Canada. New Shipping Routes The vast majority of U.S. refineries are located along the coast (including the Great Lakes) or an inland waterway. Most coastal refineries traditionally have been supplied by imported crude, and some lack pipeline connections and may not be equipped or have the space to receive crude by rail. For this reason, large amounts of oil are being moved out of production areas by truck or rail, but are being transferred to barges or tanker ships for the last leg of the trip to a refinery. Crude oil produced at Eagle Ford, TX, is conveniently located for waterborne transport due to its proximity to the coast. Some of it moves through the port of Corpus Christi, where outbound crude oil shipments nearly trebled from 2012 to 2013. The nearby port of Victoria, TX, has also experienced a dramatic increase in crude oil barge traffic. It appears that most of the Texas crude moving by vessel goes to coastal refineries in Texas and Louisiana or to the Louisiana Offshore Oil Port (LOOP), an offshore ship-to-pipeline transfer facility. A comparatively small amount of Eagle Ford crude oil moves by water to refineries in proximity to New York Harbor and the Delaware River, but much larger quantities seem to be going to refiners in Canada's Atlantic provinces. While much of the oil coming from the Bakken region moves to refineries by rail, there are now several well-established intermodal routes involving water transport. These include: rail to barge at St. Louis and Hayti, MO, and Osceola, AR, on the Mississippi River, to Gulf refineries; rail to barge at Hennepin, IL, on the Illinois Waterway, to Gulf refineries; rail to vessel at Albany, NY, on the Hudson River, to East Coast refineries; rail to Yorktown, VA, for coastal transport to East Coast refineries; rail to vessel at Anacortes and Vancouver, WA, for coastal transport to West Coast refineries. Pipeline to barge transfer is occurring at Cushing, OK, from where barges move the oil down the Arkansas and Mississippi Rivers to Gulf Coast refineries. Vessel Types and Capacities New waterborne services moving crude oil from the Bakken or Texas generally do so with smaller vessels than the trans-oceanic tankers used to carry Alaskan and imported oil. The fleet can be divided into two broad categories: "brownwater" vessels operating on inland and near-shore waters and "bluewater" vessels operating in the open ocean. A river barge can hold 10,000 to 30,000 barrels of oil. Two to three river barges are typically tied together in a single tow, and thus a river tow of tank barges could carry 20,000 to 90,000 barrels. In addition to inland rivers, this type of barge configuration is used on the intracoastal waterway (an inland canal) along the coasts of Texas and Louisiana. River barges have speeds of about 4 to 5 miles per hour (mph). A coastal tank barge designed for open seas (an articulated tug-barge, or ATB) can hold 50,000 to 185,000 barrels. However, newer ATBs can carry 240,000 to 340,000 barrels, a capacity comparable to that of coastal tankers. Seagoing barges have speeds of about 10 knots (12 mph). In contrast to coastal tank barges, a river barge can be used in "drop and swap" operation—that is, the tugboat can drop a loaded barge at a facility where it can be used for storing product while the tugboat is free to make other barge movements—so that the relatively expensive self-propelled portion of the vessel is not tied up while unloading, as a tank ship would be. The tugs designed for ATBs sail poorly without the barge, so they seldom perform drop and swap operations. A coastal tank ship can hold 300,000 to 650,000 barrels. The coastal tankers that are being deployed to move Texas crude carry 330,000 barrels and are referred to as "handysize" or "medium range" tankers. Coastal tankers have speeds of about 12-15 knots. For comparison, tankers moving Alaska oil to the West Coast carry between 800,000 and 1.3 million barrels of oil and fall into the "Aframax" or "Suezmax" size categories. Very large or ultra-large crude carriers (VLCCs and ULCCs) that carry imported oil from overseas hold 2 to 3 million barrels. A crude oil pipeline moves between 400,000 and 800,000 barrels per day, enough to service the largest U.S. refineries. The unit trains that move Bakken and Texas crude oil can carry 70,000 to 80,000 barrels. Table 1 summarizes conveyances for moving domestic crude oil. As Table 1 indicates, the Jones Act-eligible fleet of crude oil tankers consists of 11 ships, all employed in moving Alaska crude oil to the U.S. West Coast or to a refinery in Alaska. Of the 86 seagoing barges, 42 can carry more than 130,000 barrels. While a tanker's capacity is better matched to the daily consumption rates of a single refinery than the capacity of a unit train or most barges, the limited fleet of Jones Act-eligible tankers has required some refineries with direct ocean access to ship domestic oil by barge or train or to continue to rely on foreign sources. Jones Act-qualified ATBs and product tankers are also used to lighter ocean-going crude oil tankers. Although it is technically feasible to do so, tank vessels do not readily alternate between carrying dirty oil (crude oil, residual fuel oil, asphalt) and refined (clean) petroleum products because the tanks would have to be extensively washed after carrying dirty product, a time-consuming and costly process. However, due to the recent increase in domestic crude oil production, particularly at Eagle Ford, some tonnage has shifted from the "clean" products trade to the crude oil trade. Tankers that used to carry refined product from the Gulf Coast to Florida (via the Port of Tampa) are now carrying crude oil because they can earn higher returns. Barges are replacing them to move refined products to Florida, a development that has been blamed for higher gasoline prices in Florida. The decline of oil imports from overseas may free up some of the lightering fleet for the domestic crude trade. If West Coast refineries source more crude from the Bakken or Canada rather than Alaska, this could also free up Jones Act tankers. One such tanker is believed to have been redeployed to move crude oil from the Gulf of Mexico to the West Coast via the Panama Canal. However, there is a limit to how many clean product tankers will switch to carrying crude oil. The crude oil boom has also led to a boom in U.S. refinery output, so there is also strong demand for clean product tankers. Vessel Size Relates to Voyage Distance The most economic tank vessel size to deploy depends largely on voyage distance. The longer the voyage, the more incentive there is to use a larger vessel because of economies of scale at sea. The first VLCCs were built when the Suez Canal was closed in the late 1960s and tankers headed from the Persian Gulf to Europe and North America had to sail longer routes around South Africa. Larger tankers face diseconomies of scale in port: they take longer to load and unload than smaller ships, and some port charges are based on vessel size. Thus, smaller vessels are used for shorter voyages, on which a tanker will spend a greater portion of its total time in port. Aframax and Suezmax tankers, considered of medium size, are being used to ship Alaska oil from Valdez to Seattle, a distance of 1,200 nautical miles, and to Los Angeles, a distance of 2,000 nautical miles. Similar tankers carry Texas oil to eastern Canadian refineries with sailing distances ranging from 2,300 to 3,000 nautical miles. Evidence from these other trades suggests that Aframax or Suezmax tankers would be the preferred vessels for shipments from Texas ports to Delaware River and New York Harbor oil terminals, a distance of 1,900 to 2,000 nautical miles, if such tankers were available in the Jones Act-eligible fleet. The handysize tankers that are now used for this purpose may be smaller than the preferred size. Prior to carrying crude oil, these handysize tankers were moving refined product on much shorter intra coastal voyages, such as from Houston to Tampa. From 2001 to 2011 (before the Texas and Bakken oil boom began) the average haul of Jones Act handysize product tankers was roughly 1,000 nautical miles while the average haul for the larger Jones Act Aframax and Suezmax crude oil tankers was roughly 1,700 nautical miles. ATBs are used on much shorter coastal voyages. From 2001 to 2011, their average haul was about 420 nautical miles (the approximate sailing distance between Norfolk, VA, and Charleston, SC). Since they are somewhat slower than tankers, on longer voyages they could require an additional day or two to reach destination. However, newer ATBs, which can be larger and faster, tend to be deployed on longer voyages. In 2010, coastal tank barges that were less than 10 years old accounted for 63% of overall coastal barge shipments less than 500 miles but 70% of the shipments 500 miles or more. Maritime Safety Issues The large increase in domestic waterborne shipment of crude oil and refined products comes at a time when the Coast Guard is reevaluating its regulations and industry oversight. Several new regulations are pending. New Barge Safety Regime Barges are the workhorses in moving Bakken and Texas oil by water. However, the Coast Guard has just begun establishing a safety inspection regime for barges. In the Coast Guard and Maritime Transportation Act of 2004 ( P.L. 108-293 , §415), Congress directed the Coast Guard to establish a barge safety inspection and certification regime similar to that which exists for ships. This includes establishing structural standards for vessels as well as standards for the crew. This new inspection regime will be more significant for tank barges used on rivers than for seagoing barges, because seagoing barges moving oil or other hazardous material are already inspected. However, one pending rule would also apply to seagoing barges. Section 409 of the 2004 act authorized the Coast Guard to evaluate an hours-of-service limit for crews on towing vessels. This was in line with a 1999 National Transportation Safety Board (NTSB) recommendation that the Coast Guard establish scientifically based hours-of-service regulations for domestic vessel operators. On August 11, 2011, the Coast Guard issued a notice of proposed rulemaking on barge inspections and work hours. In the notice, the Coast Guard states that on a schedule providing six hours of work followed by six hours of rest, as is typical on barges engaged in multi-day voyages, sleep debt accumulates and gradually increases crew members' fatigue levels. ATB operators have filed comments opposed to addressing hours of service as part of this rulemaking, while maritime unions have filed comments in favor of a mandatory eight-hour rest period. The NTSB filed comments reiterating its support of an eight-hour rest period. The Coast Guard has not issued final regulations. Crewing Requirements of ATBs vs. Tankers According to an original designer of the ATB, "The American coastwise shipping business has grown in a way that differs from many other nations. The high cost of manning and building ships has led over the years to a coastwise transportation network dominated by tugs and barges." ATBs are sometimes referred to as "rule breakers" within the maritime industry because they operate with smaller crews. The Coast Guard determines crewing requirements based on the registered tonnage of a vessel, which for barges includes only the tug, not the barges the tug may be pushing. As a result, the crew required aboard an ATB is one-third to one-half the number required aboard a tank ship; an ATB typically has a crew of 6 to 12, versus 21 to 28 for a tank ship. (The precise number for each vessel type depends on the amount of automation.) The Coast Guard's pending decision on hours of service could force ATBs to carry larger crews, possibly negating their economic advantage compared to tankers. This occurred previously with a precursor to the ATB called the integrated tug barge: when the Coast Guard increased their manning requirements in 1981, integrated tug barges lost their economic advantage, and none have been built since. The Coast Guard increased manning requirements because integrated tug barges operated essentially as ships since the tug and barge seldom separated. While ATBs are designed for easier separation of tug and barge, as noted earlier, they also seldom separate. The distinction in crewing requirements between ships and ATBs has been criticized for distorting the domestic shipping market by encouraging the use of otherwise less efficient (and perhaps less militarily useful) barges instead of ships. A counterargument is that the problem is not the small crew size on ATBs but the excessive manning requirements for coastal tankers. Pace of Rulemaking an Issue for Congress Congress has been concerned with the pace at which the Coast Guard is issuing barge safety regulations under the 2004 law. In the Coast Guard Authorization Act of 2010 ( P.L. 111-281 , §701), Congress requested that all rulemakings related to oil pollution prevention, including barge inspection, be finalized within 18 months of enactment (i.e., by April 15, 2012). The 2010 act (§702) also required the Coast Guard to promulgate additional regulations to reduce the risk of oil spills in operations involving the transfer of oil from or to a tank vessel. The Coast Guard has issued a request for public comments, but has not yet proposed regulations. Performance of the Coast Guard's Marine Safety Office The Coast Guard's ability to provide effective safety oversight of certain maritime operations has been a long-standing concern. In response to questions raised by Congress in 2007, the Coast Guard acknowledged that its practice of regularly rotating staff geographically or by activity, as military organizations typically do, was hindering its ability to develop a cadre of staff with sufficient technical expertise in marine safety. In response, the agency created additional civilian safety positions, converted military positions into civilian ones, and developed a long-term career path for civilian safety inspectors and investigators. Despite these changes, at an October 2011 meeting to discuss inspection regulations towing operators complained about having to rehash the same issues with a "revolving door" of Coast Guard officials. They also asserted that the Coast Guard was placing too much emphasis on a one-day-per-year inspection of vessels and equipment and not enough emphasis on human factors, the leading cause of marine accidents. The number and quality of the Coast Guard's investigations and reports of marine accidents, as well as the lack of a "near-miss" reporting system, have been noted by the Department of Homeland Security Inspector General (IG) and other observers as missed opportunities to learn from past incidents. A May 2013 IG audit concluded: The USCG does not have adequate processes to investigate, take corrective actions, and enforce Federal regulations related to the reporting of marine accidents. These conditions exist because the USCG has not developed and retained sufficient personnel, established a complete process with dedicated resources to address corrective actions, and provided adequate training to personnel on enforcement of marine accident reporting. As a result, the USCG may be delayed in identifying the causes of accidents; initiating corrective actions; and providing the findings and lessons learned to mariners, the public, and other government entities. These conditions may also delay the development of new standards, which could prevent future accidents. The IG found that at the 11 sites it visited, two-thirds of accident inspectors and investigators did not meet the Coast Guard's own qualification standards. The IG noted that the shortage of qualified personnel would be further compounded by the new towing vessel safety regime, which would expand the inspections workload. In response to this audit, the Coast Guard stated it was developing a "Maritime Prevention Enhancement Plan" that it hoped to complete in FY2014. In the Coast Guard Authorization Act of 2010 ( P.L. 111-281 , §521), Congress requested an annual report from the Coast Guard assessing the adequacy of its marine safety workforce. The Jones Act The Jones Act requires that vessels transporting cargo between two U.S. points be built in the United States, crewed by U.S. citizens, and at least 75% owned by U.S. citizens. The law was enacted in 1920 (Merchant Marine Act of 1920, §27, P.L. 66-261). One of the motivations for the U.S.-build requirement was to facilitate the disposal of cargo ships constructed during World War I by the U.S. Shipping Board, a government agency set up in 1916 to purchase, construct, and operate merchant ships during the war. The Jones Act authorized the sale of these vessels to the private sector. The Jones Act stated an explicit national policy of supporting a U.S. merchant marine and a U.S. shipbuilding industry in the interest of national defense. That policy remains in the law today: It is necessary for the national defense and the development of the domestic and foreign commerce of the United States that the United States have a merchant marine (1) sufficient to carry the waterborne domestic commerce and a substantial part of the waterborne export and import foreign commerce of the United States and to provide shipping service essential for maintaining the flow of waterborne domestic and foreign commerce at all times; (2) capable of serving as a naval and military auxiliary in time of war or national emergency; (3) owned and operated as vessels of the United States by citizens of the United States; (4) composed of the best-equipped, safest, and most suitable types of vessels constructed in the United States and manned with a trained and efficient citizen personnel; and (5) supplemented by efficient facilities for building and repairing vessels. Because of the restrictions on shipbuilding and crewing, Jones Act ships tend to be more costly to build and operate than vessels used by foreign-flag ocean carriers, which can order vessels from whichever shipyards offer the lowest bids and typically hire most of their crew members from countries where seafarers' wages are much lower than in the United States. Jones Act Shipping Rates According to oil shippers, the price for moving crude oil from the Gulf Coast to the U.S. Northeast on Jones Act tankers is $5 to $6 per barrel, while moving it to eastern Canada on foreign-flag tankers is $2. For a Texas oil producer using a tanker with capacity of 300,000 barrels, this rate difference amounts to receiving $1 million less for a shipment of oil to a U.S. refinery than for a shipment to a more distant Canadian refinery. In consequence, from January 2013 through March 2014, more than twice as much Gulf Coast crude oil was shipped by water to Canada as was shipped to U.S. Northeast refineries. Refineries in the U.S. Northeast consumed about 12 times as much crude oil from fields offshore of eastern Canada as oil shipped from the Gulf Coast in all of 2013. They also consumed imports from Nigeria, Saudi Arabia, and other countries. Shipping rates for these imports, regardless of country of origin, are much lower than domestic shipping rates for Gulf Coast oil ( Table 2 ). (Shipping oil from the Gulf Coast to eastern Canada costs more than shipping it from Africa to the U.S. Northeast because ice-class tankers must be used to serve Canadian refineries for a portion of the year.) Although there is currently no Bakken oil moving from Washington or Oregon ports to California refineries, the cost aboard a Jones Act tanker is estimated to be $4 to $5 per barrel; as the oil would have to move from the Bakken region to the ports by rail at a cost of about $9 per barrel, the total shipping cost would be $13 to $14 per barrel. The cost of shipping Eagle Ford oil through the Panama Canal to these refineries is estimated to be $10 per barrel. By comparison, shipping oil from Ecuador to West Coast refineries costs around $3.25 per barrel, and Iraqi oil about $2.30 per barrel. Jones Act rates for shipping Alaska oil to West Coast refineries are not available, but Bakken oil shipped by rail to Pacific Northwest refineries is beginning to displace Alaskan oil. Alaska oil producers could look to resume exports to Asia to replace lost shipments to the U.S. West Coast. However, as specified by Congress when it lifted the export ban on Alaska North Slope oil in 1995 ( P.L. 104-58 ), the oil must be exported on U.S.-crewed and -flagged tankers, although the tankers do not need to be U.S. built. After the Alaska export ban was lifted, roughly 5%-7% of Alaskan oil was exported, mostly to South Korea, Japan, and China, but exports ceased in 2000. In the case of crude oil, the price coastal refineries are willing to pay is based on the international price of oil, as a refinery has no way to raise the prices of gasoline and other refined products if its transportation costs are higher than those of its competitors. In order to minimize transportation costs, U.S. oil shippers have favored barges over ships for coastwise transport, but this may have reduced the shipment distances over which domestic waterborne oil is price competitive. The long-term decline in the amount of petroleum carried domestically by tankers is reflected in the diminished capacity of the privately owned Jones Act-eligible tanker fleet (see Figure 2 ). Following World War II, the relatively small U.S.-flag tankers in international service were gradually replaced by much larger foreign-built tankers. Many of the Jones Act-eligible tankers in domestic service were replaced by tank barges following enactment of a double-hull requirement for tank vessels in the Oil Pollution Act of 1990. The decline of oil production in Alaska, which has fallen by about 46% over the last decade, also contributed to reduced demand for Jones Act-eligible crude oil tankers, causing some to be scrapped. Domestic Tanker Construction Costs According to data from the U.S. Maritime Administration (MARAD), an agency of the U.S. Department of Transportation, and from industry sources, the cost of domestically built tankers is approximately four times the cost of tankers of similar size built in foreign shipyards ( Table 3 ). Almost all oceangoing tankers are built in Asia; in 2012, Korean shipyards received 60% of worldwide orders for new tankers, Chinese yards 30%, and Japanese yards 8% (measured by ship capacity). U.S. shipyards' prices are higher even though major ship components, like the engines, are built in foreign yards. The purchase price of new river tugs and barges in the United States is not considered to be as great a deterrent to river transport, perhaps because barges are simpler to build and are ordered in sufficient quantities that shipyards can achieve some economies of scale. As Table 3 indicates, tank ships are more expensive to build than ATBs. They require more scantling (interior framing) and more freeboard (the height of the hull from the water to the deck) than barges. However, tank ships have significant advantages over barges. They can operate in more adverse weather conditions than ATBs, are faster, and have superior fuel economy. The U.S. Energy Information Administration estimated in 2012 that the cost of moving crude oil from the Gulf Coast to Northeast refineries by tanker would be about half the cost of moving it by barge—not counting the cost of construction. This suggests that tankers could have a competitive advantage over barges on longer coastal voyages if domestic shipbuilding costs were lower or if foreign-built tankers could be employed. The Tariff Act of 1930 (19 U.S.C. §1466), requires that U.S.-flag ships pay a 50% ad valorem duty on any non-emergency repairs conducted in foreign shipyards. A 2011 MARAD study of ships operating in international trade found that ship repair costs for U.S.-flag ships are 1.3 times those of foreign-flag ships. The MARAD study found that many U.S. ships have repairs performed in foreign yards because, even with the 50% duty, the total cost is less than if the repairs were performed in a U.S. domestic shipyard. U.S.-Flag Vessel Operating Costs A 2011 MARAD study comparing U.S.-flag versus foreign-flag operating costs in international trade found that U.S.-flag vessels' operating costs were substantially higher—2.7 times higher. (This higher operating cost does not reflect higher domestic construction costs, because U.S.-flag ships engaging in international trade do not have to be built in the United States.) The study estimated the average daily operating cost of a foreign-flag ship to be under $6,000. A separate MARAD study in June 2012 estimated the daily operating cost of a Jones Act tanker to be $22,000, which would be about 3.7 times the operating cost of a foreign-flag tanker. A major reason U.S.-flag vessels cost more to operate is that they are crewed by U.S. citizens. The crews on most foreign-flag ships are drawn mainly from poor countries and are paid significantly less than U.S. merchant seafarers. According to MARAD, the daily operating cost of an ATB ($13,000) is almost half that of a U.S.-flag tanker ($22,000). Since an ATB might travel two to three knots slower than a tanker, it might require additional sailing time. On a voyage from Texas to New York, an ATB would require two additional sailing days, reducing the ATB's cost savings over a tanker to about one-quarter, assuming that the vessels carry similar amounts of oil. However, only five ATBs in the Jones Act fleet match the capacity of a handysize tanker (330,000 barrels). Most ATBs now in use carry half as much oil as a tanker, thus requiring two voyages to match the capacity of a tanker; their operating cost per barrel of oil on this comparatively long voyage is likely to be higher than that of a tanker. A large tanker carrying oil from Nigeria to the U.S. East Coast, requiring two weeks sailing time, would be expected to have lower overall operating costs and lower operating costs per barrel than a U.S.-flag tanker ship or ATB making the much shorter domestic voyage. The Missing Triangle Trade One consequence of the relatively high cost of building and operating Jones Act tankers is that they cannot compete effectively for international cargo. This results in Jones Act tankers sailing empty much of the time, further raising shipowners' costs. A key aspect to improving the economic competitiveness of freight carriers is reducing empty travel miles. If Jones Act product tankers were price competitive in the international market, they could triangulate their trade routes, perhaps moving diesel fuel from Gulf Coast refineries to Europe, then carrying European gasoline to the U.S. Atlantic Coast before sailing in ballast (carrying only ballast water for stability) to the Gulf Coast to repeat. In this triangular route, two out of three voyages would generate revenue and the ballast sailing distance would amount to 18% of the total sailing distance. With their costs rendering them uncompetitive on international routes, however, Jones Act product tankers typically sail "piston" routes, carrying crude oil or refined products from the Gulf Coast to the East Coast and then returning in ballast, thus earning revenue on only half the trip. A peculiar triangular trade has developed to circumvent the Jones Act requirements. This involves Gulf Coast refineries shipping gasoline to the Bahamas, where additives are mixed in before the product is moved to the U.S. Northeast. So long as the product is processed in the Bahamas, both water movements can be made in foreign-flag tankers. The savings from using foreign-flag shipping are apparently greater than the cost of an additional tanker unloading and loading operation. Chartering and the Jones Act Because of the Jones Act, U.S. oil shippers also cannot take advantage of the current surplus in the world tanker fleet, caused in part by the drop-off in crude oil shipments to the United States. If it were accessible, chartering could be done on a spot basis (for a single voyage) or on a time basis (for six months to two years). Given the rapid changes in the U.S. oil market, some shippers might prefer the flexibility of chartering to the long-term financial commitment required to build a pipeline or a rail terminal. However, the number of Jones Act-qualified tankers is small, and most appear to be tied up in charters lasting several years. Current Jones Act charter rates are $75,000 to $100,000 per day, up from about $50,000 per day in the 2010 through 2012 period. In the world market, charter rates for tankers of similar size ("medium range") have fluctuated around $10,000 per day for spot charters and $15,000 per day for 12-month time charters. A spot market is also valuable because it lowers the overall cost of moving oil for everyone by adding fluidity to tanker supply. For instance, the sailing times of tankers cannot always be synchronized exactly with loading schedules. If an oil company's tanker is two weeks early for a shipment, rather than idling its tanker for that time, the company can re-let the tanker in the spot market for someone else's use. The oil company could then charter someone else's tanker for its intended shipment. In other words, by pooling the tanker supply in the spot market, the fleet is used more efficiently. By segregating the domestic shipping market from the international market, the Jones Act undermines a competitive advantage of tankers against pipelines, namely their status as mobile assets that can be redeployed in response to market changes. Waterborne vs. Pipeline Before the advent of oil produced from shale deposits and its movement by rail, tank vessels and pipelines were the primary options for moving oil. Both modes can move crude oil to refineries in lot sizes of hundreds of thousands of barrels, fitting a large refinery's daily intake needs. Economies of scale are important to both, but installing a larger pipe reduces the transportation cost per barrel more rapidly for pipelines than building a larger vessel does for ship lines. For this reason, oil companies typically share use of a large pipeline rather than building smaller individual pipelines. Pipelines face a disadvantage in that they must acquire, build, maintain, and pay property taxes on their rights of way, not only for the pipe but also for the pumping stations, whereas navigation infrastructure in harbors (shipping channels) and on inland waterways (locks and dams) is largely provided by the federal government. As indicated in Table 1 , pipelines move product between 3 and 8 mph, so tankers have a speed advantage. This can be important when oil prices are volatile. On the other hand, pipelines are extremely dependable in delivering product on time, so little safety stock is needed. Economies of Scale Diverge Over recent decades, pipeline operators have managed to ship more oil with less pipe. Pipeline mileage leveled off in the 1980s. Since then, miles of trunk line have actually decreased but capacity has increased because the pipes are larger in diameter. The amount of oil carried per mile of trunk line pipe is about 37% higher today than it was in the 1980s. In contrast, Jones Act carriers are utilizing smaller, rather than larger, vessels to transport oil, a result of increasingly relying on barges rather than tankers in coastwise transport. In 1980, barges represented 39% of the total cargo capacity of the tank vessel fleet (barges and tankers). In 2012, barges accounted for 82% of the total cargo capacity and carried about 65% of the coastwise refined product tonnage. The shift from tankers to barges is significant, because what should be the least-cost method for transporting crude oil and petroleum products is being utilized less than it might be in favor of a method that is cost-competitive due only to regulation. The divergence in economies of scale between the pipeline and waterborne modes parallels a trend in their respective modal shares. In 1979, pipelines handled 58% of crude oil shipments (measured in ton-miles) and waterborne carriers 41%. For refined products, 44% moved by pipeline and 48% by water. By 2009, pipelines were carrying 80% of crude oil shipments to 19% for ships and barges, and 63% of refined products movements went by pipeline as opposed to 26% by water. Part of the reason for the change in modal share in refined product was a sharp decline in use of residual fuel oil for heat and power, which affected waterborne market share. Today, tanker ships are used in domestic trade primarily where there is no pipeline service, as with crude oil shipments from Alaska to the lower 48 states and gasoline shipments from the Gulf Coast to Florida. Pipelines appear to be preferred over river transport as well. Pipelines are used heavily to move Gulf Coast crude oil north to the Upper Midwest, carrying about 30 million barrels a month, whereas barges do not carry any crude oil upriver on the Mississippi waterway system. Barges have less than 10% of the market for refined products moving between the Gulf Coast and the Upper Midwest. Waterborne vs. Railroad Options For the many refineries located on the coasts, the cost of rail versus vessel transport is particularly relevant. Phillips 66 has chartered two Jones Act product tankers to move crude oil from Eagle Ford, TX, to its Bayway refinery in Linden, NJ (in proximity to New York harbor). The company also supplies that refinery with Bakken oil via railroad (or rail to barge via the Port of Albany), as well as with imported oil from West Africa. The refinery has a capacity of 238,000 barrels per day. Rail and coastal transport are competitors in supplying crude oil to the coastal refineries that process similar types of crude. Vessels, especially tankers, have superior economics in moving crude, which is why so many refineries are located on the water. A 330,000-barrel tank ship can move the equivalent of four to five unit trains of oil. A larger tanker, of the size used in the Alaska trade, can move the equivalent of 15 unit trains. With the median capacity for U.S. refineries of about 160,000 barrels per day, even the smallest tankers can carry a two-day supply of oil. Rail loading and unloading terminals are being built to accommodate four to five trains per day to match a refinery's delivery needs; the challenge has been developing high-speed pumping equipment that can load/unload an entire train (100 to 120 tank cars) in sufficient time to avoid train backups at terminals (a unit train is over a mile long). On the other hand, coastal refineries already have docks and pumping facilities to receive vessels. Moreover, railroads must build and maintain track and pay property taxes on their rights of way, whereas the cost of building and maintaining navigation channels in harbors is largely born by the federal government. For these reasons, tanker should be significantly cheaper than rail for transport of crude oil, even when the water route is much longer. A round-trip voyage from the Gulf to the Northeast might take two weeks. Thus, to sustain a supply chain for one refinery, a fleet of several tankers would be needed. As Jones Act-eligible tankers are in very short supply, however, refineries such as Bayway utilize waterborne transport as a supplement to the more expensive rail option from the Bakken. Phillips 66 has stated that if Jones Act eligible tankers were available, it would run 100,000 barrels a day of Gulf Coast oil to this refinery. In 2013, an average of 22,000 barrels a day of Gulf Coast oil was shipped to all seven U.S. Northeast refineries. By rail, Bayway alone receives 50,000 barrels per day and is completing a rail terminal with capacity to unload 75,000 barrels a day. Eagle Ford crude oil is not currently shipped to California refineries, but such shipments are estimated to cost $14.50 per barrel. The estimated cost of shipping Eagle Ford oil in Jones Act tankers to California through the Panama Canal is $10 per barrel. Again, the water route is cheaper than rail even though the railroad route is only one-fourth the length of the water route. The Panama Canal route would also be cheaper than moving Bakken oil to California refineries via rail to the Pacific Northwest followed by coastwise vessel transport to California, with a total cost of $13 to $14 per barrel. When the Panama Canal's expansion project is completed in 2015, tankers with capacity of 600,000 barrels will be able to pass through, twice the size of the largest tankers using the canal today. This would further increase the cost advantage of ocean transport, if Jones Act-eligible vessels of that size are available. It is not inconceivable that tankers could also play a role in moving Bakken oil to East or West Coast refineries, although the route would be circuitous compared to rail. Significant amounts of Bakken oil are moved to Gulf Coast terminals by a combination of pipeline, railroad, and barge for refining within that region. From a Gulf Coast port, tankers could transport the oil either to East or West Coast refineries. Existing rail and pipeline connections serve Great Lakes ports, from which tankers could move Bakken oil to Northeast refineries. The experience of agricultural producers in the upper Midwest, however, suggests that these two routing options are not economically feasible because of the Jones Act. Notwithstanding the U.S.-flag requirement for Alaska oil exports, the situation is somewhat similar to that of Texas oil in that higher domestic shipping rates encourage sales to foreign buyers. This shipping pattern is not unique to oil. In the 1960s and 1970s, the U.S. lumber industry in Washington and Oregon asserted that the Jones Act hindered its ability to compete with western Canadian lumber that could be shipped at cheaper international freight rates to the U.S. east coast. Today, Oregon and Washington are still large waterborne shippers of forest products, but all their products shipped by water are exported while all the forest products the East Coast receives by vessel are imported. Other bulk shippers have made similar assertions. Waterborne Transport and Concerns about Rail Safety If Eagle Ford, and possibly Bakken oil producers were able to access foreign-flag tankers at international rates of around $2 or perhaps less per barrel, some of their domestic oil shipments would likely shift from rail to water. That shift could be beneficial in terms of the safety of oil transport, although the allowance of foreign-flag tankers could potentially displace U.S. seafarer jobs. Congress is greatly concerned about the safety of shipping crude oil by rail. Existing railroad tank cars are inadequately designed to prevent release of product during derailment, and the transportation of crude oil in unit trains, a new development, has meant that a single incident can involve a large quantity of flammable and explosive material. Incidents involving unit trains of crude oil have caused numerous fires and explosions, requiring evacuations and in one case resulting in 47 fatalities. Railroads have increased track and equipment inspections on oil routes, and have reduced the speeds of unit trains of crude oil through populated areas. However, recent incidents have shown that a high proportion of derailed tank cars will puncture and release product even at much lower speeds. The capability and resources of local responders to crude-by-rail incidents are ongoing concerns. In contrast, tankers are not a new method for moving oil. Vessels have double hulls and vessel operators are required to have emergency response equipment and resources in place in case of a spill. The Coast Guard has a regulatory regime in place to safeguard tanker transits through harbors. Where allowed, states have imposed additional safeguards on tankers transiting their harbors. Environmental damage from an oil spill remains a grave concern, but tanker incidents generally do not require evacuations of towns and cities. Impact on Other Rail Users The heavy reliance on railroads to move crude oil has interfered with the smooth functioning of the rail system. This has had negative consequences for other rail users, including passengers as well as freight shippers. From 2008 to 2013, annual rail car loadings of crude oil increased from 9,500 to over 400,000. In 2014, railroads are expected to move 650,000 tank cars of crude oil, the equivalent of 18 unit trains of 100 cars per day. Many of these shipments move out of the Bakken region of North Dakota, and grain, sugar beet, potato, and coal shippers have complained of serious delays in rail service in the Upper Midwest. Amtrak cancelled several trains across North Dakota because the freight railroad that owns the track could not accommodate them, and on other occasions it has had to substitute bus service between points in North Dakota for rail service. Based on past experience, local rail backups can have ramifications for service nationwide. Some railroads are installing new track to handle the growing demand to ship oil by rail. If tankers were available and their operating costs more competitive with rail costs, it is possible that increased use of waterborne transport could relieve some of the pressure on rail service. Jones Act Waivers The executive branch has statutory authority to waive the Jones Act "in the interest of national defense." During the summer of 2011, when President Obama released oil from the nation's Strategic Petroleum Reserve (SPR) due to unrest in Libya, the Administration waived the Jones Act and about 25 million barrels of SPR crude oil was moved on foreign-flag tankers to Gulf Coast, East Coast, West Coast, and Hawaii refineries. Each foreign-flag tanker carried 500,000 barrels or more in a total of 44 shipments. One delivery was made in a Jones Act vessel, a barge carrying 150,000 barrels. The Jones Act has also been waived temporarily after disruptions to normal oil supply routes, in the Gulf after Hurricanes Katrina and Rita in 2005, and in the Northeast after superstorm Sandy in 2012. During the 12-day waiver for superstorm Sandy, 12 foreign-flagged tankers transported more than 3 million barrels of refined product from the Gulf Coast to the Northeast. Recent U.S. Shipbuilding Activity Over the past decade, one tank ship and about 125 tank barges have been built in the United States each year, on average. Limited capacity exists in U.S. shipyards to build tankers. As of February 2014, there were 11 petroleum tankers on order for delivery before 2016 and three ATBs on order. Two of these tankers are definitely being built for crude oil, and are planned to replace two Alaska tankers ready for scrapping. The intended use of the other nine ships has not been announced; they could carry either crude or refined products. If they are intended to carry refined products, the shipyard will install coatings on tank walls and more specialized pumping equipment than needed on crude oil tankers, so that the ship can carry a variety of refined products without cross-contamination. The tanker ships are being built by the General Dynamics NASSCO Shipyard in San Diego and the Aker Philadelphia Shipyard. One industry analysis estimates that NASSCO has the capability of building four large vessels per year and that Aker has the capability of building three, and that these two yards are essentially booked through at least 2016. Recent ATBs have been built by shipyards in Mississippi, Washington, Oregon, and Pennsylvania. Foreign Components NASSCO has partnered with Daewoo Shipbuilding and Aker with Hyundai Mipo Dockyards, both Korean shipbuilders, for ship design, engineering, and procurement support. In the past, shipyard unions have opposed such agreements with Korean shipbuilders because the engines, piping, crew quarters, and portions of the bow and stern were imported from overseas and only assembled in the United States. NASSCO has explained that since Korean yards "build a hundred times more ships, they learn at a rate a hundred times faster, so you learn from the best." Shipyard unions refer to ships built in this manner as "kit ships." Coast Guard regulations deem a vessel to be U.S. built if (1) all major components of its hull and superstructure are fabricated in the United States, and (2) the vessel is assembled in the United States. The Coast Guard holds that propulsion machinery, other machinery, small engine room equipment modules, consoles, wiring, certain mechanical systems, and outfitting have no bearing on a U.S. build determination. Shipbuilding Loans, Grants, and Tax Deferrals The federal government has long provided financial assistance to domestic shipyards. The so-called "Title XI" program (46 U.S.C. §53702) provides government-backed loan guarantees (with repayment over 25 years) for prospective buyers of U.S.-built vessels as well as to shipyards for modernization of their facilities. The loan guarantee covers 87.5% of the cost of a ship. In FY2014, Congress appropriated $38 million for the program, the first time it has provided funds to expand the loan portfolio in several years. For FY2015, the House passed bill ( H.R. 4745 ) would rescind $29 million of this amount while the Senate reported bill ( S. 2438 ) provides $7 million for the program. For each loan, a reserve amount must be held depending on the risk, but typically 5% to 10% of the loan amount. As of April 2014, MARAD had $73 million available for new guarantees, enough to cover approximately $735 million of loans and a current portfolio of outstanding loan guarantees totaling $1.7 billion covering about 250 vessels. The Title XI program has been controversial in Congress when large loan recipients have defaulted, like in October 2001, when American Classic Voyages defaulted on a loan for two cruise ships intended for the Hawaii trade. Other borrowers have defaulted since. Foreign yards are subsidized also, although the form of assistance is often not transparent. An international agreement to reduce shipbuilding subsidies failed largely because the six largest U.S. shipyards objected to reducing the Title XI program. In the National Defense Authorization Act for FY2006 ( P.L. 109-163 , §3506), Congress created a grant program for small shipyards (currently defined as having no more than 1,200 employees). The grant can cover up to 75% of the cost of improving their facilities. Since then, about $10-$15 million a year has been made available for this program, except that the American Recovery and Reinvestment Act of 2009 provided $100 million and no funds were appropriated in FY2014. MARAD also administers the Capital Construction Fund (CCF) program, which allows U.S.-flag operators to defer taxes on income placed in such a fund if used to purchase or reconstruct U.S. built ships. The fund is established by the ship owner subject to MARAD regulations and reporting requirements. The investment income in the CCF is also tax deferred. The tax deferral is essentially indefinite as long as the program remains active. U.S.-flag Reservation for Export of Oil and Natural Gas? Congress is debating whether to allow crude oil produced in the continental United States to be exported to other countries, in addition to Canada. Domestic producers of natural gas are seeking federal export permits. Current law would not require that such exports be carried in U.S.-flagged ships. Many U.S.-based petroleum producers and refiners control foreign-flag tankers, some of which deliver imported crude oil to the United States or export refined petroleum products from U.S. refineries. U.S. merchant mariners are seeking additional U.S.-flag voyages because the government-impelled cargos (military and food-aid cargos) they rely on are in decline. During markup of the Coast Guard and Maritime Transportation Act of 2014 ( H.R. 4005 ) an amendment to require that LNG exports move in U.S.-crewed and eventually in U.S.-built tankers was withdrawn in favor of a Government Accountability Office study of maritime employment related to this requirement. Also unsuccessful were two amendments to a House-passed energy bill ( H.R. 6 , passed on June 25, 2014) which sought to require that LNG exports be carried in U.S.-flag tankers and require that federal regulators give priority to export terminal projects that would use U.S.-flag vessels. Amendments to the Energy and Water Appropriations Act of 2015 ( H.R. 4923 ) would have tied federal approval of LNG export terminals to the use of U.S.-flag tankers, but they were defeated on points of order. Whether the nation's energy trade should be carried in U.S.-flag tankers is a long-standing debate in Congress. In 2006, when the United States was still expected to be an importer rather than an exporter of LNG, Congress specified that federal regulators give "top priority" to the processing of licenses for offshore LNG import terminals if they would be supplied by U.S.-flag tankers, so as to promote the security of the United States. LNG shippers contended that tying U.S. trade routes to certain flag vessels would hinder the ability to supply LNG under short-term contracts, which was how LNG was increasingly traded as the global market matured. Security was the rationale put forth by proponents of requiring U.S. imported oil to be carried in U.S.-flag tankers in the 1970s. In 1974, The Energy Transportation Security Act (ETSA, H.R. 8193 , 93 rd Congress) would have required that 30% of imported oil be carried in U.S.-flag and U.S.-built tankers. The bill was pocket-vetoed by President Ford. In the 94 th Congress (1975), Congress created the Strategic Petroleum Reserve in response to the supply crisis in imported oil ( P.L. 94-163 ). Since the oil for the reserve is purchased by the federal government, half the oil shipped by vessel must be transported by U.S.-flag tankers pursuant to the Cargo Preference Act of 1954. In the 95th Congress (1977), the ETSA was reintroduced ( H.R. 1037 , S. 61 ) with modifications. A version requiring that 9.5% of U.S. imported oil be carried in U.S.-flag tankers passed the House by voice vote, but was then defeated in a recorded vote of 257 to 165. In the House floor debate, supporters of the bill primarily cited national security and the importance of boosting the domestic shipbuilding base. While opponents cited costs to consumers and potential retaliation from trading partners, much of their argument reflected a Common Cause report on political campaign contributions by the U.S.-flag industry, which had been released just days before. That neither the Department of Defense nor Department of State had testified in support of a national security rationale for the bill was also noted in the floor debate. The Senate never took up the measure. At a 2014 industry symposium organized by MARAD to solicit ideas for addressing the decline in U.S.-flag cargoes, several participants advocated requiring a certain amount of LNG exports be carried in U.S.-flag or U.S.-built ships. Much of the discussion concerned additional statutory or regulatory requirements for staying the decline in cargoes. There was little or no discussion, given the inverse relationship between price and quantity demanded, of efficiencies that could lower the price of U.S.-flag shipping. The one commercial shipper making a presentation at the symposium stated, "Today U.S. flag is seen as a group of carriers that we have to use. I think that going forward, to be successful, you have to be seen as a group of carriers that we want to use." Current Legislation Several bills now pending in Congress address matters related to waterborne transportation of oil, including many of the safety and commercial issues raised in this report: The Coast Guard and Maritime Transportation Act of 2014 ( H.R. 4005 , passed by the House April 1, 2014) directs the U.S. Department of Transportation to submit a national maritime strategy that identifies federal regulations that reduce the competitiveness of U.S.-flag vessels in international trade, submit recommendations to make U.S.-flag vessels more competitive and enhance U.S. shipbuilding capability, and identify strategies to increase the use of U.S.-flag vessels to carry imports and exports and domestic commerce. The Coast Guard is directed to arrange with the National Academy of Sciences an assessment of laws that impact the ability of U.S.-flag vessels to compete in international trade, while GAO is directed to study how U.S. maritime employment would be affected by a requirement that LNG exports move in U.S.-flag vessels. S. 2444 , the Coast Guard Authorization Act for Fiscal Years 2015 and 2016, would require the Coast Guard to report marine casualties to state or tribal governments within 24 hours, publish on a publicly accessible website its incident action plans in response to an oil spill, and modify oil spill contingency plans to include advance planning for closing and reopening of fishing grounds. H.R. 2838 , sponsored by Resident Commissioner Pierluisi, would exempt liquefied natural gas and propane tankers serving Puerto Rico from the Jones Act. S. 1483 , sponsored by Senator Cantwell, establishes a federal oil spill research committee and requires updates to vessel oil spill response plans. The National Defense Authorization Act for FY2015 ( H.R. 4435 ), as passed by the House on May 22, 2014, declares the sense of Congress (§3503) that "the United States coastwise trade laws [the Jones Act] promote a strong domestic trade maritime industry, which supports the national security and economic vitality of the United States and the efficient operation of the United States transportation system."

New sources of crude oil from North Dakota, Texas, and western Canada have induced new routes for shipping crude oil to U.S. and Canadian refineries. While pipelines have traditionally been the preferred method of moving crude overland, they either are not available or have insufficient capacity to move all the crude from these locations. While rail has picked up some of this cargo, barges, and to a lesser extent tankers, also are moving increasing amounts of crude in domestic trade. The rather sudden shift in transportation patterns raises concerns about the safety and efficiency of oil tankers and barges. The United States now imports less oil than five years ago by oceangoing tankers, while more oil is moving domestically by river and coastal barges. However, the Coast Guard still lacks a safety inspection regime for barges similar to that which has long existed for ships. The possibility of imposing an hours-of-service limit for barge crews as part of this regime is controversial. Congress called for a barge safety inspection regime a decade ago, but the related rulemaking is not complete. The Coast Guard's progress in revamping its Marine Safety Office is a related issue that Congress has examined in the past. The majority of U.S. refineries are located near navigable waters to take advantage of economical waterborne transport for both import and export. However, for refineries switching from imported to domestic crude oil, the advantage diminishes considerably. This is because the Jones Act, a 1920 law that seeks to protect U.S. shipyards and U.S. merchant sailors in the interest of national defense, restricts domestic waterborne transport to U.S.-built and -crewed vessels. The purchase price of U.S.-built tankers is about four times the price of foreign-built tankers, and U.S. crewing costs are several times those of foreign-flag ships. The small number of U.S.-built tankers makes it difficult for shippers to charter tankers for a short period or even a single voyage, highly desirable in an oil market with shifting supply patterns. The unavailability of U.S.-built tankers may result in more oil moving by costlier, and possibly less safe, rail transport than otherwise would be the case. Some Texas oil is moving to refineries in eastern Canada, bypassing refineries in the northeastern United States, because shipping to Canada on foreign-flag vessels is much cheaper than shipping domestically on Jones Act-eligible ships. Some of these issues may be addressed in the Coast Guard and Maritime Transportation Act of 2014 (H.R. 4005), which has passed the House, and the Coast Guard Authorization Act for Fiscal Years 2015 and 2016 (S. 2444), introduced in the Senate. The House bill requests federal agency studies and recommendations towards improving the competitiveness of the U.S.-flag industry while the Senate bill contains provisions related to oil spill response.

Background Introduction Immigrant eligibility for major public assistance programs is an ongoing issue in Congress. (1) Prior to 1996, legal permanent residents (LPRs) were eligible for federal public assistance underterms comparable to citizens, and states were not permitted to restrict access to federal programs onthe basis of immigration status. The Personal Responsibility and Work Opportunity ReconciliationAct of 1996 ( P.L. 104-193 ) -- the original law authorizing the Temporary Assistance for NeedyFamilies (TANF) program -- dramatically changed noncitizen eligibility for public assistance. Itrestricted the eligibility of LPRs, refugees, asylees, and other noncitizens for means-tested public aid. These provisions ranged from categorical eligibility bars to new rules governing aliens with sponsorsand their sponsors' responsibilities. (2) Aliens in theUnited States without authorization, commonlyreferred to as "illegal aliens," remained ineligible federal public assistance. Although the federal government retains exclusive responsibility for immigration policy, federal law now permits states to differentiate among types of noncitizens when setting welfare policy. The1996 welfare reform act gave states several options of placing further restrictions on noncitizeneligibility. It also gave them options of expanding benefits to noncitizens. (3) As Congress considersthe reauthorization of the welfare reform law, the issue of state options to restrict or expandassistance to noncitzens arises. After outlining the options states have to cover noncitzens under TANF and presenting data on the number of LPRs in each state, this report studies whether and which states have exercised theseoptions regarding noncitizen eligibility for TANF. It investigates how states are funding theassistance provided to noncitizens, and also analyzes TANF receipt by state. Current Federal Eligibility Policy Under current law, noncitizens' eligibility for TANF largely depends on their immigration status and whether they arrived (or were on a program's rolls) before August 22, 1996, the enactmentdate of P.L. 104-193 . The TANF eligibility policies laid out by the 1996 welfare reform act remainessentially unchanged for noncitizens entering after its enactment. The basic federal rules are asfollows: (4) LPRs who entered the United States after August 22, 1996, are barred from TANF for five years, after which their coverage becomes a state option. (5) LPRs with a substantial work history -- generally 10 years (40 quarters) ofwork documented by Social Security or other employment records -- or a military connection (activeduty military personnel, veterans, and their families) are eligible for TANF. Refugees and asylees are eligible for TANF for five years after entering theUnited States. (6) After this five-year term, refugeesand asylees may be eligible, at state option, forTANF. (7) Nonimmigrants (e.g., temporary alien residents) and unauthorized aliens (i.e., illegal aliens) are barred from TANF, as they were barred from its predecessor, Aid for Families with DependentChildren. Legal Permanent Residents by State The state residential patterns of the almost 14.5 million aliens who became LPRs in the United States from FY1988 through FY2002 provide a gauge of the relative effect of these policies acrossthe states. Although a substantial number of people who are currently LPRs came to the UnitedStates before 1988, many others who came prior to 1988 have become U.S. citizens. All LPRs areeligible to become citizens through the naturalization process after they have lived here for five yearsas LPRs (three years in the case of spouses of U.S. citizens). (8) Estimates of the naturalization raterange from 30% to 49%, and the median number of years between becoming an LPR andnaturalizing as a U.S. citizen varies from eight to 10 years (for those who opt to naturalize). (9) Immigrants are concentrated in several states; indeed over half of all new LPRs from FY1988 through FY2002 indicated that they intended to live in just three states: California, New York, andTexas. (10) As Table 1 presents,California dominates with 4,561,693 new LPRs, which is 31.5% ofall new LPRs during this period. New York follows with 2,001,439 new LPRs (13.8%). Interestingly, both California and New York had a slightly smaller percentage of all new LPRsduring the 1997-2002 period (26.1% and 12.8%, respectively) than during 1988-1996 period (34.4%and 14.3%, respectively), suggesting a somewhat wider dispersion of new LPRs to other states. Almost 80% of all new LPRs reported their intended state of residence in one of 10 states: California, New York, Texas, Florida, Illinois, New Jersey, Massachusetts, Virginia, Washington,and Maryland. The only other states with more than 1% of all new LPRs reporting intendedresidence are: Pennsylvania, Michigan, Arizona, Georgia, Connecticut, and Ohio. Table 1. Legal Permanent Residents (LPRs) Admitted FY1988-FY2002 by State of Intended Residence Source: CRS analysis of Department of Homeland Security, Office of Immigration Statistics data. The LPR data in Table 1 has several limitations, the most obvious being that "intended residence" does not take into account people who subsequently move. The data also, as notedearlier, do not include LPRs who arrived before 1988 and do not exclude LPRs who have sincebecome U.S. citizens. State Policies and Funding Options Under TANF States may permit or prohibit participation by LPRs who entered the United States before enactment of the welfare law (August 22, 1996) from TANF. LPRs entering the United States afterAugust 22, 1996, are barred for five years from all benefits under TANF, food stamps, Medicaid(except emergency medical assistance), and the Social Services block grant. LPRs ineligible forTANF, however, may receive state-funded benefits if they meet other program requirements. Afterfive years, the decision as to whether LPRs may participate in TANF (as well as Medicaid and theSocial Services block grant) rests with the states. Many states, as discussed below, offer publicassistance to LPRs not eligible for federally financed benefits. The five-year bar discussed previously does not apply to refugees and asylees. Refugees and asylees who meet the other program criteria are eligible for TANF benefits for five years. After thisperiod of time, refugees and asylees are eligible for TANF at state option, provided they areotherwise eligible for TANF. State Policies in 2000 and 2002 During the fall of 2002 and winter of 2003, the Congressional Research Service (CRS) conducted the State Noncitizen Eligibility Survey (SNES), a two-phase survey of state eligibilitypolicies on noncitizen eligibility for public assistance as of December 2000 and December 2002. CRS sent questionnaires to state officials responsible for TANF in all 50 states and outlying areas. The nine states and four outlying areas that did not respond to the TANF portion of SNES areindicated in the following tables as "NR" for no response. If a state official responded to the survey,but did not answer a particular question on the survey, it is noted as "skip." (11) As of December 2002, 34 states and Washington, D.C. reported that they were exercising the option to provide TANF to LPRs after the five-year bar ends. Thirty-five states and Washington,D.C. reported that they have exercised the option to provide TANF to LPRs present in the UnitedStates before August 1996. Table 2 summarizes two major options that states may exercise onLPReligibility for TANF and whether they opted for these policies in 2000 and 2002. As Table 2 indicates, there was no noteworthy change in state policies from 2000 to 2002. Table 2. Summary of State Policies on LPR Eligibility for TANF: 2000 and 2002 Source: CRS analysis of the State Noncitizen Eligibility Survey (SNES), Jan. 2003. As Table 3 indicates, 34 states and Washington, D.C. reported that they provide TANF to asylees and refugees who were residing in the United States at the time of the welfare reform act'spassage in 1996. Only 27 states and Washington, D.C., however, reported that they provide TANFto asylees and refugees who have surpassed the five-year limit for TANF and two reported that theydid not. It is important to note that several states skipped this question on the survey. Only WestVirginia reported a change in policy of providing TANF in 2000 but not in 2002 to asylees andrefugees who were residing in the United States at the time of the welfare reform act's passage. Table 3. Summary of State Policies on Asylee and RefugeeEligibility for TANF: 2000 and 2002 Source: CRS analysis of the State Noncitizen Eligibility Survey (SNES), Jan. 2003. Funding Sources for Noncitizens A total of 27 states and Washington, D.C. reported that they used their own funds as well as federal funds in 2000 and 2002 to cover the costs of providing TANF to those LPRs who were in theUnited States prior to the passage of the 1996 welfare reform act. Twenty-six states and the U.S.Virgin Islands reported that they used their own funds as well as federal funds in 2000 and 2002 tocover the costs of providing TANF to those LPRs who were excluded (e.g., barred first five yearsin U.S.) or whose eligibility had expired (e.g., refugees after five years in U.S.). Presumably, thoseLPRs barred from federal TANF (e.g., first five years in the U.S.) were covered by state funds, andfederal funds were used to cover those LPRs whom the states had the option to cover federally (e.g.,refugees after five years in U.S.). As Table 4 indicates only 22 states reported that they optedtoprovide TANF to those LPRs in the United States prior to the passage of the 1996 welfare reformact as well as those LPRs who were excluded or whose eligibility had expired. Table 4. Use of State and Federal Funding for Optional TANF Assistance to Noncitizens by State, 2000 and 2002 Source: CRS analysis of the State Noncitizen Eligibility Survey (SNES), Jan. 2003. An important source of funding for state assistance to noncitizens comes from the "maintenance of effort" (MOE) requirement. MOE refers to the amount of the state's own money it must spendto comply with the TANF requirement that the states must continue to spend at least 75% of the totalthey spent in 1994 for the specific programs that were folded into the TANF block grant. Nationally,the MOE funds total $10.4 billion, as compared to $16.5 billion in TANF grants. Among the varietyof authorized uses for MOE funds are expenditures for persons ineligible for TANF because of thecitizenship and immigrant rules. (12) As of December 2002, 17 states reported using their state MOE money to provide public assistance to newly arriving LPRs who are barred from federal TANF for the first five years, as listedin Table 5 . Six states reported using their state MOE money in 2002 to provide TANF to LPRswhohad exhausted their eligibility or were currently barred: California, Colorado, Florida, New York,Utah, and Washington. Eight states reported contributing their state MOE money in 2002 to aseparate program for those LPRs who were excluded (e.g., barred first five years) or whose eligibilityhad expired (e.g., refugees after five years): California, Georgia, Hawaii, Maryland, Pennsylvania,Tennessee, Utah, and Wisconsin. Table 5. State Use of MOE Funds in 2002 to Assist Noncitizens During Periods of Federal Ineligibility and Optional State Eligibility Source: CRS analysis of the State Noncitizen Eligibility Survey (SNES), Jan. 2003. Noncitizen Receipt of TANF Trends Over Time As an annual percentage of total adult TANF recipients, noncitizens who received Aid for Families with Dependent Children (the predecessor of TANF) rose from 7.0% in FY1989 to 12.3%in FY1996. The percent of noncitizen adults receiving TANF dropped slightly to 11.7% in 1999 andultimately fell to 8.0% in 2001, the most recent year data are available. That many states haveexercised one or more options to extend coverage to certain classes of LPRs has mitigated the effectsof the federal bars enacted in 1996. This trend in receipt of TANF, which does not includenoncitizens assisted by the separate state programs noted above , is illustrated in Figure 1 . Trends by State California tops the list of states, with 16.9% of its 278,069 TANF recipients who were noncitizens in 2001, as Table 6 presents. Calculated in terms of percentage of all adultnoncitizensreceiving TANF, Californians comprised 41.8% of adult noncitizens in the United States on TANFin 2001. New York followed California with 12.3% of its 189,299 recipients who were adultnoncitizens or 20.7% of noncitizens in the United States on TANF. Texas and Minnesota weredistant third and fourth places with 7.4% and 5.2% respectively of adult noncitizens in the UnitedStates on TANF, with 8.9% and 16.8% of their states' caseload respectively who were noncitizens. Data presented in Table 6 do not include noncitizens assisted by the separate state programs inCalifornia, Georgia, Hawaii, Maryland, Pennsylvania, Tennessee, Utah, and Wisconsin. Table 6. Percentage of Adult TANF Recipients Who Are Noncitizens by State, FY2001 Source: CRS presentation of data from National TANF Datafile as of May 15, 2002. Generally, states with larger shares of LPRs were more likely to have expanded state-level TANF policies for noncitizens as well as have a greater percentage of their caseload who werenoncitizens. There were, however, some exceptions as noted above. The level of immigrantenrollment in assistance programs is affected by the restrictions imposed under the 1996 welfarereform law, by states' choices to extend or deny coverage when given the option and, to somedegree, by individuals' perception of their eligibility status and their election to participate or not. Among the public at large, confusion remains over what classes of noncitizens are eligible for whichprograms, in part because the 1996 welfare law used the phrase "qualified alien" -- not a term inimmigration law -- that encompasses a variety of classes of noncitizens who must meet additionalspecified conditions. Moreover, despite narrowly drawn regulations from the former Immigrationand Naturalization Service (now the U.S. Citizenship and Immigration Services in the Departmentof Homeland Security) on what constitutes "public charge," many believe that receiving publicbenefits may adversely affect a noncitizen's immigration status or potential to sponsor immigrationpetitions for family members. These factors may be inhibiting participation among eligibleimmigrants.

The eligibility of immigrants for major public assistance programs is an ongoing issue in Congress. Prior to 1996, immigrants, i.e., legal permanent residents (LPRs), were eligible for federalpublic assistance under terms comparable to citizens, and states were not permitted to restrict accessto federal programs on the basis of immigration status. The Personal Responsibility and WorkOpportunity Reconciliation Act of 1996 ( P.L. 104-193 ) -- the original law authorizing theTemporary Assistance for Needy Families (TANF) program -- dramatically changed noncitizeneligibility for public assistance. It restricted the eligibility of LPRs, refugees, asylees, and othernoncitizens for all means-tested public aid. Aliens in the United States without authorization,commonly referred to as "illegal aliens," remained ineligible for federal public assistance. AsCongress considers the reauthorization of the welfare reform law, the issue of state options to restrictor expand assistance to immigrants arises. The 1996 welfare reform act gave states several options of placing further restrictions on noncitizen eligibility or of expanding benefits to noncitizens. LPRs who entered the United Statesafter August 22, 1996, are barred from TANF for five years, after which their coverage becomes astate option. This five-year bar, however, does not apply to LPRs who entered the United States asrefugees and asylees. Refugees and asylees who meet the other program criteria are eligible forTANF for the first five years they are in the United States. After this period of time, refugees andasylees are only eligible for TANF at state option. Many states have been exercising one or more of these options to extend coverage to certain classes of LPRs. As of December 2002, 34 states reported that they are exercising the option toprovide TANF to LPRs after the five-year bar ends. Thirty-five states reported that they haveexercised the option to provide TANF to LPRs present in the United States before August 1996. Furthermore, 34 states reported that they provide TANF to asylees and refugees who were residingin the United States at the time of the welfare reform act's passage in 1996. Only 27 states, however,reported that they provide TANF to asylees and refugees who have surpassed the five-year limit forTANF. In terms of funding, 27 states and Washington, D.C. reported that they used their own funds as well as federal funds in 2000 and 2002 to cover the costs of providing TANF to those LPRs whowere in the United States prior to the passage of the 1996 welfare reform act. An important sourceof funding for state assistance to noncitizens comes from the TANF "maintenance of effort" (MOE)requirement. In 2002, 17 states reported using their state MOE money to provide public assistanceto newly arriving LPRs who are barred from federal TANF for the first five years. Six statesreported using their state MOE money in 2002 to provide TANF to LPRs who had exhausted theireligibility or were currently barred. Eight states reported contributing their state MOE money in2002 to a separate program for those LPRs who were excluded or whose eligibility had expired. This report may be updated if new data become available.

Flood Management Responsibilities: A Federalist Division Recent major flooding events have drawn attention to ongoing debates about how to improve management of flood risk and the roles and responsibilities of individuals, communities, and the various levels of government. As with many other policy areas, the federal system has resulted in public functions for flood damage reduction being shared by all levels of government. Local governments are responsible for land use and zoning decisions that direct floodplain and coastal development; however, numerous federal and state flood policies and programs influence local and individual decision-making. The federal government also funds some flood and storm damage reduction measures, manages a flood insurance and mitigation program, and provides disaster assistance. It also generates essential data through mapping and other efforts. Levees may be built by federal, state, or local entities (including private entities at the local level). Generally, levees are maintained by a local entity, with some exceptions. Local levee districts are generally the first entities responsible for monitoring levee conditions during flooding. The levee districts are also the first entity responsible for emergency response. If a flood or other emergency exhausts the levee district's flood fighting resources, the district typically contacts the state. The state will contribute its flood fighting resources to the local effort; as the state's resources are exhausted, it typically will contact the Corps for assistance under the Corps' emergency response authority. Federal Role and Interest in Reducing Flood Damages The federal role in flood control began in the late 19 th century. Prompted by devastating floods in the Mississippi River basin, Congress created a commission to oversee the development of a levee system to control the river's flow. The Mississippi River Flood of 1927 and floods in the mid-1930s, ushered in a modern era of federal flood control investment. The Flood Control Act of 1936 (19 Stat. 1570) declared flood control a "proper" federal activity in the national interest. Section 1 of the act established the following policy: It is hereby recognized that destructive floods upon the rivers of the United States, upsetting orderly processes and causing loss of life and property, including the erosion of lands and impairing and obstructing navigation, highways, railroads, and other channels of commerce between the States, constitute a menace to national welfare; that it is the sense of Congress that flood control on navigational waters or their tributaries is a proper activity of the Federal Government in cooperation with States, their political sub-divisions and localities thereof; that investigations and improvements of rivers and other waterways, including watersheds thereof, for flood-control purposes are in the interest of the general welfare; that the Federal Government should improve or participate in the improvement of navigable waters or their tributaries including watersheds thereof, for flood-control purposes if the benefits to whomsoever they may accrue are in excess of the estimated costs, and if the lives and social security of people are otherwise adversely affected. As with many other policy areas, the federal system has resulted in public functions for flood damage reduction being shared by all levels of government. Since the mid-1980s, local project sponsors (often local governments or special levee and drainage districts) share construction cost of federal flood control projects and are fully responsible for operation and maintenance. Local entities (and sometimes state entities) may construct flood control infrastructure independently from the federal government, and are responsible for land use and zoning decisions guiding development in floodplains and coastal areas. The impetus for federal and state attention to flooding comes from multiple sources. For instance, flooding often can occur regionally, and flood control works of one community can exacerbate or, alternatively, mitigate flood risk in other areas. Some federal and state actions attempt to alter individual and community behavior to account for flooding risks and losses. Most individuals discount the probability of loss from infrequent events, even if those events may cause significant losses and disruption. In general, many local decision makers do not view environmental hazards, such as flooding, as serious problems, in comparison to the many other problems that local governments are expected to address. Principal Federal Agencies As previously noted, the Corps and FEMA are the principal federal agencies involved in flood damage reduction and flood fighting and emergency response. Other federal agencies also are involved with flood damage reduction projects, such as the U.S. Department of Agriculture's Natural Resources Conservation Service, the Department of the Interior's Bureau of Reclamation, and the Tennessee Valley Authority. At the direction of Congress, the Corps is authorized to participate in the cost-shared planning and construction of flood damage reduction projects, such as building levees and floodwalls to reduce damages from coastal and riverine flood hazards. The Corps is responsible for much of the federal construction investment in flood control and storm protection infrastructure. It has constructed nearly 9,000 miles of the nation's roughly 15,000 miles of levees. Corps involvement in flood control construction is predicated on the project being in the national interest, which is determined by the likelihood of widespread and general benefits, a shortfall in the local ability to solve the water resources problem, the national savings achieved, and precedent and law. Generally, after construction by the federal government, this infrastructure is turned over to a local entity for operation, maintenance, repair, and rehabilitation. The Corps, however, has retained responsibility for roughly 900 miles of levees, primarily along the Mississippi River and for multi-purpose dams. FEMA has various programs, such as its Hazard Mitigation Grant Program and its Flood Mitigation Assistance Program, that promote flood mitigation actions, such as assisting in removing vulnerable structures from floodplains and other activities that reduce the impact of a flood disaster. The Corps performs most of the federal inspections of levees. Levee inspections are conducted for participation in two federal programs. The first is the Corps' Rehabilitation and Inspection Program. This program provides federal assistance for repairing levees damaged during floods. The Corps is to conduct annual (or semi-annual) inspections of levees for initial inclusion in the program and for continued eligibility for assistance. The Corps also often performs the inspections to certify a levee's reliability for a 100-year flood under FEMA's National Flood Insurance Program (NFIP). Congress gave the Corps emergency response authority that allows the agency to fight floods and other natural disasters. P.L. 84-99 (33 U.S.C. §701n) provides the Corps authority for emergency response and disaster assistance. It authorizes disaster preparedness, advance measures, emergency operations (disaster response and post-flood response), rehabilitation of flood control works threatened or destroyed by floods, protection or repair of federally authorized shore protection works threatened or destroyed by coastal storms, emergency dredging, and flood-related rescue operations. These activities are limited to actions to save lives and protect improved property (public facilities/services and residential or commercial developments). FEMA can also direct the Corps and other agencies to undertake activities in response to flooding and other national emergencies, as part of FEMA's implementation of the National Response Framework. A Flood Risk Framework Hurricane Katrina and recent midwestern flooding demonstrate that not only property damage but also significant risks to life, economic disruption, and other social hardships occur during floods. Flood risk is a composite of three factors: vulnerability , which allows a threat to cause consequences (e.g., level of protection provided by levees and dams, their reliability, and location within a floodplain); threat of an event (e.g., probability of a Category 5 hurricane storm surge or a 200-year flood affecting a particular location); and consequence of an event (e.g., property damage, loss of life, economic loss, environmental damage, reduced health and safety, and social disruption). Reducing Vulnerability and the 100-Year Flood In the United States, the 1% annual chance flood, more commonly known as the 100-year flood, is a standard often used as a basis for identifying, mapping, and managing flood hazards. For example, the NFIP and most state and local governments use location in the 100-year floodplain or similar coastal zone inundation areas as triggers for various requirements. The 100-year flood standard was established at the recommendation of a group of experts in the late 1960s. "It was selected because it was already being used by some agencies, and it was thought that a flood of that magnitude and frequency represented a reasonable probability of occurrence and loss worth protecting against and an intermediate level that would alert planners and property owners to the effects of even greater floods." The adoption of the 100-year flood standard in many respects guides perceptions of what is an acceptable level of vulnerability . The 100-year flood standard is a vulnerability standard, and not a risk standard. Thus, the question of whether the 100-year flood standard combined with current threat and consequence information results in an acceptable level of risk remains largely unaddressed; this question is especially relevant for low probability, high consequence events such as a Category 4 hurricane hitting a major urban center. The attempt to provide at least 100-year flood protection often drives local floodplain management and infrastructure investments, resulting in a measure of equity within and across communities. That equity in vulnerability, however, results in uneven levels of risk because flooding of different communities has different consequences, such as differences in the potential loss of life, social disruption, structures damaged, and economic impact because of variations in land use and development patterns. The National Flood Insurance Program does not differentiate between 100-year flood protection provided by a flood control structure and flood protection resulting from natural topography and hydrology. As a result, development behind levees and downstream of dams providing 100-year flood protection is not designated as located in a "special flood hazard area," thus freeing occupants from flood insurance requirements. While the NFIP largely presumes that levees, dams, and other flood control structures will not fail, their presence does not entirely eliminate an area's vulnerability to flooding. The residual flood risk behind levees or downstream of dams remains largely unaccounted for in the NFIP and often is not incorporated into individual, local, and state decision-making. Residual risk is the portion of risk that remains after flood control structures have been built and other damage-reducing measures have been taken. Risk remains because of the likelihood of the measures' design being surpassed by floods' intensity and of structural failure of the measures. Often when the designs of flood control structures are surpassed or when structures fail for other reasons, the resulting flood is catastrophic, as shown by the floodwall breaches in New Orleans (LA) with Hurricane Katrina in 2005. The damaging consequences of floods increase as development occurs behind levees and below dams; ironically, this development may occur because of the flood protection provided. The nation's risk in terms of lives lost, economic disruption, and property damage is increased by overconfidence in the level and reliability of structural flood protection. Next Step: A Risk Management Approach? Investments in flood control measures, such as dams and levees, and emergency response activities have resulted in a decreasing trend (excluding the deaths associated with Hurricane Katrina and most recent midwestern floods) in lives lost to flooding since the 1920s; during the same period, property damage due to flooding has been increasing. Through the NFIP, the federal government attempts to promote flood-hazard awareness and damage-reducing practices, as well as to assist individuals in managing flood losses. While this produces clear benefits for moderate floods, some stakeholders are concerned that structural flood control measures and the NFIP together may contribute to a false sense of security for individuals and communities. This sense of security may foster decisions to locate in potentially hazardous areas, thus increasing the national vulnerability to flood losses. The 2008 midwestern floods and Hurricane Katrina have contributed to interest in fundamental reexaminations of the approach to managing floodwaters. Some of the questions raised are: Do current policies, programs, practices, and investments result in an acceptable level of aggregate risk for the nation? Do they promote wise use and investments of the nation's floodplains and coasts? Risk management is being increasingly viewed as a method for setting priorities for managing some hazards in the United States. Because floodplain and coastal development are largely managed by local governments, some aspects of national flood risk management likely would be unwelcome and infeasible, and could be perceived as resulting in an inequitable distribution of flood protection. For example, if floods in large urban concentrations are perceived as representing a greater risk for the nation, federal resources may be directed away from protecting smaller communities and less-populated states. Two of the concerns raised in discussions of greater emphasis on risk analysis in the development and design of specific projects are that risk analysis may result in lower levels of protection being implemented in some areas, and that information and knowledge are insufficient to perform an adequate analysis. However, an argument can be made that the federal government has an interest in reducing risks resulting in national consequences, and in prioritizing federal involvement and appropriations accordingly. Factors complicating the determination of the nation's flood risk include changing conditions and incomplete information. For example, many flood control projects were built decades ago using the available data, technologies, and scientific knowledge of the period that may have underestimated flood hazards for particular areas. Similarly, there are issues with changes in risk over time due to processes such as land loss, subsidence, sea-level rise, reduced natural buffers, urban development, and infrastructure aging. For existing dams, there is some information on consequences of failure as measured by loss of life, economic loss, environmental loss, and disruption of lifeline infrastructure (such as bridges and power grids); however, the database with this information only tracks the amount and type of losses, not the likelihood of failure. A risk-reduction approach for organizing federal flood-related investments likely would incorporate many structural and nonstructural flood management measures already being considered and implemented, but change their priority and mix. Options considered in a risk-centered approach may include shifting federal policy toward wise use of flood-prone areas (e.g., rules or incentives to limit some types of development in floodplains), incorporating residual risk and differences in riverine and coastal flood risk into federal programs (e.g., residual risk premiums as part of the National Flood Insurance Program), creating a national inventory and inspection program for levees, promoting greater flood mitigation and damage mitigation investments, re-evaluating operations of flood control reservoirs for climate variability and uncertainty, and investing in technology and science for improved understanding of flooding threats. The Levee Challenge Hurricane Katrina brought national attention to the issue of levee and flood wall reliability and different levels of protection provided by flood damage reduction structures, particularly those protecting concentrated urban and population centers. A 1982 National Research Council report stated that levee overtopping or failure was estimated to be involved in approximately one-third of all flood disasters, and that the nation's dam inspection program suggests that a large percentage of locally built levees are likely poorly designed and maintained. How to address levee reliability and various levels of protection remains at issue. Many levees protecting today's communities and agricultural investments originally were planned and constructed beginning nearly a century ago (or more than a century ago) by local interests attempting to reclaim land to make it productive for agriculture and other uses. Rather than each landowner building separate levees, landowners often consolidated their resources by forming a levee district. As a consequence of this history, many of today's physical constructions and configurations, as well as institutional arrangements, for flood protection have roots distinct from their current use as flood protection for development. Most levees currently are operated by a levee district or some other special or general local government. For the most part, municipalities serving concentrated urban populations have assumed flood control responsibilities, while special levee districts remain abundant in rural and agricultural areas. Note, however, that there are exceptions to this generality. An issue that may limit government entities' interest in levee construction, maintenance, and possibly inspection responsibilities is liability for flood damages. A principal source of concern may stem from the uncertainty related to the implications of Paterno v. State of California, which held the State of California liable for a levee it did not build, but operated as part of a state-sponsored levee system . The issue of federal liability for damages is discussed in CRS Report RL34131, Federal Liability for Flood Damage Related to Army Corps of Engineers Projects , by Cynthia Brougher. Flood Management Issues in the 110th Congress A Legislative Response to Katrina's Lessons: Factoring in Safety In the first omnibus Water Resources Development Act (WRDA, which is the legislative authorization vehicle for the Corps) enacted after Hurricane Katrina—WRDA 2007 ( P.L. 110-114 )—Congress addressed a number of policy changes and authorized numerous flood and storm damage reduction projects and project modifications. WRDA 2007 included the following provisions specifically related to flood-related policies: Water Resources Principles and Guidelines (§2031)— This provision states a national water resources planning policy that includes avoiding unwise use of floodplains and flood-prone areas, and requires the Corps to update by 2010 the guidelines it uses for planning and implementing Corps water resources projects. Water Resources Priorities Report (§2032)— Ths provision requires the President submit to Congress a report by 2010 on the vulnerability of the nation to flood damages, including the risk to human life, which is to include assessments of current programs and recommendations for improvements. Planning (§2033)— This provision makes changes to Corps planning activities, including requirements that the economic analysis of flood damage reduction projects consider the risk that remains behind levees and floodwalls, upstream and downstream impacts, and equitable analysis of structural and nonstructural alternatives. Safety Assurance Review (§2034)— This provision requires that the design and construction of Corps flood and storm damage reduction projects be independently reviewed by experts to assure public health, safety, and welfare. National Levee Safety Program (Title IV ) — This title creates a Committee on Levee Safety to make recommendations to Congress by mid-2008 for a national levee safety program; however, the committee has not yet been funded. The title also requires the Corps to establish and maintain a database with an inventory of the nation's levees by 2009 and to inspect federally constructed and other levees. How these changes are implemented over the next few years may affect the nature of the federal investment in flood and storm damage infrastructure and mitigation measures. Selected Remaining Issues The 2005 hurricane season and the 2008 midwestern floods have focused the nation's attention once again on issues that flood experts have debated for decades. The devastation of these events renewed public concerns about reliability of the nation's aging flood control levees and dams. The debate over what is an acceptable level of risk—especially for low-probability, high-consequence events—and who should bear the costs to reduce the flood risk (particularly in the case of levees) is taking place not only in the affected states, but nationally. The concerns being raised range widely, including interest in providing more protection for concentrated urban populations, risk to the nation's public and private economic infrastructure, support for reducing vulnerability by investing in natural buffers, equity in protection for low-income and minority populations, consistency in and the form of flood insurance and disaster aid, and the level of federal, state, and local investment in structural and nonstructural flood damage reduction measures. Response to the 2005 hurricane season and previous midwestern floods included discussions of expanding mitigation activities (such as floodproofing structures and buyouts of structures on the most flood-prone lands), investing in efforts to restore natural flood and storm surge attenuation, and assuring vigilant maintenance of existing flood control structures, as well as interest in new and augmented structural flood protection measures. Although major flood events, generally spur these discussions, the policy changes implemented often are incremental. The 110 th Congress, like previous Congresses, faces a challenge in reaching consensus on whether and how to proceed on anything other than incremental change because of the wealth of constituencies and communities affected by federal flood policy. Another practical challenge is the division of congressional committee jurisdictions over the federal agencies and programs involved in flood mitigation, protection, and response. There are many questions that remain about how events unfolded in the aftermath of Hurricane Katrina, and much information that is still needed to understand how to apply and communicate nationally the lessons in the Gulf and midwestern states learned about flood risk and disaster preparedness and response. Although there is no way to protect against all flood risk, many contend that more information is needed to evaluate flood risk, to understand the reliability and residual risk of structural flood protection, and to incorporate the full range of flood consequences into local, state, and federal decision-making and programs.

Midwestern flooding and Hurricane Katrina have raised concerns about reducing human and economic losses from flooding. In the United States, local governments are responsible for land use and zoning decisions that shape floodplain and coastal development; however, state and federal governments also influence community and individual decisions on managing flood risk. The federal government constructs some of the nation's flood control infrastructure, supports hazard mitigation, offers flood insurance, and provides emergency response and disaster aid for significant floods. In addition to constructing flood damage reduction infrastructure, state and local entities operate and maintain most of the flood control infrastructure and have initial flood-fighting responsibilities. Prior to the Lower Mississippi River Flood of 1927, the federal role in flood control was limited. The Flood Control Act of 1936 (19 Stat. 1570) declared some flood control a "proper" federal activity. Today, the federal agencies most involved in flood control and flood fighting and emergency response are the U.S. Army Corps of Engineers (Corps) and the Federal Emergency Management Agency (FEMA). The 110th Congress is faced with numerous flood control issues, including responding to disasters and adjusting federal flood policies. The recent midwestern floods and Hurricane Katrina have broadened interest in fundamental review of the current approach to managing floodwaters. Questions raised are: Do current policies, programs, and practices result in an acceptable level of aggregate national risk? Do they promote wise use and investments in the nation's floodplains and coasts? Do they encourage development that puts people in harm's way? Levees represent a particular challenge in that they may encourage development in flood-prone areas, but sometimes fail or are overtopped by significant storms. Hurricane Katrina brought national attention to the catastrophic consequences when structures fail or are breached. Similarly, two major midwestern floods in the span of 15 years (one in 1993 and one in 2008) have raised concerns about structures' ability to reduce or avoid flood damages and their effects on development patterns. The 110th Congress addressed some flood issues in the first omnibus Water Resources Development Act (WRDA) enacted after Hurricane Katrina—WRDA 2007 (P.L. 110-114). For example, WRDA 2007 requires that national water resources planning avoid the unwise use of floodplains and flood-prone areas, and requires the President to report by 2010 on national vulnerability to flood damages, including the risk to human life. This report is to include assessments of current programs and recommendations for improvements. The law also creates a Committee on Levee Safety to make recommendations for a national levee safety program. How these changes are implemented over the next few years may affect the nature of federal investment in flood and storm damage infrastructure and mitigation measures. This report provides a primer on responsibilities for flood management, describes the role of federal agencies, and discusses flood issues before the 110th Congress. The report also discusses the legislative response to Hurricane Katrina.

Network-Centric Warfare Network-centric warfare (NCW), also known as network-centric operations (NCO), is a key element of defense transformation. NCW focuses on using computers, high-speed data links, and networking software to link military personnel, platforms, and formations into highly integrated local and wide-area networks. Within these networks, personnel are to share large amounts of information on a rapid and continuous basis. The Department of Defense (DOD) and the Navy view NCW as a key element of defense transformation that will dramatically improve combat capability and efficiency. Examples of Navy NCW Programs CEC And NIFC-CA The Cooperative Engagement Capability (CEC) system links Navy ships and aircraft operating in a particular area into a single, integrated air-defense network in which radar data collected by each platform is transmitted on a real-time (i.e., instantaneous) basis to the other units in the network. Units in the network share a common, composite, real-time air-defense picture. CEC will permit a ship to shoot air-defense missiles at incoming anti-ship missiles that the ship itself cannot see, using radar targeting data gathered by other units in the network. It will also permit air-defense missiles fired by one ship to be guided by other ships or aircraft. The Navy wants to install the system on aircraft carriers, Aegis-equipped cruisers and destroyers, selected amphibious ships, and E-2C Hawkeye carrier-based airborne early warning aircraft over the next several years. The system has potential for being extended to include Army and Air Force systems. Tests of CEC aboard Navy ships in 1998 revealed significant interoperability (i.e., compatibility) problems between CEC's software and the software of the air-defense systems on some ships. In response, the Navy undertook a major effort to identify, understand, and fix the problems. The CEC system, with the new fixes, passed its technical evaluation (TECHEVAL) testing in February and March 2001 and final operational evaluation (OPEVAL) testing in April and May 2001. In 2002, the primary CEC contractor, Raytheon, faced potential competition from two firms—Lockheed and a small firm called Solipsys—for developing the next version of CEC, called CEC Block II. Solipsys had devised an alternative technical approach to CEC, called the Tactical Component Network (TCN). Solipsys entered into a teaming arrangement with Lockheed to offer TCN to the Navy as the technical approach for Block II. In late-December 2002, Raytheon announced that it had agreed to purchase Solipsys. In early-February 2003, Raytheon and Lockheed announced that they had formed a team to compete for the development of Block II. Some observers expressed concern that these developments would reduce the Navy's ability to use competition in its acquisition strategy for Block II. As an apparent means of preserving competition, the Navy in mid-2003 announced that it would incorporate open-architecture standards into Block II divide the Block II development effort into a series of smaller contracts for which various firms might be able to submit bids. In December 2003, however, the Navy canceled plans for developing Block II in favor of a new plan for developing a joint-service successor to Block I. The conference report ( H.Rept. 108-283 , page 290) on the FY2004 defense appropriations act ( H.R. 2658 / P.L. 108-87 ) directed the Navy to keep the Appropriations committees informed on potential changes to the CEC Block II acquisition strategy and stated that, if the Navy adopts a new acquisition strategy, "the additional funds provided in this act for CEC Block 2 may be merged with and be available for purposes similar to the purposes for which appropriated." The House and Senate Armed Services Committees, in their reports ( H.Rept. 109-89 , page 178, and S.Rept. 109-69 , pages 108-109, respectively) on the FY2006 defense authorization bill ( H.R. 1815 / S. 1042 ), expressed satisfaction with the Navy's efforts to improve interoperability between the CEC system and other combat direction systems and ended a requirement established in the conference report ( H.Rept. 105-736 ) on the FY1999 defense authorization act ( P.L. 105-261 ) for the Navy to report to Congress on these efforts on a quarterly basis. The Naval Integrated Fire Control-Counter Air (NIFC-CA) system is to combine the CEC system with the E-2D Advanced Hawkeye carrier-based airborne radar and control system (AWACS) aircraft and the SM-6 version of the ship-based Standard air defense missile (both now in development) to expand the Navy's networked air-defense capabilities out to the full range of the SM-6 missile. Among other things, NIFC-CA will enable Navy forces at sea to provide overland defense against enemy cruise missiles. Current Navy plans call for NIFC-CA to be partially deployed in FY2011 and fully deployed in 2014. IT-21 IT-21, which stands for Information Technology for the 21 st Century, is the Navy's investment strategy for procuring the desktop computers, data links, and networking software needed to establish an intranet for transmitting tactical and administrative data within and between Navy ships. The IT-21 network uses commercial, off-the-shelf (COTS) desktop computers and networking software that provide a multimedia organizational intranet. The Navy believes IT-21 will improve U.S. naval warfighting capability and achieve substantial cost reductions by significantly reducing the time and number of people required to carry out various tactical and administrative functions. FY2008 funding requested for IT-21 "continues to provide Integrated Shipboard Network Systems (Increment 1) procurement and installation to achieve a Full Operational Capability (FOC) for all platforms by FY2011." FORCEnet FORCEnet is the Navy's overall approach for linking various networks that contribute to naval NCW into a single capstone information network for U.S. naval forces. The Navy has highlighted FORCEnet as being at the center of Sea Power 21, the Navy's vision statement for the future. The Navy states that "Undersea FORCEnet Satellite Communications (SATCOM) FY2008 funding provides the Internet Protocol (IP) connectivity between Anti-Submarine Warfare (ASW) platforms to conduct collaborative ASW. Connecting the platforms for collaborative ASW enables sharing of time critical queuing, classification, and targeting data, provides a means for precluding blue-on-blue engagement, and ensures rapid positioning of ASW platforms into the best attack posture to prosecute the threat submarine." Some observers have criticized FORCEnet for being insufficiently defined. The Naval Network Warfare Command issued a functional concept document for FORCEnet in February 2005, but Navy officials acknowledged at the time that the concept was not yet adequately defined and stated that an improved version of the document would be published in 2006. The conference report ( H.Rept. 107-732 ) on the FY2003 defense appropriations bill ( H.R. 5010 / P.L. 107-248 ) expressed concern about "the lack of specificity and documentation on the program," and directed the Navy to submit a detailed report on it by May 1, 2003 (page 279). The Senate Appropriations Committee, in its report ( S.Rept. 108-87 , page 156) on the FY2004 defense appropriations bill ( S. 1382 ), expressed support for the FORCEnet program but also said it "is concerned that no requirements have been approved or implemented and that there is duplication of effort, especially in the areas of experimentation and demonstrations. The Committee directs that the FORCEnet program establish these requirements, test them within the Navy Warfighting Experimentations and Demonstrations line (PE0603758N), and release the approved requirements changes as quickly as possible." NMCI A significant program related to NCW is the Navy-Marine Corps Intranet (NMCI), which is a corporate-style intranet linking more than 300 Navy and Marine Corps shore installations. NMCI is to include a total 344,000 computer work stations, or "seats." As of January 2006, the Navy had ordered 341,000 seats and fully implemented about 264,000. The Navy planned to achieve steady-state operation of all NMCI seats during FY2007. In October 2000, the Navy awarded an industry team led by Electronic Data Systems (EDS) Corporation an $6.9-billion, five-year contract for installing, supporting, and periodically upgrading the NMCI. In October 2002, Congress, through P.L. 107-254 , authorized a two-year extension to this contract, which is now worth $8.9 billion. Congress has closely followed the program for several years. The NMCI implementation effort has experienced a number of challenges and delays. A 2005 report from DOD's weapons-testing office identified problems found with the program in 2003. On September 30, 2004, the Navy and EDS restructured the terms of the NMCI contract to consolidate the number of performance measures and focus on measuring results rather than implementation steps. User reaction to the system reportedly has been mixed. A December 2006 Government Accountability office (GAO) report on NMCI stated: NMCI has not met its two strategic goals—to provide information superiority and to foster innovation via interoperability and shared services. Navy developed a performance plan in 2000 to measure and report progress towards these goals, but did not implement it because the program was more focused on deploying seats and measuring contractor performance against contractually specified incentives than determining whether the strategic mission outcomes used to justify the program were met. GAO's analysis of available performance data, however, showed that the Navy had met only 3 of 20 performance targets (15 percent) associated with the program's goals and nine related performance categories. By not implementing its performance plan, the Navy has invested, and risks continuing to invest heavily, in a program that is not subject to effective performance management and has yet to produce expected results. GAO's analysis also showed that the contractor's satisfaction of NMCI service level agreements (contractually specified performance expectations) has been mixed. Since September 2004, while a significant percentage of agreements have been met for all types of seats, others have not consistently been met, and still others have generally not been met. Navy measurement of agreement satisfaction shows that performance needed to receive contractual incentive payments for the most recent 5-month period was attained for about 55 to 59 percent of all eligible seats, which represents a significant drop from the previous 9-month period. GAO's analysis and the Navy's measurement of agreement satisfaction illustrate the need for effective performance management, to include examining agreement satisfaction from multiple perspectives to target needed corrective actions and program changes. GAO analysis further showed that NMCI's three customer groups (end users, commanders, and network operators) vary in their satisfaction with the program. More specifically, end user satisfaction surveys indicated that the percent of end users that met the Navy's definition of a satisfied user has remained consistently below the target of 85 percent (latest survey results categorize 74 percent as satisfied). Given that the Navy's definition of the term "satisfied" includes many marginally satisfied and arguably somewhat dissatisfied users, this percentage represents the best case depiction of end user satisfaction. Survey responses from the other two customer groups show that both were not satisfied. GAO interviews with customers at shipyards and air depots also revealed dissatisfaction with NMCI. Without satisfied customers, the Navy will be challenged in meeting program goals. To improve customer satisfaction, the Navy identified various initiatives that it described as completed, under way, or planned. However, the initiatives are not being guided by a documented plan(s), thus limiting their potential effectiveness. This means that after investing about 6 years and $3.7 billion, NMCI has yet to meet expectations, and whether it will is still unclear. Department of Defense officials conceded problems with the implementation of NMCI at a March 28, 2007, hearing before the Terrorism and Unconventional Threats and Capabilities subcommittee of the House Armed Services Committee. Issues for Congress Potential issues for Congress include the following: Is the Navy's implementation of NMCI adequate? To what degree is the system achieving its goals? Does the Navy have a clear and adequate acquisition strategy for developing a successor to CEC Block I? Is the FORCEnet concept adequately defined? Is the Navy taking sufficient actions for preventing, detecting, and responding to attacks on NCW computer networks? Is the Navy taking sufficient steps to provide adequate satellite bandwidth capacity to support NCW? Are Navy efforts to develop new tactics, doctrine, and organizations to take full advantage of NCW sufficient? Has the Navy taken the concept of NCW adequately into account in planning its future fleet architecture? What effect will implementation of NCW in U.S. and allied navies have on U.S.-allied naval interoperability?

Programs for implementing network-centric warfare (NCW) in the Navy include the Cooperative Engagement Capability (CEC) and Naval Integrated Fire Control-Counter Air (NIFC-CA) systems, the IT-21 program, and FORCEnet. A related program is the Navy-Marine Corps Intranet (NMCI). Congress has expressed concern for some of these programs, particularly NMCI. This report will be updated as events warrant.

Introduction The deregulation of the airline industry in the United States in 1978 eliminated governmental control over most business practices of airlines. However, the federal government continues to regulate certain practices for the protection of the airlines' customers, in addition to its long-standing role in overseeing air safety. Congressional interest in the rights of airline passengers became intense between 2007 and 2009, when a series of delays stranded passengers aboard airplanes at U.S. airports for 10 hours or longer. Since then, Congress has strengthened passengers' rights under federal law, and many Members of Congress have continued to follow aviation consumer issues closely. This report examines aviation consumer protections in the post-deregulation era. It explains the roles of Congress and the U.S. Department of Transportation (DOT) in protecting airline consumers, and discusses some major passenger rights issues and related laws and regulations. Three Levels of Airline Passenger Protection The rights of domestic airline passengers are set forth at three different levels: in federal laws, in regulations, and in the airlines' own policies. Congress, under its constitutional power to "regulate Commerce with foreign Nations, and among the several States," has authority over airline passengers' rights. State and local governments are generally preempted by law from regulating "price, route, or service of an air carrier." The Role of Congress By and large, the rights of airline passengers are defined by Congress. Congress determines the extent to which airline consumer rights are codified in law, authorizes federal agencies to enforce those rights, and directs or authorizes federal agencies to define and enforce passenger rights that are not specifically enumerated in legislation. The House Committee on Transportation and Infrastructure and the Senate Committee on Commerce, Science, and Transportation are the primary congressional committees of jurisdiction, and exercise routine oversight over DOT, the principal department responsible for executing and enforcing airline passenger rights laws. In many cases, Members of Congress become aware of passenger rights issues by receiving complaints from constituents, and congressional office staff members are often called upon to advise constituents about their rights as air passengers, to provide guidance on filing complaints with DOT, and to communicate with DOT about constituent concerns. The controversy surrounding tarmac delays illustrates the ways in which Congress exercises its oversight authority. Between 2007 and 2009, hundreds of incidents occurred in which passengers were held aboard planes that had either departed airport gates but were not allowed to take off or had landed but were not allowed to disembark passengers. These incidents were extensively reported in the news media, and congressional offices received numerous complaints from constituents who had been aboard planes that were unable to provide passengers with drinking water or on which lavatories stopped functioning. Congressional hearings ensued in 2009. In the wake of this attention, DOT issued rules on tarmac delays in 2010. Language on this subject, providing a firmer statutory footing for the federal rules that had already entered into effect, was incorporated into the FAA Modernization and Reform Act of 2012 ( P.L. 112-95 ). The 2016 FAA reauthorization incorporated language that defined excessive tarmac delays, but also altered how the tarmac delay threshold is measured, which could afford airlines more leeway in dealing with delayed flights. Some Members of Congress also have expressed concern about issues related to flight schedules, aircraft capacity, and frequency of service. Although these matters are no longer subject to federal regulation, they are often raised in the context of business dealings between air carriers that do require federal approval, such as mergers and code-share arrangements. For example, the proposed merger between American Airlines and US Airways led to objections that the combination would reduce competition and limit consumer choices. These concerns were expressed by some Members of Congress and witnesses during congressional hearings in February and March 2013, before completion of the merger in December 2013 and the final court approval of a settlement between the airlines and the U.S. Department of Justice Antitrust Division was granted in April 2014. The Role of the U.S. Department of Transportation (DOT) DOT Regulatory Authority DOT is responsible for executing and enforcing airline consumer rights laws established by Congress. It may also develop regulations based on more general statutory authority, giving it broad powers to prescribe regulations, standards, and procedures related to air travel. More specifically, DOT has authority "under 49 U.S.C. Section 41712, in concert with 49 U.S.C. Sections 40101(a)(4), 40101(a)(9), and 41702 to protect consumers from unfair or deceptive practices and to ensure safe and adequate service in air transportation." DOT's authority in this area is exercised by the Office of the Secretary, not by the Federal Aviation Administration (FAA), which is responsible for aviation safety. DOT does not have authority over matters related to aviation security and airport security screening, which are administered by the Transportation Security Administration (TSA), an agency of the Department of Homeland Security. DOT's statutory authority is generally used as the basis for rulemaking. Occasionally, it is also used in direct enforcement actions. Most of DOT's consumer rules are based on the "unfair or deceptive practices" provision, with a few based on the "ensure safe and adequate service" provision. The definition and interpretation of the phrase "unfair or deceptive practices" can significantly affect the scope of DOT's rulemaking and enforcement authorities. Separately, DOT enforces regulations to ensure that individuals with disabilities have nondiscriminatory access to the air transportation system, and that airlines do not subject passengers to unlawful discrimination on the basis of race, gender, religion, or national origin. The DOT Aviation Consumer Protection Division's booklet Fly-Rights: A Consumer Guide to Air Travel is published online. It covers a wide array of topics, from flight delays and cancellations to travel scams. It also provides information about DOT rules on consumer complaints. DOT Enforcement Authority The Office of the Assistant General Counsel for Aviation Enforcement and Proceedings in DOT (OAEP), including its Aviation Consumer Protection Division, monitors airline compliance, investigates reported violations of DOT regulations, and enforces rules and regulations. It may negotiate consent orders with air carriers and fine violators. In 2015, DOT issued 15 consent orders related to aviation consumer rule violations and assessed $2,435,000 in civil penalties. OAEP considers a number of factors in determining the civil penalty it would seek in an enforcement proceeding, such as the harm caused by the violations, the alleged violator's compliance disposition, the alleged violator's financial condition and ability to pay, how long the violations continued, and the strength of the case . Currently, air carriers are subject to a maximum civil penalty of $32,140 per violation, under 49 U.S.C. §46301 and 14 C.F.R. §383. Small businesses or individuals are subject to a maximum penalty of $1,414. Notwithstanding this limit, small businesses and individuals are subject to higher maximum penalties for discrimination ($12,856 per violation) and for engaging in unfair or deceptive practices ($3,214 per violation). OAEP may look into possible violations based on complaints from individuals, groups, other government agencies, or its own staff members' observations and research. Usually, its first action is to send a letter to the air carrier, setting forth the complaint or issues involved and requesting a response. This gives the air carrier a chance to look into the matter and to resolve the complaint, deny the complaint, or provide an explanation. This may be the end of the process, but OAEP may issue a warning letter if it concludes violations occurred but were inadvertent or minor. If OAEP believes enforcement action is appropriate, it would seek a civil penalty and consent order. A consent order typically relates the facts of the case to law and regulation, sets forth the penalty the violator has agreed to pay, and incorporates language ordering the air carrier to cease and desist from further violations. If the air carrier refuses to settle, the case may go to an enforcement hearing before a DOT administrative law judge. DOT also may request injunctive relief from a federal district court, although this is unusual. Airline Deregulation and Contracts of Carriage The third source of airline passengers' rights is each air carrier's "Contract of Carriage," the legal agreement between an airline and its ticket holders. Contracts of carriage typically define the rights, duties, and liabilities of parties to the contract. For example, United Airlines' contract of carriage lists 30 rules, covering matters from reservations and ticketing to cancellation and refund policies to medical ground transfer services. Before the age of electronic tickets, contracts of carriage were usually evidenced by standard terms and conditions printed on the reverse of paper tickets. Now, they are often available for download via airlines' websites or at an airline's ticketing facilities. Passengers may take legal action in federal courts based on the contracts. Contracts of carriage replace the pre-deregulation-era-rules "tariffs" that were subject to approval by the Civil Aeronautics Board (CAB) . The CAB could take action against an air carrier that violated its approved tariffs. Since the economic deregulation of the domestic airline industry in 1978, the federal government no longer has control over airlines' prices or routes, and contracts of carriage are not subject to federal review or approval. However, a contract of carriage that conflicts with federal laws or regulations may not be enforceable by the airline. With respect to passenger rights, the deregulated environment differs from the former regulated environment in two major ways. First, under regulation, the CAB had authority to approve carriers' proposed fares and even to set fares itself. The airlines' profitability was protected by this price setting and by barriers to the entry of new competitors. Airlines, for the most part, competed on service and frequency rather than price. Since deregulation, and especially with the advent of low-cost carriers, the primary means of competition has become price, not service. In recent years airlines have "unbundled" their offerings, charging separately for services that once were included in the price of a ticket. Among these charges are fees for checked baggage, early/priority boarding, and seat change on a flight. Such ancillary fees have become major causes of consumer complaints. Second, because the CAB used a cost-plus basis for approving fares, airlines could afford to maintain a significant amount of extra capacity, which made it relatively simple for them to deal with problems arising from flight delays or cancellations. Carriers' treatment of passengers booked on delayed or canceled flights is now a major cause of complaints (see Text Box ). Major Passenger Air Service Provisions in 2016 FAA Reauthorization The FAA Extension, Safety, and Security Act of 2016 ( P.L. 114-190 ), signed into law on July 15, 2016, included a few provisions relating to passenger rights. Some of the passenger-rights provisions put forth during the debate over FAA reauthorization were not included in the final bill, as similar protections had meanwhile been implemented through the DOT rulemaking process. Relevant passenger-rights provisions of P.L. 114-190 are summarized below. Training Policies Regarding Assistance for Persons with Disabilities Section 2107 requires the Government Accountability Office to submit a report to Congress assessing air carrier personnel and contractor training programs regarding assistance to persons with disabilities, as well as reporting instances since 2005 in which DOT has requested an air carrier to take corrective action following a review of its training programs. Section 2107 also requires DOT to disseminate to air carriers such best practices as it deems necessary to improve the reviewed training programs. Air Travel Accessibility Section 2108 requires DOT, no later than one year from enactment of the law, to issue a supplemental notice of proposed rulemaking regarding accessibility-related matters such as pressurized oxygen in a tank, transport of service animals, and provision of accessible lavatories. Refunds for Delayed Baggage Section 2305 requires DOT to issue a final rule requiring domestic and foreign airlines to provide a refund of a checked-bag fee if a bag is delayed 12 hours or longer on a domestic flight or 15 hours on an international flight. The provision provides DOT latitude to expand the aforementioned window (up to 18 hours for domestic flights and up to 30 hours for international flights), if the Secretary decides that a shorter time frame is not feasible or would adversely affect consumers in certain cases. Tarmac Delays Section 2308 amends 49 U.S.C. §42301, which addresses airline tarmac delays. It specifies that "excessive tarmac delay" means a delay that lasts more than three hours for an interstate flight or more than four hours for an international flight. The section directs DOT to issue regulations to implement the statute. Language in Section 2308(a) alters how excessive tarmac delays are defined. Under existing DOT regulations (14 C.F.R. §259.4), excessive delay is measured from the time that passengers last have an opportunity to deplane, which could be well before an aircraft actually departs the gate, to the point at which the air carrier permits passengers to deplane in the event of delay. The statutory change requires that delay be measured from the time the main aircraft door is closed in preparation for departure to the point at which the air carrier "shall begin to return the aircraft to a suitable disembarkation point." Depending upon the length of time required to move the aircraft from its position during the delay to a disembarkation point such as a gate at the terminal, the actual amount of delay permitted before passengers are allowed to disembark may be significantly greater than under the previous regulations. In addition, the new legislation does not specify the maximum time an air carrier has to complete the deplaning of passengers after returning to a disembarkation point. This may require a change in the existing DOT rule, which simply requires that passengers be given the opportunity to deplane no later than the three-hour or four-hour point in a tarmac delay. Family Seating Section 2309 requires DOT to review and, if appropriate, to establish a policy directing airlines to establish policies that would enable a child who is age 13 or under to be seated adjacent to an accompanying family member over age 13 "to the maximum extent practicable" at no additional cost. This requirement would not apply when assignment to an adjacent seat would require an upgrade to another cabin class or a seat with extra legroom or seat pitch for which additional payment is normally required. Advisory Committee for Aviation Consumer Protection Section 1102(j) extends the Advisory Committee for Aviation Consumer Protection through FY2017. This advisory committee was established by the Secretary of Transportation in 2012, fulfilling the requirement in the 2012 FAA reauthorization to establish a four-member committee for aviation consumer protection to advise the Secretary in carrying out passenger service improvements. Consumer Complaints to DOT Despite the fact that the 15 largest U.S. airlines' on-time arrival rate was nearly 80% in calendar year 2015, flight delays and cancellations continue to be a prevalent passenger complaint to DOT. In 2015, there were about 6,433 such complaints in total, accounting for nearly 32% of all complaints. Mishandled baggage, problems with reservations, ticketing, and boarding, customer service, and refunds are also among the most frequent complaints (see Figure 1 ). While DOT continues to receive many complaints about mishandled baggage, improved tracking systems have helped U.S. air carriers reduce the proportion of bags that are lost or sent to the wrong destinations. In 2015, the U.S. carriers reported 4.04 mishandled bags per 1,000 passengers, which was among the lowest annual rates of mishandled baggage since DOT first collected data on the subject in 1987. DOT Regulatory Actions Airline flight delays and cancellations were addressed in a final rule issued in December 2009 by DOT, "Enhancing Airline Passenger Protections." The rule expanded on previous regulations to address tarmac delays and chronically delayed flights and to require greater information disclosure to consumers. While language in the FAA Extension, Safety, and Security Act of 2016 ( P.L. 114-190 ) alters how tarmac delays are measured, the rest of the tarmac delay rule is unaffected by the statutory change. The existing rule requires large U.S. carriers to provide assurance that they will not permit an aircraft to remain on the tarmac for more than three hours without providing passengers an opportunity to deplane. An air carrier's failure to comply subjects the carrier to civil penalties of up to $32,140 per passenger. This final rule contains the following mandates: Each air carrier is required to develop and implement a contingency plan for lengthy tarmac delays. Each contingency plan must include an assurance that, for domestic flights, the air carrier will not allow a tarmac delay to exceed three hours unless the pilot-in-command determines there is a safety-related or security-related impediment to deplaning passengers, or unless air traffic control has advised the pilot-in-command that deplaning would significantly disrupt airport operations. The plan must include assurance that adequate food and water will be provided within two hours after the aircraft leaves the gate, as well as assurance of operable lavatory facilities and adequate medical attention. For international flights, air carriers must commit to a set number of on-tarmac hours to be determined by air carrier and set forth in its plan. The tarmac delay rule took effect for domestic flights in April 2010. There has been a significant reduction in lengthy tarmac delays since the rule was published. In 2014, airlines reported the lowest number of tarmac delays longer than three hours on record—30 domestic flights with tarmac delays longer than three hours and 9 international flights with tarmac delays longer than four hours at U.S. airports. The rule issued in December 2009 also contained several other consumer protection provisions: Air carriers must display flight delay information for each domestic flight they operate on their websites and designate employees to monitor the impacts of flight delays and cancellations, respond to consumer complaints, and tell consumers where and how to file complaints. Air carriers are prohibited from applying changes to their contracts of carriage retroactively. Under the rule, any chronically delayed flight scheduled by an air carrier is considered an unfair and deceptive practice and an unfair method of competition within the meaning of 40 U.S.C. §41712. On April 25, 2011, DOT issued a further rulemaking to strengthen the rights of air travelers in the event of oversales, flight cancellations, and delays; to ensure consumers have accurate and adequate information when selecting flights; and to improve responsiveness to customer complaints. These rules, fully effective January 26, 2012, include the following: Baggage fees must be reimbursed for lost bags; Additional fees must be prominently disclosed on airline websites; and The ban on excessive tarmac delay is expanded to foreign airlines' operations at U.S. airports, with a four-hour limit on international flights. Ongoing Airline Passenger Consumer Issues Code-Share Agreements27 Over the past few decades, large U.S. carriers (also known as mainline carriers) have increasingly moved to joint marketing agreements, known as "code-share agreements." In domestic code-share agreements, mainline carriers, such as Delta and American Airlines, purchase seat capacity from regional airlines or contract for the services of regional carriers to fly passengers to their hub airports. Such agreements often allow a regional carrier to (1) use the mainline carrier's airline designator code to identify flights and fares in computer reservation systems; (2) use the mainline carrier's brand—for example, logos and uniforms; and (3) participate in joint promotion and advertising activities. It is also common for major U.S. carriers to establish international alliances with foreign carriers, which almost always include a code-share component, although in international code-share agreements there is no distinctive large or mainline carrier. The DOT code-share disclosure rule (14 C.F.R. §257) applies equally to domestic and international air transportation to and from the United States. It requires that U.S. airlines and foreign air carriers that participate in code-share agreements or long-term "wet leases" tell consumers clearly when the air transportation involves such an agreement, and that they disclose the transporting carrier's identity. DOT does not review most domestic code-share agreements, but does require ticket sellers to disclose which airline is operating the flight prior to booking to ensure consumer transparency. However, some confusion still appears to exist among passengers because airlines, travel agencies, and advertisers may disclose this information differently. In some cases, the name of the operating carrier may not be displayed prominently. Also, some regional carriers have code-share agreements with multiple mainline carriers and use different "doing business as" names when operating on different domestic routes. Oversale/Overbooking32 Most airlines overbook their scheduled flights to a certain degree to compensate for "no-shows." Such oversale or overbooking is not illegal. When a flight is oversold, DOT requires airlines to ask passengers to give up their seats voluntarily (voluntary bumping), in exchange for compensation, before bumping anyone involuntarily. A DOT rule (14 C.F.R. §250) requires airlines to properly inform and compensate passengers who are bumped involuntarily. Air carriers are required to establish and disclose boarding priority rules and criteria for determining which passengers shall be denied boarding on an oversold flight. Boarding priority criteria may include factors such as a passenger's time of check-in, the fare paid, and passenger's frequent flyer status. In April 2011, DOT issued an amended final rule to address issues regarding denied boarding or involuntary bumping compensation, especially inadequate denied boarding compensation to passengers. The amendment increased denied boarding compensation rates and dollar limits, with dollar limits subject to inflation-related adjustment every two years. When a passenger is bumped involuntarily and the airline arranges substitute transportation that is scheduled to reach the passenger's final destination within one hour of the original arrival time, no compensation is required. However, if the scheduled arrival time via substitute transportation is more than one hour later than the original arrival time, the following rules apply: If the substitute domestic transportation arranged by the airlines is scheduled to arrive between one and two hours later than the original arrival time, the airline must pay the passenger an amount equal to 200% of the one-way fare (including all taxes and mandatory fees), with a $675 maximum, effective August 25, 2015. On international flights departing the United States, this limit applies when a bumped passenger is delayed up to four hours. If the substitute transportation is scheduled to arrive more than two hours later on domestic flights (four hours on international flights), or if the airline does not make any substitute transportation arrangements for the passenger, the compensation doubles to 400% of the one-way fare, with a $1,350 maximum, effective August 25, 2015. An air carrier must refund any unused ancillary fees for optional services paid by a passenger if he or she was denied boarding, voluntarily or involuntarily. Ancillary Fees and Disclosure of Full Fares37 Many U.S. air carriers have held down ticket prices by advertising cheap base airfares and adding separate optional fees for services that traditionally have been included in the price of a ticket. These ancillary charges, including checked baggage fees, reservation cancellation or change fees, seat selection fees, priority boarding fees, and charges for in-flight meals, are generating considerable revenue. In 2015, the U.S. passenger airline industry collected more than $3.8 billion in baggage fees and over $3 billion in reservation cancellation/change fees. In order to make it easier for consumers to know how much they will have to pay for airline transportation and to ensure that airlines' fee-related practices are fair and transparent, the DOT rule issued in 2011 requires that an airline's most prominently advertised airfare must be the full cost of the ticket, with government taxes, mandatory fees, and optional surcharges included. For both domestic and international markets, carriers must disclose the full price to be paid, including government taxes and fees and any carrier surcharges, in their advertising, on their websites, and on the passenger's e-ticket confirmation. In addition, carriers must disclose all fees for optional services through a prominent link on their home pages, and must include information on e-ticket confirmations about the free baggage allowance and applicable fees for the first and second checked bags and carry-on bags. Airlines must refund charges for lost bags. Spirit Airlines, Allegiant Air, and Southwest Airlines challenged in federal court that portion of DOT's April 2011 rule that requires airlines and ticket agents to most prominently display the total cost of a ticket, including taxes, when advertising airfares. In July 2012, the U.S. Court of Appeals for the Washington, DC, circuit rejected the airlines' contention that the rule violates their rights to engage in commercial and political speech and is an effort by the government to conceal taxes in airfares. The airlines subsequently appealed to the U.S. Supreme Court, which, on April 1, 2013, refused to consider their challenge and left the rule intact. On July 28, 2014, the House of Representatives passed the Transparent Airfares Act of 2014 ( H.R. 4156 , 113 th Congress) by a voice vote. The bill would have allowed airlines' advertisements and websites to give greatest prominence to "base airfare," as long as they "clearly and separately" disclose government taxes and fees and the total cost of air transportation. While the bill would have enabled airlines to call greater attention to the many government taxes and fees on passenger aviation, it could have made price comparisons more difficult, as some advertisements or websites might have displayed the "base airfare" most prominently while others might have advertised the after-tax price. The Senate did not act on the legislation. The FAA Extension, Safety, and Security Act of 2016 ( P.L. 114-190 ), signed into law on July 15, 2016, did not address disclosure of ancillary fees.

The 1978 deregulation of the airline industry in the United States eliminated federal control over many airline business practices, including pricing and domestic route selection. However, the federal government continues to legislate and enforce certain consumer protections for airline passengers. Congress largely determines the degree to which the rights of airline passengers are codified in law or developed through regulatory rulemaking. The House Committee on Transportation and Infrastructure and the Senate Committee on Commerce, Science, and Transportation are the primary congressional committees of jurisdiction over airline passenger rights. Congress can authorize or require the U.S. Department of Transportation (DOT) to enact rules on certain issues, and it can enact requirements for airlines through direct legislation. In specific cases, DOT may take enforcement actions against air carriers that violate consumer protection rules. Most of DOT's consumer rules are based on 49 U.S.C. §41712, which directs it to "protect consumers from unfair or deceptive practices." Some are based on DOT's authority to require air carriers in interstate transportation to provide "safe and adequate service" (49 U.S.C. §41702). The interpretation of the phrase "unfair or deceptive" can significantly affect the scope of DOT's enforcement authority. In December 2009, DOT issued a comprehensive final rule, "Enhancing Airline Passenger Protections," that expanded regulatory protections for aviation consumers. The rule established procedures related to extended ground delays involving aircraft with passengers aboard, required air carriers to address chronically delayed flights, and mandated more information disclosure to consumers. In April 2011, DOT completed a further rulemaking that strengthened the rights of air travelers in the event of oversales, flight cancellations, and delays. The rule also required consumer access to accurate and adequate information when selecting flights, and improvements in agency responsiveness to customer complaints. A key provision of the 2011 rules, requiring airlines to prominently disclose to the consumer the total cost of a flight, including all government and airline taxes and fees, was upheld in the federal courts. The FAA Extension, Safety, and Security Act of 2016 (P.L. 114-190), signed into law by the President on July 15, 2016, included a few provisions regarding the rights of airline passengers and created a firmer statutory basis for certain rules already adopted by DOT. However, the legislation did not address a number of consumer-related subjects, including disclosure of code-share arrangements on domestic flights, compensation of passengers "bumped" from oversold flights, and disclosure of ancillary fees. Proposals to overturn a DOT policy requiring that airline and travel websites give most prominent display to the total cost of a flight, including taxes and fees, were not included in the act. Such action would have allowed airlines to advertise base airfares, even though consumers would not be able to purchase transportation at those prices.

Introduction Interest in the fuel efficiency of automobiles and trucks has waxed and waned over more than three decades as oil and gasoline prices have risen and fallen. However, in recent years, as oil prices have spiked to historic levels, and concerns over greenhouse gas emissions and climate change have grown, there has been a resurgence in interest in the fuel economy and emissions of motor vehicles in the United States. Proponents of higher vehicle fuel efficiency standards argue that they create incentives for the development of new technologies that will help reduce dependence on imported oil and better enable the United States to use scarce resources and limit greenhouse gas emissions—technologies that would not be developed in the absence of that "technology push." Critics argue that efficiency standards distort the market for new vehicles, compromising consumer choice, and that other policy mechanisms (e.g., higher fuel taxes) would be more effective at reducing petroleum consumption and emissions. The most recent federal legislation on fuel efficiency was the Energy Independence and Security Act of 2007 (EISA), which requires the National Highway Traffic Safety Administration (NHTSA) to increase combined passenger car and light truck fuel economy standards to at least 35 miles per gallon (mpg) by 2020, up from roughly 26.6 mpg in 2007. Along with requiring higher passenger vehicle standards, EISA dramatically changed the structure of the passenger vehicle fuel economy program. It also directed DOT to study improvements in heavy-duty vehicles and, if feasible, issue standards for those vehicles as well. In the same year, the Supreme Court found that the Environmental Protection Agency (EPA) has the authority to regulate vehicle greenhouse gas (GHG) emissions under the Clean Air Act. These two actions at the federal level have significantly changed how motor vehicles are regulated at the federal level. Fuel consumption and greenhouse gas (GHG) emissions from motor vehicles are closely linked. The vast majority of vehicle GHG emissions result from the burning of petroleum products, so reducing vehicle fuel consumption is the most direct means of reducing emissions. For these reasons, the Obama Administration has issued joint rules on vehicle fuel economy and GHG emissions for model year (MY) 2012-2016 passenger cars and light trucks, MY2014-MY2018 medium- and heavy-duty trucks, and MY2017-MY2025 passenger cars and light trucks. The Administration intends the passenger vehicle standards to be harmonized with standards issued by the state of California under the Clean Air Act. Passenger Vehicle Standards for MY2017-MY2025 On August 28, 2012, the Obama Administration issued final rules to tighten passenger vehicle fuel economy and greenhouse gas (GHG) standards for MY2017-2025. (See Table 1 .) In a similar process to the landmark agreement that led to new fuel economy and greenhouse gas standards for MY2012-MY2016, the Administration has secured commitment letters from the state of California and from 13 automakers. Many stakeholders were concerned about a potential "patchwork" of different federal and state standards if EPA, NHTSA, and California were to establish different standards at the intersection of fuel economy and GHG emissions. (See discussion below on " Different Statutes Govern Fuel Efficiency .") Two key parts of the agreement are that California will treat any vehicle meeting the new federal GHG standards as meeting California standards, and that the automakers agree to not challenge the new standards in court. The Administration expects that consumers' fuel savings from the new standards will more than offset the additional cost of the new technology for these vehicles, which could be thousands of dollars per vehicle. EPA and NHTSA expect that the new standards will save roughly 4 billion barrels of oil and 2 billion metric tons of greenhouse gases over the life of the vehicles covered under the new standards. Critics have challenged the Administration's assumptions, countering that the costs will be higher and could lead to a drop in new vehicle sales. Different Statutes Govern Fuel Efficiency Federal Authorities Federal authorities to regulate vehicle fuel economy and GHGs arise from very different statutes. The Energy Policy and Conservation Act of 1975 (EPCA) requires NHTSA to set Corporate Average Fuel Economy (CAFE) standards for passenger cars and light trucks. Amendments in EISA direct NHTSA to tighten passenger vehicle CAFE standards and set efficiency standards for medium- and heavy-duty trucks as well. EPCA does not provide statutory authority to regulate GHG. Vehicle GHG standards are administered by EPA through its authority under the Clean Air Act and subsequent amendments —authority affirmed by the previously mentioned Supreme Court decision. These two statutes differ in several ways, including: the authority they grant the agencies; the lead-time required to implement regulations; the time span of those regulations; standards for vehicle testing; requirements for cost-benefit analysis; and provisions for fines or penalties. Thus, although the agencies have acted to integrate the standards, there are key differences between the standards. Most notably, the "miles-per-gallon" targets under the rules that have received the most attention in the new (MY2017 and later) rule are not, in fact, the CAFE standards. The oft-cited "standard" of 54.5 mpg in MY2025 for the rule is a proxy for the actual GHG standard of 163 grams per mile (g/mi) of carbon dioxide (CO 2 ) equivalent. As the vast majority of vehicle GHG emissions come from fuel combustion, the primary means for achieving the standards will be through fuel economy increases. The 54.5 mpg "standard" assumes that all of the reductions in GHG emissions come from fuel savings. In actuality, some of the most cost-effective emissions reductions come through other means not reflected in the CAFE test, such as improvements in vehicle air conditioning systems. If finalized, the expected CAFE standard for MY2025 is lower, 49.7 mpg, although that number is still significantly higher than current standards or what is required for MY2016. Another key difference between EPA and NHTSA's authority is that NHTSA is limited by statute and may only issue rules covering five model years or fewer. Thus, while the final GHG rule extends through MY2025, the CAFE rule only extends through MY2021. For MY2022 and later, NHTSA has published "conditional standards," but will need to complete a separate rulemaking for those years, a process that had not been started as of September 2012. Because of this difference, and because of the long time frame for the GHG rule, the agencies plan a "comprehensive mid-term evaluation" to assess the progress of the program, revisit cost-benefit analyses, and propose new CAFE standards. The inclusion of the mid-term evaluation was a key demand made by the automakers in the commitment letters they signed in support of the proposal. As noted in the BMW Group's letter: BMW Group believes that the robust and comprehensive mid-term evaluation described by EPA and NHTSA in the July 2011 Supplemental Notice of Intent is critical, given BMW Group's view of the uncertainty associated with the model years 2022-2025 standards. Although BMW Group may not have full knowledge about the evolution and cost of technologies necessary to meet these standards, particularly in 2022-2025, the mid-term evaluation provides a basis for BMW Group's support for adoption of standards for model years that far into the future. Nearly identical language is contained in the other automakers' letters, including letters from the Detroit 3. State Regulations EPCA explicitly preempts states from setting their own fuel economy standards. Under the Clean Air Act, states are also generally preempted from setting their own vehicle emissions standards with one key exception: California may establish its own vehicle emissions standards if EPA determines that the standards are necessary and if they are at least as stringent as any federal standards. For California to set new emissions standards, the state must first secure a waiver by EPA from the Clean Air Act preemption (§209). Once a waiver is granted to California, other states may adopt the California standards. This exception from state preemption was originally enacted because California had particularly troublesome pollution problems and had state vehicle emissions standards before there were federal standards. Two key provisions of the agreement between the Administration, the automakers, and California are that EPA will grant California the waiver for MY2017-MY2025, and that California will accept vehicles complying with the federal greenhouse standards as meeting the California standards. Structure and Design of the CAFE/GHG System Size-Based Standards In addition to requiring NHTSA to increase CAFE standards to at least 35 mpg by 2020, EISA also made major changes to NHTSA's authority to establish the structure and rules for the CAFE program. Before EISA, passenger car standards were based on a "straight-line" average of 27.5 mpg. In general, for each model year, every automaker needed to achieve a sales-weighted average of 27.5 mpg for all of its cars, regardless of vehicle attributes, or face penalties. Because smaller and lighter vehicles typically consume less fuel, the CAFE program thus provided an incentive for automakers to downsize their vehicles. Larger vehicles tend to offer greater passenger protection in accidents, however. Larger vehicles also tend to be heavier, so a fuel economy program structure that does not factor vehicle size into the setting of CAFE standards could promote the use of smaller, less safe vehicles. A corollary and further criticism of the program was that it favored producers of smaller vehicles that would tend to have higher fuel economy, generally non-U.S. manufacturers. Whereas the inflexible passenger car CAFE system was set in statute, that same statute provided NHTSA with much broader authority to set CAFE standards for other vehicle classes, such as light trucks. Under an MY2011 rule for light trucks finalized by the Bush Administration, for the first time, fuel economy targets varied with vehicle size, with smaller vehicles expected to achieve higher fuel economy than larger vehicles. Under the new system, each vehicle is assigned a fuel economy "target" based on its footprint, which is the product of a vehicle's track width (the horizontal distance between the tires) and its wheelbase (the distance from the front to the rear axles). The sales-weighted average of the targets for a manufacturer's fleet is the CAFE average that the manufacturer must achieve in a given model year. In this way, no specific vehicle is required to meet a specific fuel economy, and the average fuel economy required will vary from manufacturer to manufacturer. In amending the CAFE program through EISA, Congress required NHTSA to set new standards "based on 1 or more vehicle attributes related to fuel economy … in the form of a mathematical function." For each model year, NHTSA establishes these functions separately for cars and light trucks based on size ( Figure 1 ). In harmonizing the CAFE and GHG standards, EPA adopted NHTSA's size-based curves. For each model year EPA has also established similar compliance functions. The size-based standards make for a much more complicated regulatory system than the previous one, but arguably provide less incentive to comply with the regulations by simply making vehicles smaller. Benefits and Costs of the Rules EPA estimates that the GHG rules will raise the average price of a new MY2025 vehicle by roughly $1,800 compared to MY2016, but that annual fuel savings lead to a payback period of just over three years: Fuel savings for consumers are expected to more than offset the higher vehicle costs. The typical driver will save a total of $5,700 to $7,400 (7 percent and 3 percent discount rate, respectively) in fuel costs over the lifetime of a MY 2025 vehicle and, even after accounting for the higher vehicle cost, consumers will save a net $3,400 to $5,000 (7 percent and 3 percent discount rate, respectively) over the vehicle's lifetime. This estimate assumes a gasoline price of $3.87 per gallon in 2025 with small increases most years over the vehicle's lifetime. Further, the payback period for a consumer purchasing a 2025 light-duty vehicle with cash would be, on average, 3.4 years at a 7 percent discount rate or 3.2 years at a 3 percent discount rate, while consumers who buy with a 5-year loan would save more each month on fuel than the increased amount they will spend on the higher monthly loan payment, beginning in the first month of ownership. [EPA footnotes omitted] Whether or not the Obama Administration has understated the costs, as some have asserted, EPA and NHTSA argue that the benefits of the program will far outweigh the costs. For example, EPA estimates the total costs of the program to automakers and vehicle buyers at roughly $148 billion to $156 billion, while the benefits are roughly $510 billion to $639 billion over the life of the vehicles covered by the rule, depending on various factors, especially the discount rate. The vast majority (roughly 80%) of these benefits are expected to come through fuel savings, and thus reduced expenditures on fuel. Compliance and Vehicle Cost Factors The costs of compliance will be different for each manufacturer, depending on the vehicles they produce. Under the size-based standards, an advantage of one automaker over another is not based on the automaker's overall fuel economy, but on the rated fuel economy relative to the size of the vehicle. For example, an automaker with smaller vehicles may not be compliant with the standards while an automaker with larger vehicles may be, even if the smaller vehicles actually have higher fuel economy. Compliance, and thus costs, are based on how each vehicle performs relative to the CAFE and GHG "curves" shown in Figure 1 . In its regulatory impact analysis of its MY2017-MY2025 rule, EPA estimated total sales and per-vehicle costs for each automaker in MY2025. Although some results were expected—for example, larger automakers face higher total costs simply due to the volume of vehicles they produce ( Figure 2 ), some results were surprising. For example, some automakers are projected to fare well under the car standards relative to other automakers, but poorly under the light truck standards, or vice versa ( Figure 3 ). Medium- and Heavy-Duty Truck Standards for MY2014-MY2018 In addition to requiring an increase in light-duty vehicle CAFE standards, EISA also required NHTSA to study the potential for fuel efficiency gains, and, if feasible, implement fuel efficiency standards for medium- and heavy-duty trucks and engines. After the completion of studies by the National Academy of Sciences and NHTSA, EPA and NHTSA proposed a joint rulemaking for MY2014-MY2018. On August 9, 2011, the agencies announced final rules. Because of the inherent differences between commercial and passenger vehicles, the standards are based on multiple attributes, including the weight class, physical size, and the presence of a sleeping area in the driver's cab. Further, because the same heavy-duty engine may be used in various vehicles, and similar vehicles are often configured in different ways, the standards are based on fuel consumption and greenhouse gas emissions per tons of payload miles, as opposed to the miles-per-gallon standards for passenger vehicles. EPA and NHTSA estimate that the rules will raise the average cost of new heavy-duty MY2018 combination tractors (i.e., the tractor portion of a tractor-trailer) by about $6,200. For heavy-duty pickup trucks and vans, the agencies estimate the average increased MY2018 cost at around $1,000, and around $400 for vocational vehicles (a wide range of vehicles including utility trucks, refuse trucks, and dump trucks). Depending on the vehicle and the annual number of miles traveled, the agencies estimate that the increased costs would be made up within a few years in fuel savings resulting from the rules. The agencies estimate that the rules will save 530 million barrels of oil and 270 million metric tons of greenhouse gases over the life of the vehicles sold in MY2014-MY2018. They estimate total program costs of $8.1 billion (present value), offset by $50 billion in fuel savings and $7.3 billion in other net benefits (e.g., reduced emissions of greenhouse gases and other pollutants, more miles driven from lower fuel costs, minus the increased congestion and fatalities from that increase in miles), for a net benefit estimate of $49 billion over the life of the vehicles covered by the rules. Some critics have questioned the Administration's methodology in determining costs and benefits. They argue that the net benefits could be considerably lower than EPA and NHTSA have projected.

In recent years, as oil and gasoline prices have risen and concerns over greenhouse gas emissions and climate change have grown, there has been a resurgence of interest in the fuel economy and emissions of motor vehicles in the United States. Federal fuel economy and greenhouse gas standards have become a focal point for addressing these concerns. The debate over rising fuel efficiency and greenhouse gas standards for passenger vehicles and heavy trucks has been controversial. Proponents of higher fuel economy argue that new standards will create incentives for the development of new technologies that will help reduce oil consumption and limit greenhouse gas emissions. Critics argue that these standards will impose regulatory costs which will distort the market for new vehicles, and that other policy mechanisms would be more effective at reducing petroleum consumption and emissions (e.g., higher fuel taxes). On August 28, 2012, the Obama Administration issued new passenger vehicle fuel economy and greenhouse gas standards for vehicle model years (MY) 2017-2025. The National Highway Traffic Safety Administration (NHTSA) and the Environmental Protection Agency (EPA) expect that combined new passenger car and light truck Corporate Average Fuel Economy (CAFE) standards will rise to as much as 41.0 miles per gallon (mpg) in MY2021 and 49.7 mpg in MY2025, up from 34.1 mpg in MY2016. To the extent possible, new CAFE standards will be integrated with federal and state greenhouse gas (GHG) standards for automobiles, because fuel economy improvements are a key strategy for reducing vehicle emissions. If all of the GHG reductions were made through fuel economy improvements, the equivalent miles-per-gallon requirement would be 54.5 mpg in MY2025. However, other strategies will also be used (for example, improved vehicle air conditioners) to reduce GHG emissions to the actual GHG standard of 163 grams of carbon dioxide per mile. The Administration expects that consumers' fuel savings from the new standards will more than offset the additional cost of the new technology for these vehicles, which could be thousands of dollars per vehicle. EPA and NHTSA expect that the new standards will save roughly 4 billion barrels of oil and 2 billion metric tons of greenhouse gases over the life of the vehicles covered under the proposal. Critics dispute some of the Administration's assumptions. They counter that the costs will be higher and could lead to a drop in new vehicle sales, as the higher vehicle costs may put new car financing out of reach for many consumers. In a similar process to an earlier Obama Administration agreement that led to new fuel economy and greenhouse gas standards for MY2012-MY2016, the Administration has secured commitment letters from the state of California and from 13 automakers to support the MY2017-2025 rulemaking as well. There has been concern about a potential "patchwork" of different federal and state standards if EPA, NHTSA, and California were to establish different standards on fuel economy and GHG emissions. Two key parts of the agreement are that California will treat any vehicle meeting the new federal GHG standards as meeting California standards, and that the automakers agree to not challenge the new standards in court. In August 2011, the Administration also tightened fuel economy and GHG emissions standards for MY2014-MY2018 medium- and heavy-duty trucks.

Introduction This report analyzes recent laws that relate to the regulation of guns in the District of Columbia (DC or District), and congressional proposals that would further amend these laws. The four main statutes or bills at issue are (1) federal provisions under the National Firearms Act of 1934 and the Gun Control Act of 1968; (2) the D.C. Firearms Control Regulation Act of 1976, as in effect prior to the Supreme Court's decision in District of Columbia v. Heller ; (3) the proposed Second Amendment Enforcement Act introduced in February 2011 ( H.R. 645 ); and (4) the District's legislation that permanently amends its gun laws—the Firearms Control Amendment Act of 2008 (FCAA), and the Inoperable Pistol Amendment Act of 2008 (IPAA). Congressional proposals to address the District's firearms laws often arise when the issue of voting rights for the District is before Congress; thus, it is worth noting another congressional proposal from the 111 th Congress to amend the District's gun laws, Title II of S. 160 , which was the District of Columbia House Voting Rights Act of 2009. While Title II of S. 160 of the 111 th Congress and H.R. 645 from the 112 th Congress are substantially similar, this report will point out the differences where appropriate. This report begins with an overview of the introduction of these bills and their status today. It proceeds to analyze current DC law after the passage of the FCAA and the IPAA, and the effect that the congressional proposals would have on the District's firearms laws. In doing so, the report traces the congressional proposals section by section. Overview of Congressional and DC Legislation Much of the congressional activity on DC firearms laws occurred after the Supreme Court issued its decision in District of Columbia v. Heller . In Heller , the Supreme Court held, by a vote of 5-4, that the Second Amendment protects an individual's right to possess a firearm, unconnected with service in a militia, and the use of such arm for traditionally lawful purposes, such as self-defense within the home. The decision in Heller affirmed the lower court's decision that declared unconstitutional three provisions of the District's Firearms Control Regulation Act: (1) DC Code § [phone number scrubbed].02(a)(4), which generally barred the registration of handguns and thus effectively prohibited the possession of handguns in the District; (2) DC Code § 22-4504(a), which prohibited carrying a pistol without a license, insofar as that provision would prevent a registrant from moving a gun from one room to another within his or her home; and (3) DC Code § [phone number scrubbed].02, which required that all lawfully owned firearms be kept unloaded and disassembled or bound by a trigger lock or similar device. However, the Supreme Court's opinion did not address the District's license to carry requirement, making note of Heller's concession that such a requirement would be permissible if enforced in a manner that is not arbitrary and capricious. After the Supreme Court issued its decision, the DC Council enacted emergency legislation to temporarily amend the city's gun laws to comply with the ruling in Heller while considering permanent legislation. The DC Council enacted the Firearms Control Emergency Amendment Act of 2008, the first of several emergency enactments, and this attempt was met with criticism, as some felt that the changes did not comply with the decision in Heller . At the same time, perhaps in reaction to the Court's decision or the District's first attempt to temporarily amend its gun laws, H.R. 6691 , the Second Amendment Enforcement Act, was introduced in the 110 th Congress by Representative Travis Childers. The proposal appeared to overturn or loosen provisions of the District's existing gun laws (i.e., the DC Code as it was prior to any of the city's emergency regulations). The content of H.R. 6691 was subsequently adopted in the nature of a substitute into H.R. 6842 , which was passed in the House of Representatives by a vote of 266-152. The Senate did not pass H.R. 6842 , and the bill did not become law. In the 111 th Congress, Senator John Ensign had introduced S.Amdt. 575 to S. 160 , the District of Columbia Voting Rights Act of 2009. This amendment, which also used the language of H.R. 6842 (110 th Congress), was approved by the Senate on February 26, 2009, and became Title II of S. 160 (hereinafter Title II- S. 160 ). Although S. 160 was passed in the Senate by a vote of 61-37, it was later reported that movement on this legislation was stalled. As the House passed H.R. 6842 (110 th Congress) in September 2008, the DC Council continued to enact emergency legislation until permanent legislation could become effective. Language contained in the emergency acts later was encompassed in the permanent legislation. In 2009, the Firearms Control Amendment Act of 2008 (FCAA) and the Inoperable Pistol Amendment Act of 2008 (IPAA) were passed by the DC Council and transmitted to Congress for the requisite 60 days before becoming effective, respectively, on March 31, 2009, and May 20, 2009. Analysis of DC Gun Laws Under the Proposed Amendments Overall, the FCAA and IPAA not only amended firearms provisions of the DC Code that were at issue in Heller , but also provided a different range of restrictions on the regulation of firearms and firearm ownership. It is worth noting that the District's new firearms amendments under the FCAA and IPAA were challenged and upheld in the United States District Court for the District of Columbia on March 26, 2010. As discussed above, the language of Title II- S. 160 had been adopted from a bill ( H.R. 6842 ) introduced in the 110 th Congress, which originated prior to the enactment of the two new DC acts. The most recent congressional legislation, H.R. 645 , though it also seeks to overturn or loosen many of the District's gun provisions, takes into consideration the passage of these two new acts, the FCAA and IPAA. Sections 3-8 of H.R. 645 would amend firearms provisions in the DC Code in substantially the same manner as Title II- S. 160 , by limiting the District's ability to promulgate rules regulating firearm possession, and repealing the District's registration scheme, among other things. Sections 9-13 would preserve certain provisions of IPAA, while Section 14 would repeal other provisions of the IPAA and all of the FCAA. Authority of DC to Promulgate Rules In general, federal firearms laws establish the minimum standards in the United States for firearms regulations. The states, territories, and the District of Columbia may choose to supplement the federal statutes—the National Firearms Act of 1934 (NFA) and the Gun Control Act of 1968 (GCA)—with their own more restrictive firearms laws in a manner that does not run counter to the Supreme Court's decision in District of Columbia v. Heller . Under the District of Columbia Self-Government and Governmental Reorganization Act (the Home Rule Act), the District generally has authority to promulgate its own laws pursuant to the act's procedures. For instance, the Home Rule Act provides that "the legislative power of the District shall extend to all rightful subjects of legislation within the District ..." More specifically, the Home Rule Act authorizes the DC Council "to make … all such usual and reasonable police regulations … as the Council may deem necessary for the regulation of firearms." Since much of the District of Columbia's law that existed prior to home rule consisted of congressional enactments, this power has often been used by the District of Columbia to amend laws passed by Congress. Congress nonetheless retains the ability to legislate for the District, as well as to impose limits on the legislative authority of the District of Columbia government. In the Home Rule Act, Congress specifically reserved for itself "the right, at any time, to exercise its constitutional authority as legislature for the District by enacting legislation for the District on any subject, whether within or without the scope of legislative power granted to the Council ... including legislation to amend or repeal any law in force in the District prior to or after enactment of this chapter and any act passed by the Council." Because the District legislates within delegated congressional authority under the Home Rule Act, the question of whether the District of Columbia can amend or repeal a particular congressional enactment would appear to depend upon whether Congress, either expressly or by inference, intended that such congressional act not be amended by the District. For instance, Section 3 of H.R. 645 , like Title II- S. 160 , would explicitly provide a limit upon the District of Columbia's authority to legislate in this area: Nothing in this section or any other provision of law shall authorize, or shall be construed to permit the Council, the Mayor, or any governmental or regulatory authority of the District of Columbia to prohibit, constructively prohibit, or unduly burden the ability of persons not prohibited from possessing firearms under Federal law from acquiring, possessing in their homes or businesses, transporting for legitimate purposes , or using for sporting, self-protection or other lawful purposes, any firearm neither prohibited by Federal law nor subject to the National Firearms Act. The District of Columbia shall not have the authority to enact laws or regulations that discourage or eliminate the private ownership or use of firearms (emphasis added). It is worth noting that the phrase—"transporting for legitimate purposes"—is included in H.R. 645 , presumably to address the transportation requirements that it would adopt from the IPAA. This phrase does not otherwise affect the analysis of this section's language under H.R. 645 . The proposed language emphasizes that the Council would not be empowered to promulgate laws relating to firearms regulation either by virtue of the authority granted under the DC Code or any other provision of law that could otherwise be interpreted as granting similar police power. It is unclear, however, what would constitute "a constructive prohibition or undue burden" on the ability of individuals to acquire firearms. The language would also appear to prevent the District from barring firearms possession by any persons not prohibited from possessing a firearm under current federal law and, moreover, appears to prevent the District from prohibiting the possession of any firearm that was not already prohibited or regulated under federal law. In other words, with the exception of carrying, discussed below, it appears that District firearms laws would be substantially the same as federal firearms laws because the District would be limited in its ability to create its own stricter provisions beyond that of the NFA and GCA. Furthermore, the language does not make clear what elements would render a law or regulation in violation of the proscription against discouraging or eliminating the private ownership or use of firearms. In addition, while the proposed language would not directly revoke the District's general authority to enact and enforce sanctions for the criminal misuse of firearms, it appears that the scope of this authority would be limited as well. The last part of Section 3 would not "prohibit the District of Columbia from regulating the carrying of firearms by a person, either concealed or openly, other than at the person's dwelling place, place of business, or on other land possessed by the person" (emphasis added). Under this phrase, it seems clear that the District could regulate concealed or open carry, but it would not be explicitly empowered to prohibit individuals from carrying firearms altogether. Because "regulating the carrying of firearms" could encompass an outright prohibition on such activity, the District could still argue that it would be able to prohibit open or concealed carry altogether (with the stated exceptions), notwithstanding the congressional provision; however, an opposing argument could be made that "regulating the carrying of firearms" does not give the District authority to have a ban on the open or concealed carriage of firearms. This last sentence of H.R. 645 differs from Title II- S. 160 , which stated that nothing "shall be construed to prohibit the District ... from regulating or prohibiting the carrying of firearms" (emphasis added). DC Semiautomatic Ban Prior to Heller , the DC Code's definition of "machine gun" included "any firearm, which shoots, is designed to shoot or can be readily converted to shoot ... semiautomatically, more than 12 shots without manual reloading." By virtue of this broad definition, any semiautomatic weapon that could shoot more than 12 shots without manual reloading, whether pistol, rifle, or shotgun, was deemed a "machine gun," and prohibited from being registered. It appears that under the District's old definition, registration of a pistol was largely limited to revolvers. Under the NFA, "machine gun" is defined as any weapon which shoots, is designed to shoot, or can be readily restored to shoot, automatically more than one shot, without manual reloading, by a single function of the trigger. The term shall also include the frame or receiver of any such weapon, any part designed and intended solely and exclusively, or combination of parts designed and intended, for use in converting a weapon into a machinegun, and any combination of parts from which a machinegun can be assembled into such parts are in the possession of or under the control of a person. In the FCAA, the District amended its definition of "machine gun" to conform with the federal definition, above. By doing so, semiautomatic firearms are generally no longer prohibited from being registered. However, the District has also chosen to mirror other state laws, like California, and has enacted a list of prohibited firearms. (See " Assault Weapons/Handgun Roster ," below.) If H.R. 645 were enacted, the definition of "machine gun" would be restored to its pre- Heller state because the bill would undo any changes made by the FCAA. Thus, Section 4 of H.R. 645 would essentially continue the definition of "machine gun" to conform with the federal definition, above. Registration Requirements, Ammunition Sales, and Interstate Purchases Registration Although the DC Code has a scheme for registering firearms, the pre- Heller provisions prohibited registration of sawed-off shotguns, machine guns, short barreled rifles, or pistols not validly registered prior to September, 24, 1976. Together, the pre- Heller definition of "machine gun" and the ban on registering pistols post-1976 also acted as a virtual prohibition on handguns, which the Supreme Court declared unconstitutional in Heller . Pursuant to the FCAA, the District now allows the registration of pistols for self-defense, and because "machine gun" conforms to the federal definition, semiautomatic handguns may be registered so long as the applicant meets other requirements. Furthermore, the FCAA includes an exemption from the registration requirement for a person who temporarily possesses a firearm registered to another while in the home of the registrant, provided the temporary possessor is not barred from possessing a firearm and the person reasonably believes that possession is necessary for self-defense in that home. The FCAA makes several amendments to the provisions that set forth the qualification and information requirements for the registration of a firearm. For example, a person who has been convicted, within five years prior to applying for a registration certificate, of an intrafamily offense, or two or more violations of the District's or any other jurisdiction's law that restricts driving under the influence of alcohol or drugs, is prohibited from registering. Similarly, applicants who, within five years of applying, (1) have a history of violent behavior; (2) have been a respondent in either an intrafamily proceeding in which a civil protection order was issued against him or her; or (3) have been a respondent in a proceeding in which a foreign protection order was issued against him or her, are prohibited from registering a firearm. The FCAA also requires applicants to complete a firearms training or safety course and provide an affidavit signed by the certified firearms instructor, in addition to expanding the firearms competency test. Additionally, the Chief of Police (Chief) is required to have any registered pistol submitted for a ballistics identification procedure; further, the Chief is barred from registering more than one pistol per registrant during any 30-day period, except for new residents who are able to register more than one pistol if such pistols have been lawfully owned in another jurisdiction for six months prior to the application. The District's existing registration scheme is all-encompassing, as the registration of a firearm is a method to also license firearms owners and acts as a permit to purchase. Though H.R. 645 would continue to prohibit the possession of sawed-off shotguns, short barreled rifles, and machine guns, it would, however, repeal all sections pertaining to the registration requirement. Thus, DC residents would no longer be required to have a registration certificate for the firearm, or as a prerequisite to purchasing a firearm, and there would be no provision for licensing of gun owners. H.R. 645 would also make other conforming amendments to eliminate all registration language. It is worth noting that with the repeal of the FCAA provisions under H.R. 645 , it appears that the Chief would no longer be required to have any pistol submitted for ballistics testing, nor would the Chief be required to limit registration of pistols to one per month. In other words, there would be no restriction on how many handguns an individual would be able to purchase per month. Ammunition Sales and Registration H.R. 645 would amend DC Code § [phone number scrubbed].02, which sets forth permissible sales and transfers of both ammunition and firearms. Currently, under DC law, a licensed dealer may sell or transfer ammunition only to "any nonresident person or business licensed under the acts of Congress," "any other licensed dealer," or "any law enforcement officer." A provision under Section 5 of H.R. 645 would allow the transfer of ammunition, excluding restricted pistol bullets, "to any person," which would include DC residents. In addition to eliminating any ammunition certificate language, this section would also eliminate the requirement of a licensed dealer to keep track of ammunition received or sold from his or her inventory. Interstate Transfers of Firearms Under 18 U.S.C. § 922(b)(3), a firearms dealer is generally prohibited from selling handguns to out-of-state persons, and must conduct such transactions by transferring the handgun to another firearms dealer in the state where the purchaser resides. Both H.R. 645 and Title II- S. 160 permit interstate purchase of firearms, but do so in different ways. In Title II- S. 160 , there would have been an amendment to the federal statute that would carve out an exception to the federal law to allow federal licensees whose places of business are located in Maryland or Virginia to sell and deliver handguns to residents of the District of Columbia. H.R. 645 , however, would place the amendment of interstate firearms transfer in the DC Code itself. Thereafter, under the DC Code, a federally licensed importer, manufacturer, or dealer of firearms in Maryland or Virginia would be treated as a dealer licensed under DC law. Thus, notwithstanding 18 U.S.C. § 922(b)(3), Maryland and Virginia firearms dealers would be permitted to sell handguns to District residents if "the transferee meets in person with the transferor to accomplish the transfer, and the sale, delivery, and receipt fully comply with the legal conditions in both the District of Columbia and the jurisdiction in which the transfer occurs." Trigger Lock Requirement The GCA requires that licensed dealers sell or deliver handguns with a secure gun storage or a safety device, but there is no federal requirement on how firearms should be stored or whether trigger locks must be used. The District's trigger lock requirement, which was declared unconstitutional by the Supreme Court, went further than federal law and required any firearm in the possession of a registrant, even if within the home, to be "unloaded and disassembled or bound by a trigger lock or similar device" unless the firearm was kept at the owner's place of business, or was being used for lawful recreational purposes within the District. Under the FCAA, the District amended the provisions of the trigger lock requirement so that it would be the policy of the District that any firearm in one's lawful possession be unloaded and either disassembled or secured by trigger lock. The FCAA prohibits a person from storing or keeping any loaded firearm on any premises under his control if "he knows or reasonably should know that a minor is likely to gain access to the firearm without the permission of the parent or guardian of the minor" unless he or she "keeps the firearms in a securely locked box ... container ... or in a location which a reasonable person would believe to be secure" or "carries the firearm on his person or within such close proximity that he can readily retrieve and use it as if he carried it on his person." The FCAA further provides that a person in violation of these firearm storage responsibilities can be found guilty of criminally negligent storage of a firearm or other criminal penalties. Title II- S. 160 would repeal this section of the FCAA. By contrast, Section 7 of H.R. 645 , similar to existing DC law, would create penalties for allowing access of minors to loaded firearms if injury results. Under this section of H.R. 645 , a person would be guilty of unlawful storage if the person knowingly stores or leaves a loaded firearm at any premises under the person's control; the person knows or reasonably should know that a minor is likely to gain access to the firearm without permission of the minor's parent or legal guardian; and the minor kills or injures any person (including the minor) by discharging the firearm. Any person who violates this section would be subject to a fine not to exceed $1,000 and/or a term of imprisonment not to exceed one year. However, there would be several exceptions. Penalties would not apply if (1) the firearm was stored in a securely locked container and the person did not inform the minor of the location of the key to, or the combination of, the container's lock; (2) the firearm was secured by a trigger lock and the person did not inform the minor of the location of the key to, or the combination of, the trigger lock; (3) the firearm was stored on the person's body or in such proximity that it could be used as quickly as if it were on the person's body; (4) the minor's access to the firearm was as a result of unlawful entry; (5) the minor was acting in self-defense; (6) the minor was engaged in hunting or target shooting under the supervision of a parent or adult over the age of 18; or (7) the firearm is in possession or control of a law enforcement officer while the officer is engaged in official duties. If the victim of a shooting under the section is the child of the person who committed the violation, "no prosecution shall be brought ... unless the person who committed the violation behaved in a grossly negligent manner, or unless similarly egregious circumstances exist." Criminal Penalties for Possession of Unregistered Firearms Currently, under DC law, a general violation of the registration scheme, including the maintenance of an unregistered firearm in a dwelling place, place of business, or on other land possessed by the owner of a firearm, warrants a fine of not more than $1,000 or not more than one year's imprisonment, or both. A person who is convicted a second time for unregistered possession of a firearm in such areas shall be fined not more than $5,000 or imprisoned not more than five years, or both. As a conforming amendment to repealing the registration scheme, H.R. 645 would amend the DC Code to remove this provision. It is worth noting that Title II- S. 160 would have further removed the criminal penalties for the intentional sale or transfer of a firearm or destructive device to a person under the age of 18. Regulating Inoperable Pistols and Harmonizing Definitions for Certain Types of Firearms When the District amended its firearms laws, it also amended several definitions such as "machine gun," (discussed above) "sawed off shotgun," and "firearm." The FCAA and IPAA are presumably meant to complement each other so that amended definitions or newly created terms are consistent in both Titles 7 and 22 of the DC Code. Section 9 of H.R. 645 would continue the harmonization of definitions between Titles 7 and 22 for certain definitions. These include the terms "firearm," "machine gun," "pistol," "place of business," "sawed off shotgun," and "shotgun." Prohibitions of Firearms from Private and Sensitive Public Property The IPAA amended DC law to permit the District of Columbia to prohibit or restrict the possession of firearms on its property or any property under its control. It also allows private persons or entities who own property in the District to prohibit or restrict possession of firearms on their property, with the exception of law enforcement personnel when they are lawfully authorized to enter. Section 10 of H.R. 645 also addresses property owners restricting firearms on their premises. Under the first part of this section, "[p]rivate persons or entities owning property in the District of Columbia may prohibit or restrict the possession of firearms on their property by any persons, other than law enforcement personnel when lawfully authorized to enter onto the property or lessees occupying residential or business premises " (emphasis added). This provision is unlike existing DC law because it would further prohibit the ability of private landlords of businesses or residential premises to restrict their tenants from possessing firearms on such premises. The second part of Section 10 relates to the District's authority to restrict or prohibit the possession of firearms on public property. Specifically, the District would be able to prohibit or restrict the possession of firearms within any building or structure under its control, or in any area of such building or structure, which has implemented security measures (including but not limited to guard posts, metal detection devices, x-ray or other scanning devices, or card-based or biometric access devices) to identify and exclude unauthorized or hazardous persons or articles, except that no such prohibition or restriction may apply to lessees occupying residential or business premises. This proposed language is arguably narrower in application in that it would apply to "buildings or structures under its control," whereas current law gives the District authority to regulate over "property under its control." Under the proposed language, it is not clear if the District could regulate firearms on real property under its control other than buildings and structures. Furthermore, while it is explicit that the District would not be able to exercise the granted authority upon lessees that occupy buildings under the District's control, it is unclear as to what kinds of buildings over which the District would be able to exercise this authority. Would the District be able to regulate the possession of firearms in any building that is under its control but that does not necessarily have the requisite security measures, or would it be limited to regulating firearm possession only in buildings and structures that have security measures. Should the phrase—", or in any other area of such building or structure, which has implemented security measures ..."—be read as disjunctive from the preceding phrase? Alternatively, could the phrase be read to relate back to describe the buildings or structures under DC's control, thereby narrowing the range of areas that would fall under this provision? Regulating the Carrying and Transport of Firearms Under the IPAA, the District repealed the Chief's authority to issue licenses to a carry a concealed firearm. This provision would be repealed upon enactment of H.R. 645 , thus re-permitting the Chief to issue licenses for concealed carry within her discretion. H.R. 645 would continue a provision from the IPAA that explicitly prohibits a person from carrying a rifle or a shotgun within the District of Columbia, except as otherwise permitted by law. The exceptions for where a rifle or shotgun may be carried are discussed below. Carrying of Firearms Congress passed a provision that regulates a qualified current or retired law enforcement officer's ability to carry a concealed firearm. Beyond this, states may impose their own laws on carrying firearms. As amended by the IPAA, the District currently permits persons who hold a valid registration for a firearm (handgun/rifles/shotguns) to carry it (1) within the registrant's home; (2) while it is being used for lawful recreational purposes; (3) while it is kept at the registrant's place of business; or (4) while it is being transported for a lawful purposes in accordance with the law. Because the Chief's authority to issue licenses to carry appears to be revoked under the IPAA, these four circumstances currently seem to be the only scenarios under which a person may possess and carry firearms. H.R. 645 would re-adapt from the IPAA and slightly modify the provision granting persons authority to carry their firearms in certain places for certain purposes without a license to carry. H.R. 645 would allow a person to carry a firearm, whether loaded or unloaded, without needing to obtain a license to carry in the person's dwelling house or place of business or on other land owned by the person; by invitation on land owned or lawfully possessed by another; while it is being used for lawful recreational, sporting, education, or training purposes; or while it is being transported for lawful purposes as expressly authorized by District or federal law and in accordance with the requirements of that law. As noted above, because the Chief's authority to issue licenses to carry concealed would be restored if H.R. 645 were enacted, it is likely that a firearm owner could obtain a concealed carry license and carry his or her firearm outside these four circumstances. Transportation of Firearms H.R. 645 would continue provisions similar to those already enacted by the IPAA pertaining to the lawful transportation of firearms. Thus, it would remain that a person, who is not otherwise prohibited from transporting, shipping, or receiving a firearm, would be permitted to transport a firearm for any lawful purpose from any place he may lawfully possess the firearm to any other place where he may lawfully possess the firearm if the firearm is transported in accordance with this section. If the transportation is by vehicle, the firearm shall be unloaded, and neither the firearm nor any ammunition being transported may be readily accessible or directly accessible from the passenger compartment of the transporting vehicle. Also, if the firearm is not being transported by vehicle, the firearm must be "unloaded, inside a locked container, and separate from any ammunition." Toy and Antique Pistols The IPAA made a technical change to the District Code by including toy and antique pistols as types of firearms that are prohibited from being used to commit a violent or dangerous crime, and violators are subject to certain criminal penalties. Section 12 of H.R. 645 would continue this technical change. Providing Jurisdiction to Office of Administrative Hearings H.R. 645 would provide jurisdiction to the Office of Administrative Hearings to hear cases pertaining to the denial or revocation of firearms dealer licenses. The FCAA had provided such authority to the Office of Administrative Hearings, except that it went further to grant the office jurisdiction over the denial or revocation of a firearm registration certificate. However, since the registration scheme would be repealed under H.R. 645 , it is likely unnecessary to give the office such jurisdiction. Additional District Provisions That Would Be Affected by the Congressional Proposals The next provisions discussed were all amendments to the DC Code pursuant to the enactment of the FCAA and IPAA. These provisions would no longer exist under the congressional proposal because Section 14 of H.R. 645 would repeal the two acts, "and any provision of law amended or repealed by either of such Acts [would be] restored or revived as if such Acts had not been enacted into law." Qualifications and Duties for Dealers of Firearms The DC Code's provisions that govern who may qualify to apply for a dealer's license, who is eligible to sell and transfer firearms to a dealer, and to whom a dealer can sell are dependent upon one's ability to obtain a registration certificate. Thus, anyone who wishes to obtain a dealer's license, or engage in purchasing or transferring a firearm, must meet the new requirements created by the FCAA (discussed in " Registration "), to obtain a registration certificate. Because H.R. 645 would repeal the District's registration scheme, it would allow any person who is not prohibited from possessing or receiving a firearm under federal or District law to qualify in applying for a dealer's license, selling or transferring ammunition or any firearm to a licensed dealer, or making such purchase from a licensed dealer of firearms. The federal prohibitions are discussed in the next section. Furthermore, as noted in the discussion on " Ammunition Sales and Registration ," duties such as reporting the loss, theft, or destruction of any firearms or ammunition in the dealer's inventory would be repealed. Transfer or Sale by Non-Dealers and by Licensed Dealers The federal GCA lists nine categories of persons who are prohibited from possessing, shipping, or receiving firearms. They are (1) persons who have been convicted of a crime punishable by imprisonment exceeding one year; (2) persons who are fugitives; (3) persons who are users of or addicted to any controlled substances; (4) persons who have been adjudicated as a mental defective or who have been committed to a mental institution; (5) persons who are unlawfully in the United States or admitted under a nonimmigrant visa; (6) persons who have been dishonorably discharged from the Armed Forces; (7) persons who have renounced U.S. citizenship; (8) persons who are on notice of or are subject to a court order restraining them from harassing, stalking or threatening an intimate partner; and (9) persons who have been convicted in any court of a misdemeanor crime of domestic violence. Among other federal regulations, it is unlawful for both licensed dealers and non-licensed persons to sell or transfer a firearm to another if he knows or has reasonable cause to believe that the purchaser falls within one of the nine categories above. Because the FCAA imposes new eligibility requirements before an applicant can be approved for a registration certificate (see " Registration ") it follows that a non-licensed person or licensed dealer wishing to transfer firearms must meet not only what is required by federal law but also the additional eligibility requirements under the FCAA since anyone wishing to transfer firearms must be eligible to register a firearm under DC law. Under D.C. law, a non-licensed person may sell or transfer firearm or ammunition only to a licensed dealer. In other words, a private sale between two non-licensed people must take place through a licensed dealer. This would remain unchanged in H.R. 645 . Under H.R. 645 , it would still be unlawful for licensed dealers to make transfers to those prohibited from receiving or possessing a firearm under federal or DC law , but because the bill would essentially remove any registration requirement that is required by the DC Code, it appears that the only disqualifications that would prohibit a transfer are those listed under federal law. Assault Weapons/Handgun Roster Another amendment to DC law that would be affected by Section 14 of H.R. 645 is the assault weapons ban created by the FCAA. The FCAA created a new definition of "assault weapon" that includes a list of specific rifles, shotguns, and pistols and their variations, regardless of the manufacturer. It also includes semiautomatic rifles, pistols, and shotguns based on the presence of a single military-type characteristic. The definition of "assault weapon" also includes any shotgun with a revolving cylinder, except that it does not apply to "a weapon with an attached tubular device designed to accept, and capable of operating only with, .22 caliber rimfire ammunition." Currently, the Chief also has the power to designate as an assault weapon any firearm that he or she believes would reasonably pose the same threat as those weapons enumerated in the definition. The definition of assault weapon does not include antique firearms or certain pistols sanctioned for Olympic target shooting. The FCAA also makes this new definition of "assault weapon" applicable in the Assault Weapon Manufacturing Strict Liability Act of 1990. Thus, any manufacturer, importer, or dealer of a weapon deemed an "assault weapon" pursuant to this new definition can be held strictly liable in tort for all direct and consequential damage arising from bodily injury or death if either proximately results from the discharge of the assault weapon in the District of Columbia. These particular changes made by the FCAA would be repealed by Section 14 of H.R. 645 . Large Capacity Ammunition Feeding Devices The FCAA prohibits any person in the District from possessing, selling, or transferring any large capacity ammunition feeding device. The meaning of "large capacity ammunition feeding device" includes a "magazine, belt, drum, feed strip or similar device that has a capacity of, or that can be readily restored or converted to accept, more than 10 rounds of ammunition." However, the term does not include "an attached tubular device designed to accept, and capable of operating only with, .22 caliber rimfire ammunition." Thus, even though residents of DC are now allowed to register and possess semiautomatic firearms (see " DC Semiautomatic Ban "), the FCAA prevents them from possessing large capacity ammunition feeding devices, which some semiautomatic firearms are capable of holding. This provision would be repealed by Section 14 of H.R. 645 . Waiting Period Under the Brady Handgun Violence Prevention Act, which amended the GCA to establish the National Instant Criminal Background Check System (NICS), a licensed dealer is generally prohibited from transferring a firearm to any other non-licensed person without running a background check by contacting NICS. The licensee may transfer the firearm if the system provides the licensee with a unique identification number, or if three business days have elapsed with no response from the system and the licensee has verified the identity of the transferee by examining valid identification documents that contain a photograph of the transferee. Generally, once the background check has been completed and the transferee approved, the licensee may transfer the firearm unless a state imposes a waiting period. Non-licensed persons are not required to perform a background check under federal law. The DC Code imposed a waiting period of 48 hours before a seller within the District can deliver a pistol or handgun. Under the IPAA, however, the waiting period for the transfer of a "firearm" is now 10 days. Firearm, as amended by the IPAA, means "any weapon regardless of operability , which will, or is designed or redesigned, made or remade, readily converted, restored or repaired or is intended to expel a projectile or projectiles by the action of an explosive" (emphasis added). Thus, the IPAA makes the new waiting period apply to all firearms, not just pistols. Title II- S. 160 would not have changed the waiting period, which would have remained applicable to the transfer of pistols, and not shotguns or rifles. It should also be noted that if the IPAA is repealed under H.R. 645 , the waiting period to obtain a handgun would revert back to 48 hours. Microstamping and Discharge of Firearms The FCAA added new provisions with regard to microstamping. The DC Code had already prohibited the sale of a firearm that does not have imbedded in it an identification or serial number unique to the manufacturer or dealer of the firearm. The FCAA now adds a new provision requiring that beginning January 1, 2011, "no licensee shall sell or offer for sale any semiautomatic pistol manufactured on or after January 1, 2011, that is not microstamp-ready as required by and in accordance with sec. 503." The FCAA creates two new sections, 503 and 504. New Section 503 sets forth requirements that determine if a semiautomatic pistol is microstamp-ready, and it also contains provisions that require manufacturers to provide the Chief with the make, model, and serial number of the semiautomatic pistol when presented with a code from a cartridge that was recovered as part of a legitimate law enforcement investigation. New Section 504 prohibits a pistol that is not on the California Roster of Handguns Certified for Sale (California Roster) from being manufactured, sold, given, loaned, exposed for sale, transferred, or imported into the District of Columbia as of January 1, 2009. Such a pistol is prohibited from being owned or possessed unless it was lawfully owned and registered prior to January 1, 2009. Furthermore, if a resident of DC lawfully owns a pistol not on the California Roster, that individual can sell or transfer ownership only through a licensed firearms dealer; or a licensed dealer who has such a pistol in its inventory prior to January 1, 2009, can only transfer it to another licensed firearms dealer. The FCAA also requires the Chief to review the California Roster at least annually for any additions or deletions, and the Chief is authorized to revise, by rule, the roster of handguns determined not to be unsafe. Under the IPAA, the District also makes unlawful the discharge of a firearm without a special written permit from the Chief, except as permitted by law which includes legitimate self-defense. It further allows the District to prohibit or restrict the possession of firearms on its property and any property under its control, and would similarly allow private persons owning property in the District to prohibit or restrict the possession of firearms on their property, except where law enforcement personnel is concerned. These two new provisions would be also repealed if H.R. 645 became law.

In the wake of the Supreme Court's decision in District of Columbia v. Heller, which declared three firearms provisions of the DC Code unconstitutional, a flurry of legislation was introduced both in Congress and in the District of Columbia Council. In the 110th Congress, the House of Representatives passed H.R. 6842, the Second Amendment Enforcement Act. In the 111th Congress, similar provisions were incorporated as an amendment to the District of Columbia Voting Rights Act of 2009 (S. 160), which was passed by the Senate. Later, separate measures, which also would have overturned or loosened many of the District's gun provisions, were introduced in both the House of Representatives (H.R. 5162) and the Senate (S. 3265). Meanwhile, the District Council passed its own legislation that made permanent amendments to DC's firearms control regulations. The two bills from the District are the Firearms Control Amendment Act of 2008 and the Inoperable Pistol Amendment Act of 2008, which amended the DC Code in an effort to comply with the ruling in Heller as well as provide a different range of restrictions on firearm possession. In the 112th Congress, Representative Mike Ross introduced H.R. 645, "To restore Second Amendment rights in the District of Columbia." This measure is identical to H.R. 5162 from the previous Congress. This report provides an analysis of the District's firearms laws and congressional proposals.

Developments President's Budget and the Budget Resolution On February 4, 2008, President Bush sent his FY2009 budget to Congress. It included $39 billion for the Department of Housing and Urban Development (HUD). On June 4, 2008 , the Senate passed the FY2009 budget resolution conference agreement ( H.Rept. 110-659 ); the House passed it the following day. The budget resolution is used to establish the amount of funding each appropriations subcommittee will have available to allocate. The budget resolution cannot generally be used for determining congressional funding levels for any specific program. House and Senate Consideration On June 20, 2008 , the Transportation-HUD subcommittee of the House Committee on Appropriations approved a draft FY2009 HUD appropriations bill by voice vote. According to a press release issued by the subcommittee, the draft bill included the following: $110 million for new incremental vouchers: $75 million to fund 10,000 new housing vouchers for homeless veterans and $30 million for 4,000 new housing vouchers for the disabled; $75 million for foreclosure counseling and assistance to assist more than 200,000 families at risk of losing their homes; $1.69 billion for Homeless Assistance Grants ($55 million above the President's request); $4 billion for Community Development Block Grants ($1 billion above the President's request); $765 million for housing for the elderly ($225 million above the Administration's request) and $250 million for disabled housing ($90 million above the President's request); and $4.5 billion for the public housing operating account, $2.5 billion for the public housing capital account, and $120 million for HOPE VI (combined, $896 million more than the Presidents' request for the public housing accounts). (Note: The remainder of this report is not updated to reflect House subcommittee action, as their draft bill was never released.) On July 10, 2008 , the Senate Committee on Appropriations approved its version of the FY2009 Transportation-HUD appropriations bill, following subcommittee approval the previous day ( S. 3261 ). Continuing Resolution, Emergency Funding and Stimulus Legislation On September 30, 2008 , President Bush signed a continuing resolution (CR) funding most government agencies—including HUD—at their FY2008 levels ( P.L. 110-329 ). It funded agencies through the earlier of March 6, 2009, or enactment of a final FY2009 funding bill. The CR was included as Division A of a larger bill that also included supplemental emergency funding (Division B) and the Defense, Homeland Security, and Military Construction/Veterans Administration FY2009 full-year appropriations acts (Divisions C-E). It was attached to the FY2008 Homeland Security bill ( H.R. 2638 ) and passed by the House on September 24, 2008, and the Senate on September 27, 2008. The CR included several additional provisions related to HUD. Specifically, it authorized the Secretary to spend funds at a faster rate in order to ensure the timely renewal of project-based Section 8 contracts, extended the authorization for the HOPE VI program, raised the loan commitment levels for the Federal Housing Administration's (FHA) mortgage insurance programs, and allowed HUD to use salaries and expenses funding to meet FHA's technology needs. Division B of the act provided FY2008 emergency supplemental disaster funding, including: $85 million to provide new Section 8 vouchers to households affected by the 2005 hurricanes; $50 million in new project-based Section 8 vouchers to be used in areas affected by the 2005 hurricanes; $15 million to redevelop public housing developments damaged by the 2005 hurricanes; and $6.5 billion in Community Development Block Grant (CDBG) funding for communities affected by presidentially declared disasters declared in 2008. On January 15, 2009 , the House approved its version of H.R. 1 , an economic stimulus plan, which included emergency supplemental funding for several HUD programs. The Senate passed its version of H.R. 1 on February 10, 2009. A conference agreement was approved by both houses of Congress on February 13, 2009, and it was signed by President Obama on February 17, 2009 ( P.L. 111-5 ). As enacted, the bill provided over $13.68 billion in emergency FY2009 funding for HUD programs. Congress did not enact final appropriations before the expiration of the CR, so a second CR was enacted on March 6, 2009 . It extended funding though March 10, 2009. Omnibus Appropriations Legislation On March 11, 2009 , President Obama signed the Omnibus Appropriations Act, 2009 ( P.L. 111-8 ) into law. It finished the FY2009 appropriations cycle by funding all agencies that were covered under the CR (including HUD) for the remainder of the 2009 fiscal year. It was passed by the House on February 25, 2009, and the Senate on March 11, 2009. Introduction to the Department of Housing and Urban Development (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 enacted by Congress. HUD's programs are primarily designed to address housing problems faced by households with very low incomes or other special housing needs. These include several programs of rental assistance for the poor, elderly, and/or disabled. Three rental assistance programs—Public Housing, Section 8 Vouchers, and Section 8 project-based rental assistance—account for the majority of the Department's non-emergency funding (more than 75% in FY2008). Two flexible block grant programs, HOME and Community Development Block Grants, help communities finance a variety of housing and community development activities designed to serve low-income families. Other, more specialized, block grants help communities meet the needs of homeless persons, including those with AIDS. In recent years, HUD has also focused more attention on efforts to increase the homeownership rates for lower-income and minority households, with programs providing funding for downpayment assistance and housing counseling. HUD's Federal Housing Administration (FHA) insures mortgages made by lenders to lower-income home buyers, many with below-average credit records, 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 and offset its administrative costs. Surplus FHA funds have been used to offset the cost of the HUD budget. Table 1 presents total enacted appropriations for HUD over the past five years, including emergency appropriations. Overview and Recent Trends in HUD Funding HUD's annual funding, or budget authority, is made up of several components, including regular annual appropriations, emergency appropriations, rescissions, and offsets. HUD's programs and activities are funded almost entirely through regular annual appropriations , also referred to as discretionary appropriations. As a result, the amount provided in the annual appropriations acts each year generally determines how much funding will be obligated and eventually spent for each of HUD's programs and activities. In some years, Congress will also provide emergency appropriations , generally in response to disasters, through one or more of HUD's programs. These funds are generally provided outside of the regular appropriations acts—often in emergency supplemental spending bills—and are generally provided in addition to regular program level funding. Congressional appropriators are generally subject to limits in the amount of new, non-emergency, discretionary appropriations they can provide in a year. One way to stay within these limits is to provide less in regular annual appropriations. Another way to stay within these limits is to find offsets for spending. A portion of the cost of HUD's regular annual appropriations acts is generally offset in two ways. The first is through rescissions or cancellations of unobligated or recaptured balances from previous years' funding. The second is through offsetting receipts and collections , generally derived from fees paid by HUD partners or clients. The interaction between new appropriations and offsets provided through rescissions, receipts, and collections, determines HUD's total budget authority. Budget authority is also the "cost" of the HUD budget, as estimated by the Congressional Budget Office in its scorekeeping process. The total amount of budget authority provided to HUD each year, while important for federal budgeting purposes, is not necessarily the best measure of the amount of funding that is being provided for HUD's programs and activities. For example, if Congress has increased appropriations for HUD's programs and activities at the same time that offsetting receipts are increasing by a greater amount, then HUD's total budget authority may appear to be declining. Conversely, if Congress has reduced appropriations for HUD's programs and activities at the same time that offsetting receipts are declining by a greater amount, then HUD's budget authority may appear to be increasing. If Congress wished to maintain level budget authority for HUD programs, Congress would increase appropriations if offsets are declining (or, provide less appropriations if offsets are increasing). As shown by the line in Figure 1 , total non-emergency budget authority for HUD increased 28% between FY2002-FY2008, from over $29 billion to just under $38 billion. However, the increase in total budget authority masks several important trends. From FY2002 to FY2008, regular annual appropriations, which is the amount available to fund HUD's programs and activities, grew by 20%. During the same period, the amount available in offsetting receipts and collections, which Congress uses to reduce the cost of providing new appropriations, declined by more than 65% (see Figure 1 ). As a result, the increase in total non-emergency budget authority for HUD from FY2002-FY2008 is not fully attributable to increases in appropriations for HUD's programs and activities; rather, part of the increase in total budget authority is attributable to decreases in the amount available in offsetting receipts. For example, in FY2007, Congress provided $39 billion in regular appropriations for HUD's programs and activities. Since $3 billion was available from offsets and rescissions, HUD's total budget authority was $36 billion. If less had been available in offsets, the cost to Congress of providing $39 billion in regular appropriations would have been higher. The increase in regular (non-emergency) appropriations shown in Figure 1 (from just over $35 billion in FY2002 to over $40 billion in FY2008) is largely attributable to the growth in appropriations for the project-based and tenant-based Section 8 program. From FY2002-FY2008, appropriations for Section 8 grew by more than 40%; appropriations for all other programs and activities during that period declined by about 4%. As can be seen in Figure 2 , appropriations for the Section 8 program have grown from about 45% of HUD's regular appropriations in FY2002 to about 55% of HUD's regular appropriations in FY2008. The large decline in offsetting receipts over this period is largely attributable to declines in excess receipts in the Federal Housing Administration's (FHA) mortgage insurance programs (discussed later in this report). As shown in Figure 3 , from the peak (in FY2004) to the lowest point (in FY2008), the amount of offsetting receipts available from the FHA mortgage insurance program declined by 92%. FY2009 Appropriations Table 2 presents President Bush's FY2009 budget request for HUD compared to the prior year's enacted budget authority and the congressional response. Four totals are given in Table 2 : "budget authority provided" and "available budget authority," both including and excluding emergency appropriations. Total budget authority provided includes current year appropriations, plus advance appropriations provided in the current fiscal year for use in the next fiscal year; total available budget authority includes current year appropriations, plus advance appropriations provided in the prior fiscal year for use in the current fiscal year. Congress is scored by CBO for the amount of available budget authority in an appropriations bill; however, the Appropriations Committees' documents often discuss the amount of budget authority provided. President Bush's FY2009 budget requested a less than 4% increase in total, regular (non-emergency) budget authority for HUD. Following recent trends, the requested increase in budget authority was largely driven by declines in the amount available for rescission (88% decline from FY2008) and projected to be available in offsetting receipts (23% decline from FY2008). The FY2009 request for regular (non-emergency) appropriations—which is the amount of new funding that would be available for HUD's programs and activities—represented a slight decline (1.4%) from FY2008. The 110 th Congress adjourned before work on the FY2009 appropriations acts was complete. In the House, an FY2009 funding bill was marked up in subcommittee, but not reported. (The unreported House subcommittee-passed bill is not reflected in Table 2 or in the remainder of this report.) In the Senate, a bill was reported by committee, but not considered by the full Senate. Before the end of FY2008, Congress approved a continuing resolution funding most federal agencies at their FY2008 levels through March 6, 2009. That CR was extended through March 11, 2009. On March 11, 2009, a FY2009 omnibus appropriations bill was signed into law, funding HUD for the remainder of the fiscal year ( P.L. 111-8 ). It provides a more than 10% increase in regular, non-emergency appropriations over the FY2008 level. Prior to enactment of the omnibus, Congress enacted a FY2009 supplemental appropriations bill ( P.L. 111-6 ) designed to act as an economic stimulus. It provided nearly $13.7 billion for HUD programs (see discussion in the Appendix ). Selected Accounts The following section of the report provides a detailed discussion of the many of the accounts included in Table 2 . Tenant-Based Rental Assistance (Section 8 Vouchers) The tenant-based rental assistance account funds the Section 8 Housing Choice Voucher program. (See CRS Report RL32284, An Overview of the Section 8 Housing Programs , by [author name scrubbed].) Section 8 vouchers are portable rent subsidies that low-income families use to reduce their housing costs in the private market. HUD currently funds more than 2 million Section 8 vouchers, which are administered at the local level by quasi-governmental Public Housing Authorities (PHAs). This account—the largest in HUD's budget—funds the cost of those vouchers and the cost of administering the program. Table 3 presents three totals for the Section 8 tenant-based rental assistance account: budget authority provided; available budget authority, pre-rescission; and available budget authority, post-rescission. As described earlier, total budget authority provided includes current year appropriations, plus advance appropriations provided in the current fiscal year for use in the subsequent fiscal year; available budget authority includes current year appropriations, plus advance appropriations provided in the prior fiscal year for use in the current fiscal year. In FY2008, Congress enacted a rescission from the advance appropriations provided in FY2007 for use in FY2008. This rescission reduced the total funding available in FY2008. (See expanded discussion below under " Current Appropriations, Advance Appropriations and Rescissions ") Current Appropriations, Advance Appropriations and Rescissions The budget authority for the tenant-based rental assistance account is made up of two components: current year appropriations and advance appropriations. Current year appropriations are provided in a fiscal year for use in that fiscal year. Advance appropriations are provided in a fiscal year for use in the subsequent fiscal year. For budget scoring purposes, the Appropriations Committee is charged for an advance appropriation in the year it becomes available for use. Since FY2001, funding for the Section 8 program has included an advance appropriation, and for most years, the advance appropriation was the same amount every year. As a result, the amount of funding that was provided in a given year (the current year appropriation, plus the advance for the next year) was equal to the amount of budget authority available to the program for that fiscal year (the current year appropriation, plus the advance from the previous year). In FY2008, the advance appropriation provided by Congress to become available in FY2009 was less than the amount of the advance appropriation that became available in FY2008 (which had been provided in FY2007). As a result, the amount of budget authority provided in FY2008 ($16,391 million) was less than the amount of budget authority available to the program in FY2008 ($16,426 million). Congress was "scored" by CBO for the amount of budget authority available in the fiscal year, rather than the amount provided by the bill. FY2008 funding for the tenant-based rental assistance account was further complicated by a rescission that was included in the administrative provisions of the FY2008 appropriations law. Section 238 of Division K ( P.L. 110-161 ) directed that HUD reduce the advance appropriation that was provided in FY2007 for use in FY2008 by $723 million. This rescission did not affect the amount of budget authority provided by the FY2008 funding bill, but it did affect the amount of budget authority available to the program in FY2008, reducing it from $16,426 million to $15,703 million. This rescission served to lower the CBO "score" for the bill by $723 million. In his FY2009 budget request, President Bush requested that Congress again provide less in advance appropriations for the Section 8 tenant-based rental assistance account than will become available in FY2009. The President requested that Congress provide $4,000 million in advance appropriations for use in FY2010 (a decrease from the $4,158 million in advance appropriations provided in FY2008 for use in FY2009). In addition to the advance, the President's budget requested $11,881 million in current year funding for FY2009. Combined, President Bush's request would have resulted in $16,039 million in available budget authority for FY2009 (an increase from the $15,703 million available post-rescission in FY2008) and $15,881 million in budget authority provided in FY2009 (a decrease from the $16,391 million provided in FY2008). S. 3261 would have provided more in current year funding than the President's request ($12,503 million, compared to $11,881 million) and more in advance appropriations for use in FY2010 than the President's request ($4,200 million, compared to $4,000 million). However, S. 3261 also included a rescission of $800 million from the advance appropriation provided in FY2008 for use in FY2009. As a result, S. 3261 would have made less budget authority available for use in FY2009 ($15,861 million) than the President requested ($16,039 million) but would have made more budget authority available in FY2009 than was available in FY2008 ($15,703 million). The omnibus appropriations law increased current year funding ($12,817 million) above the FY2008 level, President Bush's FY2009 request, and S. 3261 . It provides $4,000 million in advance appropriations for use in FY2010, which is the same level President Bush requested, but less than was provided in FY2008 or proposed by S. 3261 . While it also includes a rescission ($750 million) of advance appropriations provided in FY2008 for use in FY2009, the amount rescinded is $50 million less than proposed in S. 3261 . Combined, the omnibus makes more budget authority available for use in FY2009 ($16,225 million) than was available in FY2008, was requested by President Bush or was included in S. 3261 . Renewal Funding In FY2008, Congress provided $14,695 million to renew existing vouchers, but also rescinded $723 million from advance appropriations intended to be used for renewal funding (as described above). The net funding for renewals in FY2008—$13,972 million—was intended to be supplemented with agencies' use of their net restricted assets. Net restricted assets are accumulated unspent funds that agencies are not permitted to spend because their use would result in the agency leasing more than their allocated number of vouchers (referred to as overleasing). In order to enable agencies to spend their net restricted assets, Congress directed HUD to reduce agencies' FY2008 funding by the amount by which their net restricted assets exceeded 7% of their prior year renewal funding (see discussion under "Renewal Formula" heading below). It was estimated that roughly the same amount of net restricted asset funding would be freed up as was rescinded ($723 million). As a result, it was assumed that the overall funding available for renewals in FY2008 would be equal to just under $14,695 million ($13,971 million in appropriations plus $723 billion in newly freed-up net restricted assets). For FY2009, President Bush requested $14,327million for voucher renewals, an increase over FY2008 ($13,972 million). HUD's Congressional Budget Justifications indicated that the President anticipated supplementing the amount requested for renewals by "freeing-up" PHAs' remaining net restricted assets, which HUD estimated to be worth roughly $600 million. Combining the President's requested appropriations level with the $600 million anticipated to be available from net restricted assets, the FY2009 program level requested by President Bush would have been $14,927 billion, an increase over the estimated FY2008 program level ($14,695 million, including the use of $723 million in net restricted assets), of about $232 million, or 1.6%. This rate of increase is likely below the annual adjustment factor (AAF), which is the inflation measure that is generally used for calculating PHAs' budgets; in FY2009, the unweighted average AAF is about 3.4%. S. 3261 proposed a renewal funding strategy similar to the one used in FY2008. The bill would have provided $14,827 million for renewals but also rescinded $800 million from the advance appropriation provided in the prior year. The resulting net funding level ($14,027 million) would have been less than the amount requested by the President for renewals ($14,327 million). However, the bill assumed that PHAs would have access to their net restricted assets in an amount roughly equal to the amount rescinded, making $14,827 million available to PHAs for renewals. This amount would be more than was provided in FY2008 and more than the overall program level proposed by the President (including the use of net restricted assets). The omnibus adopts the same funding strategy proposed by President Bush and S. 3261, but provides a higher funding level. Specifically, it provides $15,200 million for renewals, but rescinds $750 million in renewal funding from the prior year's advance appropriation. That leaves a net funding level of $14,450 million, which is more than $400 million greater than the amount proposed by S. 3261 and more than $100 million greater than the amount requested by President Bush. Combined with the assumed $750 million in "freed-up" net restricted assets, the omnibus provides a FY2009 program level ($15,200 million) that is about 3.4% higher than FY2008, and equal to the unweighted average AAF in FY2009 (see footnote 9). Renewal Formula One of the most contentious aspects of the HUD budget in recent years has been how Congress directs HUD to allocate voucher renewal funding to PHAs. Although a statutory allocation formula exists, it has been overridden in the annual appropriations acts each year since FY2003. In some years, PHAs have been funded according to the cost of their vouchers and the number of vouchers they have leased (called their utilization rate); in other years, PHAs have been funded on the basis of what they received in the previous year, without adjustments for cost or utilization changes. (For more information, see CRS Report RL33929, Recent Changes to the Section 8 Voucher Renewal Funding Formula , by [author name scrubbed].) In FY2008, Congress directed HUD to fund PHAs on the basis of their costs and utilization from the previous year, adjusted for inflation and other factors. Congress then directed HUD to reduce each PHA's allocation by the amount that their net restricted assets exceeded 7% of their previous year's allocation, and then prorate PHAs' budgets to fit within the amount appropriated ($13,922 million ). Some PHAs—PHAs participating in the Moving to Work demonstration, PHAs that spent more than they were allocated in the previous year, certain PHAs affected by the 2005 hurricanes, and PHAs under a HUD receivership—were subject to a different formula. Moving to Work PHAs were funded on the basis of their contracts with HUD; PHAs that spent more than their allocations were funded on the basis of what they received in the previous year, plus inflation; and the others were funded on the basis of the higher of what they received in the previous year (plus inflation), or what they were eligible to receive under the FY2008 funding formula. The prohibition on overleasing was continued in FY2008. Additionally, Congress provided $50 million for a rental subsidy reserve that HUD could use to fund PHAs that would either not have enough funding to maintain their current vouchers or that faced high portability costs. For FY2009, President Bush requested that PHAs be funded on the basis of what they received in the previous year, plus inflation, reduced by their remaining net restricted assets, and prorated to fit within the amount appropriated. The FY2009 budget request also included a $50 million rental subsidy reserve to adjust the budgets of PHAs facing unforeseen circumstances or high portability costs. Finally, it proposed allowing PHAs to use excess budget authority to fund additional vouchers above their baseline allocation (overleasing), which, as noted earlier, they have been prohibited from doing since FY2003. For PHAs whose costs and utilization remain relatively steady from FY2008 to FY2009, this formula change would have little impact; for PHAs with increases/decreases in costs and/or utilization, this formula change could result in a relative funding decrease/increase from FY2008 to FY2009. S. 3261 included a renewal funding formula similar to the one used in FY2008. Specifically, PHAs would have been funded on the basis of their costs and utilization from the previous year, adjusted for inflation and other factors, reduced by the amount of net restricted assets they had accumulated (up to $800 million in aggregate), and prorated to fit within the amount appropriated. The only agencies that would have been funded under an alternate formula would be Moving to Work agencies, who would continue to be funded on the basis of their agreements. S. 3261 would have maintained the prohibition on overleasing. Of the amount available for renewals, $100 million would have been set aside to adjust the budgets of agencies (1) with a significant increase in costs due to unforeseen exigencies or portability; (2) with increased leasing between the end of the fiscal year (the period upon which the cost and utilization data are based) and the end of the calendar year (the period for which PHAs are funded); or (3) with low utilization because of vouchers that were set aside for prior, project-based commitments. The omnibus funding bill directs HUD to fund PHAs using roughly the same formula proposed in S. 3261 . It directs HUD to fund PHAs based on their costs and utilization from FY2008, adjusted for inflation and other factors, reduced by the amount of net restricted assets they had accumulated (up to $750 million in aggregate), and prorated to fit within the amount appropriated. It also includes a $100 million set aside, which is the same as S. 3261 , but contains an extra category of eligible PHAs: those with VASH vouchers (discussed below). Administrative Fee Formula Prior to FY2003, administrative fee funding was provided as a part of voucher renewal funding. PHAs were paid administrative fees on a per voucher basis, in an amount based on a formula tied to HUD-established fair market rents (FMRs) in their communities. In FY2003, Congress separated administrative fee funding from voucher renewal funding and directed HUD to provide administrative fees to PHAs on a pro-rata basis, according to what they received in the previous year. This formula change was maintained until FY2008, when Congress directed HUD to allocate administrative fees to PHAs on the basis of the per voucher formula tied to FMRs that was in use prior to FY2003. However, Congress continued to set-aside a fixed amount of funding for administrative fees ($1,351 million in FY2008). While more administrative fee funding was made available to PHAs in FY2008 than FY2007, it is estimated that the amount provided in FY2008 would not be sufficient to fund 100% of PHAs administrative fee eligibility under the formula. For FY2009, President Bush requested an increase in administrative fee funding (by about $50 million to $1,400 million). The President's budget request proposed using the same formula for allocating administrative fees as was used in FY2008. S. 3261 would have provided $1,500 million for administrative fees. That amount included $1,400 million for administrative fees, to be allocated using the formula used in FY2008, as requested by the President. Of the remaining $100 million, $50 million would have been set aside for PHAs requiring extra funds to administer their vouchers and $50 million would have been set-aside for Family Self Sufficiency (FSS) coordinators. (FSS coordinators have historically been funded separately from administrative fees.) The ominbus bill includes the same proposed funding levels for administrative fees in FY2009 as S. 3261 . New Incremental Vouchers FY2008 was the first year since FY2002 that Congress funded new incremental vouchers. From FY2003 through FY2007, the only "new" vouchers that were funded by Congress were vouchers for families displaced from other forms of housing assistance (called tenant protection vouchers). In FY2008, Congress provided $125 million to fund new vouchers for homeless veterans (called Veterans Affairs Supportive Housing (VASH) vouchers), non-elderly disabled families, and families in the child welfare system, including youth aging out of foster care (referred to as Family Unification Program, or FUP, vouchers). In his FY2009 budget, President Bush requested $39 million to fund incremental vouchers for elderly and disabled families who were displaced by the 2005 hurricanes and whose FEMA-funded rental assistance will be ending in March 2009. He also requested $75 million for new VASH vouchers. S. 3261 would have provided $20 million for FUP vouchers, $75 million for VASH vouchers, and $39 million for vouchers for elderly and disabled households displaced by the 2005 hurricanes. The omnibus appropriations bill provides $20 million for FUP vouchers, $75 million for VASH vouchers, and $30 million for non-elderly disabled households, not directed specifically to households displaced by the 2005 hurricanes. Project-Based Section 8 Rental Assistance This account provides funding to administer and renew existing project-based Section 8 rental assistance contracts between HUD and private landlords. Under those contracts, HUD provides subsidies to units owned by private landlords that allow eligible low-income families to live in the units but pay only 30% of their incomes toward rent. No new contracts have been entered into under this program since the early 1980s. When the program was active, Congress funded the contracts for 20-40 year periods, so the monthly payments for landlords came from old appropriations. However, once those contracts expire, if they are renewed, they require new annual appropriations. Two totals are provided in Table 4 : budget authority provided , which includes advance appropriations provided for use in the subsequent fiscal year; and available budget authority, which includes the advance appropriation provided in the prior fiscal year for use in the current fiscal year. Contract Renewal Funding In July 2007, HUD stopped making monthly payments to project-based Section 8 property owners and suspended renewals of expiring contracts. At the time, HUD stated that they lacked sufficient funding to meet the needs of their existing contracts. Department officials stated that the problem arose because HUD's legal counsel had determined that HUD could no longer obligate partial funding when it entered into a 12-month contract renewal with a property owner, which had been the Department's past practice. The FY2007 funding level had not been sufficient to all contract renewals for their full 12 month terms. The Office of Management and Budget (OMB) and HUD worked together to identify sufficient funding to resume payments to landlords for the remainder of FY2007 (including retroactive payments) and HUD modified its contracts with property owners to indicate that funding might not be set aside for the full length of the contract. This practice of short-funding contracts was the subject of a hearing before the House Financial Services Committee. At that hearing, a HUD official testified that HUD's FY2008 funding request would be sufficient to partially fund contracts through the end of FY2008. Figure 4 helps illustrate the concept of full contract funding versus partial contract funding. Project-based contracts expire throughout the year. When a contract expires, HUD can either provide funding for the full 12-month term of the contract (the light plus dark shaded areas of Figure 4 ) or some shorter period, such as through the end of the federal fiscal year, September 30 (the dark shaded areas of Figure 4 ). For example, if a contract expires at the beginning of July, in order to fund it through the end of the federal fiscal year (as shown in the dark shaded area in Figure 4 ), HUD would be required to provide 3 months' worth of funding. To fund the contract for a full year, through the following July, HUD would be required to provide 12 months of funding (as shown in the dark and light shaded area in Figure 4 ). Assuming all of the roughly 18,000 project-based Section 8 contracts expire evenly across the months of the year (which is likely not the case), in order to fund all 18,000 contracts through the end of the fiscal year, HUD would need 78 months worth of funding (see dark shaded area of Figure 4 ). In order to fund all 18,000 contracts for their full 12 month terms, HUD would need 144 months worth of funding (sum of dark shaded and light shaded areas in Figure 4 ). For FY2008, Congress provided about $600 million more for project-based rental assistance than the President requested. That amount of funding was estimated to be sufficient to fund all of the existing contracts through at least the end of the fiscal year, but not sufficient to provide a full 12 months worth of funding for all of the contracts. For FY2009, President Bush requested $6,768million for project-based contract renewals and also requested that Congress provide an additional $400 million in advance appropriations to become available in FY2010. HUD's Congressional Budget Justifications indicated that the amount of current year funding requested would be sufficient to fund all contracts through the end of the 2009 federal fiscal year (September 30, 2009), and that the $400 million advance would be sufficient to cover the program's payment needs on the first day of the next fiscal year (October 1, 2009). The requested funding level would not be sufficient to fully fund all contracts for 12 months. HUD estimated that it would have needed an additional $1,900 million to fully fund all contracts for 12 months. S. 3261 would have provided $6,468 million in current year funding for project-based contract renewals in FY2009 and $1,750 million in advance appropriations to become available in FY2010. The total amount provided by S. 3261 for renewals would be $8,218 million, $1,050 million more than the President's request. The Senate committee report ( S.Rept. 110-418 ) noted that the increased funding would not be sufficient to fund all contracts for 12 months but would "restore some stability to the program by allowing the Department to enter into longer-term contracts with owners." The omnibus appropriations bill provides $7,100 million in current year funding and $400 million in advance appropriations for use in FY2010 for the project-based rental assistance account. The bill provides a total of $7,268 million for renewals, $6,868 million of which is available in FY2009. In addition to the regular FY2009 funding provided by the omnibus, the American Recovery and Reinvestment Act of 2009 ( P.L. 111-5 ) included $2 billion for project-based contract renewals in FY2009. The amount provided by P.L. 111-5 , paired with the regular FY2009 funding level provided by the omnibus, should be sufficient to allow HUD to return to funding project-based renewal contracts on a 12-month basis. (For more information, see the Appendix .) Public Housing The public housing program provides publicly owned and subsidized rental units for very low-income families. Although no new public housing developments have been built for many years, Congress continues to provide funds to the more than 3,100 public housing authorities (PHAs) that own and maintain the existing stock of more than 1.2 million units. Through the Operating Fund, HUD provides funds to PHAs to help fill the gap between tenants' contributions toward rent and the cost of ongoing maintenance, utilities, and administration of public housing. Through the Capital Fund, HUD provides funding to PHAs for large capital projects and modernization needs. HOPE VI is a competitive grant program that provides funds to help demolish and/or redevelop severely distressed public housing developments, with a focus on building mixed-income communities. Operating Fund Proration PHAs receive operating funding on the basis of a formula that is meant to make up the difference between what it costs to maintain public housing and what PHAs receive in tenant rents. Each year, HUD estimates PHA budgets on the basis of this formula. HUD then compares the amount of funding PHAs are eligible to receive in aggregate to the amount of funding provided by Congress. If the amount provided by Congress is less than PHAs' aggregate budget eligibility, HUD applies an across-the-board reduction to PHAs' budgets. The percentage of eligible funding provided to PHAs after applying the across-the-board reduction is referred to as the proration level. In FY2008, Congress provided $4,200 million for public housing operating funds, which was sufficient to fund an estimated 84% of PHA budget eligibility. In FY2009, President Bush requested just under $4,300 million, which HUD's Congressional Budget Justifications estimated would result in a proration level of 81%. S. 3261 would have provided $100 million more than the President's request and $200 million more than the amount provided in FY2008. Using the estimates from HUD's Congressional Budget Justifications, the funding level provided by S. 3261 could be estimated to result in a proration level of just under 83%. The omnibus provides just under $4,455 for operating subsidies in FY2009. Using updated estimates of operating funding eligibility from HUD, the funding level provided by the omnibus can be estimated to result in a proration level of just under 89%. Capital Fund President Bush's FY2009 budget requested a roughly 16% decrease in funding for formula grants under the Capital Fund, compared to FY2008. The amount requested is roughly equal to the estimated $2 billion in new capital needs that accrue every year in public housing. In addition to new needs, there is an estimated backlog of roughly $20 billion in unmet capital needs. These estimates of need, however, are more than 10 years old, and the public housing stock has changed significantly during that time, due to demolition and disposition of many units. HUD's Congressional Budget Justifications note that HUD is in the process of undertaking a Capital Needs Assessment in order to estimate the current capital needs of public housing. HUD's Congressional Budget Justifications also note that PHAs can use their capital funding to leverage outside resources to help address unmet capital needs. S. 3261 would have provided $2,342 million for capital grants, roughly 21% more than the President's requested funding level and slightly more (<1%) than was provided in FY2008. The omnibus appropriations bill included $2,356 billion for capital funding. The amount is more than S. 3261 , and is in addition to the $4 billion in capital funding provided by the American Recovery and Reinvestment Act of 2009 ( P.L. 111-5 ). (For more information, see the Appendix .) HOPE VI In each budget since FY2003, President Bush requested no new funding for the HOPE VI public housing revitalization program. In response, each year, Congress has continued to fund the program. Up until FY2003, the program was generally funded at just under $600 million; in recent years its funding level has generally been around $100 million. HUD's FY2009 Congressional Budget Justifications criticized the program for a slow expenditure of grant funds. They also noted that PHAs are able to use their capital fund grants to leverage resources in much the same way HOPE VI grants are used to leverage additional resources, making HOPE VI less necessary. Proponents of HOPE VI cite the program's transformative effects on severely distressed communities. (For additional information, see CRS Report RL32236, HOPE VI Public Housing Revitalization Program: Background, Funding, and Issues , by [author name scrubbed]). S. 3261 would have provided $100 million for HOPE VI, setting aside $2 million for technical assistance. It also included language to extend the authorization for the program through the end of FY2009. Authorization for the HOPE VI program is currently slated to sunset at the end of FY2008. The omnibus provides $120 million for HOPE VI, setting aside just over $2 million for technical assistance. It also extends the program through the end of FY2009. Native American Housing Block Grants The Native American Housing Assistance and Self-Determination Act of 1996 (NAHASDA) reorganized the system of federal housing assistance to Native Americans by eliminating several separate programs of assistance and replacing them with a single block grant program. In addition to simplifying the process of providing housing assistance, the purpose of NAHASDA was to provide federal assistance for Indian tribes in a manner that recognizes the right of Indian self-determination and tribal self-governance. NAHASDA provides block grants to Indian tribes or their tribally designated housing entities (TDHE) for affordable housing activities. Affordable housing activities include any programs currently authorized in law, as well as model activities as approved by HUD. The President's budget requested an appropriation of $627 million in Native American Block Grants for FY2009, a decrease of $3 million from the level enacted for FY2008. The request included $2 million in credit subsidy to support about $17 million in loans under the Title VI program. No set-aside was requested for the National American Indian Housing Council. The Senate committee recommended an appropriation of $650 million in Native American Block Grants for FY2009, a $23 million increase over the budget request and a $20 million increase over the FY2008 level. As requested by the Budget, the committee recommended $2 million in credit subsidy that would support up to $17 million in guaranteed loans. The committee also recommended $4 million for inspections of Indian housing units, contract expertise, training, technical assistance, oversight, and management. The FY2009 omnibus legislation provides $645 million in Native American Block Grants, an increase of $18 million over the President's request and an increase of $15 million over the FY2008 enacted level, but $5 million less than the amount recommended by the Senate committee. This amount includes $2 million in credit subsidy that would support up to $17 million in guaranteed loans; $4 million for inspections of Indian housing units, contract expertise, training, and technical assistance in training, oversight, and management; and $3.5 million for a national organization representing Native American housing interests to provide training and technical assistance to Indian housing authorities and TDHE. The American Recovery and Reinvestment Act of 2009 ( P.L. 111-5 ) included an additional $510 million in funding for Native American Block Grants. Half of this amount ($255 million) is to be distributed to tribes and TDHE according to the formula used in FY2008, and is to be used for new construction, acquisition, rehabilitation (including energy efficiency and conservation), and infrastructure development. The remaining $255 million is to be distributed to tribes and TDHE through competitive grants, and recipients are to prioritize construction and rehabilitation projects that will create employment for low-income and unemployed persons. Housing for Persons with AIDS (HOPWA) The HOPWA program (42 U.S.C. §§12901-12912) provides housing assistance and related supportive services for low-income persons living with HIV/AIDS and their families. Funding is distributed both by formula allocation and competitive grants to states, localities, and nonprofit organizations. (For background, see CRS Report RL34318, Housing for Persons Living with HIV/AIDS , by [author name scrubbed]). For FY2009, the omnibus appropriations bill funds HOPWA at $310 million, which is $10 million more than the President's request and the FY2008 funding level, but $5 million less than the amount proposed by the Senate Appropriations Committee in the 110 th Congress ( S. 3261 ). The Bush Administration's budget recommended changing the formula used to allocate HOPWA funds to states and localities. Currently the formula uses the cumulative number of AIDS cases in a recipient jurisdiction (including those individuals who have died) to determine how funds are distributed. The method proposed by the President would have used as formula factors the number of persons living with AIDS and would have included a housing cost factor to account for rents in high cost areas. The omnibus appropriations bill does not discuss the President's proposal to change the HOPWA formula. Office of Rural Housing and Economic Development (RHED) This office was established to enable HUD to have a comprehensive approach to rural housing and rural economic development issues. The RHED program provides funding for capacity building in rural, under-served areas; and grants for Indian tribes, state housing finance agencies, state and local economic development agencies, rural nonprofits, and rural community development corporations to pursue strategies designed to meet rural housing and economic development needs. As in previous years, the Bush Administration's FY2009 budget requested no funding for RHED. The Administration argued that if its proposed revisions of the Community Development Block Grant program (CDBG) are enacted, the needs of America's rural communities will be addressed through the state CDBG program, the HOME program, and through the U.S. Department of Agriculture (USDA) rural housing programs. The Senate committee recommended an appropriation of $30 million for RHED for FY2009, which is $13 million more than the FY2008 level. The committee noted that the Office plays an important role in HUD's community development activities and that the RHED programs are sufficiently different from the housing programs administered by the USDA to warrant separate appropriations. The committee noted its concern about the high rates of unemployment and poverty experienced by Native Americans and stated that is believes that it is critical to give federally recognized Indian tribes the resources and tools that will enable them to promote economic development, create jobs, and increase housing capacity. Therefore the committee recommended that $12 million of the increased RHED funds be used for conducting economic development and entrepreneurship activities for federally recognized Indian tribes. For FY2009, the omnibus provides $26 million for RHED. Of this amount, $5 million must be made available to promote economic development and entrepreneurship for federally-recognized Indian tribes. Community Development Fund/Block Grants The Community Development Fund (CDF) account supports activities undertaken through the Community Development Block Grant (CDBG) program. In addition, the CDF has funded other community development-related programs in past years, including the Economic Development Initiatives (EDI) and Neighborhood Initiative (NI) demonstrations. President Bush's FY2009 budget recommendation of $2,927 million for the formula portion of CDBG was $659 million (18.4%) less than the $3,586 million appropriated for distribution to communities and states in FY2008. In addition, the President's FY2009 budget request stated that the Administration would seek to reform the CDBG program during the 110 th Congress by again offering Congress a proposal that was first unveiled during the 109 th Congress, namely, the Community Development Block Grant Reform Act. The Bush Administration proposal, which would have restructured the CDBG distribution formula, included the following changes: replacement of the existing dual CDBG formula with a single weighted formula that would target assistance on the basis of a community's or state's share of households living in poverty (excluding college students), the number of female-headed households with minor children, the number of overcrowded housing units, and the number of housing units 50 years or older occupied by low-income families and per capita income; a requirement that entitlement communities would have to meet a minimum grant threshold in order to receive a direct annual allocation; a two-year transition for communities that no longer met the minimum grant threshold amount; and a new $200 million bonus grant program called Economic Development and Revitalization Challenge Grants to reward entitlement communities whose programs resulted in improved living conditions in distressed neighborhoods. In addition to requesting reduced funding for CDBG formula grants, the Administration's FY2009 budget proposed eliminating funding for several other community development related programs, including Rural Housing and Economic Development Grants, Community Development Block Grant Section 108 loan guarantees, and Brownfields Economic Development Initiatives. The budget characterized these programs as duplicative of the activities funded by the CDBG formula grant program. S. 3261 , as reported to the Senate on July 14, 2008, recommended an appropriation of $3,889 million for Community Development Fund activities in FY2009. This included $3,586 million for formula-based allocations to 1,173 entitlement communities and the 50 states and Puerto Rico, the same amount appropriated for FY2008, but $659 million more than requested by the Bush Administration. The Senate Appropriations Committee also recommended $201 million in EDI assistance to be allocated to 192 congressionally designated projects for an average award of just over $1 million. For FY2008, approximately 820 projects were awarded $180 million in EDI funds for an average allocation of approximately $220,000. For FY2009, the omnibus legislation provides $3,900 million for the Community Development Fund, including $3,642 million for CDBG formula grants. The amount appropriated for formula grants when combined with the $1 billion in additional funding appropriated under the American Recovery and Reinvestment Act ( P.L. 111-5 ) results in a 21% increase in formula allocations awarded to the 1,162 entitlement communities, the 50 states and Puerto Rico. In addition, the omnibus appropriates $165 million for Economic Development Initiative grants for 510 earmarked projects, and $20 million in Neighborhood Initiative grants for 27 earmarked projects. CDBG Section 108 Loan Guarantees The Section 108 loan guarantee program allows states and entitlement communities to leverage their annual CDBG allocation in order to help finance brownfield redevelopment, large scale economic development, and housing projects. CDBG entitlement communities and states are allowed to borrow an amount equal to as much as five times their annual CDBG allocation for qualifying activities. As security against default, states and entitlement communities must pledge their current and future CDBG allocations. The Bush Administration's budget did not request funding for the Section 108 loan guarantee program for FY2009. Citing the results of its Program Assessment Rating Tool (PART), which found the program was duplicative and that results were not demonstrated, the Bush Administration recommended the program be terminated. The Senate Appropriations Committee recommended $6 million in subsidies to support $275 million in Section 108 loan guarantee commitments. This is a slight increase above the amount appropriated in FY2008. For FY2009, consistent with the Senate's recommendation, the omnibus legislation appropriates $6 million in subsidies in support of $275 million in Section 108 loan guarantee commitments. In addition, the omnibus includes a general provision (Sec. 222 of Title III) that clarifies a previous practice allowing non-entitlement jurisdictions to access a state's Section 108 loan guarantee program, and requires HUD to promulgate regulations governing this provision within 60 days of enactment of the legislation. Brownfields Economic Development Initiative The Brownfields Economic Development Initiative program is a competitive grant program that provides funds to assist communities with the redevelopment of abandoned, idled, and underused industrial and commercial facilities where expansion and redevelopment are burdened by real or potential environmental contamination. The funds are used in support of CDBG Section 108 loan guarantees and may be used in collaboration with brownfield-related funding by the Environmental Protection Agency. The Bush Administration's FY2009 budget—as in previous years—recommended termination of the Brownfields Redevelopment program. The Senate Appropriations Committee-approved bill did not include funding for brownfield redevelopment activities. For FY2009, the omnibus legislation appropriates $10 million for the brownfields redevelopment account and includes a provision prohibiting brownfield funds from being used as collateral for Section 108 loan guarantees. The HOME Investment Partnerships Program Created in 1990, the HOME Investment Partnerships Program provides formula-based block grant funding to states, units of local government, and insular areas to fund affordable housing initiatives. Eligible activities include acquisition, rehabilitation, and new construction of affordable housing, as well as rental assistance for eligible families. The HOME program account has also been used to fund related programs. The American Dream Downpayment Initiative (ADDI), created in 2003 ( P.L. 108-186 ), funds HOME grantees to provide downpayment, closing cost, and rehabilitation assistance to first-time home buyers. Housing counseling assistance, which has typically been funded within the HOME account, is authorized under Section 106 of the Housing and Urban Development Act of 1968 (P.L. 90-448). HUD provides competitive grants to local housing counseling agencies, intermediaries, and state Housing Finance Agencies to provide several categories of housing counseling, including comprehensive counseling, counseling services that address predatory lending, counseling in conjunction with HUD's Homeownership Voucher Program, counseling services that specifically target colonias (rural communities on the U.S.-Mexico border), and Home Equity Conversion Mortgage counseling. HOME Formula Grants President Bush's FY2009 budget requested a $275 million increase in funding for HOME formula grants over the FY2008 funding level. HUD's Congressional Budget Justifications identify the HOME program as key to the President Bush's goal of increasing homeownership opportunities, especially for minorities. They also cite the program's relatively strong rating from the Office of Management and Budget's (OMB) Program Assessment and Rating Tool evaluation. According to HUD's Congressional Budget Justifications, OMB found that the program "has a clear purpose, strong management, and can demonstrate results." S. 3261 would have provided $1,937 million for formula grants, just under 2% more than the President's requested level and a nearly 19% increase over the FY2008 level. The 2009 omnibus legislation provides $1,809 million for formula grants, nearly 5% less than the President's requested level but over 11% more than the FY2008 level. The American Recovery and Reinvestment Act of 2009 ( P.L. 111-5 ) included $2.25 billion in emergency FY2009 funding for the HOME account. These funds are to be distributed to states based on the amount of HOME formula funding that each state and its participating localities received in FY2008. However, states are required to use this funding to provide gap financing for Low-Income Housing Tax Credit (LIHTC) projects, rather than for the full range of housing activities that are usually eligible uses of HOME funds. American Dream Downpayment Initiative (ADDI) President Bush's budget requested a 400% increase in funding for ADDI, from $10 million in FY2008 to $40 million in FY2009. The program was originally authorized through the end of FY2007 at $200 million per year, although it has never been funded at more than $86 million. The program was slated to sunset at the end of FY2007, but it was continued through FY2008 by the FY2008 appropriations law. The President's FY2009 budget requested language to extend the program through FY2011. S. 3261 would have provided $10 million for ADDI, an amount equal to the FY2008 funding level. The bill included language to extend the authorization for ADDI, as requested by the President. The 2009 omnibus legislation includes neither funding for ADDI nor language extending its authorization. Housing Counseling In each of the past several years, President Bush requested that Congress provide funding for housing counseling assistance in a separate account, and each year, Congress had continued to fund it as a set-aside within the HOME account. For FY2009, the President's budget again requested that housing counseling be funded separately from HOME, at $15 million more than it was funded in FY2008. HUD's Congressional Budget Justifications cite the housing counseling program's ability to aid troubled homeowners during the current period of increased mortgage defaults and foreclosures as the reason behind the request for increased funding. S. 3261 would have funded housing counseling in a separate account, at the President's requested level ($65 million). The 2009 omnibus legislation adopted this recommendation. Self-Help and Assisted Homeownership Opportunity Program This account funds the Self-Help Housing Opportunity Program (SHOP) program and several set-asides. Through the SHOP program, HUD provides grants to national and regional organizations and consortia that have experience in providing or facilitating self-help homeownership opportunities. Prospective home buyers with the assistance of volunteers provide "sweat equity" by contributing labor toward the construction of their homes. President Bush's FY2009 budget requested $40 million for the SHOP program, including just under $1 million for technical assistance. The President's budget did not include funding for Section 4 (capacity building) grants. These grants are usually awarded to four national intermediaries—National Community Development Initiative (Living Cities), the Local Initiative Support Corporation, the Enterprise Foundation, and Habitat for Humanity. Recipients use the funds to develop the capacity and ability of local community development corporations and community housing development organizations to develop and manage community development and affordable housing projects and programs. S. 3261 , as reported by the Senate Appropriations Committee, recommended an appropriation of $66 million for the Self-Help Homeownership Opportunities account. This is $6 million more than appropriated for FY2008 and $26 million more than requested by the Bush Administration. The bill included $35 million for capacity-building grants to be awarded to the Enterprise Foundation, the Local Initiative Support Corporation, and Habitat for Humanity. This is $1 million more than appropriated in FY2008. The bill would also have appropriated $4 million to be awarded to the Housing Assistance Council for capacity-building activities in rural areas. The omnibus legislation appropriates $64 million for self-help homeownership opportunities, including $26.5 million for SHOP, which is expected to leverage $7 million from other sources; $34 million for capacity building activities carried out by the Local Initiative Support Corporation, the Enterprise Foundation, and Habitat for Humanity; and $4 million for activities of the Housing Assistance Council. Homeless Programs Homeless Assistance Grants is the blanket title given to four homeless programs authorized by the McKinney-Vento Homeless Assistance Act ( P.L. 100-77 ) and administered by HUD. Three of the four programs are competitive grants: the Supportive Housing Program (SHP), the Shelter Plus Care program (S+C), and the Section 8 Moderate Rehabilitation Assistance for Single Room Occupancy Dwellings program (SRO). Funding for the fourth HUD program, the Emergency Shelter Grants (ESG), is distributed via a formula allocation to states and local communities. The Homeless Assistance Grants are codified at Title 42, Chapter 119, Subchapter IV of the U.S. Code. (For more information about the Homeless Assistance Grants, see CRS Report RL33764, The HUD Homeless Assistance Grants: Distribution of Funds , by [author name scrubbed]). Funding levels for the Homeless Assistance Grants have increased steadily since FY2005, from $1,230 million in that year to $1,586 million in FY2008. For FY2009, the omnibus appropriations legislation provides $1,677 million for the grants, an increase of $91 million over the FY2008 appropriation and $41 million more than was requested by the President for FY2009. The Senate Appropriations Committee bill in the 110 th Congress ( S. 3261 ) had proposed to fund the Homeless Assistance Grants at $1,667 million. Unlike the President's budget request, which proposed to set aside $50 million for a Samaritan initiative to provide permanent supportive housing for chronically homeless individuals, the omnibus does not set aside funding for this purpose. The omnibus appropriations bill provides $10 million for a demonstration program for the prevention of homelessness among veterans. Under the demonstration program, HUD is to collaborate with the Department of Veterans Affairs (VA) and the Department of Labor (DOL) to provide funding to a limited number of urban and rural sites, which in turn are to provide housing and services to veterans who are at risk of homelessness or are temporarily homeless. At least three sites selected for the demonstration are required to have a high number of service members separating from the military and transitioning to civilian life, and at least four sites are to be in rural areas where access to VA medical centers and other services may be limited. The omnibus bill also provides $3 million "to conduct research on homeless issues, including homeless prevention and youth homelessness." In addition to funds for the Homeless Assistance Grants, the omnibus legislation (like S. 3261 and the President's budget) provides $75 million for Section 8 vouchers for homeless veterans (see discussion of new incremental vouchers under Section 8 tenant-based rental assistance). Funding for these vouchers is provided through the Section 8 tenant-based account and not through the Homeless Assistance Grants. About 1,800 of these vouchers were initially provided for homeless veterans through a collaboration between HUD and the VA called HUD-VA Supported Housing, or HUD-VASH. Approximately 1,000 of these vouchers are still used by veterans today. In FY2008, Congress appropriated $75 million for HUD-VASH, which funded 10,070 new vouchers. (For more information about HUD-VASH, see CRS Report RL34024, Veterans and Homelessness , by [author name scrubbed].) Housing Programs for the Elderly and Persons with Disabilities Formerly known together as Housing for Special Populations, the Section 202 Housing for the Elderly program (12 U.S.C. §1701q) and the Section 811 Housing for Persons with Disabilities program (42 U.S.C. §8013) provide capital grants and ongoing project rental assistance contracts (PRAC) to developers of new subsidized housing for these populations. In addition, the Section 811 program provides vouchers for tenants with disabilities to use in the private housing market. The Housing for the Elderly appropriation includes funds for the Service Coordinator program and the Assisted Living Conversion program. (For more information about Section 202, see CRS Report RL33508, Section 202 and Other HUD Rental Housing Programs for Low-Income Elderly Residents , by [author name scrubbed], and for more information about Section 811, see CRS Report RL34728, Section 811 and Other HUD Housing Programs for Persons with Disabilities , by [author name scrubbed]). Section 202 The FY2009 omnibus appropriations bill appropriates $765 million for the programs that provide housing and services for elderly households (defined by HUD as those with a member age 62 or older). This amount exceeds the President's request by nearly $200 million and is $30 million more than was provided in FY2008. The Senate Appropriations Committee bill in the 110 th Congress ( S. 3261 ) had recommended the same funding level as the omnibus legislation. Of the total provided by the omnibus appropriations bill, $90 million is allocated for the Service Coordinator program, an increase of $10 million over both the President's request and the amount in S. 3261 , and $30 million more than was appropriated for the program in FY2008. The omnibus funds the Assisted Living Conversion program at $25 million, the same amount that was provided in FY2008, as well as requested by the President and the Senate Appropriations Committee for FY2009. The FY2009 omnibus appropriations bill does not provide funding for a leveraged financing demonstration program, which was proposed by the President for the second year in a row and was also included in the Senate Appropriations Committee's bill. The proposed program would have provided $15 million for HUD to work together with private sector professionals to increase the use of mixed financing arrangements, such as incorporating Low Income Housing Tax Credits, to develop Section 202 housing. The House Explanatory Statement accompanying the omnibus appropriations bill states that "the bill does not include funding for a mixed finance demonstration program as requested, but encourages the Department to use its substantial authority under existing law to streamline the ability of project sponsors to leverage other public and private sources of capital financing, including the low income housing tax credit." The omnibus legislation includes language similar to language that was included in the Senate Appropriations Committee bill to make a change to the refinancing provisions of the statute governing the Section 202 program. Under current law, Section 202 owners may refinance their properties if they agree to operate the project under terms at least as advantageous to tenants as the terms of the existing loan and if the refinancing results in a lower interest rate and reduced debt service. Under the FY2009 omnibus appropriations bill, owners may also refinance loans with interest rates at or below 6% in order to address a property's physical needs (and do not need to refinance into a loan with a lower interest rate and reduced debt service). These refinancing transactions for loans with interest rates at or below 6% also have several other requirements: The transactions have to meet a cost benefit analysis; The transactions cannot result in increased costs for project-based Section 8 rental assistance except under certain circumstances; With the approval of HUD, owners can raise tenant rents in order to meet increased debt service and operating costs if insufficient project-based Section 8 rental assistance is available to meet these costs. However, HUD's approval of increased tenant rents "shall be the basis for the owner to agree to terminate the project-based rental assistance contract," which triggers tenant eligibility for enhanced Section 8 vouchers; When tenants who have received enhanced vouchers as a result of refinancing terminate their occupancy, those units become eligible for project-based Section 8 rental assistance; and Owners have to enter into a use agreement to maintain affordability of units for 20 years beyond the maturity date of the original Section 202 loan. The FY2009 omnibus appropriations bill (like the Senate Appropriations Committee bill and the President's request) appropriates $2 million for technical assistance for the Section 202 and Section 811 programs to improve grant applications and to facilitate the development of housing. In addition, the House Explanatory Statement includes language directing HUD to establish a Section 202 and a Section 811 funding allocation for the State of Nevada. These provisions were also included in the Senate Appropriations Committee Report ( S.Rept. 110-418 ). Section 811 The FY2009 omnibus appropriations legislation provides $250 million for the Section 811 program. This is $90 million more than was proposed by the President's budget and approximately $13 million more than was appropriated in FY2008. The Senate Appropriations Committee bill in the 110 th Congress ( S. 3261 ), like the omnibus, proposed to provide $250 million for Section 811. The omnibus appropriations bill does not fund new Section 811 vouchers for persons with disabilities, although it provides $87 million to renew existing vouchers. The President's budget and Senate Appropriations Committee bill included similar proposals. As with the Section 202 program, the omnibus bill does not fund the President's proposed leveraged financing demonstration program. President Bush's budget proposed to make $10 million available for this program to encourage mixed finance developments for persons with disabilities. Federal Housing Administration The FHA administers a variety of mortgage insurance programs that insure lenders against loss from loan defaults by borrowers. Through FHA insurance, lenders make loans that otherwise may not be available, and enable borrowers to obtain loans for home purchase and home improvement, as well as for the purchase, repair, or construction of apartments, hospitals, and nursing homes. The programs are administered through two program accounts: the Mutual Mortgage Insurance/Cooperative Management Housing Insurance fund account (MMI/CMHI) and the General Insurance/Special Risk Insurance fund account (GI/SRI). The MMI/CMHI fund provides insurance for home mortgages. The GI/SRI fund provides insurance for more risky home mortgages, for multifamily rental housing, and for an assortment of special-purpose loans such as hospitals and nursing homes. (For more information, see CRS Report RS20530, FHA-Insured Home Loans: An Overview , by [author name scrubbed] and [author name scrubbed]). In past years, receipts to the MMI fund have exceeded expenses, so the MMI fund did not need appropriations for credit subsidy. The FY2009 Budget estimated that, if no programmatic changes were made, the MMI fund would need either credit subsidy or increases in insurance premiums to continue operation. The Budget proposed to permit FHA to set insurance premiums on the basis of the risk that the borrowers pose to the insurance fund, and it proposed to set the rate at a level that would avoid the need for subsidy appropriations. Barring the authority to establish risk-based premiums, the Budget proposed that FHA would use its existing authority to increase the insurance premiums charged to borrowers. The Budget assumed that the increased premiums coupled with legislative and programmatic changes would avoid the need for credit subsidy appropriations. Legislative changes proposed in the budget included reform of the FHA single family insurance program to enable FHA to be more flexible in responding to changes in the mortgage market, and to provide a lower cost alternative to borrowers who might otherwise choose subprime mortgage products or even become the victims of predatory lending. The Budget proposed to move several single-family programs from the GI/SRI fund to the MMI fund. The Budget proposed that no new loan insurance would be provided to households using seller-financed downpayments to meet their downpayment requirements. Several of these proposals were included in P.L. 110-289 , the Housing and Economic Recovery Act of 2008. (For more information on the changes enacted for FHA please see CRS Report R40243, The FHA Modernization Act of 2008 , by [author name scrubbed].)T The Budget and S. 3261 , as passed by the Senate Appropriations Committee, recommended a commitment limitation of $185 billion for the MMI fund. The Budget requested a commitment limitation of $35 billion for the GI/SRI fund, while the Senate Committee recommended a commitment limitation of $45 billion. The committee report ( S.Rept. 110-418 ) suggested that, in the wake of the present housing crisis, FHA must reestablish itself as America's mortgage lender. The committee suggested that FHA work to ensure that families are able to purchase and stay in their homes with affordable loans that they fully understand. The committee directed HUD to provide a report to the Committee on Appropriations within 90 days on the proper role of HUD and to establish an Office of Predatory Lending. Working in conjunction with the Department of Justice, the new office would establish rules and requirements to protect the public from fraud and abuse in housing loans. The omnibus permits FHA to insure up to $315 billion in mortgages during FY2009. This is a 70% increase over the $185 billion approved for FY2008. By statute, the aggregate number of Home Equity Conversion Mortgages (HECMs) that have been insured by FHA since inception of the program may not exceed 275,000. The number of HECMs has frequently exceeded that number. The FY2009 Omnibus Appropriations Act provides that, despite the limit in present law, FHA may continue to insure HECMs through September 30, 2009. Government National Mortgage Association (Ginnie Mae) Ginnie Mae is the entity within HUD that guarantees the timely payment of principal and interest on securities backed by mortgages insured or guaranteed by FHA, the Department of Veterans Affairs (VA), or the Rural Housing Service. Legislative Fee Change For FY2009, budget proposed an administrative provision which would bring all of Ginnie Mae's administrative contract expenses under discretionary authority. This change is estimated to cost $43 million, which would be offset in the first year by savings from eliminating HUD's mandatory authority to fund these expenses. The Senate committee did not assume this change in the accounts, and it was not included in the FY2009 Omnibus Act. The omnibus legislation permits Ginnie Mae to guarantee up to $300 billion in home loans during FY2009. This a 50% increase over the $200 billion authorized in FY2008. As noted, FHA is authorized to insure up to $315 billion in home mortgages during FY2009. Most FHA-insured loans become securitized into mortgage-backed securities guaranteed by Ginnie Mae. So the increased authorization of Ginnie Mae guarantees is being made to facilitate the increase in FHA-insured loans. Research and Technology The Office of Policy Development and Research (PD&R) at HUD is responsible for maintaining current information on housing needs, market conditions, and existing programs, as well as conducting research on housing and community development issues. The Research and Technology account funds PD&R's core research activities including program evaluations and housing and community development-related surveys such as the American Housing Survey and the Survey of New Home Sales and Completions. The R&T account was expanded in FY2006 to fund Section 107 University Partnerships, which were previously funded as set-asides within the CDF account. Section 107 grants are awarded to institutions of higher education to assist them in building partnerships with the residents of communities in which they are located with the objective of fostering and supporting neighborhood development and revitalization. For FY2009, the Bush Administration requested $55 million for research and technology (R&T) activities. The request, if approved by Congress, would have increased funding for R&T activities by 6% ; $3 million more than the $51 million appropriated in FY2008. This would have been achieved by increasing the amount available for core research activities by 45% from $28 million in FY2008 to $41 million for FY2009. The proposed increase in core research funding would have been offset by a proposed 41% decrease in funding for Section 107 university-based community development programs (University Partnerships). Under the Bush Administration's budget request, funding for these programs would have declined from $23 million to $14 million for FY2009. As approved by the Senate Appropriations Committee, S. 3261 recommended $60 million for activities under the Research and Technology account. This was $9 million more than appropriated in FY2008 and $5 million more than requested by the Administration. The $60 million included $23 million in grants for university-based community development grants, which is the same amount appropriated in FY2008 and $9 million more than requested by the Administration. The bill also included $2 million to finance a study of the cost necessary to administer the tenant-based housing voucher assistance program. The committee report ( S.Rept. 110-418 ) noted that the committee proposed denying HUD broad demonstration authority, noting that the committee believed HUD has used this authority in the past to administer new and unauthorized programs. S. 3261 would have made future demonstrations subject to prior congressional approval. The FY2009 omnibus legislation includes $58 million for research and technology to remain available until September 30, 2010, including $23 million for Section 107 University Partnerships. In addition, the legislation includes $32 million in unspecified appropriations, as well as language restricting HUD's authority to undertake new initiatives without congressional authorization. Similar concerns were articulated in the report accompanying the Senate bill. Fair Housing The Office of Fair Housing and Equal Opportunity enforces the Fair Housing Act and other civil rights laws that make it illegal to discriminate in the sale, rental, or financing of housing on the basis of race, color, religion, sex, national origin, disability, or family status. This is accomplished through the Fair Housing Assistance Program (FHAP) and the Fair Housing Initiatives Program (FHIP). FHAP provides grants to state and local agencies to enforce laws that are substantially equivalent to the federal Fair Housing Act. It provides grants on a non-competitive basis. FHIP provides funds for public and private fair housing groups, as well as state and local agencies, for activities that educate the public and housing industry about the fair housing laws. President Bush's FY2009 budget requested $51 million for the fair housing programs, an increase of $1 million over the FY2008 level. The Senate committee recommended an appropriation of $56 million, a $6 million increase over the level appropriated for FY2008. The Budget requested $25 million for FHAP, whereas the Senate committee recommended $27 million for the program. The Budget requested $24 million for FHIP and proposed to use some of it for a Housing Discrimination Study. The Senate committee recommended over $28 million for FHIP, an increase of over $4 million from the FY2008 enacted level. The committee directed that $2 million of the increased funds be used solely to assist in the protection of the American public from mortgage rescue scams. The committee did not fund or authorize the Housing Discrimination Study proposed in the budget request. The FY2009 Budget did not propose continued funding for the program that creates and promotes the translation of materials to assistance persons with limited English proficiency, while the Senate Committee recommended $500,000 in funding. The FY2009 Omnibus Act funds the fair housing programs at $54 million in FY2009, a $4 million increase over the FY2008 level. Of that increase, $2 million will be for efforts to assist in protecting the public from mortgage rescue scams. Lead-Based Paint Hazard Reduction The Office of Lead Hazard Control at HUD administers both the Lead-Based Paint Hazard Control Grant Program and the Healthy Homes Initiative (HHI). Under the Lead-Based Paint Hazard Control Grant Program, HUD is authorized to make grants to states, localities, and Native American tribes to conduct lead-based paint hazard reduction and abatement activities in privately-owned low-income housing. Under the Healthy Homes Initiative, HUD conducts a number of activities designed to identify and address housing-related illnesses. The FY2009 budget requested a total of $116 million for the programs under the Office of Lead Hazard Control, a reduction of $29 million from the FY2008 appropriation. The Senate committee recommended an appropriation of $145 million, the same as the FY2008 level. The committee noted that lead poisoning remains a serious childhood environmental condition and that significant lead risks remain in privately owned housing, particularly in unsubsidized low-income units. The committee encouraged HUD to work with grantees on its lead-based paint abatement hazards programs so that information is disclosed to the public on lead hazard abatements, risk assessment data, and blood lead levels through publications and internet sites. The Omnibus funds the office at $140 million for FY2009, a $5 million decrease from the FY2008 level. The lead hazard program would be funded at $125.4 million and the Healthy Homes Initiative would be funded at $14.6 million. Please note that this does not include the $100 million authorized in ARRA. That is discussed in the Appendix . Office of Federal Housing Enterprise Oversight (OFHEO) OFHEO was the office within HUD that was responsible for regulating the safety and soundness of Fannie Mae's and Freddie Mac's operations. The appropriations for OFHEO were completely offset by fees collected from Fannie Mae and Freddie Mac. For FY2009, the Budget and the Senate committee recommended an appropriation of over $66 million, an increase of $600,000 over the FY2008 appropriation. The omnibus does not provide any funding for OFHEO. The Housing and Economic Recovery Act of 2008, P.L. 110-289 , created the Federal Housing Finance Agency (FHFA) as an independent agency of the federal government and gave FHFA supervisory and regulatory authority over Fannie Mae, Freddie Mac, and the Federal Home Loan Banks. The act abolished OFHEO. Appendix. HUD Funding in the American Recovery and Reinvestment Act of 2009 The American Recovery and Reinvestment Act of 2009 (ARRA) was signed by President Obama on February 17, 2009 ( P.L. 111-5 ). Division A of the law provides supplemental emergency appropriations for the stated purposes of (1) job preservation and creation; (2) promoting economic recovery; (3) assisting those most impacted by the recession; (4) providing investments needed to increase economic efficiency by spurring technological advances in science and health; (5) investing in transportation, environmental protection, and other infrastructure that will provide long-term economic benefits; and (6) stabilizing state and local government budgets, in order to minimize and avoid reductions in essential services and counterproductive state and local tax increases. (For more information on economic stimulus, see CRS Report R40104, Economic Stimulus: Issues and Policies , by [author name scrubbed], [author name scrubbed], and [author name scrubbed].) The bill provided over $300 billion in emergency supplemental appropriations. Of that amount, $13.68 billion (about 4.4%) was provided to HUD. Some of the funding was provided to existing HUD accounts, some was provided to existing programs funded through existing accounts, and some was provided for new programs. The funding provisions are described below. Public Housing Capital Fund ARRA provided $4 billion for supplemental grants to PHAs for public housing capital needs. Of that amount, $1 billion was set aside for competitive grants and HUD was directed to allocate the remaining $3 billion using the regular public housing capital fund formula. HUD announced the formula allocations a week after the bill was signed into law. PHAs are directed to give priority to capital projects that can award contracts based on bids within 120 days and they are directed to give priority consideration to the rehabilitation of vacant rental units and capital projects that are already underway or included in their five-year capital fund. These funds are provided in addition to the regular FY2009 formula funds. ARRA directs HUD to award the remaining $1 billion competitively, "for priority investments, including investments that leverage private sector funding or financing for renovations and energy conservation retrofit investments." Native American Housing Block Grants ARRA provided $510 million for Native American Housing Block Grants. Half of this amount ($255 million) will be distributed to Indian tribes and tribally-designated housing entities (TDHE) according to the same funding formula used in FY2008. The Secretary of HUD must obligate these funds within 30 days of ARRA's enactment. Recipients must use the funds for new construction, acquisition, rehabilitation (including energy efficiency and conservation), and infrastructure development, and must prioritize projects that can be awarded contracts within 180 days of the funds being made available to the recipient. The remaining $255 million provided for Native American Housing Block Grants will be distributed as competitive grants to tribes and TDHE. The Secretary has until September 30, 2009, to award funding, and must prioritize construction and rehabilitation projects that will create employment for low-income and unemployed persons. Recipients of competitive funding must obligate the funds within one year of the date of receiving funding, spend 50% within two years of the date of receiving funding, and spend 100% within three years of the date of receiving funding. Community Development Fund ARRA appropriated an additional $1 billion in CDBG funds to be allocated to CDBG entitlement communities and states that were eligible for funding in FY2008 using the program's current formulas. Given the statute (42 U.S.C. 5306) governing the distribution of CDBG funds, ARRA will allocate the proposed $1 billion in additional appropriations as follows: $10 million to Indian tribes; $693 million to entitlement communities; and $297 million to states. For entitlement communities and states, the additional $1 billion in appropriations represents a 21% increase in FY2009 appropriations. ARRA requires funds to be awarded to state and local governments within 30 days of enactment, and directs grant recipients to give priority in the allocation of funds to projects that could be under contract within 120 days of the grantee's receipt of funds. CDBG funds will remain available for obligation until September 30, 2010. The law also includes a provision (Sec. 12001) that would require each state to certify that it will maintain its effort (funding level) with regard to the types of projects funded by the appropriations. Of potential interest to Members conducting oversight on the use of ARRA, the provision references only states as being required to meet this standard, excluding local governments that are also direct recipients of CDBG funds. In addition to providing $1 billion for CDBG funds, ARRA provides an additional $2 billion for Neighborhood Stabilization Program (NSP) activities. NSP funds allow states and selected local governments to acquire, rehabilitate, and sell abandoned and foreclosed housing to eligible low to middle income households. NSP funds under the omnibus are to remain available until September 30, 2010. Recipients are required to spend at least half of the funds within two years of allocation, and 100% within three years of the date funds become available. These funds are in addition to the $3,920 million in NSP funds previously appropriated under the Housing and Economic Recovery Act (HERA) of FY2008 (NSP 1). Unlike NSP 1 funds appropriated under HERA, which were allocated to states and a limited number of local governments based on a formula that considered the number and percentage of homes in foreclosure, delinquent payment status, and in default, the NSP funds under ARRA (NSP 2) will be allocated competitively. Non-profits as well as consortiums of non-profit and for-profits will be able to compete for funds against government entitlement communities. This raises a number of policy and administrative issues, including whether HUD will have the administrative capacity to effectively implement and monitor the three divergent grant programs (the regular CDBG program, the formula-based NSP 1 program and the competitive NSP 2 program), as well as CDBG-related disaster grants. Will HUD require that non-profits participating in the NSP 2 obtain certification from the state or local government that the proposed activities are consistent with the jurisdiction's community development plan? For additional information on NSP see CRS Report RS22919, Community Development Block Grants: Neighborhood Stabilization Program; Assistance to Communities Affected by Foreclosures , by [author name scrubbed] and [author name scrubbed]. Home Investment Partnerships Program Congress appropriated $2.25 billion in funding for the HOME Investment Partnerships Program, to be distributed to states based on the share of HOME funding that each state and its participating localities received in FY2008. However, rather than being used for traditional HOME program activities, all of the funding is to be used to provide gap financing for Low-Income Housing Tax Credit (LIHTC) projects. State housing credit agencies will competitively award funds to projects that were awarded low-income housing tax credits between FY2007 and FY2009, giving priority to projects expected to be completed by 2012. The state housing credit agencies must commit 75% of the available funds by February 2010, and project owners must use 75% of the committed funds by February 2011 and 100% by February 2012. Projects generally must comply with the requirements of the LIHTC program rather than the requirements of the HOME program. Homelessness Prevention Fund As part of ARRA, Congress appropriated $1.5 billion to be used for activities to prevent homelessness and for rapid re-housing to assist those who may become homeless. The funds are to be distributed to local communities (metropolitan cities and urban counties) and states for use in communities that do not receive their own funds through the Emergency Shelter Grants (ESG) program, which uses the CDBG formula to determine allotments. On February 25, 2009, HUD announced how the funds would be distributed. Although funds will be distributed via the ESG formula, unlike the ESG program, where only 30% of funds may be used for homelessness prevention activities, all funds are to be used for activities to prevent homelessness or to quickly find housing for those who become homeless. Specifically, the law provides that funds may be used for short- or medium-term rental assistance, and for activities to help families find and maintain housing such as help with housing searches, outreach to landlords, credit repair, security or utility deposits, utility payments, first month's rent, and help with moving expenses. Grantees must expend at least 60% of funds within two years of the date that the funds are made available by HUD, and 100% of funds within three years. Assisted Housing Stability and Energy and Green Retrofit Investments ARRA provided $2.25 billion for "Assisted Housing Stability and Energy and Green Retrofit Investments." Of that amount, $2 billion is to be used for Section 8 project-based rental assistance contract renewals. As discussed earlier in this report, in the section entitled " Contract Renewal Funding ", the amount of funding provided should be sufficient to allow HUD to resume full-year contract renewals with private property owners. The remaining $250 million is to be used for energy and green retrofit investments in assisted housing properties. Assisted housing properties include properties with Section 8 project-based rental assistance contracts, and properties with project-based rental assistance contracts provided under the Section 202 Housing for the Elderly program and the Section 811 Housing for Persons with Disabilities program. The bill specifies that the funds can be provided through grants or loans, but does not specify how HUD should allocate the funds. These funds will likely be administered through HUD's Office of Affordable Housing Preservation, as a part of their "Green Initiative," which is designed to "encourage owners and purchasers of affordable, multifamily properties to rehabilitate and operate their properties using sustainable Green Building principles." Office of Lead Hazard Control and Healthy Homes ARRA provided a supplementary appropriation of $100 million for the Lead Hazard Reduction program to remain available until September 30, 2011. The act directs that grants from this appropriation be awarded first to applicants in FY2008 who upon review were found qualified for awards but who did not receive awards because of funding limitations. The remaining funds are to be awarded during the FY2009 round of funding. Each applicant in FY2009 must submit a detailed plan and strategy that demonstrates adequate capacity to carry out the proposed use of funds. Recipients of the funds must expend at least 50% of the funds within two years of the date the funds become available and must expend 100% within three years of that date. Funds that are not expended within the two-year period must be recaptured and reallocated to those that are in compliance. Funds that are not expended within the three-year period must be recaptured. Office of Inspector General ARRA included various provisions designed to provide enhanced oversight over the newly-appropriated funds, including funding for the Government Accountability Office and increased funding for Offices of Inspector General for many federal agencies. It provided $15 million for HUD's Office of the Inspector General, which is in addition to the Office's regular FY2009 funding. General Provisions During 2008, the FHA loan limits for one-family homes were set at the lesser of $729,750 or 125% of the median home price for the area. ARRA provides that the 2008 limits will apply for loans insured during calendar year 2009. In addition, HUD is given the discretionary authority to set limits at up to $729,750 in sub-areas with higher costs. For example, in Durham, NC, the one-family loan limit is $334,650 for 2009. When warranted by higher prices, HUD now has authority to set the limit at up to $729,750 in sub-areas of Durham. In prior years, Fannie Mae and Freddie Mac had a nationwide conforming loan limit, and during 2007 that limit was $417,000 for one-family homes. During 2008, the conforming loan limit varied by area and that limit was the greater of (1) $417,000 or (2) the lesser of $729,750 or 125% of the median home price for the area. ARRA provides that the 2008 limits will apply during calendar year 2009. In addition ARRA gives FHFA the discretionary authority to increase the limit to up to $729,750 in sub-areas with higher median home prices. The loan limit for HECMs, the reverse mortgages insured by FHA, was set at $417,000 in 2008. During 2009, ARRA increases the HECM loan limit to $625,500. CBO estimated that the increase in the conforming loan limit will cost $37 million in FY2009 and $13 million in FY2010.

The FY2009 appropriations process began with President Bush's FY2009 budget request. It included $39 billion for the Department of Housing and Urban Development (HUD), an increase of 4% in net budget authority from the FY2008 non-emergency level. That requested increase in net budget authority was largely attributable to a decline in the amount available to offset the HUD budget. The President's budget request would have resulted in an overall decline in appropriations for HUD's programs and activities of just over 1% from the FY2008 level. Despite the request for an overall decline in appropriations for HUD's programs and activities, the President's FY2009 budget did request increased appropriations in several areas, including project-based Section 8 rental assistance, the HOME Investment Partnerships block grant program, and Homeless Assistance grants. The President's FY2009 budget requested reductions in funding for several programs, including the Section 202 Housing for the Elderly program and the Section 811 Housing for Persons with Disabilities program. It proposed eliminating funding for several programs that were funded in FY2008, including the HOPE VI public housing revitalization program, the Brownfields Redevelopment program, Section 108 loan guarantees, and the Rural Housing and Economic Development block grant program. President Bush had also requested no new funding for each of these programs in his FY2004-FY2008 budget requests, although Congress continued to fund them in each of those years. On June 20, 2008, the Transportation-HUD Subcommittee of the House Committee on Appropriations approved a draft FY2009 Transportation-HUD appropriations bill. The text of that bill was never released. On July 9, 2008, the Transportation-HUD Subcommittee of the Senate Committee on Appropriations approved its version of the FY2009 Transportation-HUD appropriations bill; the bill was approved the following day (July 10, 2008) by the Senate Committee on Appropriations (S. 3261). On September 30, 2009, President Bush signed a continuing resolution funding most government agencies, including HUD, at their FY2008 levels through March 6, 2009 (P.L. 110-329). The CR also provided $150 million in emergency supplemental assisted housing funds for use in areas affected by the 2005 hurricanes and $6.5 billion in emergency supplemental CDBG funding to be used to respond to presidentially declared disasters that took place in 2008. The final FY2009 appropriations legislation was not enacted before the close of the 110th Congress and the end of the Bush Administration. The 111th Congress enacted a second continuing resolution before the expiration of the first, providing funding through March 11, 2009. On February 17, 2009, President Obama signed the American Recovery and Reinvestment Act of 2009 (P.L. 111-5). Among other provisions, the bill contained emergency supplemental FY2009 funding for several HUD accounts. On March 11, 2009, the regular FY2009 appropriations process was completed when an omnibus appropriations bill was signed into law (P.L. 111-8). It provided $41.5 billion for HUD, an increase of 10% in net budget authority from the FY2008 non-emergency level.

Background This report examines the policy implications for the U.S. current account balance of the construction of natural gas pipeline from Alaska to the lower 48 states. The 108th Congress hasincluded in H.R. 6 , the omnibus energy bill, provisions which provide incentives for the construction of anAlaska natural gas pipeline. A pipeline would link currentlyunavailable Alaskan gas supplies to the consuming market. This report analyzes the possible expansion orcontraction of natural gas imports as a result of constructing, or notconstructing, an Alaskan pipeline, within the framework of the National Energy Modeling System (NEMS). (1) NEMS is used by the EIA as a tool to forecast futureenergy trends asincluded in the AEO. (2) Recently, the EIA haspublished analyses of a variety of restricted natural gas supply scenarios including the non-availability of an Alaskanatural gas pipeline. (3) Market Forecast The AEO reference case forecast is the EIA's baseline estimate of the state of energy markets in the out years to 2025. (4) The reference case forecast projects naturalgas prices to be highenough after 2009 to begin construction of an Alaska natural gas pipeline. (5) In the forecast, natural gas deliveries come on stream from a pipeline in 2018with full capacity deliveriesbecoming available near the end of the forecast period, in 2024. If policy based incentives to construct a pipelinebecome available, it is possible that a pipeline might be constructedsooner than in the AEO reference case altering the results presented in this report. As a result of the constructionand delivery time line assumed in the reference case, the forecasts withand without the construction of a pipeline are virtually identical until 2018. This report will examine differencesin the forecasts for the years 2020 and 2025. (6) To focus on the international trade effects of the pipeline, likely variations in the current account balance in 2020 and 2025 will be calculated. The current account balance is a basicmeasure of a nation's foreign trade position and is defined as the nation's exports of goods and services minus thenation's imports of goods and services. When a nation's exportsexceed its imports, the country has a current account surplus. When a nation's imports exceed its exports, the nationhas a current account deficit. The EIA forecasts do not includeestimates of the cost of constructing the pipeline, or any trade effects that might come about as a result of sourcingdecisions for the steel and other goods and services used in theconstruction process. The current account balance effects described in this report are limited to the natural gas thata pipeline would deliver to the market. Current Account Effects In the AEO reference case, an Alaska natural gas pipeline is expected to deliver approximately 2 trillion cubic feet (tcf), about 7% of yearly consumption, of gas per year by the time itreaches full capacity operation in 2024. Although deliveries are forecast to begin in 2018, they are expected to beginat approximately 0.8 tcf per year and grow to full capacity. By 2020 the reference case forecast projects a gap between total domestic production, 23.89 tcf, and total demand, 30.36 tcf, requiring imports of 6.47 tcf. The forecast projects that by2020 pipeline natural gas imports from Canada will be in decline compared to 2003 level. The U.S. imported 3.4tcf of natural gas from Canada in 2003, about 97% of importrequirements. By 2020 Canadian imports are expected to decline to 2.5 tcf, even though total U.S. importrequirement will have nearly doubled over 2003 levels. The reference forecastprojects that essentially all of the additional U.S. import requirements will come from liquefied natural gas (LNG). The values cited in the forecast are determined in conjunction withthe forecast wellhead price of natural gas in 2020 which is expected to reach $4.28 per thousand cubic feet in realterms, which would be over $8.00 per thousand cubic feet in nominalterms. (7) By 2025, the reference case projects total domestic production to reach 24.09 tcf and total demand to reach 31.33 tcf with a gap of 7.24 tcf to be filled by imports. In 2025, Canadianpipeline imports are projected to be 2.56 tcf with LNG again filling most of the remaining import gap. The referencecase forecast projects LNG demand growing from 2.16 tcf in 2010to 4.14 tcf in 2020 and 4.8 tcf in 2025. By 2025, the reference case projects a wellhead natural gas price of $4.40per thousand cubic feet in real terms, translating to a nominal price ofabout $8.40. (8) In contrast to the reference case forecast, the no pipeline case assumes that a natural gas pipeline from Alaska is not constructed. As a result, Alaskan natural gas production, whichtotaled about 0.51 tcf in 2003, is projected to rise to 0.72 tcf in 2020 and 0.51 tcf in 2025, less than the 2.29 tcf and2.71 tcf for the same years in the reference case. (9) Since imports areexpected to fill the gap between U.S. domestic production and total demand, a simple analysis might suggest thatthe no pipeline case would show an approximate 2 tcf increase inimports to compensate for no delivery of Alaskan gas. This is not the case, however. The unavailability of Alaskannatural gas through the pipeline leads to price increases in the naturalgas market. These price increases reduce the total demand for natural gas, as well as providing an incentive forproducers both in the U.S. and Canada to increase production. As aresult of these adjustments, the gas not available because of a lack of a pipeline from Alaska is not replaced byimports on a one to one basis in the EIA analysis. The increases in imports attributable to the lack of a natural gas pipeline from Alaska are 0.72 tcf in 2020, and 0.63 tcf in 2025 as projected in the EIA no pipeline case. To determinethe effect of these projected increases in natural gas imports, these quantities must be multiplied by appropriateprices. The EIA publishes import prices as part of the AEO referencecase, but not for the no pipeline case. As an approximation of the import price in the no pipeline case, CRS hascomputed prices based on the EIA reference case prices. (10) For 2020, theestimated import price is $4.81 per thousand cubic feet, and for 2025 it is $4.90 per thousand cubic feet. Based onthese values for price and quantity of imported natural gas, estimatedincreases in the value of natural gas imports as a result of lack of construction of a pipeline would be approximately$3.46 billion in 2020 and $3.09 billion in 2025. (11) To put theseprojected increases in imports in perspective, they are less than 1% of the current account deficit in 2002, the yearto which the price of natural gas is set in the EIA forecasts. Although these values represent potential increases in the current account deficits in 2020 and 2025 (or reductions in the surpluses), they might well be either increased or decreased byother related effects in the economy that might result from higher projected natural gas prices. For example,industrial demand for natural gas is projected to decrease. This could meanthat the U.S. production of chemicals, especially those that have natural gas as a large cost component, might bereduced. This might mean greater imports of fertilizers and otherchemicals bringing additional pressure on the current account balance. On the other hand, if the higher natural gasprices resulted in general reductions in income and employment in theUnited States, that might imply lower imports of consumer goods and services, improving the current accountbalance. The EIA analysis, which focuses on energy issues, does notprovide a detailed picture of all the secondary economic effects of higher natural gas prices as they alter relationshipsin the economy as a whole. Analysis An Alaska natural gas pipeline is projected to account for about 2 tcf of delivered gas in 2025 when operating at full capacity, but imports increase by only 0.63 tcf in that year as a resultof the lack of pipeline construction. In 2020, a pipeline is projected to deliver about 1.6 tcf, reflecting the build-upof delivered gas as operation begins in 2018, but imports increase byonly 0.72 tcf in the forecasts if no pipeline is constructed. It might appear that 1.37 tcf of gas in 2025, and almost1 tcf in 2020, has disappeared. The lost volumes can be accounted forby examining the effects of the higher projected prices of natural gas in 2025 and 2020 on aggregate demand andsupply. As a likely result of higher prices, projected natural gas demand is lower in the no pipeline case, both in 2025 and in 2020. Aggregate demand is 0.71 tcf lower in 2025 and 0.62 tcflower in 2020 compared to the reference case. In a 2025 comparison of demand patterns in the reference case andthe no Alaska pipeline case, all sectors reduce their consumption, butthe largest declines are in the industrial and electric generators at 0.11 tcf (1%) and 0.31 tcf (3.7%), respectively. In comparison, the residential and commercial sectors reduced theirconsumption by only 0.06 tcf (0.5%) in total. Fuel switching and reduced demand due to curtailed production arelikely explanations for the relatively larger reductions in the industrialand electric generator sectors. The pattern of reduced consumption is similar in 2020. Residential and commercial consumption each decline about 1%, while industrial demand declines by about 2% and demandfrom electric generators falls by 2.7%. On the production side of the market, because of the incentive of higher prices, domestic onshore and offshore production of natural gas in the lower 48 states increases, by 0.23 tcf in2020 and 0.67 tcf in 2025. For 2025, if the reduced demand of 0.71 tcf is added to the increased lower 48 statesproduction of 0.67 tcf the total is 1.38 tcf. If 1.38 tcf is added to theextra imports of 0.63 tcf the total is approximately equal to the 2 tcf that is not delivered through an Alaskanpipeline. For 2020, the reduction in demand is 0.72 tcf and the addedproduction projected from onshore and offshore production in the lower 48 states is 0.28 tcf which, when added,equals 1 tcf. Imports are projected to increase by 0.72 tcf in 2020 whichwhen added to the 1 tcf demand reduction and lower 48 state increased production equals 1.72 tcf which again isapproximately equal to the amount of gas not delivered as a result of noconstruction of an Alaska pipeline. (12) Conclusion In the AEO reference case, an Alaska natural gas pipeline is projected to begin deliveries in 2018 and achieve full capacity delivery of about 2 tcf of gas per year to market when itachieves full capacity operation in 2025. This quantity of natural gas, subtracted from the market in the no pipelinecase, is sufficient to alter projected market prices. In the no pipelinecase, increases in the price of natural gas cause changes in consumption and production of gas, as well as thecomposition of gas sources. These price changes and resultant changessuggest that, in the forecast, energy markets compensate for the lack of Alaskan gas supplies in a variety of ways. As a result, the forecast increase in gas imports is not as great as theloss in deliveries from the pipeline if it is not constructed.

The Energy Information Administration (EIA), in the Annual Energy Outlook 2004(AEO), projects increased demand for imported naturalgas through 2025. The AEO reference case forecast assumes a natural gas pipeline will begin delivering Alaskannatural gas to the lower 48 state consuming markets in 2018. H.R. 6, the omnibus energy bill, contains provisions to enhance the future supply of natural gas throughconstruction of a pipeline. This report examines the effects of an Alaska natural gas pipeline on the U.S. current account balance. TheEIA finds that if the pipeline is not constructed, natural gas prices willincrease, markets will adjust, and imports of natural gas will increase. However, due to price induced marketadjustments, the increase in imports is projected to be less than the gasvolume lost from the lack of pipeline construction. As a result, if no pipeline is constructed, the effect on the currentaccount balance will be less than the value of the amount of gas thatwas projected to be delivered through a pipeline. This report will not be updated.

Coverage Under the NLRA The right to engage in collective bargaining under the NLRA does not apply to all individuals employed by an employer. Rather, the right extends only to "employees." Section 2(3) of the NLRA states that an employee "shall include any employee ... but shall not include any individual ... employed as a supervisor." An employee's job title does not determine whether an individual is a supervisor for purposes of the NLRA. Instead, the term "supervisor" is defined by the Act to include any individual with the authority to perform any one of 12 specified functions, if the exercise of such authority requires the use of independent judgment and is not merely routine or clerical. Section 2(11) of the NLRA states: The term "supervisor" means any individual having authority, in the interest of the employer, to hire, transfer, suspend, lay off, recall, promote, discharge, assign, reward, or discipline other employees, or responsibly to direct them, or to adjust their grievances, or effectively to recommend such action, if in connection with the foregoing the exercise of such authority is not of a merely routine or clerical nature, but requires the use of independent judgment. Because the 12 functions and the term "independent judgment" are not further defined, the NLRB and U.S. Supreme Court have sought to provide meaning to this language. In NLRB v. Kentucky River Community Care, Inc ., the Court considered whether certain nurses should be classified as supervisors for purposes of the NLRA when their judgment was informed by professional or technical training or experience. Kentucky River Community Care, the operator of a care facility for individuals with mental retardation and illness, sought to exclude six registered nurses (RNs) from a bargaining unit on the grounds that they were supervisors. The NLRB concluded that the nurses were not supervisors because they failed to exercise sufficient independent judgment. According to the NLRB, the nurses used "ordinary professional or technical judgment" in directing less-skilled employees to deliver services in accordance with employer-specified standards. The U.S. Court of Appeals for the Sixth Circuit rejected the NLRB's position, and the Court ultimately affirmed the Sixth Circuit's decision. The Kentucky River Court understood section 2(11) of the NLRA to set forth a three-part test for determining supervisory status. Employees will be considered supervisors if (1) they hold the authority to engage in any one of the twelve supervisory functions identified in section 2(11) of the NLRA; (2) their exercise of authority is not of a "merely routine or clerical nature, but requires the use of independent judgment," and (3) their authority is held in the interest of the employer. At issue in Kentucky River , was the second part of the test. Although the Court recognized the NLRB's discretion to clarify the meaning of the term "independent judgment," it maintained that it was inappropriate for the NLRB to characterize judgment that reflects "ordinary professional or technical judgment" as failing to be independent judgment. The Court believed that the NLRB's reference to "ordinary or technical judgment" established a "startling categorical exclusion" that was not suggested by the NLRA's statutory text. The Court observed: What supervisory judgment worth exercising, one must wonder, does not rest on 'professional or technical skill or experience?' If the Board applied this aspect of its test to every exercise of a supervisory function, it would virtually eliminate 'supervisors' from the Act. In addition, the Court indicated that it was unaware of any NLRB decision that concluded that a supervisor's judgment ceased to be independent judgment because it depended on the supervisor's professional or technical training or experience. The Court maintained that when an employee exercises one of the functions identified in section 2(11) with judgment that possesses a sufficient degree of independence, the NLRB "invariably finds supervisory status." Four justices dissented from the majority's position on independent judgment. The dissent maintained that the NLRB's interpretation of independent judgment was fully rational and consistent with the NLRA. The dissent noted: "The term 'independent judgment' is indisputably ambiguous, and it is settled law that the NLRB's interpretation of ambiguous language in the [NLRA] is entitled to deference. In 2006, the NLRB revisited the issue of supervisory status in Oakwood Healthcare, Inc . Oakwood Healthcare employed approximately 181 RNs in 10 patient care units at an acute care hospital. Many of these nurses served as charge nurses who were responsible for overseeing their patient care units and assigning other RNs, technicians, and medical personnel on their shifts. Some of the RNs worked permanently as charge nurses, while others rotated into the charge nurse position. Oakwood Healthcare sought to exclude both the permanent and the rotating charge nurses from a proposed bargaining unit on the grounds that they were supervisors within the meaning of section 2(11). Oakwood Healthcare maintained that the charge nurses were supervisors because they "used independent judgment in assigning and responsibly directing employees." The NLRB viewed Oakwood Healthcare, Inc . as an opportunity to define the terms "assign," "responsibly to direct," and "independent judgment" as they are used in section 2(11) of the NLRA. With each term, the NLRB considered the language used by Congress, as well as the NLRA's legislative history, applicable policy considerations, and Supreme Court precedent. The NLRB concluded that the term "assign" should be construed to refer to the act of designating an employee to a place (such as a location or department), appointing an employee to a time, or giving significant overall duties or tasks to an employee. The NLRB noted that in the health care setting, the term "encompasses the charge nurses' responsibility to assign nurses and aides to particular patients." The term would not apply, however, to an individual who simply chooses the order in which an employee will perform discrete tasks within an assignment. Citing the legislative history of section 2(11), the NLRB interpreted the term "responsibly to direct" to apply to individuals who not only oversee the work being performed, but are held responsible if the work is done poorly or not at all. The NLRB observed: [F]or direction to be 'responsible,' the person directing and performing the oversight of the employee must be accountable for the performance of the task by the other, such that some adverse consequence may befall the one providing the oversight if the tasks performed by the employee are not performed properly. This interpretation of 'responsibly to direct' is consistent with post- Kentucky River Board decisions that considered an accountability element for 'responsibly to direct.' According to the NLRB, to establish accountability for purposes of responsible direction, it must be shown that the employer delegated to the putative supervisor the authority to direct the work and the authority to take corrective action. The possibility of adverse consequences for the putative supervisor must also be established. With regard to the term "independent judgment," the NLRB maintained that at a minimum an individual must act or effectively recommend action that is "free of the control of others and form an opinion or evaluation by discerning and comparing data." The NLRB further elaborated that a judgment is not independent if it is dictated or controlled by detailed instructions in company policies, the verbal instructions of a higher authority, or the provisions of a collective bargaining agreement. The NLRB sought to interpret the term "independent judgment" in light of the phrase "not of a merely routine or clerical nature," which appears before "independent judgment" in section 2(11). The NLRB stated: If there is only one obvious and self-evident choice ... or if the assignment is made solely on the basis of equalizing workloads, then the assignment is routine or clerical in nature and does not implicate independent judgment, even if it is made free of the control of others and involves forming an opinion or evaluation by discerning and comparing data. Applying the new definitions for the terms "assign," "responsibly to direct," and "independent judgment," the NLRB concluded that 12 permanent charge nurses assigned to five of the 10 patient care units were supervisors for purposes of the NLRA. The NLRB declined to find that any of the charge nurses responsibly directed other employees. The NLRB noted that the charge nurses were not subject to discipline or lower evaluations if employees who were subject to the nurses failed to adequately performed their tasks. However, in five of the 10 patient care units, the NLRB found that the charge nurses did assign employees within the meaning of the NLRA. These nurses assigned employees to patients and assigned overall tasks to the employees. The charge nurses in the five units were unlike emergency room charge nurses who simply placed staff in geographic areas within the emergency room. The NLRB determined that the 12 charge nurses exercised independent judgment in accordance with section 2(11). The charge nurses made assignments in light of the skill sets of employees and the nursing time patients would require on a given shift. The NLRB noted that the "process of equalizing work loads at the hospital involves independent judgment." While Oakwood Healthcare maintained a written policy for assigning nursing personnel to deliver care to patients, the NLRB observed that charge nurses were given considerable latitude in making decisions on how to assign nursing personnel. Ultimately, the NLRB concluded that when a charge nurse makes an assignment based on the skill, experience, and temperament of nursing personnel and the patients, that nurse has "exercised the requisite discretion to make the assignment a supervisory function 'requir[ing] the use of independent judgment.'" Unfair Labor Practices and Interference With Collective Bargaining In addition to recognizing the right of employees to engage in collective bargaining, the NLRA prohibits certain misconduct by both employers and unions that interferes with that right. Section 8(a)(1) of the Act states that it shall be an unfair labor practice for an employer to "interfere with, restrain, or coerce employees in the exercise of the rights guaranteed in section 7." Similarly, section 8(b)(1)(A) of the NLRA provides that it shall be an unfair labor practice for a labor organization or its agents to "restrain or coerce ... employees in the exercise of the rights guaranteed in section 7 ..." Although the NLRB has suggested in the past that Congress did not intend for section 8(b)(1)(A) to be given the broad application sometimes accorded to section 8(a)(1), section 8(b)(1)(A) appears to be viewed generally as a counterpart to section 8(a)(1). Indeed, in Capital Service, Inc. v. NLRB , a 1953 case involving a union boycott of goods manufactured by employees who resisted unionization, the U.S. Court of Appeals for the Ninth Circuit observed that it was "inconceivable" that the NLRA "intended the identical words 'restrain or coerce' of 8(a)(1) and 8(b)(1) to have a different meaning when applied to a labor organization from that when applied to an employer." To determine whether an unfair labor practice has been committed under either subsection, a reviewing court asks the same question: whether the misconduct "reasonably tends" to restrain or coerce employees in the exercise of their rights under the NLRA. Courts have emphasized that the actual effect of the misconduct is immaterial. In Int'l Union of Operating Engineers, AFL-CIO v. NLRB , a 1964 case involving picketing and the right of employees to refrain from union activities, the Third Circuit maintained: "That no one was in fact coerced or intimidated is of no relevance. The test of coercion and intimidation is not whether the misconduct proves effective." Section 8(a)(1) of the NLRA prohibits not only the use or threatened use of violence against an employee for exercising his rights under section 7 of the Act, but also verbal threats to adversely affect an employee's employment status or working conditions. In NLRB v. Gissel Packing Co., Inc ., the Supreme Court explained: [A]n employer is free to communicate to his employees any of his general views about unionism or any of his specific views about a particular union, so long as the communications do not contain a 'threat of reprisal or force or promise of benefit.' He may even make a prediction as to the precise effects he believes unionization will have on his company. In such a case, however, the prediction must be carefully phrased on the basis of objective fact to convey an employer's belief as to demonstrably probable consequences beyond his control or to convey a management decision already arrived at to close the plant in case of unionization. Whether an employer's communication to its employees constitutes an unlawful threat for purposes of section 8(a)(1) is generally fact-specific and requires consideration of the totality of the circumstances. The Gissel Court noted that any assessment of the precise scope of employer expression "must be made in the context of its labor relations setting" and must take into account the economic dependence of the employees on their employers. An employer's interrogation of its employees as to union sympathy and affiliation may also violate section 8(a)(1) of the Act because such an interrogation has a "natural tendency to instill in the minds of employees fear of discrimination on the basis of the information the employer has obtained." In Blue Flash Express, Inc ., the NLRB indicated that it would consider five factors when determining whether an interrogation reasonably tends to restrain or interfere with the exercise of rights guaranteed by the NLRA: the timing of the interrogation; the place of the interrogation; the information sought during the interrogation; the identity of the interrogator; and the employer's conceded preference with respect to the subject of the interrogation. Using these factors, the Board found a violation of section 8(a)(1) when an employer interrogated an employee after a performance review, despite resistance by the employee. The Board also found a violation when an interrogation was conducted by a high-level supervisor, without a legitimate purpose, and without any assurances against reprisals. The use or threatened use of violence by a union or one of its agents is similarly considered an unfair labor practice under section 8(b)(1)(A) of the NLRA. Other acts by unions have been found to violate section 8(b)(1)(A), including encouraging employees to quit their jobs because they were not members of the union, and threatening discharge for failure to sign union authorization cards. In Local Union No. 697 (UE & C Catalytic, Inc.) , the NLRB found a violation of section 8(b)(1)(A) when a local union engaged in a pattern of misconduct to get members of other unions employed at an Amoco refinery, identified as "travelers," to abandon their jobs because they were not members of the local union and because a large number of local members were out of work. The pattern of misconduct included repeated requests and suggestions that the travelers quit their jobs and volunteer for layoffs. The local also devised a credentialing system just for the travelers and refused to renew some of the credentials. The NLRB concluded that the local's efforts were coercive and meant to intimidate the travelers into leaving the refinery: "It wanted the travelers to leave the Amoco jobsite because they were not members of [the local] and because members were out of work." The NLRB has indicated that section 8(b)(1)(A) "broadly interdicts any union conduct threatening job security of employees because of the employees' refusal or failure to abide by union membership conditions." By telling employees that they must sign a union authorization card or be subject to termination, a union makes "an implied threat of reprisal calculated to interfere with the employees' statutory right to refrain from any and all union activities." Unions have been found to violate section 8(b)(1)(A) by engaging in other misconduct, including attempting to cause an employer to discharge employees because they opposed the union leadership, refusing to refer dissident union members for jobs, and threatening employees with the loss of employment if they contested a union election. Pre-Election Communication with Employees While section 8(a)(1) of the NLRA does prohibit an employer from interfering with the right of employees to engage in collective bargaining, the NLRB has long maintained that an employer may make antiunion, but noncoercive, speeches to their employees on company time and on company property without allowing a union an equal opportunity to reply. In Livingston Shirt Corp ., the NLRB noted: [W]e find nothing in the statute which even hints at any congressional intent to restrict an employer in the use of his own premises for the purpose of airing his views. On the contrary, an employer's premises are the natural forum for him just as the union hall is the inviolable forum for the union to assemble and address employees. We do not believe that unions will be unduly hindered in their right to carry on organizational activities by our refusal to open up to them the employer's premises for group meetings, particularly since this is an area from which they have traditionally been excluded, and there remains open to them all the customary means for communicating with employees. Last-minute speeches made by employers, however, have been distinguished from other pre-election speeches. In Peerless Plywood Co ., decided the same day as Livingston Shirt , the NLRB declared that employers and unions are prohibited from making election speeches on company time to massed assemblies of employees within 24 hours before an election. The NLRB maintained that such speeches interfere with a free election by creating a "mass psychology which overrides arguments made through other campaign media and giv[ing] an unfair advantage to the party, whether employer or union, who in this manner obtains the last most telling word." In 1956, the Court considered whether an employer could prohibit the distribution of union literature on its company-owned parking lots by nonemployee union organizers. In NLRB v. Babcock & Wilson Co ., the employer contended that it had a consistent policy against all pamphleteering and that it was not attempting to impede its employees' collective bargaining rights when it restricted the distribution of union literature on company property. The Court maintained an employer cannot be compelled to allow the distribution of union literature on its premises if a union can reach employees through other channels of communication. If, however, the employer's location and the employees' residences place the employees beyond the reach of reasonable union efforts to communicate with them, the employer must allow the union to approach its employees on its property. In Babcoc k , the Court ultimately found that the employer's restrictions were permissible because its plants were close to the communities where a large percentage of employees lived, and various methods of communication were available to the union. In Lechmere v. NLRB , a 1992 case involving the efforts of the United Food and Commercial Workers Union, AFL-CIO, to organize employees at a retail store, the Court reaffirmed its holding in Babcock . Rejecting the NLRB's conclusion that there were no reasonable, alternative means for the union to communicate with Lechmere's employees, the Court emphasized that Babcock requires access to an employer's property only when the employer's location and the employees' residences place the employees beyond the reach of reasonable union efforts to communicate with them. The Court identified logging camps, mining camps, and mountain resort hotels as "classic examples" where union access would be permitted. The Court further noted that the union has the heavy burden of establishing employee isolation and showing that no other reasonable means of communicating with employees exists. As in Babcock , the Court in Lechmere found that the union did have reasonable access to the retail employees and that this accessibility was suggested by the union's success in contacting a substantial percentage of them directly via mailings, phone calls, and home visits.

The National Labor Relations Act (NLRA or "the Act") recognizes the right of employees to engage in collective bargaining through representatives of their own choosing. By "encouraging the practice and procedure of collective bargaining," the Act attempts to mitigate and eliminate labor-related obstructions to the free flow of commerce. Although union membership has declined dramatically since the 1950s, congressional interest in the NLRA remains significant. In the 112th Congress, over 30 bills have been introduced to amend the NLRA. Some of these bills address the timing of union representation elections, while others are concerned with varying aspects of the NLRA, such as the activities of the National Labor Relations Board (NLRB), which implements and administers the Act. Since the NLRA's enactment in 1935, the NLRB and the courts have considered a variety of issues arising under the Act. This report reviews selected decisions of the NLRB and the courts on three of them. Determining when an employee may be deemed a supervisor for purposes of coverage under the Act is important because the right to engage in collective bargaining is extended only to employees under the NLRA. Employees who are properly classified as supervisors are not afforded collective bargaining rights. Both employers and unions are prohibited from restraining or coercing employees in the exercise of the rights guaranteed to them under the Act. In general, to determine whether an unfair labor practice has been committed by either an employer or union, a reviewing court asks whether the misconduct "reasonably tends" to restrain or coerce employees in the exercise of their rights under the NLRA. Courts have emphasized that the actual effect of the misconduct is immaterial. Finally, pre-election communication with employees may influence the outcome of a representation election. While the NLRA does prohibit an employer from interfering with an employee's collective bargaining rights, decisions discussed in this report indicate that an employer does not violate the Act in all cases when it denies a union access to its property.

Background The Nuclear Waste Policy Act of 1982 (NWPA, P.L. 97-425 ) defined the basic roles of the three federal agencies with responsibility over the selection, licensing, and health and safety of the first U.S. high-level radioactive waste disposal site. The Environmental Protection Agency's (EPA's) role is to establish the public health and safety standards for high-level waste disposal; the Nuclear Regulatory Commission (NRC) licenses and regulates the repository, using EPA's standards as the compliance measure; the Department of Energy (DOE) constructs and operates the repository. The Energy Policy Act (EPAct) of 1992 ( P.L. 102-486 ) maintained these roles, but established new requirements specific to the Yucca Mountain, Nevada site. EPA was directed to issue new environmental standards specifically for the Yucca Mountain repository site. General EPA repository standards previously issued and subsequently revised no longer could be applied to Yucca Mountain. DOE and NRC had raised concerns that some of EPA's general standards might have been impossible or impractical to meet at Yucca Mountain. EPAct also required EPA to contract with the National Academy of Sciences (NAS) for a technical study of "reasonable" standards that might apply to the Yucca Mountain site, and required that any standard set by EPA be "based upon and consistent with" the National Academy's findings and recommendations. The resulting study was issued August 1, 1995. The NAS study recommended that the Yucca Mountain environmental standards establish a limit on risk to individuals near the repository, rather than setting specific limits for the releases of radioactive material or on radioactive doses, as under previous EPA standards. The NAS study also examined the potential for human intrusion into the repository and found no scientific basis for predicting human behavior thousands of years into the future. On June 13, 2001, EPA issued a final Health and Safety Standard for the Yucca Mountain High-Level Radioactive Waste Repository. The regulation established a 15 millirem/year (mrem/yr) exposure standard for the facility that applied for 10,000 years based on projected doses to a Reasonably Maximally Exposed Individual (RMEI) from the undisturbed repository as well as circumstances of human intrusion. The rule established a separate groundwater protection standard equivalent to today's drinking water standards also applicable for 10,000 years. EPA's rule also required DOE to continue RMEI projections beyond 10,000 years to the time of peak dose, but declined to set numerical standards beyond the 10,000-year time frame. EPA calculated that its standard would result in an annual risk of fatal cancer for the RMEI of seven chances in a million. The nuclear industry criticized the EPA proposal as being unnecessarily stringent, particularly the groundwater standard. On the other hand, environmental groups contended that the 10,000-year standard proposed by EPA was too short, because DOE had projected that radioactive releases from the repository would peak after about 400,000 years. Despite DOE's opposition to the EPA standards, the Department's site suitability evaluation determined that the Yucca Mountain site would be able to meet them. NRC revised its repository regulations on September 7, 2001, to conform to the EPA standards. The Court Ruling Various aspects of the 2001 regulation were challenged in lawsuits filed with the U.S. Court of Appeals for the District of Columbia in July 2001. The State of Nevada, the Natural Resources Defense Council (NRDC), and the Nuclear Energy Institute (NEI) each challenged different aspects of the rule. Nevada and the NRDC challenged the rule on the grounds that it was not sufficiently protective and had not been adequately justified, focusing on the 10,000-year time period. NEI challenged the groundwater protections as unnecessary, contrary to recommendations of the NAS, and outside the agency's authority under the EPAct. On July 9, 2004, the U.S. Circuit Court of Appeals for the District of Columbia dismissed the NEI groundwater challenge, and all but one of the challenges by Nevada and NRDC. On the issue of the 10,000-year compliance standard, the Court upheld the challenge and vacated the 2001 standard, ruling that the 10,000-year compliance time frame was not "based upon and consistent with" the NAS finding that "there is no scientific basis for limiting the time period to 10,000 years or any other value ..." and their recommendation "that compliance assessment be conducted for the time when the greatest risk occurs within the limits imposed by long-term stability of the geologic environment." 2005 Proposed Final Rule In response to the court decision, EPA proposed a new version of the Yucca Mountain standard on August 22, 2005. The proposal retained the dose limits of the 2001 standard for the first 10,000 years but proposed a higher annual dose of 350 mrem/yr for the period of 10,000 years through 1 million years. EPA based the standard on variations in natural background radiation between Colorado and Amargosa Valley, Nevada, arguing that it was reasonable to use natural background as a benchmark for exposure when the compliance point was up to 1 million years in the future. The agency also argued that it was reasonable to consider protective exposures no greater than residents of Colorado experience today from natural background radiation alone. EPA also proposed basing the post-10,000-year standard on the median dose, rather than the mean, an approach that some argued would make it easier for DOE to meet the standard. Nevada state officials called EPA's proposed standard far too lenient and charged that it was "unlawful and arbitrary." Comments submitted to the public docket both praised and attacked EPA's proposal. Those in favor of the proposal focused on the unprecedented time frames and the reasonableness of drawing comparisons with natural levels of radioactivity; opponents claimed that the proposal violated EPA's basic principles of public health protection and was designed specifically to allow the facility to be built. 2008 Final Rule What Standard Has EPA Chosen? In its final standard, EPA has established a dual compliance standard: 15 mrem/yr with a separate groundwater protection standard for the first 10,000 years, and 100 mrem/yr for the period from 10,000 up to 1 million years. The concept of a dual standard was introduced in EPA's August 2005 proposal and has remained controversial. EPA maintains that the dual approach provides a reasonable measure of the disposal system's performance that appropriately combines protectiveness with recognition of the limitations of modeling in predicting the evolution of the system over hundreds of thousands of years. Critics argue that the dual standard explicitly condones a lesser level of protection for future generations and is designed to make it easier for the Department of Energy to ultimately meet the standard. EPA also specified that the mean of the distribution of results should be used to demonstrate compliance with the standard at all times. This is a departure from the proposal, in which EPA specified the mean during the pre-10,000-year period, but chose the median for the post-10,000-year period. At the time, EPA stated its belief that the median better represented the central tendency of the likely distribution of results in DOE's performance assessment. In the final rule, EPA returned to the mean for both time periods, citing public comments that pointed to a recommendation in the NAS report that the mean be used as the basis for any standard. What Is the Basis for EPA's 2008 Standard? In choosing 100 mrem/yr as the final standard for the 10,000 to 1 million-year time period, EPA abandoned the controversial "variations in natural background" approach it proposed in 2005. That approach would have set the standard based on comparisons of background levels between Amargosa Valley (the closest populated area to the proposed facility) and another geographical location in the United States. For the proposal, EPA chose Colorado. Their concept was that, so long as the hypothetical future residents of Amargosa Valley did not receive more radiation exposure in the far future than residents of Colorado receive from natural background radiation today, the exposure could be considered protective. EPA cited the unprecedented time period as one justification for its approach and referenced international precedent for using natural background levels as a "reasonable and logical reference point." In the final standard, EPA changed its approach. EPA states that it was not possible to reliably estimate levels of background exposure in a way that was relevant to making the kinds of comparisons between locations it envisioned in the proposal. EPA concluded that "comparing background radiation estimates from specific locations does not provide a clear or sufficient basis for a regulatory standard applicable to the Yucca Mountain disposal system." The agency did not abandon comparisons to background completely. The final rule notes that the 100 mrem/yr level "reasonably comports" with background estimates in Amargosa Valley, but relies more heavily on arguments that 100 mrem/yr is directly protective of public health. EPA cites both national and international standards in support of its decision, and points to existing domestic regulations, which each use 100 mrem/yr, as well as the National Council on Radiological Protection (NCRP) endorsement of the 100 mrem/yr level incorporated in the international system of radiation protection. EPA went on to state that it "acknowledges and concurs with the broad consensus in the protectiveness of the 100 mrem/yr level and, furthermore, considers it especially suitable for application to the extreme far future, when planning for and protecting public exposures is much less certain." Key Questions Comments submitted to the public docket both praised and attacked EPA's 2005 proposal. Those in favor of the proposal emphasized the unprecedented time frame and the reasonableness of drawing comparisons with natural levels of radioactivity at such long time frames. Supporters of the repository see EPA's regulation as the last tool NRC needs to complete its technical review. Opponents raised issues with the 2005 proposal in three key areas: 1) they claimed that the proposal was not protective of public health, 2) that it was legally indefensible; and 3) it was designed specifically to allow the facility to be built. Nevada state officials called EPA's proposed standard far too lenient and charged that it was "unlawful and arbitrary." In the final regulation, EPA argues that it has addressed these issues; it lowered the numerical standard significantly, from the 350 mrem/yr in the proposal to 100 mrem/yr, explaining that the original assumptions it used to justify comparing background levels in geographically similar areas were called into question by new data submitted during the public comment period. Acknowledging that it was unable to arrive at defensible estimates of natural background, EPA opted to use a different approach for the final standard. Some may argue that even adopting the 100 mrem/yr level as EPA did in the final standard is not protective of public health and that the final standard is further flawed by promulgating a dual standard that adopts a lesser level of protection for future generations than applies for the first 10,000 years. Protecting Public Health There has been much debate over the years about what is protective of public health when it comes to radiation. EPA has repeatedly held that an increased risk over a lifetime of 1 in 10,000 to 1 in 1 million excess cancer deaths is protective. The original 2001 Yucca Mountain regulation adopted a 15 mrem/yr standard for 10,000 years, which, at the time, the agency calculated was equivalent to a 7 to 8.5 in 1 million annual cancer risk. The final 2008 regulation maintains this level for the first 10,000 years. In considering the unprecedented challenge of carrying the compliance standard beyond 10,000 years out to 1 million years, EPA argues that a different framework should apply. EPA estimates that the nominal annual risk associated with 100 mrem/yr is 5.75 x 10 -5 or 5.75 in 100,000, which the it describes as fully consistent with the NAS report. EPA considers the standard both protective, given the extremely long time frames involved, and reasonable because it effectively addresses the uncertainty in projecting doses for up to a million years. The agency also emphasizes what it considers a "broad consensus" regarding 100 mrem/yr as a protective public dose limit. Some disagree with this assessment, arguing that a 100 mrem/yr exposure results in a 4 x 10 -3 or 4 in 1,000 risk over a 70-year lifetime, a level of risk that would be unacceptable in a regulation today. In the 2008 regulation, EPA argues that the increasing uncertainty in dose projections over very long time periods reduces the ability of performance assessment modeling to meaningfully distinguish among alternative and equally likely "futures" represented by individual model simulations. EPA also explained that it was attempting to balance the principles of intergenerational equity with the need to create a compliance standard that did not demand more than can be provided by scientific analysis. EPA argues that the dual nature of the regulation achieves this balance. Legal Uncertainty Critics believe EPA's standard will be legally vulnerable because they maintain that it does not fully address the District Court's direction to be based upon and consistent with the NAS report. They have also argued that any standard that accepts a greater individual risk in the far future than what we would consent to today is both not protective and not consistent with the NAS recommendation. There are many opinions on which parts of the standard may be vulnerable to legal challenge, and many more opinions about whether the regulation would survive challenge. Some Senate leaders have predicted further litigation, arguing that the standard is weak and puts people unnecessarily at risk. Meeting the Standard There are several aspects to consider related to the potential for any facility to establish compliance with a regulatory standard when likely exposures occur so far in the future. First, can DOE adequately demonstrate, using probabalistic models, that the design of the facility is sufficient to meet EPA's and NRC's regulatory standards? Modeling the performance of an engineering design is not unusual. What makes the Yucca Mountain repository, or any other deep geologic repository, unusual is the time span over which the model must be extended. Many assumptions must be built into the model to account for both natural and man-made variables, all of which carry their own uncertainties. These uncertainties are magnified when the projection is extended over tens of thousands, or in this case, over 1 million years. In its revised Final Supplementary Environmental Impact Statement for the Yucca Mountain repository, DOE estimates the maximum mean annual individual dose at 2 mrem/yr, a level that appears to meet EPA's 100 mrem/yr standard. DOE, however, has cautioned that, should the assumptions it used to develop the probabilistic model be successfully challenged during NRC's licensing process, their estimates of maximum annual individual dose could change. A DOE spokesperson has stated that DOE believes it can meet EPA's standard, but many critics, including the state of Nevada, are skeptical that any facility will be able to demonstrate through engineering design and probabilistic modeling that it can protect the public from exposure for 1 million years. Conclusion Now that EPA has issued the final health and safety standard, attention will shift to the licensing process and the many technical and policy issues to be addressed in that context. NRC's technical review and licensing process will take several years and may proceed regardless of additional legal challenges to EPA's standard. As Congress continues to oversee the Yucca Mountain repository program, it will face issues related to whether DOE's technical work is sufficient to demonstrate compliance with EPA's standard and other safety issues surrounding storage and transportation of spent nuclear fuel and high level radioactive waste to the facility should it be licensed. Annual appropriations will be a key venue in this debate. Some have argued that it would be a better public policy choice to continue to store nuclear waste on-site at the power plants where it is produced while continuing to search for as a safer, more cost-effective solution to permanent disposal of spent nuclear fuel and high-level nuclear waste. A larger issue is how will the continuing controversy over the Yucca Mountain Project affect the U.S. nuclear power industry and its role in broader national energy policy.

On September 30, 2008, the Environmental Protection Agency (EPA) issued the long-awaited revision to its 2001 Public Health and Safety Standard for the proposed Yucca Mountain deep geologic repository for high-level radioactive waste and spent nuclear fuel. While the issuance of the standard allows the Nuclear Regulatory Commission (NRC) to issue its final conforming standards and move forward toward a final license decision for the facility, EPA's standard raises several unprecedented regulatory issues and is likely to be further challenged in court. EPA's final regulation represents the first time the federal government has attempted to regulate public health far into the future, for a period of up to 1 million years. The continued prospect of legal challenges creates an uncertain atmosphere around the licensing process. It has been argued that the government's difficulty promulgating a legally defensible public health and safety standard for the Yucca Mountain repository has far-reaching impacts on the nuclear industry and the viability of nuclear power as a long-term component of the United States' energy strategy. Permanent disposition of spent nuclear fuel and high-level radioactive waste has been the subject of substantial controversy for several decades. The creation of a deep geologic repository for this type of waste has been an element of U.S. nuclear policy since the early 1980s. The technical, legal, and policy challenges have delayed development of a repository and created an uncertain environment for high-level nuclear waste management in the United States. Congress has held several hearings in the past few years focusing on the administration's progress toward finalizing the health and safety standard, the technical soundness of the Department of Energy's (DOE's) design for the facility, the relationship of the project to broader energy policy, and transportation safety issues for waste packages eventually sent to the facility, among other issues. Funding for the program has also been controversial.

Introduction Tax reform has been a subject of debate in the past several Congress and many policymakers agree that the U.S. tax system is in need of reform. Recent tax reform proposals seek to lower tax rates, broaden the tax base, and provide a simpler and fairer tax system overall. The difficulty with tax reform, however, is agreeing on the crucial details needed to refresh the tax system. How far should rates be lowered? Which tax provisions should be modified or eliminated? Should the reformed tax system be income-based or consumption-based? What are the objectives regarding federal deficits and the debt? To assist Congress as it continues to debate tax reform options, this report provides a review of recent legislative proposals introduced since the 113 th Congress. Policymakers often speak of the goal to achieve comprehensive reform of the entire tax code. If comprehensive tax reform is not deemed feasible, Congress could choose to consider reforms to certain parts of the code as an alternative. For example, the corporate tax system could be reformed first and the individual tax system, and perhaps payroll tax system, at a later date. Similarly, Congress could choose to reform only portions of the corporate system, such as just the international aspects of the corporate system. Alternatively, Congress could choose to evaluate business-only options, which would involve changes to the corporate system and portions of the individual system under which "pass-through" business income generated by sole proprietors, partnerships, limited liability companies, and S corporations is taxed. Before reviewing recent reform proposals, it may be helpful to review the three criteria by which economists often evaluate tax policy—equity, efficiency, and simplicity. Equity concerns the fairness of a particular tax system. Economists rely on two concepts of equity—horizontal equity and vertical equity. Horizontal equity holds that taxpayers with similar incomes should face similar tax burdens. Vertical equity examines the distribution of tax burdens across different income groups. Under an ability-to-pay standard, vertical equity suggests that taxpayers in higher income groups should pay more. Efficiency relates to the degree to which the tax system distorts economic decision making. Low marginal tax rates applied to a broad tax base, with few exclusions or exemptions, tend be more economically efficient. S implicity considers the amount of resources that must be committed to administering, enforcing, and complying with the tax system. Tradeoffs may exist between these three objectives. Tax Reform in the 115th Congress Tax reform continues to be actively debated in the 115 th Congress. Although no comprehensive tax reforms have been introduced into legislation yet in the 115 th Congress, two 2016 reform proposals appear to be at the forefront of current congressional debates—the House GOP's "A Better Way" tax reform proposal, released in June, 2016, and President Trump's campaign reform proposal, released in September 2016. The House GOP's tax reform proposal is intended to be revenue neutral. On the individual side, the proposal, also referred to as the tax reform "blueprint," calls for consolidating the current seven tax rates on individual labor income into three: 10%, 20%, and 25%. The proposal also would reduce taxes on active pass-through business income, dividends, and capital gains; increase the standard deduction; repeal the Affordable Care Act (ACA)-related tax provisions; and repeal the alternative minimum tax (AMT). To offset the revenue loss associated with these proposals, the blueprint calls for the repeal of all itemized deductions, except the deduction for charitable contributions and mortgage interest; the repeal of personal exemptions; and the repeal of various and to-be-determined tax expenditures. On the corporate side of the tax code, the House blueprint proposes reducing the corporate tax rate to 20% and repealing the corporate AMT. Investment would be eligible for expensing, although the interest on new debt would not be deductible. Other fundamental changes include implementing a territorial tax system and a border adjustment (exports would not be subject to tax; imports would be subject to tax). Currently held untaxed overseas earnings would be subject to a deemed repatriation tax of 8.75% on cash and cash-equivalents, and 3.5% on earnings held in all other forms. Most current corporate tax provisions would be repealed with the exception of net operating loss (NOL) carryforwards, last-in-first-out (LIFO) accounting, and the research and design (R&D) tax credit. President Trump's campaign proposal is also intended to be revenue neutral. Similar to the House plan, the President's campaign proposal calls for consolidating the seven tax rates on individual income into three: 12%, 25%, and 33%. The proposal also would increase the standard deduction, limit deductions, and repeal the 3.8% unearned Medicare tax, as well as the AMT. All businesses (corporate and pass-through) would be subject to a 15% income tax. The income of corporations with overseas operations would no longer be eligible for deferral, and previously earned foreign-source income would be subject to a 10% deemed repatriation tax, payable over 10 years. Most corporate tax expenditures would be eliminated except for the R&D tax credit. Legislative Proposals Reform the Income Tax System As of the date of this report, no legislation has been introduced that would provide a comprehensive reform of the individual and corporate income tax systems. Replace the Income Tax System Two bills have been introduced in the 115 th Congress thus far that would repeal and replace the income tax system. The Fair Tax Act of 2017 ( H.R. 25 and S. 18 ) proposes to repeal the individual income tax, the corporate income tax, all payroll taxes, the self-employment tax, and the estate and gift taxes. These taxes would be effectively replaced with a 23% (tax-inclusive, meaning that the rate is a proportion of the after-tax rather than the pre-tax value) national retail sales tax. The tax-inclusive retail sales tax would equal 23% of the sum of the sales price of an item and the amount of the retail sales tax. Every family would receive a rebate of the sales tax on spending amounts up to the federal poverty level (plus an extra amount to prevent any marriage penalty). The Social Security Administration would provide a monthly sales tax rebate to registered qualified families. The 23% national retail sales tax would not be levied on exports. The sales tax would be separately stated and charged. Social Security and Medicare benefits would remain the same with payroll tax revenue replaced by some of the revenue from the retail sales tax. States could elect to collect the national retail sales tax on behalf of the federal government in exchange for a fee. Taxpayer rights' provisions are incorporated into both acts. The sales tax would sunset at the end of a seven-year period beginning on the enactment of this act if the Sixteenth Amendment is not repealed. The amendment provided Congress with the "power to lay and collect taxes on incomes." Other Tax Reform Proposals The Tax Code Termination Act ( H.R. 29 ) would terminate the Internal Revenue Code (IRC), and declares that any new tax system be a simple and fair system that (1) applies a low rate to all Americans; (2) provides tax relief for working Americans; (3) protects the rights of taxpayers and reduces tax collection abuses; (4) eliminates the bias against savings and investment; (5) promotes economic growth and job creation; and (6) does not penalize marriage or families. Tax Reform in the 114th Congress The 114 th Congress did not enact comprehensive tax reform or legislation to replace the income tax system. Legislative Proposals Reform the Income Tax System No legislative proposals were introduced in the 114 th Congress to comprehensively reform the individual and corporate income tax systems. As previously discussed, the House majority released a tax reform proposal blueprint as part of their "A Better Way" policy agenda in June 2016and President Trump released a campaign tax reform proposal in September 2016. Please see " Tax Reform in the 115th Congress " for more details on these proposals. Replace the Income Tax System Several proposals to replace the income tax system were introduced in the 114 th Congress: the Fair Tax Act of 2015 ( H.R. 25 / S. 155 ), the Flat Tax Act ( H.R. 1040 ), and the Simplified, Manageable, and Responsible Tax (SMART) Act ( H.R. 1824 / S. 929 ). The Fair Tax Act of 2015 would have replaced the current income tax system with a national retail sales tax. Both the Flat Tax Act and the SMART Act would have imposed a flat tax system that is structurally similar to the Hall-Rabushka flat tax proposal, taxing wages and business taxable income. The Fair Tax Act of 2015 (H.R. 25/S. 155) Please see " Replace the Income Tax System 's" Fair Tax Act of 2017 ( H.R. 25 / S. 18 ) for a summary of The Fair Tax Act of 2015. The Flat Tax Act (H.R. 1040)6 This proposal would have authorized an individual or a person engaged in business activity to make an irrevocable election to be subject to a flat tax (in lieu of the existing tax provisions). It also would have repealed estate and gift taxes. For individuals not engaged in business activity who selected the flat tax, their initial tax rate would have been 19%, but after two years this rate would have declined to 17%. The individual flat tax would have been levied on all wages, retirement distributions, and unemployment compensation. An individual's taxable income also would have included taxable income of each dependent child who has not attained age 14 as of the close of such taxable year. The flat tax would have had "standard deductions" equal to the sum of the "basic standard deduction" and the "additional standard deduction." The basic standard deduction would have depended on filing status: $32,496 for a married couple filing jointly or a surviving spouse, $20,739 for a single head of household, or $16,248 for a single person or a married person filing a separate return. The additional standard deduction would have been an amount equal to $6,998 for each dependent of the taxpayer. All deductions would have been indexed for inflation using the consumer price index (CPI). For individuals engaged in business activity who selected the flat tax, their initial tax rate would have been 19% (declining to 17% when the tax was fully phased in two years after enactment) on the difference between the gross revenue of the business and the sum of its purchases from other firms, wage payments, and pension contributions. For those employees who elected the flat tax, government employers and employers of nonprofit organizations would have paid a flat tax on their employees' fringe benefits, except retirement contributions, because activities of government entities and tax-exempt organizations would have been exempt from the business tax. Any congressional action that would have raised the flat tax rate or reduced the amount of the standard deduction would have required a three-fifths (supermajority) vote in both the Senate and the House of Representatives. The Simplified, Manageable, And Responsible Tax (SMART) Act (H.R. 1824/S. 929) 7 The SMART Act ( H.R. 1824 / S. 929 ) would have replaced the current individual and corporate income taxes and estate and gift taxes with a flat tax. This flat tax proposal had two components: a wage tax and a cash-flow tax on businesses. The individual wage tax would have been levied at a 17% rate on all wages, salaries, pension distributions, and unemployment compensation. An individual's taxable income would have included taxable income of each dependent child who has not attained age 14 as of the close of the taxable year. The individual wage tax would not have been levied on Social Security income. Thus, the current partial taxation of Social Security payments on high-income households would have been repealed. Social Security contributions would have continued to be taxed; that is, they would not have been deductible and would be made from after-tax income. Firms would have had to pay the business tax on their Social Security contributions. Individuals would have had to pay the wage tax on their Social Security contributions. The individual wage tax would have had standard deductions that would equal the sum of the basic standard deduction and the additional standard deduction. The basic standard deduction would have depended on filing status: $28,960 for a married couple filing jointly or a surviving spouse, $18,490 for a single head of household, or $14,480 for a single person or a married person filing a separate return. The additional standard deduction would have been an amount equal to $6,240 for each dependent of the taxpayer. All deductions would have been indexed for inflation using the CPI. Businesses would have paid a tax of 17% on the difference (if positive) between gross revenue and the sum of purchases from other firms, wage payments, and pension contributions. This business tax would have covered corporations, partnerships, and sole proprietorships. Pension contributions would have been deductible but there would have been no deductions for fringe benefits. State and local taxes (including income taxes) and payroll taxes (e.g., Social Security, Medicare) would have not been deductible. If the business's aggregate deductions had exceed gross revenue, then the excess of aggregate deductions could have been carried forward to the next year and increased by a percentage equal to the three-month Treasury rate for the last month of the taxable year. Government and nonprofit organizations employers would have paid a 17% tax on their employees' fringe benefits, except retirement contributions, because activities of government entities and tax-exempt organizations would have been exempt from the business tax. A supermajority vote in the House and Senate would have been required to (1) increase any federal income tax rate; (2) create any additional federal income tax rate; (3) reduce the standard deduction; or (4) provide any exclusion, deduction, credit, or other benefit that reduces federal revenues. The American Business Competitiveness Act (H.R. 4377) The American Business Competitiveness Act ( H.R. 4377 ) proposed a top rate of 25% on net business income, whether that income was earned by a corporation or a business in a noncorporate form. Most business tax credits and deductions would have been repealed. The current system of depreciation also would have been repealed (with provisions allowing for depreciation deductions accrued before enactment to be claimed as scheduled), and businesses would expense capital purchases. Interest would have no longer been deductible as a business expense, and interest income for individuals would be taxed at the same rate as capital gains and dividends. Net operating losses could have been carried back five years, and carried forward indefinitely. All businesses would have been required to use the cash method of accounting. The AMT would have been repealed for business income. The proposal also would have converted to a territorial system for taxing overseas income. A cash flow tax, similar to what was proposed in H.R. 4377 , is essentially the business component of a flat tax. Other Tax Reform Proposals Other legislation introduced in the 114 th Congress would have eliminated the current tax code, leaving it to Congress to design a new tax code. The Tax Code Termination Act ( H.R. 27 ) would have terminated the IRC and declared any new tax system be a simple and fair system that (1) applies a low rate to all Americans; (2) provides tax relief for working Americans; (3) protects the rights of taxpayers and reduces tax collection abuses; (4) eliminates the bias against savings and investment; (5) promotes economic growth and job creation; and (6) does not penalize marriage or families. (This is the same bill, H.R. 29 , introduced in the 115 th Congress.) Tax Reform in the 113th Congress Several major tax reform proposals were put forward by Members in the 113 th Congress, but not enacted. Some of these may inform the current debate in the 115 th Congress. Legislative Proposals Reform the Income Tax System The Tax Reform Act of 2014 (H.R. 1) The Tax Reform Act of 2014 ( H.R. 1 ) was introduced late in the 113 th Congress. This formal legislative proposal was preceded by several tax reform discussion drafts, the first of which was introduced during the 112 th Congress. The Tax Reform Act of 2014 would have made substantial changes to the current federal tax system, modifying individual, corporate, and business income taxes, as well as the tax treatment of multinational corporations. The proposal also would have made a number of changes related to the treatment of tax-exempt entities, tax administration and compliance, and excise taxes. Under the proposal, there would have been two regular income tax brackets, with rates of 10% and 25%. A third bracket would have applied to an alternative definition of income, making for a top statutory rate of 35%. The 35% bracket results from a 10% tax on modified adjusted gross income (MAGI) above certain income thresholds ($400,000 for single filers and $450,000 for joint filers, adjusted for inflation). The 10% bracket would have phased out for certain higher-income taxpayers. Brackets would have been adjusted for inflation using chained-CPI. Dividends and capital gains would have been taxed as ordinary income, but 40% of net capital gains and qualified dividends would have been excluded from taxable income. The proposal also would have repealed AMT. Other substantial changes to the individual income tax system's structure included eliminating personal exemptions and increasing the standard deduction. The standard deduction would have been set at $22,000 for joint filers and $11,000 for other individual filers. An additional standard deduction of $5,500 would have been available for single filers with at least one child. The standard deduction would have been phased out for certain higher-income taxpayers. The proposal also would have modified or eliminated a number of individual income tax credits, deductions, and other provisions. Major changes included eliminating the deduction for state and local tax payments; scaling back the mortgage interest deduction and earned income tax credit (EITC); modifying the charitable deduction and education incentives; and changing 401(k) and Roth IRA retirement savings vehicles. Under the proposal, all C corporations would have been taxed at a top statutory rate of 25%, with the statutory rate reduction phased in through 2019. Other business income, including income earned by S corporations, partnerships, and sole proprietorships, would have been taxed through the individual income tax system. Similar to the individual system, the proposal would have modified or eliminated a number of corporate and business income tax credits, deductions, and other provisions. The proposed changes included eliminating the modified accelerated cost recovery system (MACRS); requiring amortization of research and experimental expenditures and advertising expenses; modifying the net operating loss (NOL) deduction; repealing by phasing out the Section 199 domestic production activities deduction; and repealing the last-in, first-out (LIFO) method of inventory accounting. The corporate also AMT would have been repealed. The proposal would have made significant changes to the tax treatment of foreign source income earned by U.S. multinational corporations. Specifically, it proposed adopting a 95% exemption for dividends received by U.S. corporations from foreign subsidiaries. Subpart F rules would have been modified, providing broad taxation of intangible income of foreign subsidiaries when earned, with foreign intangible income subject to a 15% rate (once fully phased in). The proposal also included "thin capitalization" rules that would have restricted domestic interest deductions and a one-time tax on previously untaxed earnings and profits (E&P) of U.S. corporations' foreign subsidiaries. E&P retained as cash would have been taxed at 8.75% and any remaining E&P would have been taxed at 3.5%. Numerous changes also were proposed with respect to tax-exempt entities, administration and compliance, and excise taxes, including an excise tax on systemically important financial institutions. The Family Fairness and Opportunity Tax Reform Act (S. 1616) The Family Fairness and Opportunity Tax Reform Act ( S. 1616 ) proposed substantive changes to the current income tax. Specifically, S. 1616 would have consolidated the tax brackets, repealed the AMT, provided an additional child tax credit and personal credit, eliminated the standard deduction and most itemized deductions (retaining, with modifications, the deduction for mortgage interest and charitable contributions), in addition to making other changes to the tax code. Flat Tax Rate Act (H.R. 5882) The Flat Tax Rate Act ( H.R. 5882 ) would have imposed a single income tax rate of 15%. Replace the Income Tax System Several proposals were introduced in the 113 th Congress that would have replaced the income tax system with some alternative form of taxation at the federal level. The Fair Tax Act of 2013 ( H.R. 25 / S. 122 ) would have repealed the individual income tax, the corporate income tax, all payroll taxes, the self-employment tax, and the estate and gift taxes. These taxes would have effectively been replaced with a national retail sales tax. Thus, under H.R. 25 / S. 122 , the current federal tax system, based on taxing income, would have been replaced with a system that taxes consumption. The Fair Tax Act was reintroduced in the 114 th Congress (discussed above). The Flat Tax Act ( H.R. 1040 ) proposed to allow taxpayers to elect to be subject to a flat tax, as an alternative to the current tax system. Individuals and businesses electing a flat tax would pay a flat rate of 19% for the first two years, and a rate of 17% thereafter. The SMART Act ( S. 173 ) also proposed a 17% flat tax on individuals' wages and businesses' taxable incomes. The flat tax systems proposed in H.R. 1040 and S. 173 were structurally similar to the Hall-Rabushka flat tax proposal. Both of these proposals were reintroduced in the 114 th Congress (discussed above). The American Growth & Tax Reform Act of 2013 ( H.R. 2393 ) would have required the Secretary of the Treasury to submit to Congress a legislative proposal for a progressive consumption tax. H.R. 2393 would have been designed to eliminate the public debt outstanding. Specifically, the Treasury would have been directed to provide rates and details on a progressive consumption tax to eliminate the public debt under scenarios in which (1) the consumption tax would be in addition to all other federal taxes in effect on the date of enactment; (2) the consumption tax would replace the individual income tax; and (3) the consumption tax would replace the corporate income tax. The Progressive Consumption Tax Act of 2014 ( S. 3005 ) proposed a 10% consumption tax on most goods and services (structured as a value-added tax [VAT])). Although the legislation would not fully replace the income tax system, it would have reduced individual and corporate income tax rates to a maximum rate of 28% and 17%, respectively. The legislation also would have broadened the income tax base, eliminating a number of individual tax expenditures. Further, the legislation would have provided an allowance of $50,000 for single filers ($100,000 for married filing jointly), that would have effectively exempted most taxpayers from the individual income tax. Refundable tax credits for families would effectively be replaced with rebates to offset consumption tax liability for lower-income families. Other Tax Reform Proposals Legislation introduced in the 113 th Congress would have eliminated the existing tax code, leaving it to Congress to design a new tax code. The Tax Code Termination Act ( H.R. 352 ) would have terminated the IRC and declared that any new tax system be a simple and fair system that met a set of criteria, as noted above. The End Wasteful Tax Loopholes Act ( S. 8 ) proposed to express the sense of the Senate that Congress should pass legislation to (1) eliminate wasteful tax loopholes; (2) eliminate corporate tax loopholes and wasteful tax breaks for special interests; (3) enhance tax fairness by reforming or eliminating tax breaks that provide excessive benefits to millionaires and billionaires; (4) crack down on tax cheaters and close the tax gap; (5) use the revenue saved by curtailing tax loopholes to reduce the deficit and reform the federal tax code; (6) address provisions in the tax code that make it more profitable for companies to create jobs overseas than in the United States; and (7) reform the tax code in a manner that promotes job creation, competitiveness, and economic growth. Although no legislation was ever proposed, former Committee on Finance Chairman Max Baucus released several discussion drafts related to tax reform in the 113 th Congress. The former chairman released discussion drafts related to international tax reform, tax administration, cost recovery and accounting, and energy tax policy. The discussion drafts were released in addition to a series of tax reform options papers put forward by the committee earlier in 2013. Under Senator Baucus's international tax reform proposal, passive and highly mobile forms of foreign-earned income would have been taxed at the full U.S. rate, as would have income earned from goods ultimately consumed in the United States. Two alternatives were put forth for taxing income earned from products and services sold abroad. "Option Y" would have subjected all foreign-earned income to a minimum tax, which the draft set at 80% of the U.S. statutory rate. "Option Z" would have taxed 60% of foreign active business income at the U.S. rate. Similar to Chairman Camp's international tax proposals contained in Tax Reform Act of 2014 ( H.R. 1 ), undistributed foreign earnings would have been subjected to a one-time tax. The Baucus discussion draft set this rate at 20%. Reforms to cost recovery and accounting rules were also put forward by former Chairman Baucus as a discussion draft. Proposed reforms would have eliminated the MACRS, enacting instead a system that uses asset pools and longer lives that more closely approximate economic depreciation. Certain intangibles, including research and experimentation as well as advertising expenditures, would have been capitalized and amortized. LIFO inventory accounting rules would have been repealed. Small-business expensing allowances would have been increased such that more businesses would have been allowed to use cash accounting. A number of similar proposals appeared in the Tax Reform Act of 2014, discussed above. Former Chairman Baucus had also released a discussion draft related to tax administration and energy tax reform. This tax administration draft contained several proposals designed to reduce the tax gap, enacting additional data reporting requirements and anti-fraud provisions. The energy tax reform discussion draft proposed clean energy production and investment tax credits designed to replace existing incentives for renewables and other clean electricity resources (e.g., nuclear, carbon capture, and sequestration). These credits would have been available for the long term, but were designed to begin phasing out once the annual average greenhouse gas emissions rate fell below a specified threshold. The proposal also contained a new tax credit for clean transportation fuels.

Many agree that the U.S. tax system is in need of reform. Congress continues to explore ways to make the U.S. tax system simpler, fairer, and more efficient. In doing so, lawmakers confront challenges in identifying and enacting policies, including consideration of competing proposals and differing priorities. To assist Congress as it continues to debate the intricacies of tax reform, this report provides a review of legislative tax reform proposals introduced since the 113th Congress. Although no comprehensive tax reforms have been introduced into legislation yet in the 115th Congress, two 2016 reform proposals appear to be at the forefront of current congressional debates—the House GOP's "A Better Way" tax reform proposal, released in June 2016, and President Trump's campaign reform proposal, released in September 2016. As with most recent tax reform proposals, both of these plans call for lower tax rates coupled with a broader tax base. In either case, numerous technical details would need to be addressed before either plan could be formulated into legislation. Several proposals have already been introduced in the 115th Congress to replace the current income tax system. The Fair Tax Act of 2017 (H.R. 25/S. 18) would repeal the individual income tax, the corporate income tax, all payroll taxes, the self-employment tax, and the estate and gift taxes. These taxes would be effectively replaced with a 23% (tax-inclusive, meaning that the rate is a proportion of the after-tax rather than the pre-tax value) national retail sales tax. The Tax Code Termination Act (H.R. 29) would terminate the Internal Revenue Code (IRC) and declares that its replacement meet several criteria regarding simplicity, fairness, and efficiency. Both of these proposals have been introduced in previous Congresses. In the 114th Congress, no comprehensive proposals to reform the individual and corporate income tax systems were introduced. There were, however, reform proposals to replace the income tax with an alternative system or abolish the current system altogether. In the 113th Congress, then-chairman of the House Committee on Ways and Means Dave Camp introduced the Tax Reform Act of 2014 (H.R. 1). This legislative proposal was preceded by several tax reform discussion drafts, the first of which was introduced during the 112th Congress. The Tax Reform Act of 2014 would have made substantial changes to the current federal tax system, modifying individual, corporate, and business income taxes, as well as the tax treatment of multinational corporations. The proposal would also have made a number of changes related to the treatment of tax-exempt entities, tax administration and compliance, and excise taxes. This report will be updated as warranted by legislative changes.

Legislative History and Rationale A history of the federal excise tax on tires shows that initial adoption occurred as a result ofthe revenue needs of World War I with the inclusion of the tax in the Revenue Act of 1918. (1) This act imposed the tax onboth tires and tubes at the rate of 5% of the retail price. At the conclusion of the war, certain fiscalproblems of the United States remained and because of revenue needs, the excise tax was extendedat the same rate by the Revenue Act of 1921. (2) As the financial condition of the country improved, the tax wasfirst reduced from 5 to 2 ½ percent by the Revenue Act of 1924 (3) before being repealed by theRevenue Act of 1926. (4) Today's excise tax derives from the re-institution of the tax (at 2 1/4 cents per pound on tiresand 4 cents per pound on inner tubes) by the Revenue Act of 1932. (5) The 1932 Act changed thestructure of the tax, from a tax on price to a tax on weight. The First Revenue Act of 1940 (6) raised the tax rates to 2 ½ centsand 4 ½ cents per pound, respectively. The reintroduction of the excise tax and increase in rate wasprimarily brought about to make up for the reduction in revenues from income taxes caused by theGreat Depression. At that time, the excise tax on tires and tubes was not viewed as a hardship onbusiness. The Revenue Act of 1941 (7) increased the tax rates from 4 cents to 9 cents on tubes and from2 1/4 cents to 5 cents on tires. (Various excise tax rates were increased as a part of a general increasein taxes during the World War II period.) There were no rate changes in 1943. However, theRevenue Act of 1943 (8) redefined rubber to include synthetic and substitute rubber and later the rates were codified in theInternal Revenue Code of 1954. (9) The Federal-Aid Highway Act of 1956 (10) provided for a significant expansion of the federal-aid highwayprogram and authorized federal funding over a longer period of time so as to permit long-rangeplanning. It was considered necessary to authorize the entire Interstate Highway program to assureorderly planning and completion of this network of highways throughout the United States asefficiently and as economically as possible. In the case of tire taxes, the act raised certain rates andexpanded the rate structure by prescribing different rates for different tire types. Tires for highwayvehicles were taxed at 8 cents per pound, other tires at 5 cents per pound, inner tubes at 9 cents perpound, and tread rubber at 3 cents per pound. From that time forward, proceeds from tire excisetaxes have been transferred to the Highway Trust Fund established by that act. The act provided fora rate reduction in 1972, which was rescheduled because the interstate highway system was stillunder construction. In 1960, an act called Excise Tax: Laminated Tires (11) provided a lower tax rateof 1 cent per pound for laminated tires which "consist wholly of scrap rubber" and "not of the typeused on highway vehicles." Congress recognized that the very heavy weight of laminated tiresdisadvantaged this new small industry since the tax represented nearly 20% of the retail cost of thetire. The excise tax rates on tires were once again changed in 1961. (12) This time the Federal-AidHighway Act of 1961 (13) provided excise tax rate increases to 10 cents per pound for highway vehicle tires (up 2 cents perpound); 10 cents per pound for inner tubes (up 1 cent per pound); and 5 cents per pound of treadrubber (up 2 cents per pound). Rates of 5 cents per pound for other than laminated and 1 cent forlaminated tires were left intact without change. Again, rate reductions were scheduled for 1972. Three subsequent public laws (P.L. 91-605, P.L. 94-280 , and P.L. 95-599 ) (14) postponed the scheduledrate reductions first from 1972 to 1977, then from 1977 to 1979, and finally from 1979 to 1984. Thus, as the Highway Trust Fund was extended, so too were the excise taxes that financed thenational highway system. A reduction in the rate of the tire excise tax of 2.5% was part of the Determination of SecondTier Taxes enacted in 1980. (15) The provision reduced the tax rate applicable to new highwaytires to 9.75 cents per pound and for non-highway tires to 4.875 cents per pound. The law alsophased out credits and refunds of tire excise taxes made pursuant to a warranty or guarantee after1982. The purpose of making these changes was to simplify collection procedures withoutsignificantly affecting overall tax receipts. In an effort to stimulate job creation, the Congress passed the Surface TransportationAssistance Act of 1982. (16) One of its goals (besides increased revenues for construction andmaintenance of the Nation's highways) was a redistribution of highway costs between car and truckusers. Accordingly, the act changed several of the excise taxes that fund the Highway Trust Fund. For example, the excise taxes on tread rubber and inner tubes were repealed as were the taxes onnonhighway and laminated tires. A new tax structure for heavy tires with graduated excise tax ratesdependent on tire weight was established. Tires which weigh less than 40 pounds were exemptedfrom excise tax so that tires for most passenger cars are no longer taxable. The excise tax rates onheavy tires ranged from 15 to 90 cents a pound according to the weight of the tire. These rates areshown in the following table. Table 1. Excise Tax Rates on Tires Under the SurfaceTransportation Assistance Act of 1982 Source: H.Rept. 97-987, pp. 89, 184. Included in the Tax Reform Act of 1984 (17) were minorrefund provisions for tire stock and tread rubber floor stock. These provisionsadjusted for taxes previously paid on dealer stock that had not yet been sold. From1982 through the end of 2004, excise tax rates were not changed but various tax actswhich have extended the interstate highway system have also extended the tire excisetaxes. An indirect change occurred to the federal tire excise tax under the TaxpayerRelief Act of 1997. The modification made by the act was in response to disputesoccurring during tax audits. The tire excise tax is based on weight rather than as atax on the retail selling price (18) In addition to the federal tax on tires, there is afederal retail excise tax (12%) imposed on heavy highway trucks, trailers, andtractors. Since the tires were taxed separately, the tires' retail sales value was notbeing included in determining the federal retail excise tax on heavy vehicles. Underthe act, the value of tires was to be included in determining the federal retail salestax. However, a credit for the amount of tire excise taxes paid was allowed againstthe retail sales tax on heavy highway vehicles. The change was effective as ofJanuary 1, 1998. The Joint Tax Committee estimated that this change would increasefederal revenues by $452 million during the FY1997-2002 period and $979 millionduring the FY1997-2007 period. (19) The excise tax on tires was last extended underthe Surface Transportation Revenue Act of 1998. (20) The American Jobs Creation Act of 2004 (21) changed themethod of taxing tires from the graduated weight structure of prior law to a tax basedon the load capacity of the tire. (22) The tax is set at the rate of 9.45 cents for each10 pounds of tire load capacity in excess of 3,500 pounds. In the case of super singleor bias ply tires the tax rate is set at 4.725 cents for each 10 pounds tire load capacityin excess of 3,500 pounds. This change has been scored by the Joint Committee onTaxation as having a negligible impact on federal revenues. It was argued that thelower rate on super single or bias ply tires is justified since bias ply tires do not lastas long and therefore must be replaced more frequently than radial tires. We areunaware of any studies which support or rebut this assertion. However, it is reportedthat bias ply tires are used to a greater extent on construction and farm equipmentvehicles. Thus, while tires on these vehicles may carry the same heavy loads asradial tires, they often travel less frequently and for shorter distances on highwaysand thoroughfares which are supported by the tire tax. The American Jobs CreationAct of 2004 also provided that tires sold for the exclusive use of the Department ofDefense or the Coast Guard would be exempt from the tax. A former exemption fortires with an internal wire fastening agent was repealed from the law. (23) A provision included in the Energy Tax Incentives Act of 2005 clarifies thedefinition of super single tires. Super single tires are those with a width greater than13 inches. They are "designed to replace two tires in a dual fitment" and are subjectto a lower tax rate of 4.725 cents for each 10 pounds load capacity exceeding 3,500pounds. Under the clarification, a super single tire does not include tires designedto serve as steering tires since steering axles are not equipped with a dual fitment. The clarification was made effective as if included in the American Jobs CreationAct of 2004. The revenue effect was scored as being negligible. Also included inthis legislation is a requirement that the Internal Revenue Service collect revenuedata for each class of taxable tire beginning January 1, 2006. This report is to includerevenue collections made from the tire taxes prior to the change in taxing loadcapacity. The report is scheduled to be submitted to Congress by July 1, 2007. The tire excise tax is currently scheduled to expire on October 1, 2011. However, if one uses the past as a guide, it appears likely that the tax will see furtherextension. Recent Developments Congress continues to consider highway reauthorization proposals in the 109thCongress. While the highway, public transit and road safety projects funding levelsexpire on May 31, 2005, the federal excise tax on tires does not expire untilSeptember 30, 2005. The House of Representatives approved a $283.9 billion billentitled the Transportation Equity Act: A Legacy for Users ( H.R. 3 ) ina 417 to 9 vote on March 10, 2005. That legislation includes an extension of the tiretax through September 30, 2011. Likewise, the Senate has passed its version of the bill entitled the Safe,Accountable Flexible, Efficient Transportation Equity Bill of 2005 (SAFETEA) ina vote of 89 to 11 on May 17, 2005. The Senate's version of the bill adds $11.2billion in additional revenues all of which is fully offset. It is argued that thisadditional revenue is needed so that all states will receive as much in federal highwayaid as they pay in federal gasoline excise taxes. Like the House of Representatives,the Senate's proposal would extend the tire tax through September 30, 2011. The White House remains committed to the funding level proposed by thePresident in his FY2005 budget. The President's senior advisors have recommendedthat he veto the legislation if his net funding authorization level ($283.9 billion oversix years) is not met. (24) Why is the Tax Based on Weight or Load Capacity -- Rather than Sales Price? There are two main reasons why the tax is imposed upon the weight or loadcapacity rather than the sales price of tires. At the time of World War II, there simplywere no substitutes for rubber and no domestic rubber supply. Since rubber was anecessary commodity for the war effort, the imposition of this excise tax was usedas a means to discourage domestic consumption. As such, the person using morerubber -- and heavier tires -- would shoulder a heavier tax burden than those personsconserving the valuable commodity. In this manner, two objectives were accomplished. First, the purchaser wouldpurchase tires with less rubber content and manufacturers were provided with anincentive to find alternate means of making tires with less rubber or with othersubstitutes. Synthetic tires were brought on the market shortly after this time. Ironically, an excise tax was placed upon these synthetic tires because the revenueneeds of the country were still the primary motive for the excise tax on tires andtubes. The second reason for basing the tax on weight or load capacity is that it isa manufacturer's excise tax that is assumed to be passed forward to the eventualconsumer. Administratively, the tax is much easier to collect from a fewmanufacturers than from the many dealers that sell tires. If sales price were used,then collection would have to be assigned at the point the consumer actually takespossession of the tire. Because of sales, trade-ins, etc., the tax would be moredifficult to monitor and the number of firms collecting and, thus, remitting revenuesto the Internal Revenue Service (IRS) would be much greater, resulting in greateradministrative collection expense for IRS. The proposed change from a weight based tax to a tax based on load capacitydoes not change the collection point of this manufacturers tax. As such, it should notaffect the number of collection points. Thus, it is generally believed that it shouldnot greatly affect the collection process. Assessment Because it funds highway construction, the excise tax on truck tires is oftenreferred to as a "user tax." It is generally held that heavier vehicles such as truckscause greater damage to both roadways and bridges. Thus, the tax on heavy tires fortrucks resembles a pricing mechanism with the tax viewed as a proxy for highwaywear-and-tear charges. While these taxes now apply only to heavy tires, they stillproduce substantial amounts of needed tax revenues for the Highway Trust Fund. The repeal of tire excise taxes would require additional taxes to be imposed on othersources in order to provide equivalent amounts of income for the Highway TrustFund. In its current form, this excise tax is easy to administer and, therefore,collection costs are kept to a minimum for the IRS. Several arguments have been advanced against the continued imposition ofthis excise tax. First, excise taxes have traditionally been associated with luxuryitems. Early in this century, those owning automobiles (and thus, needing tires) weregenerally wealthy individuals. In contrast, in the modern economy, tires play a vitaland necessary role in the overall transportation system and are no longer thought ofas luxuries. Second, selective excise taxes discriminate against industries whoseproducts are taxed. In this case, the commercial trucking industry must pay thisexcise tax while the chief competitors of truck transportation, namely the railroadsand waterways, have no corresponding excise tax. Thus, a question of intermodalequity arises. Finally, as noted earlier, excise taxes have their greatest impact onlower income individuals and are not based on the ability-to-pay principal. To theextent that the excise tax on truck tires is passed forward in the cost of goods sold,it places the greatest burden on lower income individuals because individuals withlower incomes tend to spend a larger portion of their income on these goods incontrast to individuals with higher incomes. Revenues As noted, revenues collected from the federal excise tax on tires are dedicatedto the Highway Trust Fund. The table (appearing on the following page) providesan historical review of those revenue collections. Early years include tax receiptscollected from the excise tax on inner tubes and tread rubber as well as the tax ontires. Today, revenues from the excise tax on tires provide less than 2% of theHighway Trust Fund receipts. Table 2. Excise Tax Collections on Tires, Tubes, and Tread Rubber (in nominal dollars) Sources: For fiscal years 1933 to 1961, collection figures have been taken from the Annual Report of the Secretary of the Treasury on the State of the Finances for thefiscal year ended June 30, 1962. For fiscal years 1962 to 1979, collection figures have been taken from the Statistical Appendix to the Annual Report of the Secretary of the Treasury on theState of the Finances for FY1979. For fiscal years 1980 to 1987, collection figures have been derived fromappropriate Annual Reports of the Commissioner of Internal Revenue published bythe Department of the Treasury, Internal Revenue Service, Publication 55. For fiscal years 1988 to 1992, collection figures have been derived fromappropriate information releases entitled Internal Revenue Report of Excise Taxes . For fiscal years 1993 to 1999, collection figures have been taken from theInternal Revenue Service Statistics of Income Bulletin , v. 19, no. 4, Spring 2000. pp.242-243. For fiscal years 2000 to 2003, collection figures have been taken from theInternal Revenue Service Statistics of Income Bulletin , v. 24, no. 3, Winter2004-2005. p. 152.

The excise tax on tires was first levied in 1918 mainly because of revenue needs broughtabout by World War I. The tax was reduced after the war and then repealed in 1926. The levy wasreintroduced during the Great Depression at a time when federal individual income tax revenueswere plummeting and was increased to help finance World War II. A general reduction in rates wasin the offing just before the outbreak of the Korean conflict but revenue needs brought about by thatwar prevented the lowering of rates. More recent history shows that in 1956 the rate of the tax wasraised in response to legislation enacted to build the interstate highway system and to create theHighway Trust Fund. Scheduled reductions did not occur after the construction of the interstatehighway system had been extended. A goal of the Surface Transportation Assistance Act of 1982was to redistribute highway costs between car and truck users. At that time, the tax structure waschanged so that the tax was imposed only on heavy tires with tax rates that are graduated, andincreased along with the tire's weight. The Taxpayer Relief Act of 1997 repealed the exclusion ofthe value of the tires from the 12% retail excise tax on heavy highway trucks, trailers, and tractors,but provided a credit offset to the retail tax for the tire tax paid. Under the American Jobs CreationAct of 2004 the tax based on tire weight was replaced with rates based on the load capacity of thetire. The federal excise tax imposed on tires is now scheduled to expire on October 1, 2011. Today, the premise for the excise tax on tires is that heavier vehicles cause greater damageto both roadways and bridges, and that the excise tax on tires resembles a pricing mechanism thatis a proxy for highway wear-and-tear charges. This premise still holds true as load capacity mustexceed 3,500 pounds before the tax is imposed, thus exempting tires on lighter vehicles. Tire excisetaxes still produce revenues for the Highway Trust Fund and repeal of the existing tax would requireadditional taxes to be imposed on other sources so as to provide an equivalent amount of revenuesto build and maintain roadways. This excise tax is said to be easy to administer with minimal federalcollection costs. Several arguments are advanced against the imposition of the tire tax. First, some view thisselective excise tax as discriminating against the tire and related industries whose products are taxedand also the trucking industry, which depends on the product. The commercial truck transportationindustry pays this tax while competitors such as railroads and waterways have no correspondingexcise tax, thus creating an intermodal equity issue. Second, to the extent that the excise tax on tiresis passed forward into the cost of goods sold, it places a burden on lower income individuals sinceindividuals with lower incomes, relative to those with higher incomes, tend to spend a larger portionof their income for the same consumption amount (thus, to the extent that the tax is passed forwardto consumers, the tax is regressive). This report will not be updated.

Introduction Congress, Presidents, and executive branch agencies create federal advisory committees to gain expertise and policy advice from individuals outside the federal government. Federal advisory committees have historically been created on an ad hoc, provisional basis and are created to bring together various experts—often with divergent opinions and political backgrounds—to examine an issue and recommend statutory, regulatory, or other policy actions. Federal advisory committees are one of only a few formalized mechanisms for private-sector citizens to participate in the federal policymaking process. Congress, the President, and executive branch agency heads may create advisory bodies. In 1972, the Federal Advisory Committee Act (FACA) was enacted to govern advisory committees established or utilized by the President or executive branch agency heads. FACA itself provides a detailed definition of a federal advisory committee. FACA-governed entities are statutorily defined as any committee, board, commission, council, conference, panel, task force, or other similar group, or any subcommittee or other subgroup thereof (hereafter in this paragraph referred to as "committee"), which is - (A) established by statute or reorganization plan, or (B) established or utilized by the President, or (C) established or utilized by one or more agencies, in the interest of obtaining advice or recommendations for the President or one or more agencies or officers of the Federal Government, except that such term excludes (i) any committee that is composed wholly of full-time, or permanent part-time, officers or employees of the Federal Government, and (ii) any committee that is created by the National Academy of Sciences or the National Academy of Public Administration. It is unclear in some cases, however, whether FACA should apply to particular advisory committees. Advisory bodies statutorily mandated may or may not be obligated to follow FACA requirements—often depending on whether Congress explicitly states in legislation whether FACA should apply. Otherwise, FACA's application can be determined by examining which branch of the federal government appoints committee members and to which branch of the federal government the committee reports its findings. Whether called commissions, committees, councils, task forces, or boards, these entities have addressed a gamut of public policy issues, offering policy recommendations on topics ranging from organ transplant practices to improving operations at the Department of Homeland Security. Pursuant to statute, the General Services Administration (GSA) maintains and administers management guidelines for federal advisory committees. In FY2011, 1,029 FACA committees with a total of 69,750 members reported total operating costs of $395,179,373 among 51 departments and agencies. Agency administrators, the President, and Congress are likely to continue creating federal advisory committees throughout the 112 th Congress. In the 112 th Congress, one bill has been introduced that would affect FACA's implementation and administration. On October 6, 2011, Representative William Lacy Clay introduced H.R. 3124 , the Federal Advisory Committee Act Amendments of 2011. H.R. 3124 would require the selection of advisory committee members without regard to their partisan affiliation and that advisory body subcommittees and privately contracted committees adhere to FACA requirements. Currently, such subcommittees and privately contracted committees are not covered by FACA. Among other changes, H.R. 3124 seeks to clarify the ethics requirements of committee members and increases records access requirements. On October 6, 2011, H.R. 3124 was concurrently referred to the House Committee on Oversight and Government Reform and the House Committee on Ways and Means. On October 13, 2011, the House Committee on Oversight and Government Reform ordered H.R. 3124 to be reported by unanimous consent. No further action has been taken on the bill. H.R. 3124 may clarify certain advisory committee transparency requirements and increase public participation with and records access to federal advisory committees. The bill, however, could increase the time and costs associated with starting and administering advisory committees. This report provides a legislative and executive-branch history of the Federal Advisory Committee Act. It then discusses a variety of studies about the design and utility of such advisory bodies. The report then offers possible considerations when designing an advisory committee and analyzes policy options related to advisory committee design and operations. History Although FACA committees did not exist until 1974, George Washington is often credited with initiating a tradition of presidential use of outside expertise when, in 1794, he appointed an ad hoc group of commissioners to investigate the Whiskey Rebellion. Since the 1840s, Congress has legislated control over federal advisory bodies—mostly by limiting funding and committee member pay. In 1842, for example, a law was enacted that prohibited payment to "any commission or inquiry, except courts martial or courts of inquiry in the military or naval service" without explicit "special appropriations." Similarly, in 1909, another law was enacted that prohibited appropriation to "any commission, council, board, or other similar body ... unless the creation of the same shall be or shall have been authorized by law." The law also prohibited the detailing of any federal employee to work on an unauthorized commission. By the 20 th century, some Members of Congress believed the executive branch's advisory bodies were inefficient and not accessible to the public. Some Members believed that the public harbored concerns that a proliferation of federal advisory committees had created inefficient duplication of federal efforts. Moreover, some citizens argued that the advisory entities did not reflect the public will, a point that was punctuated by many committees' policies of closed-door meetings. Congress was called on to increase committee oversight and gain some control over the proliferating advisory boards. Subsequently, Congress enacted the Federal Advisory Committee Act (FACA; 5 U.S.C. Appendix; 86 Stat. 770, as amended). The legislation was enacted in 1972 and requires advisory bodies that fit certain criteria to report annually a variety of information, including membership status and progress, to the General Services Administration (GSA). GSA then reports annually aggregated advisory body information to Congress. Greater detail on the actions of both the legislative and executive branches in FACA's development are provided in the Appendix. The Federal Advisory Committee Act FACA attempts to address many of the congressional and citizen concerns about federal advisory committees that were discussed in the section above. The law established the first statutory requirements for management of, access to, and oversight of federal committees. The act requires all advisory committees "be advisory only," and the issues on which they offered determinations are to be "determined, in accordance with law, by the official, agency, or officer involved." FACA allocates a variety of oversight and management responsibilities to the standing committees of Congress, the Office of Management and Budget (OMB), agency heads, and the President. FACA requires congressional committees to review continuously whether existing federal advisory committees that fall under their legislative jurisdiction are necessary or redundant. Congress is also to determine if the committees are "fairly balanced in terms of the points of view represented and the functions to be performed." FACA committees are to be created with enough autonomy from the appointing power (Congress, the President, or an agency head) as to not be unduly influenced by it. Reporting requirements are to be clearly stipulated, and proper funding and staffing are to be provided. The 1972 statute charted OMB to oversee the management of advisory committees. The OMB director's first mandated task was to review, concurrently with Congress, existing advisory entities to determine whether they should be abolished. The director was to create operating policies for advisory committees, and provide "advice, assistance, and guidance" to entities "to improve their performance." The guidelines were to include pay rates for members, staff, and consultants—and catalog overall costs for the committees that were to be used for budget recommendations to Congress. Agencies' heads were to ensure proper implementation of OMB's guidelines, and to "maintain systematic information on the nature, functions, and operations of each advisory committee within its jurisdiction." In December 1977, the duties charged to OMB were reassigned to the General Services Administration (GSA) by E.O. 12024. GSA now promulgates regulations related to FACA administration and performs annual reporting requirements to Congress. The President is required to report to Congress—within one year of receiving advice from an advisory committee—his determination for action (or inaction) on the committee's recommendation. The President is also required to report annually to Congress the "activities, status, and changes in the composition of advisory committees in existence during the preceding year." FACA requires the President to exclude the activities and composition changes of advisory committees related to national security from the report. The law authorizes only Congress, the President, or an agency head to create an advisory committee. FACA requires all committees file a charter prior to their operation. A charter is required to include the committee's objectives, the support agency, the committee's duties, the estimated operating costs, the estimated number of committee meetings, and the anticipated termination date, among other information. Most committee meetings are required to be advertised in the Federal Register and open to the public. Contemporary FACA In FY2009, 907 active FACA committees reported a total of nearly 82,000 members. In FY2009, the total reported operating costs for these committees were $361,493,408. During FY2010, 992 active committees reported a total of 74,289 members. The operating costs reported for those committees were $386,550,504. In FY2011, 1,029 active committees reported a total of 69,750 members. The FY2011 reported total operating costs were $395,179,373. In the past three years, the number of FACA committees has grown by 100 committees, while the number of committee members has dropped 12,190. Figure 1 , Figure 2 , and Figure 3 show the growth in the reported number of FACA committees, the decrease in the reported number of members serving on FACA committees, and the reported increase in costs (adjusted to 2011 dollars) for FACA committees. Data from the FACA Database demonstrate that the increase in the number of committees is prompted by the statutory creation of new committees. The impetus for the decrease in members, however, is more difficult to determine. At a June 21, 2011, meeting with GSA officials who administer the FACA database, the officials said that the increase in FACA committee membership in FY2009 was prompted largely by an increase in the membership on committees that made recommendations about where and how to distribute appropriations provided by the American Recovery and Reinvestment Act of 2009 ( P.L. 111-5 ). FACA requires that advisory committees make their recommendations accessible to the public. All committee meetings that are bound by FACA are presumed to be open to the public, with certain specified exceptions. Adequate notice of meetings must be published in advance in the Federal Register . Subject to certain records protections provided in the Freedom of Information Act, all papers, records, and minutes of meetings must be made available for public inspection. Membership must be "fairly balanced in terms of the points of view represented and the functions to be performed," and the committee should "not be inappropriately influenced by the appointing authority or by any special interest." All advisory committees that are subject to FACA must file a charter every two years. The charter must be sent to the appropriate Senate and House committee of jurisdiction, the agency head of the agency in which the committee is located, and the Committee Management Secretariat in GSA. It must include the advisory committee's mandate and duties, frequency of meetings, and membership requirements. GSA is required annually to review advisory committee accomplishments, respond to inquires from agencies that seek to create new advisory bodies, and maintain an online, publicly accessible database of FACA bodies that includes a variety of information about each entity. Pursuant to FACA, advisory entities that have at least one member who is not a federal employee are subject to the act. The act requires each agency with an advisory committee to have a committee management officer (CMO) who supervises "the establishment, procedures, and accomplishments of advisory committees established by that agency." Moreover, the CMO is required to maintain advisory committee "reports, records, and other papers" related to the entity's proceedings and ensure that the body adheres to the Sunshine Act (5 U.S.C. §552). Also pursuant to FACA, a "designated federal official" (DFO) must be present at committee meetings to call and adjourn meetings. According to OMB Circular No. A-135, FACA committees must be "essential to the performance of a duty or responsibility conveyed upon the executive branch by law." The circular then states the following: Advisory committees should get down to the public's business, complete it and then go out of business. Agencies should review and eliminate advisory committees that are obsolete, duplicative, low priority or serve a special, rather than national interest. All committees created since FACA's enactment are required to sunset after two years, unless legislation creating the entity specifies otherwise or the entity is renewed by the power that created it. Studies on Federal Advisory Committees Scholarship on the creation, operations, and effects of federal advisory committees is limited. One study examined ways Congress can design more effective committees and another explored whether advisory committees serve presidential interests. In addition to competing theories on which branch of the federal government advisory committees serve, scholars have not agreed on a single definition for the committees. Although the definition of an advisory committee can vary across the federal government, FACA-governed entities are defined specifically within the act as any committee, board, commission, council, conference, panel, task force, or other similar group, or any subcommittee or other subgroup thereof (hereafter in this paragraph referred to as "committee"), which is – established by statute or reorganization plan, or established or utilized by the President, or established or utilized by one or more agencies, in the interest of obtaining advice or recommendations for the President or one or more agencies or officers of the Federal Government, except that such term excludes any committee that is composed wholly of full-time, or permanent part-time, officers or employees of the Federal Government, and (ii) any committee that is created by the National Academy of Sciences or the National Academy of Public Administration. Also pursuant to statute, FACA committees are prohibited from creating policy or issuing regulations. Their role is to remain strictly advisory. One researcher stated that advisory committees have traditionally allowed a President to deflect blame, buy time, and give the appearance of action on issues that are too politically charged, too difficult, to solve. In addition, however, various scholars have noted that commissions are used by presidents to garner greater public support for a policy to which the president is already committed; show symbolic concern over a situation at the highest level of government; establish a fact base for others to use; respond to crises; deflect political heat from the president and allow passions to cool when issues become explosive; overcome the "stovepipes" and parochial thinking of the permanent bureaucracy; gather more information about a problem and its policy alternatives; forge consensus among the interests represented on the commission itself; and change the hearts and minds of men. That same researcher attempted to group commissions into three categories: agenda commissions, which aim to attract support and attention to presidential policy initiatives; information commissions, which are designed to give "new ideas, new facts, and new analysis to policymakers"; and political constellation commissions, which seek to "foster consensus, compromise, and cooperation in a policy domain." Another researcher who examined the impetus for committee creation found that some committees are created to acquire new ideas from outside experts. He added, however, that committees may be created to allow politicians to avoid blame for issues that are too cumbersome or too politically charged. Moreover, he stated that Members of Congress may create committees because of the immense workload of legislators. Creating an advisory committee can "pare down Congress's workload to more manageable dimensions or to handle and manage a problem in a timely manner." Another FACA study focused on how the structure and composition of a federal advisory committee may affect its deliberative process, and, therefore, its contribution to public policy. Researcher Mark B. Brown studied the requirement that FACA committee membership be "fairly balanced." He argued that the distinction between experts and laypeople in advisory committee membership is arbitrary, naïve, and artificial. Mr. Brown wrote: "… most current advisory committee guidelines rest on an untenable double-standard that directs agencies to evaluate potential expert members of advisory committees solely in terms of their professional qualifications and nonexpert members in terms of the political interests." It is not true, however, that "expert" members of advisory bodies are always treated as not having personal biases. Instead, the federal ethics requirements placed on certain "expert" members mandate that they make public certain biases. An expert member who is categorized as a special government employee, for example, is required by federal ethics codes to divulge any potential conflicts of interest and recues him or herself from any actions in which he or she would financially benefit. Since FACA's enactment, scholars and practitioners of government have debated whether advisory bodies, in fact, increase public interaction with the federal government. Other debates continue over whether advisory committees have a positive effect on the federal government, or if they are a symptom of a federal government that is not performing properly. In March 2012, the Government Accountability Office (GAO) released a report that examined FACA and non-FACA federal advisory committees within the Departments of Transportation and Education. GAO used FACA Database documentation and agency official interviews to examine whether the committees were duplicative and whether they were useful. GAO found that while advisory committees are "generally considered useful and cost efficient mechanisms for federal agencies to obtain advice and input from a range of stakeholders and experts," "the advisory group environment is fluid, and the potential for duplication exists both within and outside the agency." GAO made one recommendation to the Secretary of Transportation and the Secretary of Energy: Identify and document specific steps that should be taken in periodically assessing potential duplication and the ongoing need for both FACA and non-FACA groups. In addition to the recommendation, GAO noted four practices that it stated can influence the usefulness of an advisory body. The four practices are securing clear agency commitment; finding a balance between responsiveness to the agency and independence; leveraging resources through collaboration with similar groups; and evaluating the group's usefulness to indentify future directions for the group or action to improve its usefulness. When FACA Applies As noted earlier, FACA defines an "advisory committee" as "any committee, board, commission, council, conference, panel, task force, or other similar group, or any subcommittee or other subgroup thereof" that is "established by statute or reorganization plan," "established or utilized by the President," or "established or utilized by one or more agencies." All advisory bodies that fit this definition, however, are not necessarily entities that must adhere to FACA. The Code of Federal Regulations defines an advisory committee nearly identically to FACA's definition, but adds that the body must be created "for the purpose of obtaining advice or recommendations for the President or on issues or policies within the scope of an agency official's responsibilities." In short, FACA applies when an advisory committee is "either 'established' or 'utilized' by an agency." Pursuant to FACA, any advisory body that performs a regulatory or policy-making function cannot be a FACA entity. Although both FACA and the Code of Federal Regulations define advisory committees, it may sometimes be unclear whether some advisory committees—especially those created by statute—must adhere to FACA requirements. Advisory committees created by the executive branch that fit FACA criteria are governed by FACA. Advisory committees that are created by statute, however, may or may not be obligated to follow FACA requirements—often depending on which branch of the federal government appoints committee members and to which branch of the federal government the committee must report its findings. If, for example, a statutorily created advisory committee reported only to Congress and to no one within the executive branch, FACA guidelines likely would not apply. If, however, the same committee reported to both Congress and the President, it is unclear whether FACA guidelines would apply. According to GSA, it is generally up to the agency that hosts the advisory body to determine whether FACA statutes are applicable. To avoid confusion over whether a committee is governed by FACA, Members of Congress can include a clause within committee-creating legislation to explicitly clarify whether a committee is to be subject to FACA. While FACA may improve both the reality and perception of transparent governmental operation and accessibility, its requirements may also place a number of additional chartering, record-keeping, notification, and oversight requirements on the entity. In particular, agencies have claimed that compliance with the various FACA requirements are cumbersome and resource intensive, thereby reducing the ability of committees to focus on substantive issues in a spontaneous and timely fashion. Moreover, other scholars have argued that the scope of the openness requirements could have the practical effect of stifling candid advice and discussion within a committee. Congress may choose to exempt a congressionally-created advisory committee from FACA to allow it to operate more quickly than FACA would permit. For example, the requirement that all meetings be posted "with timely notice" in the Federal Register can slow down the daily operations of an advisory committee, which will typically not hold meetings until 15 days after the notice is published. Committees that consist entirely of part- or full-time federal employees are explicitly exempted from FACA, as are committees created by the National Academy of Sciences or the National Academy of Public Administration. Committees created by or operating within the Central Intelligence Agency or the Federal Reserve System are also FACA exempt. Some specific committees—for example the Commission on Government Procurement—have been identified by statute as FACA exempt ( P.L. 105-153 ). FACA and the 112th Congress On October 6, 2011, Representative William Lacy Clay introduced H.R. 3124 , the Federal Advisory Committee Act Amendments of 2011. H.R. 3124 incorporates language from bills Representative Clay introduced in both the 111 th and 110 th Congresses. H.R. 3124 seeks to clarify some of the language in FACA and make the process of creating a committee and selecting members more transparent and participatory. The bill also incorporates parts of the proposed Transparency and Open Government Act ( H.R. 1144 ) from the 112 th Congress. H.R. 3124 seeks to increase public access to federal advisory committees, clarify ethics requirements of FACA committee members, and extend FACA requirements to federally contracted advisory committees that are currently not governed by FACA. H.R. 3124 was concurrently referred to the House Committee on Oversight and Government Reform and the House Committee on Ways and Means. On October, 13, 2011, the House Committee on Oversight and Government Reform ordered the bill to be reported by unanimous consent. No further action has been taken on H.R. 3124 . H.R. 3124 and FACA Membership H.R. 3124 would modify the committee-member appointment process. The bill adds language requiring agencies to publish a request for comments in the Federal Register prior to making membership appointments. Pursuant to the bill, the public would be allowed to submit their recommendations electronically and the agency would be required to "consider" the comments when making appointments to the committee. Additionally, H.R. 3124 would require the selection of members without regard to their partisan affiliation. The measure also requires a review of each committee member appointment to ensure that he or she is properly designated as either a special government employee (SGE) or a representative. Not all committee members must adhere to federal ethics codes, according to the Code of Federal Regulations . If a committee member is designated as an SGE, under 18 U.S.C. §202(a), then he or she is subject to federal ethics regulations. If, however, the employee is deemed a representative, federal ethics codes may not apply. The designation of whether a committee member is an SGE or a representative depends largely on whether the member was selected to provide his or her scientific or scholarly opinion or to serve as an advocate for a particular organization or outcome. Pursuant to FACA, each type of advisory committee member must be appointed under the proper designation, which would determine the ethical standards placed on each member. H.R. 3124 would require each member, at the time of appointment, be explicitly designated and be provided a summary of the ethics requirements associated with that designation. H.R. 3124 and FACA Committee Transparency and Independence H.R. 3124 would require that advisory body subcommittees and contracted committees adhere to FACA requirements. Currently, such subcommittees and contracted committees are not covered by FACA. H.R. 3124 would require committees to provide a statement declaring their advice or recommendations were made "independent from the agency." The bill would require that any individual who "regularly attends and participates in committee meetings … as if [he or she] were a member" be regarded as a member of the committee—although they need not be provided a vote or veto power. Agencies would be required to put FACA committee meeting minutes as well as a transcript, audio, or video recording of each meeting on an agency website. In addition, H.R. 3124 would require agencies to put the following FACA committee information on an agency website: A description of the process used to establish and appoint the members of the advisory committee, which is to include: The process for identifying prospective members; The process of selecting members for balance of viewpoints or expertise; The reason each member was appointed to the committee; A justification of the need for representative members, if any. A list of all current members, including, for each member the following: The name of any person or entity that nominated the member; Whether the member is designated as an SGE or a representative; In the case of a representative, the individuals or entity whose viewpoint the member represents. A list of all special government employees members who acquired certification pursuant 18 U.S.C. §208(b), which permits them to provide advice as a committee member—even if there is a conflict of interest—in cases where a federal official determined that "the interest is not so substantial as to be deemed likely to affect the integrity of the services which the Government may expect from such officer or employee." The agency must also put online a copy of each such certification, a summary description of the conflict necessitating the certification, and the reason for granting the certification; Any recusal agreement made by a member or any recusal known to the agency that occurs during the course of a meeting or other work of the committee; A summary of the process used by the advisory committee for making decisions; Detailed minutes of all meetings of the committee and a description of committee efforts to make meetings accessible to the public using online technologies (such as video recordings) or other techniques (such as audio recordings); Any written determination by the President or the head of the agency to which the advisory committee reports, pursuant to section 10(d), to close a meeting or any portion of a meeting and the reasons for such determination; Notices of future meetings of the committee; and Any additional information considered relevant by the head of the agency to which the advisory committee reports. The bill also details what information would be required in a FACA committee charter. The Administrative Conference of the United States and FACA On December 9, 2011, the Administrative Conference of the United States adopted recommendations that it believes would improve FACA. Some of the 11 recommendations are similar or identical to the reforms included in H.R. 3124 , including a requirement that agencies invite public comment on potential members of a committee prior to member selection, that members' ethics requirements be made explicit prior to committee service, and that any waivers issued to members related to conflict-of-interest requirements be placed on the committee's website. Among other suggestions were removing the cap on the number of FACA committees agencies can create; webcasting meetings when not cost-prohibitive; posting relevant documents online prior to meetings; and requiring statutes that create FACA committees to include details on their mission, duration, membership balance, and budget. Analysis Congress has continued to use FACA as a way to gain greater control and oversight of committees created by the President or executive branch agency heads. FACA, however, can also be used to generate increased transparency and enforce consistent recordkeeping among all advisory committees—whether they are created by the legislative or the executive branch. Clarifying Whether a Committee Is a FACA Committee Despite FACA's public notice, public access, and other reporting requirements, some parts of the act remain unclear. Whether an advisory committee should adhere to FACA, for example, is often open to legal interpretation. Congress may choose to enact legislation that would more clearly define which advisory bodies are subject to FACA. The applicability of FACA is most clear when the President or an agency head created a committee. If such a body performed only advisory duties, included at least one member who is not a federal employee, and reported its findings to either an executive branch agency or the President, FACA will, most likely, apply. If, however, that same committee was created by statute and reported to both Congress and the President, its FACA status would be less certain. FACA was primarily created to provide the public and Congress greater access to the operations of certain, qualifying federal advisory committees. Congress may choose to pass legislation that would require all advisory committees to adhere to FACA statutes. Such an action could curb Congress's ability to create committees that have the flexibilities to act more quickly than a FACA committee—because non-FACA entities would not need to comply with all of the act's reporting and transparency requirements. The 112 th Congress could clarify whether any committees created by or reporting to Congress should be considered FACA committees, making it more clear to committees whether they must follow FACA's requirements. Additionally, Members of Congress could place certain desired FACA elements within a committee's statutory authority to tailor an advisory committee to the desired amounts of both flexibility and oversight. If Congress were to enact legislation exempting congressionally-created committees from FACA, concerns about transparency in government may arise. Congress may choose not to enact legislation, which would leave the FACA status of some advisory committees uncertain. This uncertainty could culminate in legal challenges. Clarifying Ethics Requirements for Members Congress may also choose to clarify whether federal advisory committee members must abide by ethics requirements that are placed on federal employees. Under current GSA regulations, "agency heads are responsible for ensuring that the interests and affiliations of advisory committee members are reviewed for conformance with applicable conflict of interest statutes and other Federal ethics rules." As noted earlier in this report, not all committee members must adhere to federal ethics codes, according to the Code of Federal Regulations . If a committee member is designated as a special government employee, under 18 U.S.C. §202(a), then he or she is subject to federal ethics regulations. If, however, the employee is deemed a "representative," federal ethics codes may not apply. Congress may choose to clarify whether FACA members are to adhere to federal ethics regulations. H.R. 3124 would require that committee members be explicitly designated as government employees or representatives prior to beginning service on an advisory committee. Such legislative language may increase trust in advisory bodies and prevent claims of bias or improper action. Congress, however, may determine that FACA already requires such member designations, and agencies that do not clearly and appropriately assign these designations to committee members is violating the act. Congress may determine that the language in H.R. 3124 , therefore, would be unnecessary or redundant. Requiring Public Participation in Committee Membership Selection Congress may also have an interest in making the process for selecting FACA committee members more transparent and participatory. H.R. 3124 would require agencies to publish a request for comments in the Federal Register prior to making membership appointments seeking comments on possible potential members. Agencies then would be required to "consider" the comments when making appointments. Additionally, the Administrative Conference of the United States recommended that agencies "invite public nominations for potential committee members." Congress may consider requiring public comment on membership appointments to advisory committees. Such action may inject FACA committees with the ideas and opinions of new and creative members. Such a requirement, though, could slow down the process of standing up a federal advisory committee. For example, it may take considerable time to publish a solicitation for comment in the Federal Register . Then agencies would have to provide a comment period, review the comments, and determine a way to demonstrate consideration of the comments received. Considerations When Creating a FACA Committee Among the considerations pertinent to the creation of an advisory committee and to its composition, operation, and effectiveness are the following: defining the committee's purpose, establishing committee membership, defining committee duties, setting the committee's powers, allocating proper support staff and office space, and mandating the committee's reporting requirements. Establishment and Mandate Each committee must be given both a name and certain duties to fulfill. In many committee charters, the entity is introduced by name and then a brief statement of mission is offered. The charter's language may include highlights of agency, presidential, or congressional findings that prompted the committee's creation—but such findings are not required. The charter must identify the authority for the establishment of the committee, including any statutes or other executive branch documents that authorized or required its creation. Advisory committees can be authorized by statute, required by statute, created by executive order, or created by agency authority. The President's Board of Advisors on Historically Black Colleges and Universities, for example, was originally authorized by E.O. 13256 of February 12, 2002. Most recently, on February 26, 2010, Executive Order 13532 renewed the board through December 31, 2012. E.O. 13532 also explicitly rescinded E.O. 13256. In contrast, the Air Traffic Procedures Advisory Committee was created by agency authority. Its powers and mission are detailed in its charter, which is available in the FACA Database. Once committee authority is established, the charter often includes a section on "duties" and "function" specifying the committee's mandate or responsibilities. The Forestry Research Advisory Council within the Department of Agriculture, for example, has its duties delineated as "advisory." The Council shall provide reports to the Secretary of Agriculture, on regional and national planning and coordination of forestry research within the Federal and State agencies, forestry schools, and the forest industries. A committee's powers and objectives are best stated in specific terms to guide the panel's members and staff in carrying out their responsibilities. Charters should authorize enough autonomy to ensure that the advisory body operates independently of its host agency as well as the authority that created it. The assigned objectives should be realistically achieved within the time constraints placed on the committee. The committee will also need time to acquire staff, find suitable office space, and address other logistical concerns. Upon completion of these objectives, the committee will need additional time to create a final report, file any required records, and vacate the office space. Membership There are few restrictions on the membership of FACA committees. As noted earlier in this report, all FACA committees must have at least one member who is not a "full-time, or permanent part-time" officer or employee of the federal government. Membership must also "be fairly balanced in terms of the points of view represented and the functions to be performed by the advisory committee." Federal ethics statutes and regulations also may affect committee membership. When designing an advisory committee, however, the entity should be designed to ensure completion of the intended mission. The size of the committee should be small enough to allow all members a chance to communicate their expertise and opinion, but large enough to maintain a quorum even when members are absent. Size and member appointment, therefore, will largely depend on the committee's functions and mandate. Members are often appointed on a staggered schedule to ensure that there are always a few continuing committee members serving at any given time. Some committees are designed to include specific members of the federal government or their designees. For example, the 15 committee members written into the charter of the U.S. Military Academy Board of Visitors are the chairperson of the Committee on Armed Services of the Senate, or designee; three other members of the Senate designated by the Vice President or the President pro tempore of the Senate, two of whom are members of the Senate Committee on Appropriations; the chairperson of the Committee on Armed Services of the House of Representatives, or designee; four other members of the House of Representatives designated by the Speaker of the House of Representatives, two of whom are members of the House Committee on Appropriations; and six persons designated by the President. Other committee charters contain specific language in their charters that describe certain qualifications or expertise required for membership. The Exxon Valdez Oil Spill Public Advisory Committee Charter, for example, created a 15-member committee to be filled by members with the following areas of expertise or qualifications: aquaculturist/mariculturist (e.g., fish hatcheries and oyster/shellfish farming); commercial fisher (e.g., commercial fishing for salmon, halibut, herring, shellfish and bottom fish; including boat captains and crews, cannery owners/operators, and fish buyers); commercial tourism business person (e.g., promoting or providing commercial travel or recreational opportunities, including charter boating, guiding services, visitor associations, boat/kayak rental); recreation user (e.g., recreation activities that occur within the area, including kayaking, power boating, sailing, sightseeing); conservationist/environmentalist (e.g., organizations interested in the wise use and protection of natural resources); local government (e.g., incorporated cities and boroughs in the affected area); Native landowner (e.g., regional or village corporations in the affected area established by the Alaska Native Claims Settlement Act); tribal government (e.g., federally recognized tribes in the affected area); scientist/technologist (e.g., organizations, institutions, and individuals involved in, or with expertise in, scientific and research aspects of the affected area/resources and/or the effects of the oil spill and/or the technical application of scientific information); sport hunter/fisher (e.g., hunting and/or fishing for pleasure); subsistence user (e.g., customary and traditional use of wild renewable resources for direct personal or family consumption as food, shelter, fuel, clothing, tools, or transportation; for the making and selling of handicraft articles; and for customary trade); regional monitoring program operator (e.g., monitoring and reporting on environmental conditions in the affected area, including monitoring for pollution and the status of biological resources); marine transportation operator (e.g., transport of goods and services in marine waters, including piloting, tug operations, barge operations, oil tankers and pipelines, shipping companies); and public-at-large (e.g., representing the affected area of the oil spill and its people, resources, and/or economics). Still other charters include membership positions for Members of Congress, the President, or agency heads to appoint. By granting appointment powers to a variety of federal institutions and to those with a variety of viewpoints, a committee can gain a widespread base of support. With a varied membership, however, the entity that created the committee may lose some control over the actions or direction of the advisory body because the members may not reflect the desired ends of Congress, the President, or an agency head. A multifarious membership may also make the final report more difficult to create because there may be little agreement on what recommendations or advice should be given. Compensation and Travel Advisory panel members who are not employees or officers of the federal government may or may not receive compensation for their work on a committee. The authority that designs the committee also determines whether committee members are to receive pay, and—if they are paid—their pay level. Neither committee members nor staff may be paid more than the equivalent of Executive Level IV ($155,500 for 2011). Committee members and staff may also be paid for travel expenses as well as a per diem. Committee Staff Advisory committee staff must be assembled quickly if the entity is to complete its mission in the time allotted. Generally speaking, most committees include an executive director, staff members, committee members, and—occasionally—outside consultants. While committee staff may draft most of what will become a committee's final report, committee members approve the final product. Committee Reports In addition to a final report, some committees may be required to make interim or annual reports to the President, Congress, or department heads. These reports are often listed in the "duties" section of a committee's charter. A committee's recommendations are strictly advisory and cannot make policy action by recipients of the report. In the case of a presidential advisory committee, however, the President must submit to Congress—within a year of receiving a committee's final report—any actions he will take on the recommendations. If the President does not make policy changes resulting from the recommendations, he must explain his inaction. A statute that creates a FACA committee can include instructions for the entities that receive a final report. For example, a statute can require the President to send a report to Congress with policy suggestions that are based on the committee's recommendations. The effort the President might put into creation of that report, however, may largely correspond to the administration's interest in the committee and its findings. If the President is not particularly interested in the committee's issues or mission, he may not place much effort into a required report to Congress. He also may not give much attention to the advisory body's recommendations overall. Committee Powers Explicit authority may be needed to accomplish certain special duties for which an advisory body may be responsible. Many committees are granted authority to hold hearings, take testimony, receive evidence, use the franking privilege, accept certain donations, and permit volunteers to work on the staff. Vesting a committee with subpoena power, however, is done on a very selective basis—and is largely dependent upon the mission of the panel. A document search of the FACA Database found no current advisory committee charters that provide subpoena powers. One charter, however, explicitly denied the entity such authority. Bylaws and Procedures Specific procedural requirements—like quorum qualifications—can often be found in committee charters. Other bylaws, including election procedures to determine a chairperson, to tally committee votes, to fill membership vacancies, and to produce reports may be included in the charter. Committee procedures may be included in the legislation that creates an advisory body. If committee procedures are provided by statute, Congress may have greater control over the body's operations, procedures, and outcomes. Conversely, if procedures are in statute, the advisory body may not have the autonomy to conduct meetings that provide for optimal opportunity to share candid advice and present new ideas. Unless an advisory committee charter states otherwise, the General Services Administration's designated federal officer is responsible for approving or calling the meeting of the committee, approving the committee agenda (except for presidential advisory committees), adjourning meetings when it is determined to be in the public interest, and certifying minutes. Funding Congress may directly fund a committee through the appropriations process, or it may carve out funding within an agency's annual appropriation. If a federal advisory body is not explicitly prohibited from doing so, it may also be funded through private donations. A committee charter may include a determination as to whether an entity may accept such private financial gifts. If a committee is permitted to accept donations or other, in kind, gifts, the authority that created the advisory body may require detailed recordkeeping of such donations in order to maintain transparency and to avoid the perception of undue influence. Committee Termination Unless statutorily mandated or otherwise extended by the President or a federal officer, an advisory committee will automatically terminate, pursuant to FACA, two years after its establishment. Consequently, most advisory committees must be rechartered with GSA every two years. Most national study committees created by statute are mandated to terminate 30 days after the submission of the final report, giving staff time to prepare the office for closing. Appendix. The Legislative and Executive Branch Background to FACA Enactment of FACA occurred over many decades and included debates and hearings in many congressional sessions as well as actions by the executive branch. This Appendix provides details on both legislative branch and executive branch actions that culminated in enactment of FACA. The Department of Justice In the 1940s and 1950s private sector industries began creating advisory committees that attempted to influence federal government operations. In the 1950s, some of these entities were created under official auspices, using guidelines formulated by the Department of Justice (DOJ) in 1950. These entities operated without explicit legislative or executive branch authority, but attempted to affect federal policies and practices. Government officials—including both the legislative and executive branches—as well as members of the general public grew concerned that these ad hoc committees were overstepping their authority. At various points within that era, DOJ released legal opinions on the creation, structure, and oversight of advisory committees. A 1944 statement by then-Attorney General Francis Biddle, for example, outlined limits to private industry's ability to form advisory committees that offered unsolicited policy advice to the government. According to Biddle's statement, "the responsibility for the formation of an industry committee to advise any particular department of the government is the responsibility of that department." A 1955 opinion released from the Office of the Deputy Attorney General created a five-pronged collection of guidelines for the creation of a valid federal advisory committee. They were as follows: 1. There must be either statutory authority for the use of such a committee, or an administrative finding that use of such a committee is necessary in order to perform certain statutory duties. 2. The committee's agenda must be initiated and formulated by the government. 3. Meetings must be called and chaired by full-time government officials. 4. Complete minutes must be kept of each meeting. 5. The committee must be purely advisory, with government officials determining the actions to be taken on the committee's recommendations. Congressional Action On January 22, 1957, Representative Dante Fascell introduced a bill that would have made DOJ's five advisory committee requirements law (H.R. 3378; 85 th Congress). The bill included language noting "an increasing tendency among Government departments and agencies to utilize the services of experts and consultants as advisory committees or other consultative groups," but warned that "protection of the public interest requires that the activities of such committees and groups be made subject to certain uniform requirements." In addition to making the five DOJ standards law, the bill would have required the President to submit to Congress an annual report "detailing the membership of each advisory committee used by each Federal department of agency; the function of each such committee; and the extent to which the operations of the committees have complied with the Standards provided in this Act." The bill, as amended, passed the House on July 10, 1957. The bill was sent to the Senate and referred to the Government Operations Committee. No further action was taken. The President and the Executive Branch In 1962, President John F. Kennedy issued an executive order (E.O. 11007) that reinforced the DOJ advisory committee requirements. The executive order defined an advisory committee as any committee, board, commission, council, conference, panel, task force, or other similar group ... that is formed by a department or agency of the Government in the interest of obtaining advice or recommendations ... that is not composed wholly of officers or employees of the Government. E.O. 11007 also limited the lifespan of all federal advisory committees to "two years from the date of its formation" unless special actions were taken by an agency or department head to continue the committee. On March 2, 1964, the Bureau of the Budget issued Circular No. A-63, which laid out the executive branch's policies for creating, maintaining, and terminating advisory committees. The circular included guidelines that discouraged dual chairmanships, required annual status reports to the Bureau of the Budget, and compelled all advisory entities not created by statute to be called committees—not commissions, councils, or boards. Throughout the early 1960s and early 1970s, while Congress was holding hearings to determine effective ways to gain oversight and control over advisory committees, executive branch representatives maintained that legislation was unnecessary and used Circular No. A-63 as evidence of systematic oversight of advisory committees. On June 5, 1972, just months prior to congressional passage of the Federal Advisory Committee Act, President Richard M. Nixon issued Executive Order 11671, which delineated new operating, transparency, and oversight standards for advisory entities. The order incorporated many of the elements within the bill that was to become FACA, including vesting the Office of Management and Budget (OMB—formerly the Bureau of the Budget) with oversight responsibilities for committee management. Congressional Reaction Congress held a series of hearings to examine the executive branch's use of federal advisory committees throughout the late 1960s and early 1970s. During an introduction to one of the hearings, the Senate Committee on Government Operations' Subcommittee on Intergovernmental Relations Chairman Edmund S. Muskie stated that Congress was using the hearings to examine "two fundamentals, disclosure and counsel, the rights of people to find out what is going on and, if they want, to do something about it." More than 30 witnesses testified before the Senate Subcommittee on Intergovernmental Relations over 12 days of hearings—from June 10 through June 22, 1971. As a result of the hearings, some Members concluded that advisory committees were "a useful means of furnishing expert advice, ideas and recommendations as to policy alternatives" but "there [were] numerous such advisory bodies that are duplicative, ineffective and costly, and many which have outlived their usefulness, and that neither the Federal agencies, the Executive Office of the President, nor the Congress, have developed any effective mechanisms for evaluating." In December 1970, the House Committee on Government Operations' Special Studies Subcommittee issued a comprehensive report titled "Role and Effectiveness of Federal Advisory Committees," which compiled research and information gathered from federal agencies from 1969 through 1970. The studies included policy recommendations for advisory bodies. On February 2, 1971, Representative John Mongan introduced the Federal Advisory Committee Standards Act (H.R. 4383; 92 nd Congress), which incorporated many of the study's recommendations. The bill addressed the responsibilities of Congress, the director of OMB, the President, and agency heads to control and maintain federal advisory bodies. For example, congressional committees with legislative jurisdiction over particular issues were to review all advisory bodies related to that topic. The congressional committees were then to eliminate any statutorily created advisory bodies they believed were duplicative, clarify advisory body missions, and ensure that adequate staff and resources were assigned to advisory bodies under their jurisdiction. Additionally, the congressional committees were to make certain the ad hoc advisory committees had "a date established for termination and for submission of the committee report." The director of OMB was to conduct a "comprehensive review" of duplicative advisory bodies and recommend to the relevant authority whether they should be eliminated or merged into existing advisory entities. The director was to work with Congress and agency heads to "provide advice, assistance, guidance, and leadership to advisory committees." In the Senate, Senator William V. Roth, Jr., and others, introduced a similar bill (S. 1964) "to authorize the Office of Management and Budget to establish a system of governing the creation and operation of advisory committees throughout the Federal Government." During introductory remarks on the Senate Floor on May 26, 1971, Senator Roth acknowledged a lack of congressional oversight of the more than 2,600 such advisory entities operating in the federal government. Advisory committees have contributed substantially to the effectiveness of the Federal Government in the past. But as the function of Government has become more complex and the decisions more difficult, numerous advisory committee have sprung up to advise the President and other decision-makers in the Federal Agencies and the Congress. Over 2,600 interagency and advisory committees exist today and it is possible that this figure could be as high as 3,200. In spite of the large number of advisory committees and their participation in the process of government, Congress has neglected to provide adequate controls to supervise their growth and activity. As a result, the use of committees or advisory groups has come under strong attack in the press and other media as wastes of time, money, and energy. The creation of another committee is often viewed by the public as another indication of inefficiency and indecisiveness in Government. S. 1964 was referred to the Senate Committee on Government Operations. No further action was taken on the bill. On May 9, 1972, Members of the House voted overwhelmingly (357 to 9) to approve H.R. 4383, with several amendments, including the addition of "openness provisions" that required public notice of advisory body meetings and public access to advisory body files under the Freedom of Information Act (5 U.S.C. §552). The bill was then sent to the Senate. S. 3529, introduced on April 25, 1972, merged the goals of a number of pending advisory committee bills. According to the Senate report that accompanied the bill, S. 3529 aimed to make advisory committees less redundant and more accessible. The purpose of S. 3529 is to: strengthen the authority of Congress and the executive branch to limit the use of Federal advisory committees to those that are necessary and serve an essential purpose; provide uniform standards for the creation, operation, and management of such committees; provide that the Congress and the public are kept fully and currently informed as to the number, purposes, membership, and costs of advisory committees, including their accomplishments; and assure that Federal advisory committees shall be advisory only. Within the Senate, debate on advisory committees centered on whether to make public participation and transparency of meetings and recordkeeping mandatory. S. 3529 required facilitating public information requests by making committee records subject to the Freedom of Information Act (FOIA). The bill, however, did not include explicit requirements for committee membership or participation. When the bill came up for vote on the Senate floor, an amendment was added exempting committees that furnish "advice or recommendations only with respect to national security or intelligence matters" from reporting requirements. Another amendment exempting the Federal Reserve Advisory Council was also added to the bill. S. 3529 passed the Senate by voice vote on September 12, 1972. The Senate then struck all the House language of H.R. 4383 and replaced it with that of S. 3529. The Senate then passed H.R. 4383 as amended. A conference report that reconciled differences between the House and Senate versions of H.R. 4383 was published on September 18, 1972. The final bill included reporting requirements for advisory committees planning to hold meetings, and ensured public inspection of advisory committee materials would be possible. The conference report was adopted by the Senate on September 19, 1972, and by the House on September 20. President Nixon signed the Federal Advisory Committee Act into law (P.L. 92-463) on October 6, 1972. Following the signing of FACA, then-President Nixon rescinded E.O. 11671, which previously had been the primary document guiding the creation and operation of federal advisory bodies. Legislative and Executive Branch Efforts After FACA's Enactment In the years since FACA's enactment, congressional oversight hearings have resulted in legislative and executive branch attempts to clarify the statute or streamline the number of FACA committees. One substantial amendment to FACA was the 1977 Federal Advisory Committee Act, which incorporated the Sunshine Act ( P.L. 94-409 ) into the law. The Sunshine Act is specifically designed to make government agency meetings more publicly accessible and transparent. Another significant change in FACA's administration came in December 1977 when Executive Order 12024 transferred advisory committee oversight duties from the Director of OMB to the Administrator of General Services. Additional executive orders have been issued since the law's inception; many of them abolished particular federal advisory committees or lengthened the lifespan of others. From 1983 through 1989, legislation was introduced in Congress to strengthen FACA's management controls, as well as to establish new ethical, financial, and conflict-of-interest disclosure requirements for committee members. None of these bills were enacted. On February 10, 1993, President William J. Clinton issued Executive Order 12838, which required each executive department to "terminate not less than one-third of the advisory committees subject to FACA (and not required by statute) ... by the end of fiscal year 1993." Agency heads were required to review all advisory committees under their jurisdictions and eliminate them or justify in writing why they were necessary to continue. Committees would need approval from the OMB director to continue operation. The following year, as part of the National Performance Review, Vice President Albert Gore issued a memorandum requiring all agencies to reduce advisory committee costs by 5%. The memorandum also stated that President Clinton would not support legislation that established a new advisory committee or exempted an advisory committee from FACA. On October 5, 1994, Alice M. Rivlin, then-acting director of OMB, released a circular detailing management policies for remaining FACA committees. The circular reinforced the Clinton Administration's decision to reduce the number of advisory committees and cut costs. It also laid out the criteria GSA was to use when evaluating the utility of existing advisory bodies, and it required GSA to create a variety of operating and reporting guidelines for advisory committees. In 1995, two FACA-related laws were enacted. The first exempted intergovernmental advisory actions—official advisory efforts between federal officers and officers of state, local, or tribal governments—from FACA ( P.L. 104-4 ). The second was a law that eliminated GSA's annual reporting requirements to Congress ( P.L. 104-66 ). Pursuant to the law, GSA stopped creating its Annual Report to Congress in 1998, but GSA officials continue to collect and examine data on FACA committees and publish it in the Annual Comprehensive Review, an additional oversight document required by FACA. The Review is used to determine whether advisory bodies are executing their missions and adhering to statutes, or whether they are in need of revision or abolition. The Federal Advisory Committee Act Amendments of 1997 ( P.L. 105-153 ) further provided for public comment of committee membership and public attendance at committee meetings for advisory bodies that existed within the National Academy of the Sciences or the National Academy of Public Administration.

Federal advisory committees—which may be designated as commissions, councils, or task forces—are created as provisional advisory bodies to collect viewpoints on various policy issues. Advisory bodies have been created to address a host of issues and can help the government manage and solve complex or divisive issues. Congress, the President, or an agency head may create a federal advisory committee to render independent advice or make policy recommendations to various federal agencies or departments. In 1972, Congress enacted the Federal Advisory Committee Act (FACA; 5 U.S.C. Appendix—Federal Advisory Committee Act; 86 Stat.770, as amended). Enactment of FACA was prompted by the perception that advisory committees were duplicative, inefficient, and lacked adequate control or oversight. FACA mandates certain formal structural and operational requirements, including formal reporting and oversight procedures. Additionally, FACA requires committee meetings be open to the public, unless they meet certain requirements. Also, FACA committee records are to be accessible to the public. Pursuant to statute, the General Services Administration (GSA) maintains and administers management guidelines for federal advisory committees. During FY2011, 1,029 active committees reported a total of 69,750 members. Operating costs for those committees reportedly was $395,179,373, of which $188,342,083 was reportedly spent on federal staff to support the committees' operations. FACA was originally enacted to make executive branch advisory committee operations more accessible and transparent. Congress can decide, however, to apply FACA's requirements to a legislative branch advisory committee. Existing statutes are sometimes unclear as to whether a congressionally created committee would have to comply with FACA's requirements—except in cases when the statute includes language that indicates whether the act is to apply. In the 112th Congress, one bill has been introduced that would modify FACA's implementation and administration. On October 6, 2011, Representative William Lacy Clay introduced H.R. 3124, the Federal Advisory Committee Act Amendments of 2011. Among other changes, the bill would require the selection of advisory committee members without regard to their partisan affiliation. In addition, H.R. 3124 would create a formal process for the public to recommend potential advisory committee members. The bill seeks to clarify the ethics requirements placed on committee members, and the bill increases records access requirements. On October 6, 2011, the bill was concurrently referred to the House Committee on Oversight and Government Reform and the House Committee on Ways and Means. On October 13, 2011, the House Committee on Oversight and Government Reform ordered the bill to be reported by unanimous consent. No further action has been taken on the bill. In addition to considering H.R. 3124, the 112th Congress may create new advisory bodies as well as oversee the operations of existing bodies. This report offers a history of the Federal Advisory Committee Act, examines its current requirements, and analyzes various advisory body design elements and operations.

Introduction Although the extent of future sea-level rise remains uncertain, sea-level rise generally is anticipated to have a range of economic, social, and environmental effects on U.S. coasts. Global sea level is rising due to warming and expanding oceans, melting glaciers, and melting ice sheets in Greenland and Antarctica, among other reasons. From 1901 to 2010, global sea levels rose an estimated 187 millimeters (mm; 7.4 inches), averaging a 1.7 mm rise annually; estimates are that from 1992 to 2010, the rate increased to 3.2 mm annually. The rates of relative sea-level rise at specific locations are likely more important to coastal communities and coastal ecosystems than the global sea-level average trends. Sea levels are rising between 9 mm and 12 mm per year (0.4 inches to 0.5 inches per year) along the Mississippi delta near New Orleans and between 1 mm and 2 mm (0.04 inches and 0.08 inches, or less) per year along some coastal shorelines in Oregon and Washington. Since the beginning of the 20 th century, coastal and tidal areas have seen significant population growth and associated development and infrastructure investments. The consequences of sea-level rise are of interest to Congress not only because of the local impacts on coastal communities and ecosystems but also because of the direct and indirect impacts and risks for the federal government. Following an introduction to sea-level rise issues for policymakers, the report is divided into three primary parts: Part I describes the phenomenon of sea-level rise. It introduces key terminology, measurements, trends, and causes. (See " Part I. What Is Sea-Level Rise? ") Part II describes the types of effects that sea-level rise can have on U.S. coasts. It addresses effects on shorelines and coastal ecosystems and on coastal development and society. Part II describes federal actions to address sea-level rise and the tension between the federal role and actions taken by state, local, and private stakeholders. (See " Part II. Sea-Level Rise and U.S. Coasts .") Part III provides a primer on policy considerations. It raises considerations and questions associated with policies to address the causes and effects of sea-level rise. It also discusses federalism issues and general considerations associated with sea-level rise policies and investments. (See " Part III. Policy Considerations and Questions .") Sea-Level Rise Issues for Federal Policymakers In 2010, roughly 100 million people lived in U.S. coastal shoreline counties (exclusive of the Great Lakes) and 2.9 million people resided in coastal shoreline counties of the U.S. territories. Many of these people may not be directly exposed to sea-level rise but may experience indirect effects on their communities or shoreline amenities. Of the U.S. coastal shoreline population, nearly 8 million people live in the 1% coastal flood zone (i.e., area in which the annual probability of coastal flooding is 1 in 100 or higher). Sea-level rise represents an increase in coastal flood and erosion hazards for exposed and protected shorelines, potentially expanding inland the 1% coastal flood zone. Higher sea levels may allow coastal storms to affect more people and cause more damage, which can result in broader social and economic effects. Higher sea levels increase permanent or temporary coastal land inundation, change shoreline dynamics and coastal erosion, and increase saltwater intrusion and hydrodynamic changes to coastal freshwater aquifers. These impacts are anticipated to result in more nuisance flooding and impeded drainage, more loss of lands to inundation, more shifts in habitat types (e.g., freshwater wetlands converting to brackish wetlands), less freshwater supply, and potential water-quality impairment. These changes may affect coastal species as well as coastal developments and their amenities (e.g., sandy beaches). Sea-level rise affects the federal government both directly and indirectly. Federal facilities (e.g., military installations) and federal projects, such as navigation improvements and coastal storm damage reduction projects, often are located on U.S. coasts. Federally assisted infrastructure, such as roads and bridges, and docks, also may be affected by sea-level rise; they may experience more intermittent flooding or a decrease in their useful life. Private-sector enterprises and individuals own or control large portions of coastline real estate and infrastructure. If sea-level rise contributes to flooding and associated damages, the federal government can become involved through disaster assistance and the National Flood Insurance Program (NFIP) for homeowners and businesses. Much public infrastructure is uninsured. Several federal agencies are affected by sea-level rise and address sea-level rise in their work. The following are examples of how federal agencies are involved with sea-level rise: Science . Federal entities engaged in understanding sea-level rise include the National Oceanic and Atmospheric Administration (NOAA) in the Department of Commerce and the U.S. Geological Survey (USGS) in the Department of the Interior. NOAA, USGS, and other federal agencies survey coastlines and conduct research to understand coastal processes, hazards, and resources. Flood Mitigation and Recovery . The Federal Emergency Management Agency (FEMA) in the Department of Homeland Security works to reduce flood losses through risk-mitigation activities and disaster response and recovery, including the NFIP. Federal Facilities, Projects , and Programs . The Department of Defense, the U.S. Coast Guard, and the National Aeronautics and Space Administration (NASA) have extensive coastal facilities that are central to their missions. The U.S. Army Corps of Engineers (Army Corps) in the Department of Defense also has significant civil works in coastal areas, including its navigation improvements and its coastal flood risk reduction projects. A significant number of federal agencies have projects and programs that are relevant to or used in coastal areas that may be affected by sea-level rise, such as the Department of Transportation and the Department of Housing and Urban Development. Environmental Protection and Restoration . Department of the Interior agencies (e.g., U.S. Fish and Wildlife Service, National Park Service), NOAA, Army Corps, and U.S. Environmental Protection Agency (EPA) also are involved in coastal ecosystem restoration and protection activities. Regulatory and Planning . Much private and nonfederal coastal construction may also require Army Corps and EPA permits. Coastal states and territories develop and maintain their coastal zone management programs under the federal Coastal Zone Management Act (CZMA; P.L. 92-532, 16 U.S.C. §1451-1464) as implemented by NOAA. Future development and economic growth along U.S. coasts may depend, to a certain extent, on the perceived risk of coastal hazards and the efficacy and efficiency of policies and investments at the local, state, and federal levels to mitigate that risk. Arguably, rising sea levels and extreme coastal storms during the 20 th and now 21 st centuries generally have not curtailed growth and investments along U.S. coasts. A long-standing concern has been the extent to which the federal government may contribute to vulnerable coastal development directly or inadvertently (e.g., federal disaster assistance, federal infrastructure programs, and federal tax policies). For example, some contend that local stakeholders may make decisions that benefit them under the anticipation that they will receive federal disaster assistance when coastal flooding occurs. Part I. What Is Sea-Level Rise? Two descriptions of sea level are commonly used by scientists: global sea level (GSL) and relative sea level (RSL). Global Sea Level Global sea level (GSL, sometimes global mean sea level ) is the average height of the Earth's oceans, as measured by satellite altimetry relative to a calculated reference ellipsoid. These global measurements, available since the first satellite ocean altimeters were placed in orbit in 1992, are combined so that the height of the world's oceans can be averaged into one number. The GSL value is significant because it allows scientists to measure trends, namely GSL rise, without having to consider whether the land surface is moving up or down along the coastline. Since 1992, satellites have measured an average GSL rise of about 3.2 mm per year (with a measurement error of +/- 0.4 mm per year, so that the range of GSL rise is 2.8 mm-3.6 mm per year). (See Table 1 and Figure 1 .) Thermal expansion of the oceans and melting from glaciers have been the dominant contributors to 20 th -century GSL rise. Meltwaters from the Greenland and Antarctic ice sheets have also contributed to GSL rise, and these contributions may have increased in the 21 st century. Another contributing factor comes from water storage on land—water impounded behind dams would reduce the amount of GSL rise because less water reaches the oceans, whereas groundwater pumped from wells would contribute to GSL rise because more water reaches the oceans as runoff or in other parts of the hydrologic cycle. Since the early 1990s, the satellite record has provided a relatively direct measurement of GSL. However, this record is short—about 25 years—compared with other sea-level measurements using tide gages. Tide gage records stretch back to the 18 th century in Europe, and systematic tide gage measurements began in the United States in the 19 th century. Several investigations have applied a variety of techniques to estimate the trend in GSL since the beginning of the 20 th century using tide gage data. (See Figure 2 .) The IPCC reported that even though different strategies were employed to account for changes in land motion, it is very likely that GSL rose an average of 1.7 mm per year (+/- 0.2 mm per year) from 1901 to 2010 (about 187 mm total, or approximately 7.4 inches). The IPCC also reported that it is likely that the rate of GSL rise increased from the 19 th century to the 20 th century. The average rate of 1.7 mm per year since 1901 is less than the rate measured by satellite altimeters since 1992; however, the rise in GSL has not been constant, according to the IPCC. For example, the IPCC reported that the trend of GSL rise in the satellite era is very likely higher than the average rate since 1901 but noted that it is also likely that GSL rose between 1920 and 1950 at a rate similar to that observed since 1992. Other factors complicate interpretation of satellite measurements, such as the role of volcanic eruptions. One recent study noted that the eruption of Mt. Pinatubo in 1991 had a cooling effect on the atmosphere, which affected sea-level rise, suggesting that the era of satellite measurements began in a highly anomalous environment. The study used a combination of modeling and analysis of satellite altimeter data to surmise that the Mt. Pinatubo eruption may have masked an acceleration of GSL that might otherwise have occurred. The study further concluded that barring another volcanic eruption, satellites may detect an acceleration of GSL rise in the coming decade. Regional Variation in GSL GSL represents the average value for the elevation of the surface of the world's oceans, but any particular location in Earth's oceans will likely differ from the average value. Several factors influence sea-surface height at any particular location on Earth. For example, average sea-surface heights off Bermuda are typically 1 meter higher than average sea-surface heights off Charleston, SC, because the Gulf Stream changes direction toward Bermuda. For the United States, average sea-surface heights are about 20 centimeters higher on the Pacific Ocean side than the Atlantic Ocean side because the water is less dense, on average, in the Pacific due to prevailing weather and ocean conditions. Overall GSL is rising, as Figure 1 , Figure 2 , and Table 1 show; however, significant regional variation in trends of sea-surface height around the globe—in addition to the factors discussed above—adds further complexity. For example, coastal communities on the U.S. West Coast did not experience significant sea-level rise from 1993 to 2012, even though the global average rose 3.2 mm per year, because the eastern Pacific Ocean exhibited a decrease in sea-surface height (shown in blue on Figure 3 ). That decrease in sea-surface height has been attributed to natural climate variability, such as El Niño, and the resulting changes to winds, ocean currents, temperature, and salinity, all of which affect sea level. However, some research indicates that the trend may have stopped and even reversed since 2012. This research indicates that another natural source of climate variability, the Pacific Decadal Oscillation (PDO), is undergoing a shift that is leading to higher sea levels in the eastern Pacific and lower sea levels in the western Pacific since 2012, the opposite of what is shown in Figure 3 . Relative Sea Level Relative sea level (RSL) refers to the elevation of sea level relative to the land surface from which it is measured. In many parts of the U.S. coastline, the elevation of the land surface is changing, due to a number of different causes. A change in RSL represents the combination of the change in land surface elevation and the change in GSL. At any two spots along the U.S. coastline, the trend in RSL value may be significantly different. This variation occurs because of the regional variation in GSL (discussed above) combined with regional variation in how the land surface elevation is changing. Figure 4 illustrates how different the change in the trend of RSL can be within the United States. As the colored dots on Figure 4 indicate, the trend and direction of RSL varies dramatically in the United States. RSL is rising at a rate of 9 mm-12 mm per year along Louisiana's Mississippi Delta region near New Orleans, and RSL is dropping along parts of the Pacific Northwest coastline and southern Alaska. The land surface is sinking in places such as coastal southern Louisiana, increasing the rate of RSL rise, and the land surface is rising in parts of Alaska, outpacing the rise of GSL. RSL rise has been recorded primarily using tide gages. In the United States, the National Water Level Observation Network, currently operated by NOAA, provides tide gage sea-level data from 210 stations, two of which date to the 1850s. The tide gage network was established to ensure that nautical maps; shoreline maps; and elevations of homes, levees, and other coastal infrastructure were accurately referenced to sea level. Trends detected in the tide gage network data, along with other sources of information, provide the long-term record of RSL for the U.S. coastlines. Causes of Sea-Level Rise GSL and RSL pose different policy challenges. Figure 5 illustrates the factors contributing to GSL and RSL rise. The drivers for rising GSL since 1900 are predominantly thermal expansion of the oceans due to warming ocean water and melting glaciers and ice sheets ( Table 2 ). The oceans have warmed due to a combination of natural variability and the influence of greenhouse gas (GHG) emissions on atmospheric temperatures. Similarly, glaciers and polar ice sheets have melted since 1900 due to a combination of natural variability and GHG-induced climate change and deposition of pollutants. The global factors driving RSL change include those that influence GSL, but in some cases regional or local factors are responsible for the largest changes in RSL along the coastlines. These regional or local factors can be natural, such as the land rebounding upward after continental ice sheets melted at the end of the last ice age, or they can be due to human activities, such as groundwater pumping, oil and gas extraction, sediment compaction, land management practices, or other factors. (See Table 2 .) Understanding the relative contributions from these different drivers of RSL rise is important for crafting responses to help coastal communities predict, mitigate, and adapt to the changing risks that sea-level rise brings. Global Sea-Level Rise According to some studies, precise satellite measurements of the Earth's energy budget and other global measurements since 1970 indicate that the net energy inflow to the climate system has increased and that the oceans have stored more than 90% of the increase in recent decades. These studies also indicate that the expansion of seawater associated with this energy storage has contributed about 40% of the associated GSL rise since 1971. Melting glaciers, combined with seawater expansion, explain about 75% of the rise in GSL over that period. The contribution to GSL rise from the Greenland and Antarctic ice sheets is considered to have increased since the early 1990s, although the precise amounts are not well understood. Greenhouse Gas Emissions and Natural Variability Global GHG emissions have increased significantly since the late 19 th century, and there is broad scientific agreement that the increased concentration of GHG in the atmosphere has exerted a discernible warming influence on both air and ocean temperatures, at least since the 1970s. Global atmospheric temperatures have risen since the late 1800s, but what portion of warming can be attributed to human activities over that time period is not precisely known. GSL has risen at an average of 1.7 mm per year since about 1880, as shown in Figure 2 . As with atmospheric temperatures, it is difficult to precisely attribute what proportion of GSL rise stems from human activities and what has been driven by natural influences (this is discussed further below in " Uncertainties in Future Global Sea-Level Rise Projections "). The three different studies of GSL rise plotted in Figure 2 show variations at the interannual and decadal-scale time spans, but overall all three studies indicate a fairly similar upward slope over the century. As mentioned above, satellite measurements show that GSL rise has averaged about 3.2 mm per year since the early 1990s, an increase compared with the 100+ year average of 1.7 mm per year. The current average rate of GSL probably is not unprecedented; studies indicate that a similar rate of GSL rise likely also occurred from 1920 to 1950. A challenge for policymakers and coastal communities is how to anticipate, plan for, and mitigate the effects of a longer-term overall rise in sea levels. The significant variations in sea-level rise occurring regionally and at the decadal time scale, such as those influenced by El Niño or the PDO, are superimposed on and may temporarily mask long-term trends of GSL rise. Uncertainties in Future Global Sea-Level Rise Projections Policymakers may contend with a pattern of GSL rise that could look very different in the 21 st century compared to what Figure 2 shows, as the longer-term trends accumulate over time and regional trends change. The IPCC, for example, concludes that it is very likely that the rate of GSL rise in the 21 st century will exceed the rate observed in the 20 th century. Further, the IPCC states that sea level will continue to rise for centuries, with the amount dependent on future GHG emissions. In its assessment of future GSL rise, the U.S. National Climate Assessment expressed very high confidence that GSL will rise at least 0.2 meters but no more than 2.0 meters by 2100 (i.e., at least 8 inches to as much as 6.6 feet). For coastal communities, highly confident assertions that sea level will rise are significant for planning. However, the difference between a rise of 0.2 meters and a rise of 2.0 meters between now and the year 2100 could signify different approaches to planning for, mitigating, and responding to the effects of sea-level rise. This is discussed in more detail below in " Part II. Sea-Level Rise and U.S. Coasts ." Both the rate of future global sea-level rise and its exact dependence on future GHG emissions appear uncertain for several reasons. Probably the biggest uncertainty is the future behavior of the Greenland and Antarctic ice sheets. Estimates of the Antarctic ice sheet contributions to GSL rise between now and 2100 vary widely. Continued GHG-driven warming in the future could create instability in the large ice sheets of West and East Antarctica and lead to collapse. The collapse of large Antarctic ice sheets presents the largest potential for sudden GSL rise, but current scientific understanding of ice sheet dynamics does not identify what factor or factors would unambiguously lead to a rapid and unstable ice sheet retreat. In Greenland, melting has exceeded snow accumulation over the last few decades, so its ice sheet appears to have contributed to GSL rise. This trend is expected to continue and even increase in the next century. Unlike Antarctica, however, Greenland does not appear to be at risk of sudden ice sheet collapse. Because the future behavior of both the Greenland and Antarctic ice sheets is relatively uncertain, an additional GSL rise of a few tenths of a meter on top of current projections is possible in the latter half of this century. GHG-driven climate forcing appears to be the main driver for future GSL rise. This implies that policies directed toward reducing sea-level rise would need to address the issue of global GHG emissions as a long-term approach to mitigating the effects of GSL rise. However, many scientists conclude that GSL will continue to rise for centuries even if GHG concentrations in the atmosphere are stabilized and that other measures may be needed to address the consequences of such rise. Relative Sea-Level Rise In many locations along the U.S. coastline, the elevation of the land surface near the shore is changing in a vertical direction. Where the land is moving down, the rate of RSL rise increases; where the land is moving up, the rate of RSL rise decreases. Several natural and human-caused factors influence RSL rise locally. Many of these factors could be amenable to regional and local policy alternatives to mitigate risks to communities and ecosystems. Some of these factors are discussed below. Natural Forces Influencing Relative Sea Level Some of the changes in land elevation are caused by natural forces, such as post-glacial rebound (also called glacial isostatic adjustment, or GIA). GIA raising land elevation is occurring most rapidly where the ice was thickest in North America about 20,000 years ago, during the peak of the last ice age, in the region around Hudson Bay and in parts of the southern Alaskan coastline (see Figure 4 ). However, as the land previously buried under thick ice is now rising, land in most of the contiguous United States is sinking. This land is sinking in response to GIA because as the ice pressed down on the crust in the north 20,000 years ago, the land not buried under ice tilted up. Now the reverse is happening, and land previously tilted up is tilting back down, like a continent-sized seesaw. For much of the U.S. coastline, downward tilting is occurring at rates between 0.5 mm and 2 mm per year. For the U.S. East Coast, land subsidence from GIA is about 1 mm-2 mm per year. Policymakers cannot change GIA, but coastal communities could account for its contribution to RSL in their planning, mitigation, and response activities. Plate tectonics and natural compaction of sedimentary layers in places such as river deltas are two other naturally occurring processes that cause vertical land movement. Regional uplift in parts of the Pacific Northwest coastline is likely occurring in response to tectonic activity associated with the Cascadia subduction zone (see Figure 4 ). Loading of sediments from the Mississippi River, shallow and deep compaction of sediments, and possibly faulting are likely responsible for some of the high rates of land subsidence in southern Louisiana, including the New Orleans area. Human Activities That Affect Relative Sea Level Despite the contributions from natural forces, most land subsidence in the United States is caused by human activities. (See Table 2 .) Groundwater withdrawals in excess of recharge to the aquifer from precipitation are responsible for about 80% of land subsidence in the United States. Groundwater pumped to the surface decreases pressure in the aquifer, and the aquifer system compacts, resulting in land subsidence. For example, groundwater withdrawals in the southern Chesapeake Bay region have accounted for more than half of overall land subsidence in the region—about 1 mm-5 mm per year. Combined with GIA, these withdrawals have resulted in the region having the highest rate of RSL rise on the U.S. East Coast ( Figure 6 ). On the West Coast, land subsidence due to groundwater pumping was first recognized in the Santa Clara Valley in California. At the northern end of the valley, land adjacent to San Francisco Bay dropped 2 feet-8 feet in elevation by 1969 since groundwater pumping began in the early 20 th century, resulting in 17 square miles of formerly dry land sinking below high-tide level. In some locations, oil and gas extraction also causes land subsidence. Oil and gas pumped to the surface decreases pressure in the reservoir, and the reservoir system compacts, resulting in land subsidence. Land subsidence in the Houston-Galveston area in Texas from both groundwater and oil and gas extraction has resulted in RSL rates exceeding 25 mm per year in some locations at different times in the 20 th century. Oil and gas pumping-induced subsidence is largely restricted to the production field, whereas subsidence from groundwater pumping may have a more regional effect. Land subsidence in the Houston-Galveston area and the high rates of RSL rise likely have increased the frequency and severity of flooding in the region. Land subsidence also occurs when organic rich soils (often called peats ) are drained of water for agricultural or other purposes. Organic rich soils can be up to 80%-90% water by volume. When these soils are drained, the effects of compaction, desiccation, and oxidation can result in subsidence. Reclamation of organic rich soils mainly for agricultural purposes in the Sacramento-San Joaquin Delta in California led to land subsidence of up to 25 mm-75 mm per year in places, resulting in some Delta islands subsiding as much as 15 feet below sea level. Addressing Activities Contributing to Relative Sea-Level Rise Groundwater withdrawal, oil and gas extraction, and draining of organic soils have long been recognized as factors leading to land subsidence. Land subsidence along the coastline exacerbates sea-level rise and increases the risks of flooding, seawater intrusion, and other impacts. Unlike for GIA or tectonic movements, policymakers could enact policies that mitigate land subsidence and potentially alter the rate of RSL rise along the coastlines. For example, some conclude that subsidence in the Houston-Galveston region led the Texas legislature to create the Harris-Galveston Subsidence District, which has the authority to restrict groundwater withdrawal. In the Santa Clara Valley, local management of groundwater resources reduced land subsidence that had dropped 2 feet-8 feet in elevation by 1969 caused by groundwater pumping since the beginning of the century. Part II. Sea-Level Rise and U.S. Coasts After a brief introduction to the effects of sea-level rise on U.S. coasts, Part II of the report is divided into the following three sections: effects on shorelines and ecosystems, which discusses how coastal processes and topography influence how U.S. shorelines and ecosystems may change with sea-level rise; effects on development and society, which describes U.S. coastal development and its coastal storm and nuisance flooding risks; and actions addressing the impacts of sea-level rise, which describes the activities of various federal agencies, existing federal coastal management statutes, and the role of public and private actions. Introduction to Effects of Sea-Level Rise on Coasts The effects of sea-level rise on U.S. coasts can be broadly categorized as permanent or episodic inundation of low-lying lands, increased erosion and shoreline change (e.g., barrier island migration), increased impacts and damages from coastal storms, and saltwater intrusion of estuaries and aquifers. These physical effects have both environmental and societal consequences. Figure 7 illustrates how a rising sea level influences coastal processes and resources and shows some of the societal implications. A suite of potential policy response options exists for each effect. Policy choices on how to respond to sea-level rise may influence not only human behavior and investments along the coast but also what types of physical response (e.g., hard or nature-based shoreline stabilization) are undertaken to manage the impacts for undeveloped, somewhat developed, and extensively developed coastlines. For policymakers, choosing a response is challenging because of the difficult tradeoffs that each response represents (e.g., short- versus long-term costs and benefits, environmental or development losses or benefits). As previously noted, uncertainty in future rates of sea-level rise also complicates the decision context; for example, the estimated range of 0.2 meter (8 inches) to 2.0 meter (6.6 feet) of sea-level rise by 2100 makes it challenging to agree upon how to evaluate and compare the costs and benefits of alternative responses, policies, and investments. Effects on Shorelines and Ecosystems The effects of sea-level rise are dependent on a shoreline's topography and hydrodynamics. Coastal topography varies dramatically across the United States. Shorelines have varied forms—marsh, rocks, bluffs, beach, forest, and developed areas and infrastructure; each is affected differently by rising sea levels. Some shorelines are directly exposed to wave action, whereas others are sheltered. Some shorelines are highly erodible; others are resistant to erosion. Because of natural coastal processes, some less-developed and undeveloped coastal areas may not necessarily be inundated by sea-level rise; instead, these areas may adapt to rising sea levels. Recent research suggests that 70% of the coastal landscape of the northeastern United States may have some capacity to adapt to sea-level rise—that is, many low-lying areas may be able to adapt rather than be inundated (e.g., marshes may build vertically in response to sea-level rise). For example, unconsolidated sandy coasts have the capacity to adjust to changing conditions if nearby sand sources are available. The availability of sand can be influenced by forces and events that shape coastal sediment transport and dispersion. For developed and rocky areas, a direct relationship between sea-level rise and inundation is likely. This diversity in vulnerability to sea-level rise is captured by the U.S. Geological Survey's effort to assess the U.S. Atlantic, Pacific, and Gulf of Mexico coasts, as shown in Figure 8 . For small islands and their populations, the options for adjustment to higher sea levels are particularly constrained. Understanding where inundation and dynamic coastal responses may occur is significant for understanding how coasts may evolve. How coasts evolve may determine which policies and investments are likely to be most effective for adjusting to higher sea levels. In addition to sea-level rise, other local physical factors shape how higher sea levels affect shorelines. These factors include coastal slope, tidal range, wave height, sediment availability, and other geomorphic characteristics. Short-term events, such as a large storm with intense surge and wave action, may contribute to rapid and concentrated coastal land loss or, in some other cases, cause land growth through accretion. Discerning where and under what climate conditions coastal processes are dominated by short-term events, such as storms, rather than long-term processes, such as sea-level rise, is part of the challenge of anticipating the evolution of U.S. coasts. Assessing the potential effects of sea-level rise depends in part on the accuracy of coastal data and mapping, especially elevation information. Advances in research, monitoring, and data analyses—combined with greater incorporation of morphologic, ecologic, and anthropogenic factors—are anticipated to improve understanding of coastal dynamics and to enhance the efficacy of sea-level rise planning efforts. Some effects of sea-level rise are particularly hard to predict. For example, complex interactions may influence the extent to which sea-level rise contributes to coastal lagoons experiencing changes in circulation, tidal exchange, and turbidity. How coastal changes may ultimately affect societal concerns, such as commercial fishing harvests, is challenging to predict. Moreover, fisheries changes may be more influenced by factors other than sea-level rise, such as higher water temperatures, coastal development impacts on habitat, and mortality from fishing activities. Coastal Wetlands and Habitats Wetlands' ability to adjust to higher sea levels may depend in part on their ability to adjust vertically and to migrate inland. Inland migration is partially determined by topography, as well as by the presence or absence of human settlements and coastal flood defenses. For undeveloped coasts, the types of habitat and species in wetlands, bays, and estuaries may change with higher sea levels due to alterations in inundation frequency, salinity, and shoreline dynamics. For example, parts of a low-lying terrestrial ecosystem, such as the Florida Everglades, may transition from freshwater-dependent species to salt-tolerant species. To illustrate variation in the effects of sea-level rise, one study attempted to identify how six coastal estuaries in Florida would lose or gain certain coastal terrestrial ecosystems under a 1-meter sea-level rise scenario. Certain coastal habitat types—most notably coastal forest and undeveloped dry land—are likely to be lost, whereas other coastal habitats, such as mangroves, transitional saltmarsh, and saltmarsh, may become more common. Habitat transitions may take decades depending on the plant species involved. Changes in estuaries are of particular interest because of estuaries' productivity and value. Estuarine fish and shellfish species comprise a substantial portion of commercial and recreational catch. The rate of sea-level rise also may determine whether the coasts experience rapid and irreversible change or whether marshes, beaches, and barrier islands are able to adapt. For example, slower rates of sea-level rise may allow for some coastal ecosystems (mangroves, estuarine beach, and ocean beach) to adjust and persist. However, these ecosystem types may convert into open water with faster rates of sea-level rise. The relatively rapid rate of RSL rise in portions of Louisiana and the low elevation of coastal lands make portions of the state particularly susceptible to the conversion of land into open water. Coastal Erosion How sea-level rise may alter coastal erosion is a function of the land forms and the nearshore hydrodynamics (e.g., the changing role of reefs and wetlands in dampening wave energy as the result of higher water levels and potential changes in storm surges). The extent to which erosion can be attributed to sea-level rise versus other human activities (e.g., dredged navigation channels, shoreline armoring, inland dams' capture of sediment) is often difficult to distinguish. For the mid-Atlantic, erosion is anticipated to dominate changes in shoreline position in response to sea-level rise and storms over the next century. For some higher sea-level rise scenarios, some barrier islands may undergo significant changes, such as segmentation or rapid island migration. Research on coastal erosion in Hawaii found that shoreline change rates varied greatly around each island; the study estimated that the average shoreline recession in 2050 would be nearly twice the historical extrapolation of past recession rates. Effects on Coastal Development and Society In addition to the anticipated effects of sea-level rise on shorelines and coastal ecosystems, sea-level rise may have broader societal implications through its effects on developed areas of the U.S. coast. For developed coastal areas, higher relative sea levels can increase the frequency and duration of nuisance flooding, as well as contribute to the risk associated with coastal storms. Saltwater intrusion into estuaries and aquifers may also affect freshwater availability for coastal communities. (For more, see the box "Sea-Level Rise and Groundwater.") Sea-level rise may pose particular physical, economic, and cultural challenges for islands and their economies (e.g., Hawaiian islands, Florida Keys) as well as the islands of U.S. territories and freely associated states. Coastal Development Some U.S. coastal activities and developments are located at the coast due to necessity, such as ports and fishing operations and certain military installations, or for cultural reasons, such as communities of indigenous coastal peoples. Other investors and households choose to locate on the coast. The recreational, aesthetic, and lifestyle amenities of the coasts often are a particular attraction. Some coastal areas are known for high property values and incomes. Other coastal areas have populations with more limited economic means or are otherwise considered to be socially vulnerable; these groups may have fewer resources available to prepare for sea-level rise or to cope with some of the consequences. U.S. states vary in how much of their coasts are developed, intermediately developed, undeveloped, or actively conserved. For example, along the Atlantic coast, the jurisdictions (including areas that are tidally influenced) with the highest percentage of developed lands within 1 meter of sea level are the District of Columbia (82%), Connecticut (80%), and New York (73%). The Atlantic coastal states with the most land within 1 meter of sea level that is either undeveloped or conserved are Maryland (65%), North Carolina (58%), and Georgia (57%). Many factors shape development patterns, including state and local restrictions on land use and coastal structures, as well as demand and financing for such development. Land use in the United States, other than federal lands, is the jurisdiction of state and local governments. Similarly, state and local entities adopt building requirements and building codes (although some federal programs may require compliance with certain standards and requirements). Some states have considerably more assets, people, and businesses at risk than others. For example, many of Florida's coastal counties have vulnerable roads, ports, airports, and energy facilities and a significant coastal recreation economy, as well as significant population centers and private property, which may be impacted by rising sea levels. For a discussion of the implications of sea-level rise for California's shorelines and the state's water supply system, see "California and Sea-Level Rise" box. Coastal Storm Risk Sea-level rise exacerbates the risks associated with flooding from coastal storms and precipitation. The extent to which sea-level rise may increase the risk of flooding from coastal storms to developed areas depends on the specifics of the storm (e.g., occurrence during high or low tide) as well as on the local characteristics of the coast. In some locations, new coastal and tidal areas may be at risk of coastal storm flooding due to higher seas allowing storm surge and floodwaters to penetrate further inland. Sea-level rise also may increase flood damages by inhibiting drainage of precipitation and floodwaters in low-lying areas. Coastal storms can result in some of the most expensive natural disasters in the United States; therefore, potential increases in damages may raise federal, state, and local financial concerns related to disaster response and recovery. A U.S. Environmental Protection Agency report using climate change projections estimated the potential future economic impacts of combined storm surge and sea-level rise on U.S. coastal property. The report estimated that cumulatively during this century (2000-2100), adaptation to and damages from the combined coastal flood hazard to infrastructure and property could cost $0.8 trillion in the United States; these costs represent investments in cost-effective protective measures, storm damages (not addressed by the protective measures), and abandoned property. Sea-level rise increases flood risk by increasing the flood hazard from storms and precipitation; the higher hazard means that more coastal areas are more vulnerable. Flood and other types of natural-disaster risk are often expressed as a probabilistic function of a hazard, which is the local threat of an event (e.g., probability of a Category 5 hurricane storm surge); vulnerability, which allows a threat to cause consequences (e.g., level of protection and performance of shore-protection measures); and consequences of an event (e.g., loss of life, property damage, economic loss, environmental damage, reduced health and safety, and social disruption). For sea-level rise, some stakeholders promote policies to reduce the hazard (e.g., climate change mitigation, reduced groundwater withdrawal). Others are interested in reducing vulnerability (e.g., shore-protection measures, storm-surge gates). Other stakeholders support policies to reduce consequences through hazard-mitigation measures, such as development restrictions, building codes, flood-proofing of structures, buyouts of vulnerable properties, and improved evacuation routes. Coastal Nuisance Flooding Relative sea-level rise contributes not only to flooding from large storms but also to the incidence and duration of lesser flood events (e.g., regular flooding during high tides); these events are known as nuisance flooding, because a main impact is public inconvenience, or sometimes referred to as "sunny day" flooding because the flooding often is not associated with a storm or precipitation. Nuisance flooding often consists of shallow flooding of infrastructure and buildings, as shown in Figure 11 . According to NOAA's 2014 report, Sea Level Rise and Nuisance Flood Frequency Changes around the United States , nuisance flooding has increased dramatically in many U.S. coastal regions since the mid-20 th century. Some scholars argue that the widespread, cumulative annualized costs associated with regular nuisance flooding may be much greater than the costs associated with the annual average flood damages from larger storms. Nuisance or minor flooding can also contribute to environmental change in affected areas. Nuisance flooding, when considered as a single event, is high probability but relatively low consequence; its full impacts are often due to the cumulative damages from repeated nuisance flooding. Although this flooding may be regularly repeated, it often may fall outside the purview or priorities of many federal disaster programs and efforts, which target their efforts on events that overwhelm local and state emergency response resources or on more disruptive and costly events. Decisionmakers in developed areas subject to nuisance flooding and other persistent sea-level rise impacts are turning to a variety of engineering solutions to cope with the near-term impacts. These solutions include adding pumping capacity and control valves to storm sewers; armoring sewer systems to keep storm water out; raising roadways; using gravity, injection wells, and trenches to drain neighborhoods; adding salinity control structures; and injecting water into aquifers to retard salinity intrusion. Decisionmakers in these areas also are employing public communication campaigns and developing public health efforts, as well as using public acquisition of at-risk properties in some instances. Actions Addressing the Effects of Sea-Level Rise Adjusting to sea-level rise presents an array of policy challenges and raises federalism questions regarding decisionmaking and responsibility. Part of the reason that the federal response to sea-level rise is particularly challenging is that regulations for coastal land use and requirements for coastal buildings and developments often are central to adjustment choices. According to a 2009 report by the U.S. Climate Change Science Program, Key opportunities for preparing for sea level rise include: provisions for preserving public access along the shore; land-use planning to ensure that wetlands, beaches, and associated coastal ecosystem services are preserved; siting and design decisions such as retrofitting (e.g., elevating buildings and homes); and examining whether and how changing risk due to sea-level rise is reflected in flood insurance rate maps. For coastal developments, the fundamental question for public and private decisionmakers is under what circumstances to protect, accommodate, or retreat in light of sea-level rise and other coastal hazards and their risks. In general, restrictions on private land-use decisions are largely the domain of local and state governments. Similarly, the requirements for coastal developments (e.g., required coastal setbacks) and buildings (e.g., building codes related to elevation of structures and equipment) have been set by local and state governments. The federal government, however, bears part of the financial burden associated with the consequences of coastal flooding through its disaster assistance and the National Flood Insurance Program (NFIP). A challenge will be that the options some local stakeholders may want to pursue may not be affordable or sustainable in the long run or when evaluated from a national perspective. That is, local stakeholders may make decisions that produce benefits for them if they anticipate being protected from negative outcomes; this is known as a "moral hazard" problem. For example, local entities may approve coastal developments that are at risk and make related public infrastructure investments in roads, schools, water systems, and the like, if the local entities believe federal disaster assistance (and related federal tax treatment of disaster losses) would be available when a coastal disaster occurs. This is also the case for decisionmaking by private interests. Some of the burden of the risk is transferred from the private interest and local government to the federal taxpayers. Another aspect that may be shaping decisionmaking behavior is a decision bias to underrate the risks, especially related to low-probability, high-consequence events such as large coastal storm surges. A public policy challenge related to sea-level rise is the intergenerational transfer of risk. Sea-level rise trends indicate that the coastal community will likely be at more risk in 25 years and 50 years. To not develop because of those future risks would represent a decision to forgo current use and enjoyment benefits to avoid future costs. Some view this as an unnecessary sacrifice given the uncertainty related to sea-level rise at the end of the 21 st century and the ability to adapt to some sea-level rise. For others, this choice would be altering current practices to reduce the potential consequences of sea-level rise for future generations. Federal Actions and Agencies For Congress, a related policy question is to what extent federal programs, regulations, and funding influence how coasts develop, redevelop after extreme events, and respond to coastal erosion and shoreline dynamics. For example, most communities in the United States adopt minimum floodplain management standards as a condition of their participation in the NFIP. Other examples of how federal programs are directly involved in preparing for sea-level rise are described in the box "Selected Examples of Sea-Level Rise-Related Federal Action Since 2012" and the later box on the "Proposed 'Living Shoreline' General Permit." In addition to federal agencies that are directly involved in sea-level rise science and research and coastal regulatory activities, several federal agencies are indirectly involved in coastal projects and programs that address or could respond to, be affected by, or be exacerbated by sea-level rise. The effect of these federal actions will be determined as they are implemented. Existing Federal Coastal Management Statutes The primary federal statutes that directly address coastal development pressures are the Coastal Zone Management Act of 1972, as amended (CZMA, P.L. 92-532, 16 U.S.C. §1451-1464) and the Coastal Barrier Resources Act of 1982, as amended (CBRA, P.L. 97-348 ). CBRA designates undeveloped coastal barriers and adjacent areas. Most federal spending that would support additional development is prohibited in the CBRA designated areas. Under the CZMA, NOAA approves the coastal zone management programs developed by participating coastal states and U.S. territories and provides limited funding for coastal zone planning and management. Coastal Zone Management Act The CZMA was enacted to encourage planning to protect natural resources while fostering wise development in the coastal zone. The CZMA recognizes that states (and, in some states, local government) have the lead responsibility for planning and managing their coastal zones. The CZMA authorizes grants to states and territories to develop and implement coastal management programs to address competing development, economic, and recreation pressures. Thirty-four of the 35 eligible states and 5 territories participate in CZMA. CZMA grants can be used for numerous CZMA-defined coastal zone enhancement objectives, including managing the effects of sea-level rise and reducing threats to life and property. Participating states and territories have developed widely varying programs that emphasize different elements of coastal management. The state programs are intended to discourage unwise development in flood-prone and exposed areas and to encourage protection of natural protective features along the coast, including beach systems, coastal barriers, and wetlands. For more on the act, see CRS Report RL34339, Coastal Zone Management: Background and Reauthorization Issues , by Harold F. Upton. Coastal Barrier Resources Act The CBRA and subsequent amendments to it have designated undeveloped or relatively undeveloped coastal barriers and adjacent areas, where most federal spending that would support additional development is prohibited. There are 585 of these "system units" encompassing nearly 1.3 million acres of land and associated aquatic areas. The units are along the Gulf of Mexico, the Atlantic Coast, and the Great Lakes and around Puerto Rico and the U.S. Virgin Islands. Every CBRA unit is identified in law and with a reference to a map. The designation of units and the drawing of boundaries have been contentious for some units. Only Congress can modify the unit boundaries, and it has enacted numerous site-specific amendments. This program does not prohibit or regulate any activity; it merely prohibits the federal government and federal programs from being used to support additional development within any designated unit. Even with the CBRA prohibitions on federal programs, development has occurred at some units, especially along the southeast Atlantic coast. Also, CBRA does not preclude federal expenditures to restore designated units to former levels of development after natural disasters (e.g., reconstruction of roads and water or sewer systems to former dimensions and capacity). In addition to system units, the CBRA system also includes 272 "otherwise protected areas" encompassing 1.9 million acres, which generally coincide with existing conservation or recreation areas, such as state parks and national wildlife refuges. Unlike the broader prohibitions of the system units, the only CBRA spending prohibition in these areas is the prohibition on federal flood insurance. Private and Local Actions Decisions of how to respond to coastal hazards are largely made by individual landowners, communities, and states. The result is a wide variety of responses across the United States. Historically, landowners and communities facing coastal erosion and coastal flood risks have invested in protection, typically using hard coastal defenses, such as seawalls or groins, or nonstructural approaches, such as dune construction and beach replenishment. Some researchers estimate that as much as 14% of the shoreline of the contiguous United States on the Pacific Ocean, Atlantic Ocean, and Gulf of Mexico has hardened infrastructure, such as seawalls, jetties, and groins. Much of this shoreline armoring has occurred along the sheltered shorelines of the Atlantic and Pacific coasts (e.g., estuaries, lagoons, tidally influenced rivers). According to NOAA, if shoreline hardening continues at the current rate of around 200 kilometers per year (125 miles per year), nearly one-third of the contiguous U.S. shoreline may be hardened by 2100. Hardened shorelines generally support fewer species than the more complex habitats of natural shorelines and may require additional financial investments in operation and maintenance and in rehabilitation and replacement. Given some of the less-desirable unintended effects of coastal armoring (e.g., beach loss following seawall or jetty construction), alternative means to manage erosion and reduce storm-surge impacts are also being pursued, such as protection of natural dunes and bluffs and investments in oyster-reef restoration or marsh creation. Researchers have identified that 50% of the tidal wetlands of the South Atlantic and Gulf of Mexico are threatened by potential future hardening based on population, development, and storm trends. Although softer approaches to shoreline stabilization may require maintenance investments over time (e.g., replantings), they often become more stable as plants, roots, or oyster reefs grow. Many private and local government efforts to manage erosion require a federal permit under the Clean Water Act. Advocates for nature-based approaches for stabilizing shorelines have argued that the current regulatory programs have favored the use of hard solutions rather than nature-based approaches. In 2016, the Army Corps of Engineers proposed a general permit for "living shorelines" that may facilitate the permitting, and therefore the adoption, of nature-based approaches for managing coastal erosion. (For more on this proposal, see the box "Proposed 'Living Shoreline' General Permit.") Part III. Policy Considerations and Questions Sea-level rise raises several questions: What does sea-level rise portend for future economic development of U.S. coasts? How does sea-level rise affect the safety and quality of life of coastal residents? How does sea-level rise alter the coastal ecosystems and potentially alter the benefits that society derives from those ecosystems, such as recreation and commercial fisheries? Near-term choices on managing and adapting to sea-level rise have the potential to significantly shape the responses to these questions and the future of U.S. coastal development. General categories of policy options related to sea-level rise include the following: Maintaining the status q uo . Current government programs, policies, and funding would continue. Reducing the g lobal r ise in sea l evel . Policies for addressing the human activities influencing sea-level rise could include pursuing domestic and international GHG-mitigation efforts. Reducing the r elative r ise in sea l evel . Policies to address the local or regional drivers of sea-level rise could focus on activities that contribute to land subsidence. Reducing v ulnerabilities to sea-level r ise . Policies could foster reducing vulnerability to the effects of sea-level rise (e.g., coastal flood risk reduction projects using dunes or storm-surge gates). Policies also could attempt to foster environmental and social resilience; these policies could include protection of certain coastal habitats, including those that contribute to natural coastal flood defenses. Reducing c onsequences of sea-level r ise . Policies could promote actions that reduce the consequences of the effects of sea-level rise. These actions could include various hazard-mitigation measures, such as development restrictions, building codes, flood-proofing of structures, buyouts of vulnerable properties, and improved evacuation routes. For all of the policy options, there are the underlying questions of the policies' costs and benefits and of who will bear the costs of not pursuing or pursuing the policies. Considerations Related to the Causes of Sea-Level Rise Future rates and levels of sea-level rise are uncertain and likely will be determined by a complex mix of phenomena and activities. This uncertainty complicates public and private decisionmaking regarding policies and investments related to coastal development and protection. Considerations for Congress related to the causes of sea-level rise include the following: How well understood is the current and projected rate of sea-level rise? What factors contribute to changes in sea level, and which of these represent natural variability and which may be influenced by human activities? How may factors that affect sea level change in the future? What are the local, state, and federal responsibilities for managing and mitigating activities that may exacerbate the rate of relative sea-level rise? Policymakers may contend with a pattern of sea-level rise that could look very different in the 21 st century compared to the 20 th century. Global sea levels may rise at least 0.2 meters (about 8 inches) but could rise 10 times that amount, or even higher, depending on the behavior of the Antarctic and Greenland ice sheets, according to many scientists. A better scientific understanding of how the two large ice sheets will contribute to sea-level rise may assist coastal communities with their approaches to planning for, mitigating, and responding to potential impacts. Further, recognizing the multiple factors that contribute to relative sea-level rise, such as the local and regional activities that exacerbate or mitigate land subsidence, may be of first-order importance. Considerations Related to the Effects of Sea-Level Rise A 2007 report of the National Academy of Sciences entitled Mitigating Shore Erosion Along Sheltered Coasts stated that "sea-level rise is chronic and progressive, requiring a response that is correspondingly progressive. Attempts to follow a 'hold the line' mitigation strategy against erosion and sea-level rise by coastal armoring will result in a steady escalation in both the costs of maintenance and the consequences of failure." The report's statement acknowledges that actions may be taken to manage the impacts of sea-level rise and that significant financial investments in protective and stabilization actions may be cost-effective for some developed areas. However, these actions will have costs, and the consequences of failure may be significant. Some responses may work well for a few decades but may eventually lose their utility or efficacy in the face of steadily higher sea levels. Communities and nature, however, have been adjusting to shoreline dynamics and coastal hazards for centuries; the current question is how to respond efficiently and effectively. Considerations for Congress associated with the impacts of sea-level rise include the following: What is the risk of sea-level rise to the nation, its population, federal facilities, federal operations, critical infrastructure and systems, and the national economy? What are the guiding principles for the federal role in coastal projects and activities given sea-level rise and other coastal hazards (e.g., what defines the boundaries and nature of the federal role in erosion control, shoreline stabilizations, and nuisance flooding)? What is the role for federal funding in adjusting to sea-level rise and its impacts given that coastal development is determined largely by local and state policies and private decisions? To what extent do federal regulations, programs, and funding influence the adoption and approaches used for managing coastal sea-level rise impacts or decisions that unintentionally exacerbate the impacts? What is the appropriate way to manage risks posed by sea-level rise to existing infrastructure, new infrastructure, and economic and social systems (e.g., multimodal transportation network)? Federalism Considerations Although most decisions about coastal land development and protection are made by states, localities, and other stakeholders, the federal government has an interest in how coasts are developing and adjusting to sea-level rise. A challenge for federal lawmakers and other policymakers is how to deal with the tension between federal efforts to manage national and federal government risks (e.g., federal disaster costs, coastal ecosystem shifts) related to sea-level rise and the local, state, and private roles in shaping coastal development and ecosystem health. States and local governments have significant discretion in coastal land use and development decisions. At the same time, local adoption of minimum floodplain management standards as a requirement for NFIP participation influences the locations and design of coastal structures. Past and future land-use, development, and building-code choices and the resulting public and private investments are factors shaping the future financial impacts of sea-level rise for the nation. Among the policy questions associated with sea-level rise facing federal policymakers are the following: In the U.S. federalist system of shared responsibilities, who is responsible for the costs associated with adjusting to sea-level rise? Is the federal role and responsibility related to coastal flood hazards clearly articulated and consistently applied across federal agencies, programs, projects, and disasters? Who is currently bearing the costs associated with sea-level rise and related coastal erosion, coastal storms, and habitat shifts? Are local, regional, and state land-use and development decisions and building requirements contributing to or eroding resilience to sea-level rise and coastal hazards, and what are the implications for the federal role in addressing sea-level rise? To what extent do federal programs transfer the risk associated with coastal development to the federal taxpayer? How does the suite of federal disaster assistance and coastal programs harm or bolster coastal resilience? Are federal investments in infrastructure and mitigation of flood damages in coastal areas coordinated? General Policy Considerations Various federal agencies are providing guidance and data to inform state, local, and private efforts to prepare for and respond to sea-level rise. Some stakeholders are concerned that insufficient attention is paid to the risk posed by sea-level rise, as well as to the existing risk associated with coastal hazards. Because of the value of coastal developments at risk from coastal flood hazards and how the risk may increase with sea-level rise, decisionmakers may invest in more coastal protections in many locations. What types of protections (hard, soft, hybrid) and policy choices (e.g., restricting human activities that exacerbate subsidence) are implemented may determine the future of U.S. coastal communities and coastal habitats. Other stakeholders are concerned that overestimating the risk of sea-level rise could result in overinvesting and overdesigning protections and mitigations to sea-level rise. Decisions about coastal land use and land protections, coastal development and infrastructure, and building codes and the resulting public and private investments can shape the future financial impacts of sea-level rise for the nation. Future growth in coastal areas may be shaped by the perceived risk from coastal hazards, such as sea-level rise and coastal storms, and by the efficacy of private and public responses to mitigate that risk.

Policymakers are interested in sea-level rise because of the risk to coastal populations and infrastructure and the consequences for coastal species and ecosystems. From 1901 to 2010, global sea levels rose an estimated 187 millimeters (mm; 7.4 inches), averaging a 1.7 mm (0.07 inch) rise annually. Estimates are that the annual rate rose to 3.2 mm (0.13 inches) from 1992 to 2010. Although the extent of future sea-level rise remains uncertain, sea-level rise is anticipated to have a range of effects on U.S. coasts. It is anticipated to contribute to flood and erosion hazards, permanent or temporary land inundation, saltwater intrusion into coastal freshwaters, and changes in coastal terrestrial and estuarine ecosystems. Some states, such as Florida and Louisiana, and U.S. territories have a considerable share of their assets, people, economies, and water supplies vulnerable to sea-level rise. In 2010, roughly 100 million people lived in U.S. coastal shoreline counties. Increased flood risk associated with sea-level rise may increase demand for federal disaster assistance and challenge the National Flood Insurance Program. Federal programs support local and state infrastructure investments that may be damaged or impaired, such as roads, bridges, and municipal water facilities. Sea-level rise also is anticipated to affect numerous federal facilities. Global and Relative Sea Levels. Sea levels are expressed in terms of global sea levels, which is the average value of sea surface heights around the globe, and relative sea levels, which is the sea level relative to the land surface. Since 1900, expanding oceans due to warming ocean water and melting glaciers and ice sheets have been the main drivers of global sea-level rise. Oceans have warmed due to a combination of natural variability and the influence of greenhouse gas emissions on atmospheric temperatures. Similarly, glaciers and ice sheets since 1900 have been melting due to both natural variability and greenhouse gas emissions. In 2012, the U.S. National Climate Assessment expressed very high confidence in global sea levels rising at least 0.2 meters (8 inches) but no more than 2.0 meters (6.6 feet) by 2100. There are regional and local variations in the rate of sea-level rise. Regional or local factors can be natural, such as the land rebounding upward after continental ice sheets melted at the end of the last ice age, or they may be due to human activities, such as groundwater pumping, oil and gas extraction, sediment compaction, and land management practices, among others. With few exceptions, sea levels are rising relative to the coastlines of the contiguous United States, as well as parts of the Alaskan and Hawaiian coastlines. Policy Considerations. Policy choices related to sea-level rise have the potential to shape the future development and resiliency of U.S. coasts. Policy options include a continuation of current government programs and policies, actions that address the forces contributing to sea-level rise globally or locally, and actions that reduce the vulnerability to and consequences of sea-level rise on U.S. coasts. For all the policy options, there are underlying questions of costs and benefits and who bears the costs of pursuing or not pursuing the policies. A challenge for federal lawmakers is how to deal with the tension between federal efforts to manage national and federal government risks (e.g., federal disaster costs, coastal ecosystem shifts) related to sea-level rise and the local and state roles in shaping coastal development and ecosystem health. Related policy questions include the following: To what extent do federal programs, regulations, and funding influence how coasts develop and redevelop? Who is responsible for the costs associated with adjusting to sea-level rise? Who will bear the risks associated with vulnerable coastal development and infrastructure? Some stakeholders are concerned that governments at all levels are paying insufficient attention to the risks posed by sea-level rise; others are concerned that overestimating the risk of sea-level rise could result in foregoing current uses of coastal areas and promoting overinvestment and overdesign of sea-level rise mitigation and adaptation. CRS In Focus IF10468, Sea-Level Rise and U.S. Coasts, also provides a brief overview of sea-level rise science and policy options.

Introduction The Patient Protection and Affordable Care Act (ACA; P.L. 111-148 , as amended) created a permanent risk adjustment program that aims to reduce some of the incentives insurers may have to avoid enrolling individuals who are at risk of high health care costs in the private health insurance market—specifically in the individual (nongroup) and small-group markets. Section 1343 of the ACA established the risk adjustment program, which is designed to assess charges to health plans that have relatively healthier enrollees compared with other health plans in a given state. The program uses collected charges from plans with comparatively healthy enrollees to make payments to plans in the same state that have relatively sicker enrollees. The Centers for Medicare & Medicaid Services (CMS) administers the risk adjustment program as a budget-neutral program, so that payments made are equal to the charges collected in each state. Risk adjustment transfers are intended to account for differences in health risk among plans in each state while allowing for premium differences based on allowable rating factors. CMS assesses payments and charges on an annual basis, beginning in the 2014 benefit year. All nongrandfathered, individual market and small-group market health plans, both inside and outside of the exchanges, participate in this program. Prior to the ACA, most state laws (and federal law under limited circumstances) allowed insurers to minimize their exposure to high-risk individuals by charging higher or lower premiums to potential enrollees based on factors such as age, gender, and health status. However, under current federal law, insurers in the individual and small-group markets are unable to set premiums based on gender or health status and are limited in how much they may vary premiums by age. Without being permitted to account for the risk from individuals who expect or plan for high use of health services on the basis of the aforementioned criteria, insurers still may attempt to avoid such individuals by using benefit designs, networks, formularies, and/or marketing techniques that are not likely to appeal to them (though insurers are limited by other ACA requirements, such as being required to offer coverage for the Essential Health Benefits). Under the ACA's permanent risk adjustment program, the Secretary of the Department of Health and Human Services (HHS) established criteria and methods to determine the actuarial risk of plans within a given state in order to make payments and assess charges. Enrollees in health plans differ in their degree of risk based on such factors as their health status, with sicker individuals considered high risk and expected to have greater health costs than healthier, or low-risk , individuals. Individuals who perceive themselves as high risk, as opposed to those who perceive themselves as low risk, are likely to have different behaviors related to health insurance. High-risk individuals, who perceive that they will need more health services, may be more motivated to seek out and enroll in plans with more comprehensive coverage and benefits than might low-risk individuals. Since individuals have more information about their own health status than does an insurer, they are able to consider this information when choosing a health plan; by contrast, an insurer is not able to take this information into account when establishing coverage, benefits, and premiums for the plan. The risk adjustment program is intended to reduce the likelihood that an insurer will aim to enroll only low-risk individuals and help ensure that price differences of plans reflect the plan design and benefits available rather than risk. Risk adjustment is a risk mitigation strategy that has been incorporated into other insurance programs. It is a component of the Medicare program, as well as some state Medicaid programs. Other countries with regulated, private health insurance markets, such as the Netherlands, Switzerland, Germany, Australia, and South Africa, also have risk adjustment mechanisms. In addition, risk adjustment was part of the Commonwealth Care program in Massachusetts from 2009 through 2016. Although risk adjustment programs may have similar aims, program designs may vary. HHS used the Medicare risk adjustment program as the basis for the ACA risk adjustment program, although HHS made modifications especially to account for the different populations in the programs. The risk adjustment program is the only permanent program that was part of the three ACA risk mitigation programs, including the transitional reinsurance program and the temporary risk corridors program. This report provides responses to frequently asked questions related to the risk adjustment program. The first several questions pertain to background on insurance markets, why risk mitigation matters, and the role of risk adjustment in risk mitigation. The following questions relate to the mechanics of the risk program, including how enrollee risk scores are calculated and how risk adjustment payments and charges are determined. Responses to the concluding questions provide information on the experience of the risk adjustment program thus far and future changes to the program. Background Understanding the sources of private health insurance coverage and how such coverage is regulated at the federal level may be useful in providing context around the current federal law and the permanent risk adjustment program (see text box "Sources and Regulation of Private Health Insurance Coverage"). Why Does Risk Matter in Health Insurance? The concept underlying insurance is risk (i.e., the likelihood and magnitude of experiencing a financial loss). In any type of insurance arrangement, all parties seek to manage their risk, subject to certain objectives (e.g., coverage and/or profit goals). In health insurance, consumers (or patients, as insurance enrollees) and insurers (as sellers of insurance) approach the management of health insurance risk differently. From the consumer's point of view, a person (or family) buys health insurance to protect against financial losses resulting from the unpredictable use of potentially high-cost medical care. The insurer employs a variety of methods to manage the risk it takes on when providing health coverage to consumers to assure that the insurer operates a viable business (e.g., balancing premiums against the collective risk of the covered population). The insurer uses these methods when pooling risk so that premiums collected from all enrollees generally are sufficient to fund claims (plus administrative expenses and profit). Where insurers have discretion, they are likely to act in their own financial self-interest to limit their exposure to risk. Prior to the ACA, insurers in the individual and small-group markets could assess the risk of an individual or group applying for insurance coverage using characteristics such as health status, gender, and age with certain exceptions. Using such characteristics, insurers could charge higher premiums for higher-risk individuals, or they could deny coverage if an individual represented too much risk, so long as the denial of coverage was permitted under state law. Similarly, before the ACA, an individual with a preexisting condition may have had that condition excluded from coverage or coverage for a preexisting condition may have been delayed for a period of time (e.g., 6 to 36 months, or indefinitely) depending on state laws and other federal requirements. The converse was also true—insurers had been able to charge lower premiums to lower-risk individuals based on health status, gender and age, with some exceptions. Why Is the Mitigation of Health Insurance Risk and Uncertainty Relevant Under Current Federal Law? The ACA includes provisions that aim to restructure the private health insurance market by implementing several market reforms targeting the individual and small-group markets, including some that impose requirements on health insurance plans. As part of a larger set of private health insurance market reforms, the ACA requires private health insurers to provide coverage to individuals regardless of health status, medical history, and preexisting conditions. Prior to the ACA, insurers in the small-group market already were prohibited from denying coverage based on these factors. Under current federal law, insurers can adjust premiums based solely on certain factors (i.e., individual or family enrollment, geographic rating area, tobacco use, and age). Additional market reforms aim to expand the pool of individuals seeking to purchase health insurance coverage. Under the ACA reforms, some individuals may be eligible for financial assistance (i.e., premium tax credits and cost-sharing subsidies) through the health insurance exchanges (also known as the marketplaces ), which may make these individuals more likely to purchase health insurance. In addition, the ACA, as originally enacted, had required that most individuals maintain health insurance coverage or pay a penalty for noncompliance (i.e., the individual mandate ), but the penalty associated with the individual mandate will be effectively eliminated beginning in 2019. The expanded pool created by the ACA reforms contributes to the uncertainty that insurers face. (Uncertainty was particularly high in the early years of ACA implementation.) Much of the uncertainty centers on the types of individuals who may or may not seek coverage in the expanded pool. For example, to what extent will healthy individuals decide to seek coverage in addition to unhealthy individuals? Also, will the expanded pool extend to individuals who previously were uninsured and/or may have delayed receiving health care services? Furthermore, what will be the demand for health care services for this expanded pool of individuals? In addition to the risks and uncertainty described above, one phenomenon that exists in health insurance markets is that individuals who expect or plan for high use of health services are more likely to seek out coverage and enroll in plans with more benefits than individuals who do not expect to use many or any of the health services. Prior to the ACA, state law (and federal law, under limited circumstances) determined whether insurers could minimize their exposure to this risk by charging higher or lower premiums to potential enrollees based on factors such as gender, age and health status. However, under current federal law, insurers in the individual and small-group markets are unable to set premiums based on gender or health status, and insurers are limited in how much they can vary premiums by age. Notwithstanding this change, and although insurers are limited by other ACA requirements, insurers still could attempt to gain a competitive advantage by avoiding individuals who expect or plan for high use of health services (e.g., sicker, older individuals) by using benefit designs, networks, formularies, and/or marketing techniques that are not likely to appeal to these individuals. Financial assistance, such as premium tax credits and cost-sharing subsidies (and the individual mandate, though the penalty has been effectively eliminated), are intended to encourage enrollment for all individuals and to reduce the risk that only individuals who expect or plan to have high use of health services will purchase health insurance. However, some risk remains, and an insurer may experience losses if it enrolls a disproportionate share of enrollees with high health care claims costs during the year. What Health Insurance Risk Mitigation Programs Are Included Under Current Federal Law? The ACA established three risk mitigation programs to mitigate the financial risk that insurers face and to stabilize the price of health insurance in the individual and small-group markets: (1) the transitional reinsurance program, (2) the temporary risk corridors program, and (3) the permanent risk adjustment program. These three programs—administered by CMS with participation by private insurers—are designed to make the health insurance market more stable and predictable. They also are designed to encourage insurers to participate and compete with one another on quality, level of service, and price rather than on the risk of enrollees who select a particular plan. Table 1 summarizes the goals and methods of each of the ACA's three risk mitigation programs and the potential sources of uncertainty or risk that each program aims to moderate to encourage insurers to participate in the market. Table 1 does not include information on program implementation. How Is the Risk Adjustment Program Supposed to Reduce an Insurer's Risk? Individuals differ in their health insurance risk based on their health status, with sicker individuals considered as high risk and as expected to have greater health costs than healthier individuals (i.e., low-risk individuals). Without a risk adjustment mechanism, a plan that enrolls a larger proportion of sicker (i.e., high-risk) enrollees than other plans in the market would need to charge a more costly average premium (across all of its enrollees) to be financially viable, all else being equal. Under the risk adjustment program, an insurer can set premiums for plans with sicker-than-average (i.e., high-risk) enrollees lower than the expected cost of claims because the insurer will receive a risk adjustment transfer payment to make up some or all of the difference. Conversely, an insurer of a plan with healthier-than-average (i.e., low-risk) enrollees will set premiums higher than what is anticipated to be needed to cover enrollees' claims cost because part of that premium will be owed to other insurers in the form of risk adjustment charges. The risk adjustment program is intended to encourage insurers to set premiums that reflect differences in the plan design and the benefits available rather than the risk of enrollees who choose a particular plan. Mechanics of the Risk Adjustment Program Figure 1 provides a summary of risk adjustment program operations for a given benefit year. The below steps provide an overview of the operational steps to determine plan transfer payments. Step 1: Collect Data Insurers submit enrollment and claims data for their plans in a state and market using the CMS distributed data collection process. Step 2: Determine Enrollee Risk Scores CMS uses the data to measure an insurer's risk for each plan. The initial calculation is to determine a risk score for individuals actually enrolled for a particular benefit year based on the enrollee's demographic information and diagnoses for that year using CMS's risk adjustment model. The risk score is a relative measure of how costly that enrollee is anticipated to be for the plan. Step 3: Calculate Plan Liability Risk Score CMS uses the risk scores for each enrollee in the plan to calculate the plan liability risk score—the insurer's risk—for the plan in a rating area. Step 4: Determine Insurer Payment or Charge The plan liability risk score is used in the payment transfer formula, which compares the predicted costs of enrollees to the expected premiums that a plan may collect. This complex formula also includes various other factors that may impact predicted costs and expected premiums. The differences between predicted costs and expected premiums (both relative to the state average for the market) for all of the plans within a state are compared to the state average premiums to translate these differences into payments and charges. Payments and/or charges are then aggregated across rating areas by plan and then by insurer in the individual or small group market in each state. All nongrandfathered, individual market, and small-group market health plans both inside and outside of the exchanges participate in this program. Step 5: Inform Insurers/States of Payments and Charges CMS releases a final report for the risk adjustment program with the transfers. The final risk adjustment report for the benefit year is due to be released on June 30 following the benefit year. How Are Data for the Risk Adjustment Program Collected? Data for the risk adjustment program are collected using a distributed data approach. Insurers submit data for all eligible plans including enrollee information, medical claims, pharmacy claims, and supplemental diagnosis information from their proprietary systems to a server controlled by the insurer. The server runs software developed by CMS to verify the data submitted and execute the risk adjustment process. Once the risk adjustment process is completed, CMS and insurers receive plan-level, summarized data files and insurers receive additional detailed, individual-level data. CMS uses the data files to calculate risk adjustment payments and charges. Data are collected for each benefit year, with all data gathered for consideration in the risk adjustment program—including adjudicated claims—by April 30 of the following benefit year. How Are Enrollee Risk Scores Determined for the Risk Adjustment Program? CMS uses the Truven MarketScan® Commercial Claims and Encounter Data to approximate (i.e., model) the relationship between diagnoses and health care expenditures and then develops coefficients used to calculate an enrollee's risk score—a relative measure of how costly the enrollee is anticipated to be for the plan—based on the enrollee data submitted by the insurer. There are three risk adjustment models—one for adults (aged 21+), one for children (aged 2-20) and one for infants (aged 0-2). Several factors are used to determine a risk score for an enrollee, including an enrollee's diagnosis information and demographics (i.e., age and sex), how many months the enrollee was covered, and whether an enrollee participated in a plan with cost-sharing subsidies (see " What Factors Are Used to Determine an Enrollee's Risk Score? " for more information). Coefficients are determined separately for each health plan metal level designation (see "Actuarial Value and Metal Level" text box in section " What Factors Are Used to Determine an Enrollee's Risk Score? "). How Is Diagnosis Information Categorized to Calculate Enrollee Risk Scores? CMS reviewed input from clinician consultants along with empirical analysis and background research they conducted to adapt the diagnoses used in the Medicare risk adjustment model for use in the ACA risk adjustment program. The diagnoses for the risk adjustment model were first grouped into diagnostic groups (DXGs) and then further aggregated into condition categories (CCs). CCs describe a set of largely similar diseases that are related clinically to one another and are similar with respect to cost (e.g., Diabetes with Acute Complications is a CC that includes DXGs for Type II Diabetes with Ketoacidosis or Coma as well as Type I Diabetes with Ketoacidosis or Coma). Only the most severe manifestation among related diseases for an enrollee is included for risk adjustment. Hierarchies are imposed among similar CCs to determine hierarchical condition categories (HCCs), which identify the most severe manifestation among related diseases (see the text box "Risk Score Example" in section " What Factors Are Used to Determine an Enrollee's Risk Score? "). What Factors Are Used to Determine an Enrollee's Risk Score? The main factors used to determine an enrollee's risk score are the demographic factor and the HCCs. The demographic factor is determined based on an enrollee's age category (21-24, 25-29, etc., up to the age of 60+ for adults; 2-4, 5-9, etc., up to the age of 20 for children) and sex (male and female). Diagnosis codes for an enrollee in the adult and child models are mapped to the appropriate CCs, and then the hierarchy is applied to groups of CCs to determine the HCCs. For an example of how diagnosis codes are categorized into CCs and HCCs, see the text box "Risk Score Example." Two additional factors are used in the adult model only. A new factor was added to the adult model starting in the 2017 benefit year to capture costs for enrollees who are enrolled in a plan for only part of a year. The adult model also includes a severity interaction factor. There are eight HCCs that are considered to be indicators of severe illness (e.g., HCC 126: Respiratory Arrest). When these indicators of severe illness are present along with certain HCCs, the increased costs related to those interactions are included in the model. A cost-sharing factor is included for any enrollees who participate in cost-sharing plans. Individuals enrolled in cost-sharing plans face lower cost-sharing requirements (e.g., lower deductibles). Therefore, enrollees in cost-sharing plans may use more health services than they would without the available cost-sharing subsidies. What Is an Example of an Enrollee Risk Score Calculation? CRS developed a sample risk score calculation for a fictitious enrollee (see text box entitled "Risk Score Example, Continued: Calculating an Enrollee's Risk Score"). This example builds on the previous example of determining the HCCs for a hypothetical enrollee (see the section " How Are Enrollee Risk Scores Determined for the Risk Adjustment Program? " and text box labeled "Risk Score Example"). The coefficients used by CRS in this example came from the HHS Notice of Benefit and Payment Parameters. How Are Payments and Charges Determined Under the Risk Adjustment Program? The payment transfer formula is used in the risk adjustment program to determine the flow of money from low-risk plans to high-risk plans. CMS administers risk adjustment as a budget-neutral program within each state, so the sum of all charges for plans with lower-than-average risk equals the payments made to plans with higher-than-average risk in a state and market (i.e., individual and small group). A plan's risk adjustment payment or charge is determined by calculating the predicted costs considering the health status of the plan's actual enrollees relative to the statewide average and subtracting expected premium revenue based on allowable rating factors (i.e., individual or family enrollment, geographic rating area, tobacco use, and age) relative to the statewide average. Risk adjustment transfers are intended to account for differences in health risk among plans while allowing premium differences based on allowable rating factors. The difference between predicted costs and expected revenues is then multiplied by the average premium for the state and the market (i.e., individual or small group) to determine the plan charge (if expected revenue is greater than predicted costs) or payment (if predicted costs are greater than expected revenue). Figure 2 shows the different factors used when calculating the predicted costs and the expected premium revenue. Each factor is explained in greater detail below. The transfer formula is applied to each plan for each rating area within a state, so when a plan exists in multiple rating areas within a state, transfers are calculated in separate plan segments , one per rating area, and then are aggregated by plan and then plans are aggregated for each insurer within a state. CMS reports risk adjustment payments and charges for a given benefit year in a yearly report which according to regulation is released on June 30 th of the following benefit year, and transfers are paid/charged on a rolling basis after that point. How Are Predicted Costs Determined for a Plan? Three factors are used in the risk adjustment transfer formula to determine a plan's predicted costs: (1) plan liability risk score (PLRS), (2) induced demand factor, and (3) geographic cost factor (GCF). Plan Liability Risk Score The PLRS is calculated based on the risk scores for each enrollee (see " How Are Enrollee Risk Scores Determined for the Risk Adjustment Program? " for additional information). Risk scores are calculated for each enrollee regardless of the type of plan (e.g., HMO, PPO) that enrollee is in or whether the enrollee is in an individual or a family policy. The PLRS is calculated by multiplying the enrollee's risk score and the months enrolled, then summing this month-weighted risk score across all enrollees in a plan and rating area. Then, the result of that sum is divided by the sum of the months enrolled that are considered "billable" in the plan (i.e., months enrolled for all of the individuals in that plan, but only including the first three children for family policies). Induced Demand Factor The induced demand factor measures how an enrollee's use of health services can be attributed to the more generous benefits provided by a plan. This factor varies by metal level and is intended to prevent insurers from receiving payments through risk adjustment due to differences in the plan design and benefits (see the text box "Actuarial Value and Metal Level" in section " What Factors Are Used to Determine an Enrollee's Risk Score? " for more information). Geographic Cost Factor (GCF) The GCF accounts for differences in input prices and medical care utilization that vary geographically within a state and may affect premiums. The GCF is determined by comparing the average silver plan premiums in a rating area to the state average silver plan premiums. How Is Expected Premium Revenue Determined for a Plan? Four factors are used in the risk adjustment transfer formula to determine the expected premium revenue: (1) actuarial value (AV) of the plan, (2) allowable rating factor (ARF) based on age, (3) induced demand factor, and (4) GCF. Actuarial Value The plan's AV accounts for differences in the percentage of enrollee costs that the plan will cover if its enrollees represent a "typical" population (see Text Box "Actuarial Value and Metal Level" in section " What Factors Are Used to Determine an Enrollee's Risk Score? " for more information). Allowable Rating Factor The ARF reflects the ages of enrollees in a plan and the impact on the premium the plan would collect based on the age rating rules. The rating for the most expensive group cannot be more than three times as high as the rating of the lowest group (e.g., an enrollee who is 21 years of age has an ARF of 1.00, and the maximum rating for an enrollee aged 64 and older is 3.00). A plan with a higher ARF can collect more premium revenue due to the age rating than a plan with a lower ARF. For example, an insurer has a Plan A with an ARF of 2.00 and a Plan B with an ARF of 1.60. The insurer would be able to collect 25% more Plan A premiums than Plan B premiums, given the differences in age rating. Induced Demand Factor and Geographic Cost Factor The induced demand factor and GCF are included on both sides of the transfer equation. See " Induced Demand Factor " for an explanation of the Induced Demand Factor and " Geographic Cost Factor " for an explanation of the GCF. What Is an Example of How Risk Adjustment Payments and Charges May Be Distributed Across Insurers in a State and Market? Under the risk adjustment program, an insurer can set premiums for plans with sicker-than-average (i.e., high-risk) enrollees lower than the expected cost of claims because the insurer will receive a risk adjustment transfer payment to make up some or all of the difference. Conversely, an insurer of a plan with healthier-than-average (i.e., low-risk) enrollees will set premiums higher than what is anticipated to be needed to cover enrollees' claims cost because part of that premium will be owed to other insurers in the form of risk adjustment charges. Since risk adjustment payments or charges impact an insurer's net premiums, CMS expects that insurers will try to anticipate transfer payments or charges and adjust their premiums accordingly. Premiums are often determined in the spring prior to open enrollment (e.g., for the 2019 benefit year, spring 2018) which begins on November 1 (e.g., for the 2019 benefit year, November 1, 2018). Data are collected for risk adjustment during the benefit year and are due on April 30 the following benefit year (e.g., for the 2019 benefit year, risk adjustment data collection will be due on April 30, 2020). In the following hypothetical example which is drawn from the American Academy of Actuaries report Insights on the ACA Risk Adjustment Program , there are three insurers in a hypothetical state and market (i.e., individual or small group): Insurer A, Insurer B, and Insurer C. Insurer A's premium is 10% below the market average ($270, compared to a state market average of $300), and it attracted a healthier-than-average population (relative risk of negative 10%, as compared to the market). Therefore, Insurer A had a risk adjustment charge of $30 (10% of $300, the state market average premium). Although the $30 charge is 10% of the state average premium, it amounts to about 11% of Insurer A's collected premiums ($270). Given its relative risk, Insurer A would have expected the net premium after the risk adjustment charge to be $243 ($270 in premium charges, minus $27 in risk adjustment charge). However, since the risk adjustment charge of $30 was calculated using the market average premium ($300), as opposed to Insurer A's premium ($270), the net premium is actually $240 ($270-$30) after the risk adjustment charge, so Insurer A is left with a shortfall of 1% of premium. In this example, Insurer B set premiums to match the market average, and also has the largest market share. Insurer's B's relative risk is the market average, so thus there is not a risk adjustment transfer. Insurer C has a premium of $330, and it attracted a sicker-than-average population (relative risk of positive 10%). Insurer C will receive a risk adjustment payment of $30, which is 10% of the $300 state average premium, but only 9% of its collected premiums, so Insurer C also is left with a shortfall of approximately 1% of premium. As discussed in the American Academy of Actuaries report Insights on the ACA Risk Adjustment Program , the relative position of an insurer's premiums within the market will affect whether or not the premium amounts, after accounting for risk adjustment transfers, are adequate for the insurer. An insurer's premiums are designed to reflect the risk of the entire market and not just the risk of the insurer's enrollees. If premiums for an insurer do not correctly account for the difference between their enrollees' risk and the risk of the entire market, then premiums may be incorrect (i.e., too high or too low), which may result in unanticipated losses or gains. For example, similar to Insurer A in Table 2 , if an insurer sets premiums lower than the average within the market because of incorrectly anticipating the risk in the total market and then has healthier-than-average enrollees, the insurer will be assessed a risk adjustment charge. It is possible that the insurer may not have enough premiums to cover the risk adjustment charge and could face solvency issues if there are not enough premiums to cover claims and administrative costs. Small insurers and new insurers may find it more difficult to set premiums due to greater variability in their risk profiles. Also, new insurers may not have tools that help manage health care spending, such as provider discounts or utilization management programs, but may choose to set premiums competitively to attract enrollees. How Is the Risk Adjustment Program Expected to Impact Premiums? The risk adjustment program is intended to allow insurers that enroll a high-risk (e.g., sicker) population and those that enroll a low-risk (e.g., healthier) population in the same market to refrain from charging different premiums based on enrollee risk, ideally allowing price differences to reflect plan benefits, efficiency, and value. CMS expects that insurers will try to anticipate transfer payments or charges and adjust their premiums accordingly. Though the risk adjustment program protects insurers from a portion of financial losses related to having an enrollee population with higher-than-average risk (i.e., a sicker enrollee population) relative to other insurers, the program is not intended to ensure that premiums can cover the costs of average claims within a state. If the costs of enrollees in the state and the market are greater than expected, the statewide average premium likely will be too low. Though the risk adjustment program would still transfer funds between insurers, it does not add money into the system, so the premiums may not cover the cost of enrollees in the entire state or market. In addition, the risk adjustment program does not ensure more stable premiums from one year to the next. These forms of risk and uncertainty were supposed to be addressed by the other temporary risk mitigation programs included in the ACA: the transitional reinsurance program and the temporary risk corridors programs (see the section titled " What Health Insurance Risk Mitigation Programs Are Included Under Current Federal Law? " for additional information). How Do Insurers Determine Premiums? Insurers develop rates for premiums based on a number of factors, including the population covered in the risk pool, projected medical costs, administrative costs insurers face, and laws and regulations. Insurers pool risk so that premiums from enrollees that do not get sick can help cover the costs of enrollees who do get sick, and premiums are set to reflect the health status of the risk pool as a whole at the state level, rather than just the plan's risk pool. Plan design (e.g., services in a plan, expected utilization of health services, cost sharing) and underlying health care costs (e.g., the price for health care services in a geographic area, fees negotiated with providers) also are considered when determining premiums. Most of the collected premiums go to paying medical claims. Premiums also must be able to cover an insurer's administrative costs (e.g., product development, sales, enrollment, claims processing) as well as profit or surplus (for not-for-profit insurers). Some laws, regulations, and policy changes affect premiums as well (e.g., fees, taxes, the presence of risk sharing programs). For example, in 2017, the American Academy of Actuaries cited several factors impacting premiums, including the end of the transitional reinsurance program, the repeal of the expansion of the small-group market, and the delay in the health insurer fee. In 2018, it cited legislative and regulatory uncertainty (e.g., funding cost-sharing subsidies, the enforcement of the individual mandate) as factors influencing premiums. The Risk Adjustment Program in Practice The risk adjustment program began in 2014 and recently completed calculations for the 2017 benefit year (its fourth year). When Will the Risk Adjustment Payments and Charges Be Published? According to regulation, the risk adjustment report for a given benefit year will be published on June 30 of the following benefit year (e.g., the risk adjustment report for the 2016 benefit year was published on June 30, 2017). The final risk adjustment report and its appendixes can be found at on the Center for Consumer Information and Insurance Oversight website at https://www.cms.gov/CCIIO/Programs-and-Initiatives/Premium-Stabilization-Programs/index.html . Although CMS suspended collections and payments on July 7, 2018, based on a court decision related to the risk adjustment methodology, the agency issued a final rule on July 24, 2018, which reissued the risk adjustment methodology with additional explanation, which CMS stated would allow the agency to continue operating the program. What Has Been the Experience of the Risk Adjustment Program Thus Far? Since the risk adjustment program is a relatively new program, there has not yet been a lot of analysis done on this program. However, both the American Academy of Actuaries and CMS found evidence suggesting that the risk adjustment program was functioning as intended in 2014. The American Academy of Actuaries reported that risk adjustment transfers reduced the medical loss ratios for insurers with high loss ratios and increased the loss ratios among insurers with low cost ratios, generally bringing the loss ratios closer together for insurers that received payments and those that experienced charges. The medical loss ratio for an insurer is the percentage of premium spent on health care claims and other expenses related to improving health care quality. By bringing the loss ratios for insurers closer together, the risk adjustment program is evening out an insurer's experience in a particular market. Premiums include factors other than risk associated with claims cost, such as administrative costs and profit. Thus, even if risk adjustment perfectly captured each insurer's risk (and compensated accordingly), the American Academy of Actuaries stresses that it would expect to see some variation in loss ratios. Also, CMS found that insurers with risk adjustment charges generally had relatively low plan liability risk scores and relatively low amounts of paid claims per enrollee; conversely, insurers that had a relatively high amount of paid claims per enrollee also had higher plan liability risk scores and were more likely to receive a risk adjustment payment. In their respective reports, both the American Academy of Actuaries and CMS analyzed the relative impact of risk adjustment according to the size of the insurer. Both organizations found that smaller insurers (i.e., those with less market share) had more variability in their risk adjustment payments and charges as a percentage of premium. The American Academy of Actuaries reported that smaller insurers were somewhat more likely than larger insurers to have a higher risk adjustment transfer relative to the percentage of premium. This correlation was attributed to the nature of the risk adjustment program, because insurers with a higher market share are by definition more likely close to the market average than insurers with smaller market share, which are more likely to have enrollees skewed toward either lower-than-average or higher-than-average risk. CMS also reported that the size of an insurer did not determine whether or not it received a risk adjustment payment or charge. In addition, both reports enumerated potential operational difficulties insurers may have experienced during the first year of the risk adjustment program. The American Academy of Actuaries suggested that because risk adjustment was a new program in 2014, some insurers may have experienced technical difficulties with the distributed data collection process and that these difficulties may have impacted small and new insurers more than larger, more established insurers, though not necessarily. CMS noted that some insurers had difficulty submitting data. Both organizations suggested that over time, data submission would become easier. Furthermore, both organizations suggested that pricing premiums to take into account risk adjustment transfers for the first year of the risk adjustment program may have been difficult and that pricing would be more accurate as time passed. What Changes Are Being Implemented in the Risk Adjustment Program? While there have been several changes made to the risk adjustment program since it began, two more substantial changes to the risk adjustment program were finalized to be implemented for the next benefit year (2018). They are (1) adding prescription drugs in the risk adjustment model to help improve the accuracy of an enrollee's risk score and (2) creating a high-cost risk pool. Below is a brief description of the changes. Inclusion of Prescription Drugs Prescription drugs were added to the adult risk adjustment model starting in the 2018 benefit year. CMS created prescription drug categories (RXCs) to group drugs to be included in the risk adjustment model. Some RXCs are used to impute (i.e., ascribe) diagnoses, and some are used to indicate the severity of a diagnosis that is included through medical coding. CMS worked with clinician consultants and staff clinicians to determine RXCs both for ascribing diagnoses and for indicating a more severe case of the related diagnosis (making it likely that the enrollee will incur greater medical expenses than an enrollee who has the diagnosis but not a prescription drug). CMS included prescription drug classes where there is a low risk of unintended impacts on provider prescribing behavior. The agency intends to monitor prescription drug utilization for any unintended impacts and may make changes to the RXCs in the future if it finds evidence of such impacts. The American Academy of Actuaries suggested including prescription drugs in the risk adjustment model in its report on risk adjustment. During the rulemaking process for the 2018 benefit year, the academy commented that including prescription drugs would improve the model's accuracy, enhance the prediction of costs for partial-year enrollees, and improve payments for conditions that are treated with high-cost drugs. High-Cost Risk Pool Starting in the 2018 benefit year, CMS created a national-level, high-cost risk pool for the individual market and the small group market to remove any potential incentive for insurers to avoid extremely high-cost enrollees and to better capture the risk associated with these enrollees in risk adjustment payments and charges. While an enrollee who is considered high-risk is expected to have higher overall claims cost, other enrollees who are not high-risk may have (one time) expensive claims and thus be considered high-cost in a given year. For high-cost enrollees (whether high risk or not) an insurer will receive an adjustment to their transfer amounts equal to 60% of the costs above a defined threshold (the threshold for high-cost enrollee is defined as enrollees with total claims costs above $1 million in a benefit year). To maintain budget neutrality, CMS first will calculate the total amount of paid claims costs above the threshold to determine the amount to be transferred. Then, CMS will calculate an adjustment as a percentage of an insurer's total premiums in each market. Once determined, this amount will be added to or subtracted from an insurer's transfer amount calculated by excluding costs above the threshold the high-cost enrollees. CMS indicated that it expects this adjustment to be a very small percentage of premiums, estimating less than 0.5% of premiums for either market. The American Academy of Actuaries noted in its risk adjustment report that risk adjustment typically does not compensate insurers adequately for very high-cost enrollees and that it may be appropriate for the risk adjustment program to incorporate a process for transfers for high-cost outliers. CMS also reported that most risk adjustment programs do not predict the existence of high-cost enrollees very precisely because the risk scores reflect the average costs for individuals in a specific age group, with a specific sex, and with specific diagnoses. Since most spending for insurance companies is related to high cost enrollees, insurers may still have an incentive to avoid very high cost enrollees. Additionally, other research also has found that risk adjustment programs do not adequately account for high-cost cases and, as a result, that insurers have an incentive to avoid these high-cost enrollees. The creation of a high-cost risk pool to provide payments to insurers for a portion of the costs of high-cost enrollees works similarly to how the ACA's transitional reinsurance program did. However, the attachment point (referred to as the threshold under the high-cost risk pool) is significantly higher (i.e., $1 million) than the attachment points that were used for the transitional reinsurance program (i.e., $90,000 in 2016). See the text box labeled "High Cost Risk Pool Example" for an illustration of the difference.

The Patient Protection and Affordable Care Act (ACA; P.L. 111-148, as amended) created a permanent risk adjustment program that aims to reduce incentives that insurers may have to avoid enrolling individuals at risk of high health care costs in the private health insurance market. Section 1343 of the ACA established the program, which is designed to assess charges to health plans that have relatively healthier enrollees compared with other health plans in a given state. The program uses collected charges to make payments to other plans in the same state that have relatively sicker enrollees. The Centers for Medicare & Medicaid Services (CMS) administers the risk adjustment program as a budget-neutral program, so that payments made are equal to the charges assessed in each state. CMS assesses payments and charges on an annual basis, beginning in the 2014 benefit year. The concept of risk (i.e., the likelihood and magnitude of experiencing financial loss) is at the root of any insurance arrangement. One of the ways that insurers are exposed to risk is that individuals have more information about their own health status than an insurer does. Individuals who expect or plan for high use of health services (e.g., older or sicker individuals) are more likely to seek out coverage and enroll in plans with more benefits than individuals who do not expect to use many or any health services (e.g., younger or healthier individuals). Prior to the ACA, most state laws (and federal law under limited circumstances) allowed insurers to minimize their exposure to this risk by charging higher or lower premiums to potential enrollees based on factors such as age, gender, and health status. However, under current federal law, insurers in the individual and small-group markets are unable to set premiums based on gender or health status and are limited in how much they may vary premiums by age. Without being permitted to account for the risk from individuals who expect or plan for high use of health services using the aforementioned criteria, insurers still may attempt to avoid such individuals enrolling by using networks, formularies, and other techniques that are not likely to appeal to them, though insurers are limited by other ACA requirements (e.g., they are required to offer certain benefits). The ACA established the permanent risk adjustment program to try to eliminate incentives insurers may have to avoid enrolling high-risk individuals. This program, along with the transitional reinsurance program and the temporary risk corridors programs, is intended to encourage insurers to participate in the marketplace by moderating the risk and uncertainty that may reduce their likelihood to participate. Under the risk adjustment program, insurers place enrollee and claims data for a benefit year on a computer server that they own but that runs CMS software. CMS's software calculates a risk score for an enrollee using that enrollee's demographic and diagnosis information and obtains summary data for each plan. CMS uses the risk scores for a plan's enrollees to calculate the difference between the plan's predicted costs for its enrollees relative to the predicted state average cost, given the health status of the plan's enrollees and the estimated premium revenue that the plan would be able to collect based on allowable rating factors, relative to the estimated state average. This difference is then multiplied by the state average premium and results in either a risk adjustment payment or charge for a given plan. This report provides responses to some frequently asked questions (FAQs) about the ACA risk adjustment program. The report begins with background on the health insurance market, discusses why risk mitigation matters, and introduces the role of risk adjustment in risk mitigation. The next section describes the mechanics of the program, including how enrollee risk scores are determined and how they are used to calculate payments and charges. The report concludes with questions regarding the program's experience thus far and future changes to the program.

Most Recent Developments President Obama's FY2014 budget request for Energy and Water Development was released in April 2013. The request totaled $34.4 billion. On June 18, 2013, the House Energy and Water Development Subcommittee approved a FY2014 bill totaling $30.4 billion. The bill, H.R. 2609 , passed the House with amendments on July 10. The Senate Energy and Water Development Subcommittee reported out a bill June 25, totaling $34.4 billion, and the full Appropriations Committee approved the bill, S. 1245 , on June 27. On October 16, 2013, Congress passed the Continuing Appropriations Act, 2014, H.R. 2775 , P.L. 113-46 , extending funding for all federal programs, including Energy and Water Development, through January 15, 2014, at the FY2013 post-sequestration spending level. On December 26 the President signed H.J.Res. 59 ( P.L. 113-67 ), which contained the Bipartisan Budget Act establishing less stringent spending caps for FY2014 and FY2015 than the BCA, thus easing the way for an appropriations agreement. On January 17, 2014, the President signed H.R. 3547 , the Consolidated Appropriations Act, 2014 ( P.L. 113-76 ), containing appropriations for all 12 FY2014 appropriations bills, including Energy and Water Development programs (Division D). Status Table 1 indicates the status of the FY2014 funding legislation. 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 (Reclamation), the Department of Energy (DOE), and a number of independent agencies, including the Nuclear Regulatory Commission (NRC) and the Appalachian Regional Commission (ARC). The Budget Control Act and Energy and Water Development Appropriations for FY2013 and FY2014 FY2013 discretionary appropriations were considered in the context of the Budget Control Act of 2011 (BCA, P.L. 112-25 ), which established discretionary spending limits for FY2012-FY2021. The BCA also tasked a Joint Select Committee on Deficit Reduction to develop a federal deficit reduction plan for Congress and the President to enact by January 15, 2012. Because deficit reduction legislation was not enacted by that date, an automatic spending reduction process established by the BCA was triggered; this process consists of a combination of sequestration and lower discretionary spending caps, initially scheduled to begin on January 2, 2013. The "joint committee" sequestration process for FY2013 required the Office of Management and Budget (OMB) to implement across-the-board spending cuts at the account and program level to achieve equal budget reductions from both defense and nondefense funding at a percentage to be determined, under terms specified in the Balanced Budget and Emergency Deficit Control Act of 1985 (BBEDCA, Title II of P.L. 99-177 , 2 U.S.C. 900-922), as amended by the BCA. For further information on the Budget Control Act, see CRS Report R41965, The Budget Control Act of 2011 , by [author name scrubbed], [author name scrubbed], and [author name scrubbed]. The American Taxpayer Relief Act (ATRA, P.L. 112-240 ), enacted on January 2, 2013, made a number of significant changes to the procedures in the BCA that took place during FY2013. First, the date for the joint committee sequester to be implemented was delayed for two months, until March 1, 2013. Second, the dollar amount of the joint committee sequester was reduced by $24 billion. Third, the statutory caps on discretionary spending for FY2013 (and FY2014) were lowered. Pursuant to the BCA, as amended by ATRA, President Obama ordered that the joint committee sequester be implemented on March 1, 2013. For further information on the changes to BCA procedures made by ATRA, see CRS Report R42949, The American Taxpayer Relief Act of 2012: Modifications to the Budget Enforcement Procedures in the Budget Control Act , by [author name scrubbed] Table 2 includes budget totals for energy and water development appropriations enacted for FY2007 to FY2014. Table 3 lists totals for each of the bill's four titles. Tables 4 through 1 6 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 FY2012-FY2013, and proposed funding for FY2014. The FY2013 figures do not reflect the March 1, 2013, sequester of funds under P.L. 112-25 . Accompanying these tables is a discussion of the key issues involved in the major programs in the four titles. Title I: Army Corps of Engineers2 The Energy and Water Development bill provides funding for the civil program of the U.S. Army Corps of Engineers (Corps), an agency in the Department of Defense with both military and civilian responsibilities. Under its civil works program, the Corps plans, builds, operates, and maintains a wide range of water resources facilities. The Corps attracts congressional attention because its projects can have significant local and regional economic benefits and environmental effects, in addition to their water resource development purposes. A number of recent changes have affected Corps appropriations, including earmark moratoriums in both houses in the 112 th and 113 th Congress and reductions for some projects and classes of projects compared to previous years. Additionally, in recent years flooding events on the Mississippi and Missouri rivers and in the northeastern United States affected a number of Corps projects which received supplemental funds. In addition to the regular appropriation for the Corps, Congress appropriated $1.724 billion in supplemental funding for response and recovery related to 2012 flooding and $5.35 billion in supplemental funding related to Hurricane Sandy. (See Table 4 .) In most years, the President's budget request for the Corps is below the agency's enacted appropriation. However, in FY2013 the final amount provided by Congress to the Corps was less than the Administration's request. Congress provided the Corps with $4.718 billion (post sequestration, post rescission), or $13 million less than the $4.731 billion requested by the Administration. FY2014 returned appropriations to the pattern of Congress providing more to the Corps than requested by the President. The President's FY2014 budget request for the Corps was $4.826 billion, not accounting for proposed rescission of prior year funds. In its markup, the House Appropriations Committee recommended $4.876 billion for the Corps, or about $50 million more than the amount requested by the Administration for FY2014. The Senate Appropriations Committee recommended $5.272 billion for the Corps, or $546 million more than the Administration's request. P.L. 113-76 provided more than any of these; under the enacted bill, the agency's civil works appropriations for FY2014 totaled $5.468 billion. Earmarks and the Corps of Engineers Corps funding is part of the debate over congressionally directed spending, or "earmarks." 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 competitive grants. Generally about 85% of the appropriations for Corps civil works activities are directed to specific projects. In addition to specific projects identified for funding in the President's budget, in past years many Corps projects have received additional funding from Congress in the appropriations process. Since the 112 th Congress, site-specific project line items added by Congress (i.e., earmarks) have been among those projects subject to House and Senate earmark moratoriums. As a result, additional congressional funding at the project level has not been provided since FY2010. In lieu of the traditional project-based increases, Congress has included additional funding for selected categories of Corps projects (e.g., "ongoing navigation work") that were not funded in the President's budget, and provided limited direction to the Corps for allocation of these funds. The House and Senate both continued this practice in their FY2014 recommendations. Key Policy Issues—Corps of Engineers Project Backlog and New Starts The large number of authorized Corps studies and projects that have not received appropriations to date, or that are authorized and have received funding but are incomplete, is often referred to as the "backlog" of authorized projects. Estimates of the construction backlog range from $20 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 which activities to fund among authorized activities. Recent budget requests by the Administration have included few new studies and construction starts, and enacted appropriations for FY2011, FY2012, and FY2013 barred any funding for new projects (defined as projects or studies that have not received appropriations previously). For FY2014, the Administration requested funding for four new construction starts and 10 new studies. The House Appropriations Committee recommended no funding for New Starts in FY2014. The Senate Appropriations Committee agreed with the Administration's request and recommended that the Corps produce a list of an additional five new studies and three new construction starts in its Work Plan for FY2014. P.L. 113-76 allows up to nine new study starts and four new construction starts. Navigation Trust Funds In addition to regular appropriations, two congressionally authorized "trust funds" are administered by the Corps and require annual appropriations. The Harbor Maintenance Trust Fund and the Inland Waterway Trust Fund support cost shared investments in federal navigation infrastructure and have both received attention in recent years. While the Harbor Maintenance Trust Fund has a surplus balance, the Inland Waterway Trust Fund currently faces a shortfall and a curtailment of activities. Both trust funds are subject to appropriations. Authorization issues associated with these trust funds are often addressed through Water Resources Development Acts, or similar legislation. Both trust funds are discussed below. Harbor Maintenance Trust Fund In 1986, Congress enacted the Harbor Maintenance Tax (HMT) to recover operation and maintenance (O&M) costs at U.S. coastal and Great Lakes harbors from maritime shippers. O&M is mostly the dredging of harbor channels to their authorized depths and widths. The tax is levied on importers and domestic shippers using coastal or Great Lakes ports. The tax revenues are deposited into the Harbor Maintenance Trust Fund (HMTF) from which Congress appropriates funds for most harbor dredging. In 1990, Congress increased the HMT rate from 4 cents per $100 of cargo value to 12.5 cents per $100 of cargo value in the Omnibus Budget Reconciliation Act ( P.L. 101-508 ). In recent years, HMTF annual expenditures have remained relatively flat while HMT collections have increased due to rising import volume. Consequently, a large surplus in the HMTF has developed. The maritime industry seeks to enact a "spending guarantee" to spend down the surplus in the HMTF (see H.R. 335 and S. 218 ). Some harbor channels are reportedly not being maintained at their authorized depth and width, requiring ships with the deepest drafts to "light load" or wait for high tide. Harbors primarily used by fishing vessels or recreational craft have also complained of insufficient maintenance dredging. Since spending from the HMTF requires an appropriation from Congress, spending more from the HMTF could reduce available funding for other Energy and Water Development activities under congressional budget caps. The Administration's FY2014 budget requested $890 million from the HMTF, leaving an estimated-end-of-year balance of more than $8.9 billion. The House Appropriations Committee recommended $1 billion for HMTF expenditures, or $110 million more than the Administration's request. The Senate Appropriations Committee did not specify an overall funding level for the HMTF in its markup. Like most appropriations bills that fund the Corps, P.L. 113-76 does not specify a specific amount of HMTF funds to be used in FY2014; based on the harbor operation and maintenance activities identified in the explanatory statement accompanying P.L. 113-76 , more than $1 billion in eligible HMTF expenditures may occur. For more information on harbor maintenance funding, see CRS Report R41042, Harbor Maintenance Trust Fund Expenditures , by [author name scrubbed]. Inland Waterway Trust Fund Since the 1980s, expenditures for construction and major rehabilitation projects on inland waterways have been cost-shared on a 50/50 basis between the federal government and users through the Inland Waterway Trust Fund (IWTF). IWTF monies derive from a fuel tax on commercial vessels on designated waterways, plus investment interest on the balance. Since FY2007, there has been a looming shortfall in the IWTF. In recent years Congress has taken measures to ensure temporary solvency of the IWTF, either by appropriating federal funds beyond the aforementioned 50% federal requirement (FY2009 and FY2010), or by limiting IWTF expenditures to the amount available under current year fuel tax revenues (FY2011-FY2013). The IWTF is expected to have a balance of approximately $70 million at the end of FY2013. Without changes to the current system, needed funding for eligible work is expected to continue to exceed available funding. In the past multiple Administrations have proposed fees (e.g., lock user fees, congestion fees) that would have increased IWTF revenues. These fees have been opposed by users and rejected by Congress. In 2011, users endorsed a plan of their own that would increase the current fuel tax by $0.06-$0.08 per gallon and alter the cost-share arrangement for some IWTF projects to increase the portion paid for by the federal government. H.R. 1149 would authorize this proposal, which has been opposed by the Obama Administration. Recent estimates by the Corps indicate that one project, Olmsted Lock and Dam on the Ohio River, is expected to use up the majority of IWTF revenues over the next 10 years. At the same time, other navigation construction and major rehabilitation work is expected to stall. Without a new source of revenue or some other change directed by Congress, the overall number of inland waterway projects is expected to be extremely limited. Changes to IWTF policies have historically been under the jurisdiction of the authorizing committees, but in recent years appropriators have expressed frustration with the lack of action on this issue. For FY2014, the Administration requested limited appropriations for IWTF projects based on current-year fuel tax revenues. This is the same approach that was proposed and enacted in FY2011-FY2013. The FY2014 Administration budget requested approximately $94 million in inland waterway spending from the IWTF, with an equal amount to be drawn from the General Fund of the Treasury. The Administration also assumed an additional $80 million in new revenues from an unspecified user fee, presumably separate from the current fuel tax. The majority of FY2014 requested IWTF funds were proposed for the Olmsted Project. The House Appropriations Committee disagreed with the user fee approach, but continued to agree with the approach of limiting appropriations to current year fuel revenue. The Senate Appropriations Committee also disagreed with the user fee proposal, and proposed exempting the Olmsted Project from IWTF cost sharing requirements in FY2014. This would allow other IWTF projects to proceed using the trust fund revenues, but would fund Olmsted entirely out of the General Fund of the Treasury. P.L. 113-76 reduces from 50% to 25% the costs of the Olmsted project that are to come from the IWTF during FY2014. For more information on inland waterways, see CRS Report R41430, Inland Waterways: Recent Proposals and Issues for Congress , by [author name scrubbed]. Ecosystem Restoration Projects The Corps portion of the Energy and Water bill typically includes funding for ecosystem restoration projects, such as restoration of the Everglades in South Florida. Previously some in Congress have criticized the fact that while the Corps has requested reductions for some "traditional" activities in recent budgets, funding for Corps environmental business line activities, which include ecosystem restoration projects, has largely remained the same. For FY2014, the Administration requested $449 million (approximately 9% of the total FY2014 Corps request, spread among several accounts) for ecosystem restoration projects. This amount is less than has been appropriated for these activities in recent years. Everglades restoration was among the ecosystem restoration projects proposed for reduction in the FY2014 request. The President's budget requested $88 million for Everglades restoration, or a significant reduction from the FY2012 enacted level of $135 million. The House Appropriations Committee recommended $83.6 million for the project, and the Senate Appropriations Committee agreed with the Administration's request. P.L. 113-76 provides less; the explanatory statement accompanying the bill identified $46.6 million for these activities. Continuing Authorities Program Projects funded under the Corps' Continuing Authorities Programs (CAPs) are typically smaller projects that can be carried out without obtaining a project-specific study or construction authorization or project-specific appropriations. CAPs are referred to by the section number in the bill where the CAP was first authorized. The Administration's FY2014 budget requested $29 million in funding for five of the nine CAPs, or a significant decrease from previous enacted levels. The Administration proposed no funding for four CAPs, including Section 14 (emergency streambank and shoreline protection), Section 103 (shore protection), Section 107 (navigation), and Section 208 (snagging and clearing for flood control). The House Appropriations Committee proposed $33 million in funding for eight CAPs, while the Senate Appropriations Committee recommended $50 million in funding for eight CAPs. The explanatory statement accompanying P.L. 113-76 provided $53 million for the CAPs. Title II: Department of the Interior17 Bureau of Reclamation and Central Utah Project Title II of the Energy and Water Development bill includes funding for two sets of activities within the Department of the Interior: it funds the Bureau of Reclamation and the Central Utah Project Completion Act (CUPCA). The total discretionary FY2014 Title II budget request was $1.050 billion. The House-passed bill recommended $965 million for these programs, and the Senate recommended approximately $1.099 billion. P.L. 113-76 provided $1.113 billion for Title II. Reclamation released an operating plan for FY2013 that accounts for sequestration's effect on FY2013 enacted level under the BCA and ATRA and allows for comparison to FY2014 proposed spending levels. According to Reclamation, funding for Title II activities under the FY2013 operating plan was $1.014 billion (post sequestration, post rescission). The FY2014 request for the Bureau of Reclamation and CUPCA included an "offset" of $53.2 million for the Central Valley Project (CVP) Restoration Fund (Congress does not list this line item as an offset), yielding a "net" discretionary authority of $996 million. As in previous years, additional funding is estimated to be available for FY2014 via "permanent and other" funds, but these funds are not included in net discretionary totals. Central Utah Project The Administration requested $3.5 million for CUPCA in FY2014, or $17.4 million less than the FY2013 enacted amount (post sequestration, post rescission). In FY2014 the Administration once again proposed to make Reclamation responsible for oversight and implementation of CUPCA (these responsibilities are currently in a separate office in DOI). The Senate Appropriations Committee agreed with the President's request, but in its bill the House retained CUPCA as a separate account and provided $8.7 million for this project. Similar to the House bill, P.L. 113-76 retained CUPCA as a separate account and provided $8.7 million for the project, including $1.3 million for expenses of the Secretary of the Interior. Bureau of Reclamation Most of the large dams and water diversion structures in the West were built by, or with the assistance of, the Bureau 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 a population of 31 million. 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. Operations of Reclamation facilities are often controversial, particularly for their effect on fish and wildlife species and conflicts among competing water users. As with the Corps of Engineers, the Reclamation budget is made up largely of individual project funding lines and relatively few "programs." Also similar to the Corps, previously these Reclamation projects have often been subject to earmark disclosure rules. The current moratorium on earmarks affects Congress's ability to steer money directly toward specific Reclamation projects, as it has done in the past. Reclamation's single largest account, Water and Related Resources, encompasses the agency's traditional programs and projects, including construction, operations and maintenance, dam safety, and ecosystem restoration, among others. The Obama Administration requested $791 million for the Water and Related Resources account for FY2014, a decrease of $57 million from the FY2013 enacted amount (post sequestration, post rescission). Most of this decrease was due to shifting of funds to new accounts for Indian water rights settlements and San Joaquin restoration. The House-passed bill provided $812 million for Water and Related Resources, and the Senate Appropriations Committee provided $946 million for this account in its recommendation. Neither the House nor the Senate included the Administration's proposed new accounts for Indian water rights funding (although some of this funding was provided within Water and Related Resources). P.L. 113-76 included multiple provisions related to Reclamation drought response and related authorities. For example, it extended the authorization of Reclamation's emergency drought relief program through FY2017 (43 U.S.C. 2214(c)), expanded the Secretary of the Interior's authority to participate in nonfederal groundwater banking in California, and waived certain reporting provisions for transfer of irrigation water among selected federal water contractors, while also directing Reclamation and the Fish and Wildlife Service to expedite "programmatic environmental compliance" to facilitate CVP water transfers. P.L. 113-76 also extended the authorization of the Calfed Bay-Delta Authorization Act ( P.L. 108-351 ) through 2015, thus continuing certain provisions of the law that were set to expire at the end of FY2014. Central Valley Project (CVP) Operations The CVP in California is one of Reclamation's largest and most complex water projects, and limited deliveries to CVP contractors are often the subject of appropriations and authorization debates. In recent years, Reclamation has had to limit water deliveries and pumping from CVP facilities due to drought and other factors, including environmental restrictions. In previous appropriations bills, this action has resulted in attempts to prevent Reclamation from implementing Biological Opinions (BiOps), some of which restrict CVP operations because of the project's potential effects on certain fish species. Previous proposals to restrict implementation of BiOps in the CVP, including amendments to appropriations bills, have not been enacted. However, other measures to lessen the impact of these restrictions have been enacted, and related legislation is currently under consideration. San Joaquin River Restoration Fund The San Joaquin River Restoration Fund was authorized by the enactment of Title X of the Omnibus Public Land Management Act of 2009 ( P.L. 111-11 ), the San Joaquin River Restoration Settlement Act. The Fund is to be used to implement fisheries restoration and water management provisions of a stipulated settlement agreement for the Natural Resources Defense Council et al. v. Rodgers lawsuit. The Fund is supported through the combination of a reallocation of Central Valley Project Restoration Fund receipts from the Friant Division water users and accelerated payment of Friant water users' capital repayment obligations, as well as other federal and non-federal sources. The Settlement Act provided $88 million from the Restoration Fund to be available without further appropriation. In recent years, some have proposed repealing the settlement outright. Reclamation reports that in FY2014, the balance of the aforementioned mandatory appropriations is expected to be exhausted. Separately, Reclamation has also proposed an allocation of $26 million in discretionary funding for FY2014 within a new account for San Joaquin River restoration activities. The House Appropriations Committee provided no funding for these activities. The Senate Appropriations Committee disagreed with the Administration's request of funding for these activities in a separate account, but provided $26 million in funding for San Joaquin River restoration as a line item under the Friant Division of the Central Valley Project in the Water and Related Resources account. The explanatory statement accompanying P.L. 113-76 followed the Senate's approach by providing $26 million for the Friant Division in the Water and Related Resources Account. WaterSMART Program In recent years Reclamation has combined funding for "bureau-wide" programs promoting water conservation into a single program—the WaterSMART (Sustain and Manage America's Resources for Tomorrow) Program. The program is part of the Department of the Interior's focus on water conservation, re-use, and planning. The FY2014 WaterSMART request included five components as shown in Table 7 . The FY2014 request for all WaterSMART programs was $35.4 million. The House bill recommended eliminating funding for two components as shown in Table 7 . The Senate Appropriations Committee recommended an increase of $8 million for WaterSMART grants and otherwise agreed with the Administration's request. The explanatory statement accompanying P.L. 113-76 provided nearly $49 million for these activities. Title III: Department of Energy The Energy and Water Development bill has funded all DOE's programs since FY2005. Major DOE activities funded by the Energy and Water bill include research and development on renewable energy and energy efficiency, nuclear power, fossil energy R&D, the Strategic Petroleum Reserve, energy statistics, general science, environmental cleanup, and nuclear weapons programs. The FY2013 continuing resolution, P.L. 113-6 , funded DOE programs at $25.1 billion, including the sequestration requirements of the Budget Control Act that went into effect March 1, 2013. The Administration's request for DOE programs for FY2014 totaled $28.9 billion. H.R. 2609 , as passed by the House July 10, 2013, totaled $24.9 billion for DOE programs. S. 1245 , as reported out by the Senate Appropriations Committee June 27, would have funded DOE programs at $28.2 billion. The final appropriations bill, P.L. 113-76 , appropriated $27.3 billion for DOE. Key Policy Issues—Department of Energy DOE administers a wide variety of programs with different functions and missions. In the following pages, some of the most important programs are described and major issues are identified, in approximately the order in which they appear in Table 8 . Energy Efficiency and Renewable Energy (EERE)25 President Obama has declared energy efficiency and renewable energy to be a high priority, stressing their importance to jobs, economic growth, and U.S. manufacturing competitiveness. For example, the 2013 Economic Report of the President notes that "President Obama has set a goal of once again doubling generation from wind, solar, and geothermal sources by 2020." But Congress so far hasn't supported his efforts to boost spending for these programs. His proposed FY2011 budget for EERE of $2.4 billion was reduced to $1.8 billion, the FY2012 request for $3.2 billion was cut to $1.8 billion, and the FY2013 request for $2.3 billion was cut to $1.7 billion. For FY2014, DOE requested $2.78 billion for the EERE programs. Compared with the FY2013 appropriation, the FY2014 request would have increased EERE funding by about $1.06 billion, or about 62%. DOE requested an additional $169 million for Electricity Delivery and Energy Reliability (EDER) programs. Table 9 gives the programmatic breakdown for EERE and EDER. EERE Active Project Management The request emphasized that fiscal and budget constraints made it important that EERE use funds as efficiently and carefully as possible. Thus, starting in FY2014, EERE stated that it will fully and uniformly implement a regimen of Active Project Management. Under this regimen, every competitive project awarded will take the form of a cooperative agreement, not a grant. This, said DOE, would enable greater EERE oversight. Also, each project would be subject to aggressive, annual go/no-go milestones, rigorous quarterly reviews, and early termination in the event of insufficient technical performance. DOE said that this approach would ensure that EERE had the correct tools and project oversight to maximize the taxpayer's return on investment. EERE-wide Cross-Cutting Initiatives The request emphasized five broad initiatives that cut across multiple EERE programs: (1) Grid Integration Initiative. Under this initiative, launched in 2012, EERE's vehicles, solar, and buildings programs would work in coordination with DOE's Grid Tech Team to address electric grid integration barriers and opportunities associated with variable, distributed renewable energy generators, electric vehicle charging, and building efficiency and controls. EERE would coordinate with DOE's Office of Electricity Delivery and Energy Reliability (EDER). EERE would issue an $80 million project announcement, jointly funded by three programs: Solar ($30 million), Vehicles ($20 million), and Buildings ($30 million). (2) EV Everywhere Grand Challenge. This DOE-wide initiative aims to make technology breakthroughs that would enable the United States, by 2022, to become the first country in the world to invent and produce plug-in electric vehicles that are as affordable and convenient as gasoline-powered vehicles. (3) SunShot Grand Challenge. This DOE-wide initiative seeks to achieve directly cost-competitive solar power by 2020. (4) Clean Energy Manufacturing Initiative. This new EERE initiative would aim to dramatically improve U.S. competitiveness in the manufacture of clean energy products (like solar modules, LEDs, batteries, and wind blades) and to strengthen U.S. competitiveness across multiple manufacturing industries through increased energy productivity. (5) Wide Bandgap Semiconductors for Clean Energy Initiative. Wide bandgap semiconductor technology was initially developed for military and solid-state lighting uses. DOE believes it is a key next-generation platform for semiconductor devices with the potential for developing high-power-conversion electronics that are much more compact, more energy efficient, and able to operate at much higher temperatures and voltages. DOE contends that this "revolutionary" technology could be a platform for the next generation of electric drivetrains, solar inverters, high-efficiency motors, solid-state transformers for the grid, and many other critical, clean energy applications. House Action Expressing concern about controlling budget expenses—and citing a need to focus EERE programs on efforts to curb gasoline and electricity prices—the House Appropriations Committee recommended cutting overall EERE funding relative to the FY2013 level by half. Further, the committee report ( H.Rept. 113-135 ) on H.R. 2609 proposed to merge EERE with the Office of Electricity Delivery and Energy Reliability (EDER). So, the $80 million recommended for EDER programs was included in the EERE total. The report also contained several management and program directives, which are noted below, in the context of specific program areas. In floor action on H.R. 2609 , two adopted amendments cut the EERE appropriation from $982.6 million to $958 million: H.Amdt. 248 cut EERE by $9.5 million (without reference to any particular programs) and H.Amdt. 249 cut the Solar Program by $15 million. Also, H.Amdt. 285 (Burgess) to H.R. 2609 was adopted, to extend a previous prohibition on the use of funds to enforce certain light bulb efficiency standards set by section 321 of the Energy Independence Act of 2007 (EISA, P.L. 110-140 ). Language to extend the previous prohibition was enacted in section 322 of P.L. 113-76 . Senate Action Urging EERE to apply more funding to near-term commercialization efforts in partnership with the private sector, the Senate Appropriation Committee recommended ( S. 1245 , S.Rept. 113-47 ) FY2014 funding at a level slightly higher than the request. S. 1245 did not reach the Senate floor. Hydrogen/Fuel Cell Program This program aims to reduce petroleum use, greenhouse gas emissions, and criteria air pollutants, while contributing to a more diverse and efficient energy infrastructure. The program supports applied research, development, and demonstration (RD&D) of hydrogen and fuel cell technologies, as well as efforts to overcome economic and institutional barriers to commercial deployment. DOE requested $100 million—about $2 million above the FY2013 final appropriation—seeking to increase hydrogen R&D and manufacturing R&D slightly, while reducing fuel cell R&D slightly. The House bill proposed a one-third cut below FY2013 to $65 million, while the Senate bill would have provided the full requested amount of $100 million. The final appropriation was $5 million less than the FY2013 level. Biomass and Biorefinery Program Initiatives This program aims to foster a domestic bioenergy industry that produces renewable biofuels, bioproducts, and biopower. The goals are to curb oil dependence, reduce greenhouse gas emissions, and stimulate economic and job development—especially in the farms and forests of rural areas. While biofuels and industrial bioproducts (plastics, solvents, alcohols) may soon be price-competitive, swings in oil prices pose an ongoing challenge to achieve cost-competitiveness. The program strategy addresses a feedstock collection barrier by focusing on converting raw biomass to solid pellets or to "green crude" bio-oil that is easy to transport at large scale. Recent goals expand the program scope to include the development of biofuels that will contribute to production targets of the Renewable Fuel Standard (RFS). These "drop-in" liquid fuels are largely compatible with existing infrastructure to deliver, blend, and dispense fuels. Examples include biomass-based hydrocarbon fuels (renewable gasoline, diesel, and jet fuel), hydrocarbons from algae, and biobutanol. The program aims to help the non-food "drop-in" biofuels (renewable gasoline, diesel, and jet fuel) reach a wholesale finished-fuel cost under $3 per gasoline gallon-equivalent (gge) by 2017. DOE requested $282 million in FY2014 for Bioenergy (Biomass and Biorefinery) programs, a $94 million increase over the $188 million appropriation for FY2013. The largest requested subprogram increase would go to conversion technologies. That increase would include $20 million for the low cost carbon fiber initiative. Another large increase would go to the integrated biorefineries subprogram. The increase would include $45 million (justified under the Defense Production Act) to support commercial demonstration-scale, military-grade fuel production from biomass through DOE collaboration with the U.S. Department of Agriculture (USDA). This would be partially offset by a $14 million cut for algae and advanced feedstocks. The House bill recommended about 8% more than the FY2013 appropriation, while the Senate proposed about 30% more than FY2013. The final appropriation provided $44 million more than the FY2013 level. Solar Energy For the Solar Program, DOE requested $356 million, an increase of $83 million over the FY2013 appropriation. The concentrating solar power (CSP) subprogram would have increased, mainly for work on thermal storage to improve grid integration. The balance of systems subprogram would grow to enable work with state and local governments to reduce permitting, interconnection, inspection, and other soft costs. Funding for the systems integration subprogram would have risen as well, with a focus mainly on power electronics and other means to improve integration of solar power with the grid. Those increases would be partially offset by a cut to the innovations in manufacturing competitiveness subprogram. Overall, the House bill recommended a cut of $118 million (43%) from the FY2013 level, while the Senate bill proposed an increase of $37 million (14%) over FY2013. The final appropriation was $16 million less than the FY2013 level. Wind Energy For the Wind Program, DOE requested a $56 million increase over the FY2013 appropriation. Nearly half of that increase would have gone to the technology development and testing subprogram, mainly for wind power plant optimization modeling. The increase would have supported analysis of new technology, advanced manufacturing, and a technology incubator. Funding for offshore wind would have grown by more than $10 million. Also, the technology application subprogram would have increased by nearly $20 million. That increase would cover resource characterization to better assess wind plant capacity factor performance, activities to optimize grid integration, and analysis of market barriers arising from impacts on radar and birds and from environmental impacts of the first installed offshore projects. Overall, the House bill recommended a cut of $18 million (21%) from the FY2013 level, while the Senate bill proposed an increase of $22 million (25%) over FY2013. The final appropriation was unchanged from the FY2013 level. Geothermal Technologies The program aims to lower the risk of resource exploration and cut power production costs to six cents/per kilowatt-hour (kwh) for hydrothermal power by 2020 and for newly developed technologies by 2030. For the Geothermal Program, DOE requested $60 million, an increase of $24 million over the FY2013 appropriation. Enhanced Geothermal Systems (EGS) would have increased more than $25 million to establish a field lab and to support strategic R&D. This increase would be partially offset by about a $3 million cut for activities involving low temperature co-produced resources. Overall, the House bill recommended a $6 million (16%) cut from the FY2013 level, while the Senate bill proposed an increase of $24 million (68%) over FY2013. The final appropriation was $10 million higher than the FY2013 level. Water Power Water power technologies employ marine and hydrokinetic (wave, tidal, current, and ocean thermal) resources—and conventional hydropower resources—to generate electricity. Hydropower technology is well established, but the fledgling industry for marine and hydrokinetic (MHK) power facilities is still looking to develop a clear technology theme. For the Water Power Program, DOE requested $55 million, a cut of $1 million below the FY2013 appropriation. The budget request would have added several million dollars for MHK RD&D, demonstration infrastructure development, and light-weight materials in manufacturing. Hydropower funding would have been cut by nearly $10 million. The House bill recommended a $11 million (19%) cut from the FY2013 amount, while the Senate bill proposed to maintain the FY2013 level. The final appropriation provided $3 million more than the FY2013 level. Vehicle Technologies This program is driven by the 10-year EV-Everywhere Challenge (launched in 2012), which aims to achieve parity for plug-in electric vehicle (EV) affordability and convenience by 2022. The EV Challenge focuses on advanced battery technology, power electronics, and advanced charging technology—with the goal of assuring U.S. leadership in the global market for next generation electric vehicle technology. A key supporting technology goal is to cut 2008 battery production cost 70% by 2015 (and 88% by 2022). Further, the program seeks to achieve (1) a cut of 1.8 million barrels per day (16%) in the national oil use trend by 2020, (2) a fuel economy of 62 miles per gallon (mpg) for cars by 2025, and (3) a 50% increase in heavy duty truck fuel economy by 2015. Also, the program participates in the Grid Integration Initiative. To help achieve those goals and support the EV Everywhere initiative, DOE sought the largest EERE FY2014 program increase—$264 million over the appropriation for FY2013. The subprogram on batteries and electric drives would have increased by more than $120 million, including about $70 million more for battery cost reduction through innovative manufacturing R&D, scale-up of advanced battery component materials, and next-generation "beyond lithium" research. An increase of nearly $40 million would have gone to advanced power electronics R&D (on wide bandgap semiconductors) to support higher performance electric drive systems. Under the materials subprogram, R&D on lightweight materials (carbon fiber composites, aluminum parts, magnesium alloys) would have grown by more than $20 million to support the EV Everywhere initiative. The deployment subprogram would have increased $90 million for a new initiative to establish "Alternative Fuel Vehicle Community Partner Projects." Competitive (and cost-shared) awards (up to 9 awards of $10 million each) would have been made for state and local community-based projects that would last three to four years. The objective would be the creation of replicable "model communities" that develop policies, procedures, and infrastructure to successfully displace on-road vehicle petroleum use with alternatives such as natural gas, electricity (e.g., plug-in EVs), or biofuels. Overall, the House bill recommended a $24 million (8%) increase over the FY2013 level, while the Senate bill proposed an increase of $104 million (34%) over FY2013. The final appropriation was $21 million less than the FY2013 level. Building Technologies This program develops energy efficiency measures to curb building-related energy costs, with a goal of reducing energy use 50% by 2030. The program strategy is designed with three linked paths: improve building components (envelope/windows, HVAC, lighting, and sensors/controls), strengthen market pull (through cooperation with private industry), and raise energy efficiency levels for new equipment (via standards) and new buildings (via model codes). DOE requested $300 million for FY2014, an increase of $93 million over the FY2013 appropriation. Most of the requested increase, more than $70 million, would have gone to the emerging technologies subprogram. From that amount, about $40 million would have supported competitive (and cost-shared) demonstration projects to accelerate commercialization of technologies that are within three years or less of market-readiness. Specific areas include advanced building controls and "next generation" air conditioning technologies. Also, about $30 million requested for the Grid Integration Initiative would have addressed R&D on how building energy control systems transact (provide status, availability, identity) with each other and with the electric grid. Projects would likely cover predictive data analytics, sensors, and energy control systems. The request also sought $24 million for another year of funding for the Building Energy Efficiency Innovation Hub. Additionally, about $15 million of the increase would have supported EERE efforts to accelerate the development of energy efficiency equipment standards and building codes. The House bill recommended a $82 million (40%) cut from the FY2013 level, while the Senate bill proposed an increase of $23 million (11%) over FY2013. The final appropriation was $29 million less than the FY2013 level. Advanced Manufacturing Domestic manufacturers face increasing challenges in the global marketplace. The Advanced Manufacturing Office (AMO) was designed to focus on national interests—especially concerns about jobs, critical materials, and international competitiveness. The general goal for AMO programs is to reduce the energy use of manufactured goods across targeted product life-cycles by 50% over 10 years. More specific objectives include (1) 50% energy savings through advanced materials and industrial processes, (2) help leading companies cut energy intensity by 25% over 10 years, and (3) facilitate installation of 40 GW (million kilowatts) of combined heat and power equipment by 2020. To meet these goals and objectives DOE requested $365 million, a net increase of $256 million over the FY2013 appropriation. Most of the requested increase (more than $180 million) was directed to the subprogram on Advanced Manufacturing R&D Facilities, with the remainder split between Next Generation Manufacturing R&D Projects (about $60 million) and Industrial Technical Assistance (about $10 million). The proposed $180 million plus increase for Advanced R&D Facilities included about $177 million more for clean energy manufacturing R&D facilities. That additional funding would have allowed the program to support the creation of at least three new Clean Energy Manufacturing Innovation (CEMI) Institutes, consistent with the President's vision for a larger, multi-agency National Network for Manufacturing Innovation (NNMI). CEMI is a new cross-cutting activity that would be anchored by AMO and would incorporate activities under many of EERE's other programs. The main goal is to improve U.S. competitiveness in the manufacturing of clean energy products, such as solar photovoltaic modules, LEDs, batteries, and wind turbine blades. The CEMI institutes would provide small- and medium-sized enterprises affordable access to cutting-edge physical and virtual manufacturing capabilities (e.g., 3-D printing equipment) and facilitate technology use in the U.S. manufacturing sector to bolster its global competitiveness. DOE plans to invest $70 million-$120 million into each CEMI institute, to be used over a five- to seven-year period. For each institute, DOE plans to provide up-front funding to the greatest extent possible. Another R&D facility, the Critical Materials Hub, was created in FY2012 to focus on technologies that enable manufacturers to make better use of critical materials (e.g., rare earth elements) and to eliminate the need for materials that are vulnerable to supply disruptions. Many rare earth elements are essential to technologies of the clean energy industry. Examples include wind turbines, solar photovoltaic panels, electric vehicles, and energy-efficient lighting. DOE requested $25 million to extend the Hub's operation for a third year. Under the Next Generation Manufacturing Projects subprogram, advanced R&D projects focus on technology areas with the greatest potential impact on clean energy manufacturing and energy productivity-related competitiveness. DOE requested an increase of about $60 million over FY2013. The increase would have supported at least three new project competitions—in specific technology areas—of about $20 million to $40 million each. Previously identified and approved technology areas include additive manufacturing (3-D printing), wide bandgap semiconductors (efficient power conversion), low-cost carbon fiber (lightweight) materials, and other technologies that would benefit multiple clean energy sectors. Also, one of the three competitions would have been established as an "incubator activity" project. It would have gotten up to $20 million in support for a new technology area that might not be included among the above-referenced list of approved technology areas. For Industrial Technical Assistance, the requested increase of about $10 million would have expanded combined heat & power (CHP) partnerships to provide greater technical assistance and market development for critical infrastructure facilities (e.g., hospitals, military bases, wastewater treatment facilities) and to support other applications. Overall, the House bill recommended a $41 million (37%) increase over the FY2013 level, while the Senate bill proposed an increase of $107 million (98%) over FY2013. The final appropriation provided $71 million more than the FY2013 level. Federal Energy Management Program (FEMP) FEMP provides expertise, training, and other services to help federal agencies achieve congressionally mandated energy efficiency and renewable energy goals. DOE requested $36 million, about $8 million more than the FY2013 appropriation. A new subprogram, the Federal Energy Efficiency Fund, would have gotten about $10 million to provide leverage for cost sharing of capital improvement projects at federal agencies. The House bill recommended $18 million, a cut of $10 million. The Senate bill proposed $30 million, an increase of $2 million over FY2013. The final appropriation was unchanged, relative to the FY2013 level. Program Direction This administrative program funds federal employees, contract support, and operational costs. DOE requested $185 million, about a $30 million increase over the FY2013 appropriation. The increase would have covered an EERE reorganization that would consolidate information technology and establish an active project management (APM) system to oversee competitive grants and cooperative agreements. The House bill recommended a $41 million (26%) cut from the FY2013 level, while the Senate bill proposed an increase of $30 million (19%) over FY2013. The final appropriation was $23 million less than the FY2013 level. Strategic Programs For this program (formerly Program Support), DOE sought $36 million, an increase of $12 million over the FY2013 appropriation. Of that amount, about $7 million would have gone to a new effort to increase the rate of clean energy technology commercialization from the national labs. Another $4 million of the increase would have expanded efforts to evaluate EERE's impacts and returns on investment. The House bill recommended a $14 million (58%) cut from the FY2013 level, while the Senate bill proposed an increase of $4 million (19%) over FY2013. The final appropriation was $12 million less than the FY2013 level. Weatherization Grant Program This program addresses regulatory, financial, and planning barriers faced by state and local governments. The goal is to foster technologies, practices, and policies that support state and local governments in providing home energy services to low-income families that help them reduce energy costs and save money. DOE requested $184 million, a $120 million increase over the FY2013 appropriation. DOE stated that many states have expended leftover Recovery Act funds and now need new funds to avoid cutting core programs and services. The House bill recommended a $10 million (15%) cut below the FY2013 level, while the Senate bill proposed an increase of $120 million (187%) over FY2013. The final appropriation was $110 million higher than the FY2013 level. State Energy Grant Program This program supports both administrative and program activities at many state energy offices. DOE requested $57 million, a $10 million increase over the FY2013 appropriation. The increase would have supported competitive projects that address barriers to an effort that aims to cut state energy use by 1% annually. The House bill recommended a $22 million (47%) cut from the FY2013 level, while the Senate bill proposed a small increase of $6 million (13%) over FY2013. The final appropriation provided $3 million more than the FY2013 level. Electricity Delivery and Energy Reliability (EDER) Program32 DOE requested $169 million—a net increase of $37 million over the FY2013 DOE estimate—which included $20 million for a new Electricity Systems Hub. The Hub would address the growing need for the grid to accommodate renewables, the impact of electric vehicles and distributed generation, and the advent of smart grid equipment. The Hub funding would be mostly offset by cuts to other programs. Also, notable increases were sought for three subprograms: infrastructure security (about $10 million), cybersecurity (about $9 million), and clean energy transmission (about $7 million). Offsetting reductions would come from two subprograms: smart grid (a cut of about $9 million) and energy storage (a cut of about $4 million). The House bill recommended a cut of $9 million (7%), while the Senate bill proposed an increase of $17 million (13%) over FY2013. The final appropriation was $15 million higher than the FY2013 level. Nuclear Energy33 The FY2014 appropriation for nuclear energy research and development is $889.2 million, 21% above the Obama Administration's $735.5 million request. Including advanced reactors, fuel cycle technology, infrastructure support, and safeguards and security, the total nuclear energy appropriation is $131.7 million (17%) above the FY2013 funding level. Funding for safeguards and security at DOE's Idaho facilities in FY2013 was provided under a separate appropriations account, Other Defense Activities, but it is included under the Nuclear Energy account in the FY2014 request and final appropriation. In contrast, funding for space and defense infrastructure, totaling $64.1 million in the FY2013 nuclear energy appropriation, would have been shifted to the National Aeronautics and Space Administration (NASA) by the Administration's request. The Administration request proposed reductions of 4.5% for Reactor Concepts, 12.6% for Nuclear Energy Enabling Technologies, and 8.8% for Fuel Cycle R&D—cuts that were mostly rejected by the final appropriation. A 4.5% increase was requested for Small Modular Reactor Licensing Technical Support, which was increased by an additional $40 million by the final appropriation. The House-passed bill would have provided $656.4 million for nuclear energy. That total excluded the Administration's proposed shift of $94.0 million for Idaho safeguards and security from Other Defense Activities and included the space and defense funding transfer to NASA. For the programs that were to remain in nuclear energy, therefore, the House bill would have provided an increase of $14.9 million from the Administration request and a decrease of $37 million from FY2013. The Senate Appropriations Committee had recommended the same total as the Administration request, including the proposed funding transfers. The Administration's FY2014 nuclear R&D budget request was consistent with DOE's Nuclear Energy Research and Development Roadmap issued in April 2010. The Roadmap lays out the following four main goals for the program: Develop technologies and other solutions that can improve the reliability, sustain the safety, and extend the life of current reactors; Develop improvements in the affordability of new reactors to enable nuclear energy to help meet the Administration's energy security and climate change goals; Develop sustainable nuclear fuel cycles; and Understand and minimize the risks of nuclear proliferation and terrorism. The Senate Appropriations Committee directed DOE to update the Roadmap within 180 days after enactment to reflect lessons learned from the Fukushima nuclear accident, advances in small modular reactors, and the Administration's new nuclear waste strategy. Reactor Concepts The Reactor Concepts program area includes the Next Generation Nuclear Plant (NGNP) demonstration project and research on other advanced reactors (often referred to as Generation IV reactors). This area also includes funding for developing advanced small modular reactors (discussed in the next section) and to enhance the "sustainability" of existing commercial light water reactors. The total FY2014 appropriation for this program is $113 million, nearly the same as the FY2013 level and $40.5 million above the Administration request. The House had voted to provide $86.5 million, while the Senate Appropriations Committee had approved the Administration's funding level. Most of the Administration's proposed reduction in Reactor Concepts had targeted NGNP, a high-temperature gas-cooled reactor demonstration project authorized by the Energy Policy Act of 2005 (EPACT05, P.L. 109-58 ). The reactor is intended to produce high-temperature heat that could be used to generate electricity, help separate hydrogen from water, or be used in other industrial processes. DOE did not request any funding specifically for the NGNP project in FY2014. Under EPACT05, the Secretary of Energy was to decide by the end of FY2011 whether to proceed toward construction of a demonstration plant. Secretary of Energy Steven Chu informed Congress on October 17, 2011, that DOE would not proceed with a demonstration plant design "at this time" but would continue research on the technology. Potential obstacles facing NGNP include low prices for natural gas, the major competing fuel, and private-sector unwillingness to share the project's costs as required by EPACT05. According to the DOE budget justification, some research activities now conducted under the NGNP program will be shifted to the Advanced Reactor Concepts subprogram in FY2014. Funding for the Advanced Reactor Concepts subprogram was increased to $60.0 million in the final appropriation—up from $31.0 million sought by the Administration and $21.7 million in FY2012. The increase would cover research on high-temperature gas reactors previously conducted under the NGNP Program. Reactor concepts being developed by the Advanced Reactor Concepts subprogram are generally classified as "Generation IV" reactors, as opposed to the existing fleet of commercial light water reactors, which are generally classified as generations II and III. Such advanced reactors "could dramatically improve nuclear power performance including sustainability, economics, and safety and proliferation resistance," according to the FY2014 justification. Nuclear technology development under this program includes "fast reactors," using high-energy neutrons, and reactors that would use a variety of heat-transfer fluids, such as liquid sodium and supercritical carbon dioxide. International research collaboration in this area would continue under the Generation IV International Forum (GIF). The House bill would have boosted Advanced Reactor Concepts funding to $45 million, with the increase focused on high-temperature gas reactor fuel development formerly conducted under the NGNP program. The Light Water Reactor Sustainability subprogram received $30.0 million, substantially higher than the $21.5 million requested by the Administration and the $24.8 million appropriated in FY2012. The program conducts research on extending the life of existing commercial light water reactors beyond 60 years, the maximum operating period currently licensed by the Nuclear Regulatory Commission. The program, which is to be cost-shared with the nuclear industry, is to study the aging of reactor materials and analyze safety margins of aging plants. Other research under this program is to focus on improving the efficiency of existing plants, through such measures as increasing plant capacity and upgrading instrumentation and control systems. Research on longer-life LWR fuel is aimed at eliminating radioactive leakage from nuclear fuel and increasing its accident tolerance, along with other "post-Fukushima lessons learned," according to the budget justification. The House had approved the Administration funding level, as had the Senate committee. Small Modular Reactors Rising cost estimates for large conventional nuclear reactors—widely projected to be $6 billion or more—have contributed to growing interest in proposals for small modular reactors (SMRs). Ranging from about 40 to 300 megawatts of electrical capacity, such reactors would be only a fraction of the size of current commercial reactors. Several modular reactors would be installed together to make up a power block with a single control room, under most concepts. Current SMR proposals would use a variety of technologies, including the high-temperature gas technology described above and the light water (LWR) technology used by today's commercial reactors. The FY2014 appropriation for DOE technical support for licensing small modular reactors is $110 million, 36% above the Administration request, which was about $3 million above the FY2013 funding level. The final funding level was the House-approved amount, while the Senate Appropriations Committee had endorsed the Administration request. This program has focused on LWR designs because they are believed most likely to be deployed in the near term, according to DOE. The FY2014 budget justification states that the SMR licensing and technical support program will last six years and cost DOE a total of $452 million. The program is similar to DOE's support for larger commercial reactor designs under the Nuclear Power 2010 Program, which ended in FY2010. DOE will provide support for design certification, standards, and licensing. As with the Nuclear Power 2010 Program, at least half the costs of the SMR design and licensing program are to be covered by industry partners, according to DOE. A consortium led by Babcock & Wilcox (B&W) was announced by DOE in November 2012 as the first award recipient under the program. DOE and the B&W consortium signed a cooperative agreement in April 2013 to implement the award, allowing for federal payments of around $226 million over five years to design and license a commercial demonstration plant that could open by 2022. A second cooperative agreement, for an innovative SMR design that could begin commercial operation around 2025, was awarded in December 2013 to NuScale Power for a 45 megawatt reactor. The FY2014 appropriation reserved $85 million for the B&W project, leaving $25 million for NuScale, which is still negotiating with DOE on the details of its cooperative agreement. An additional $23.0 million for FY2014 was appropriated to the Reactor Concepts program (described in the section above) for SMR advanced concepts R&D—$1.5 million below the FY2012 funding level and $3.0 million above the Administration request. Unlike the SMR licensing support program, which focuses on near-term technology, the SMR advanced concepts program would conduct research on technologies that might be deployed in the longer term, according to the budget justification. The House had approved the Administration funding level, as had the Senate panel. Small modular reactors would go against the overall trend in nuclear power technology toward ever-larger reactors intended to spread construction costs over a greater output of electricity. Proponents of small reactors contend that they would be economically viable despite their far lower electrical output because modules could be assembled in factories and shipped to plant sites, with minimal on-site fabrication, and because their smaller size would allow for simpler safety systems. In addition, although modular plants might have similar or higher costs per kilowatt-hour than conventional large reactors, their ability to be constructed in smaller increments could reduce the financial commitment and risk of building them. Fuel Cycle Research and Development The Fuel Cycle Research and Development Program conducts "long-term, science-based" research on a wide variety of technologies for improving the management of spent nuclear fuel, according to the DOE budget justification. The total FY2014 appropriation for this program is $186.5 million, $21.4 million above the Administration request and $11.3 million above the FY2013 appropriation. The House bill would have provided $91.1 million, while the Senate Appropriations Committee had recommended $175.1 million. The range of fuel cycle technologies being studied by the program includes direct disposal of spent fuel (the "once through" cycle) and partial and full recycling, according to the FY2014 budget justification. The Fuel Cycle R&D Program "will research and develop a suite of technology options that will enable future decision-makers to make informed decisions about how best to manage nuclear waste and used fuel from reactors," the budget justification says. Much of the Administration's planned research on spent fuel management options would address the near-term recommendations of the Blue Ribbon Commission on America's Nuclear Future, which issued its final report on January 26, 2012. The commission was chartered to develop alternatives to the planned Yucca Mountain, NV, spent fuel repository, which President Obama wants to terminate. DOE released its Strategy for the Management and Disposal of Used Nuclear Fuel and High-Level Radioactive Waste in January 2013 in response to the Blue Ribbon Commission report. Funding to begin implementing the strategy is included in the Used Nuclear Fuel Disposition subprogram, with a request of $60.0 million, $2.1 million above the FY2012 funding level. Activities in that area include developing plans for a "consent-based siting process" for nuclear storage and disposal facilities, waste transportation analyses, and research on potential waste repositories, including salt caverns and deep boreholes. (See the " Nuclear Waste Disposal " section, below, for more details.) Other major research areas in the Fuel Cycle R&D Program include the development of advanced fuels, including accident-tolerant fuels for existing commercial reactors, evaluation of fuel cycle options, development of improved technologies to prevent diversion of nuclear materials for weapons, and technology to increase nuclear fuel resources, such as uranium extraction from seawater. The final appropriation includes $60.0 million for accident-tolerant fuels, including $3.0 million for promising and innovative research. The Administration had requested $37.1 million for the Advanced Fuels subprogram. Nuclear Energy Enabling Technologies The Nuclear Energy Enabling Technologies (NEET) program "is designed to conduct research and development (R&D) in crosscutting technologies that directly support and enable the development of new and advanced reactor designs and fuel cycle technologies," according to the FY2014 DOE budget justification. The final appropriation for this program is $71.1 million, $8.8 million above the Administration request and $2.8 million below FY2013 level. The House bill had included $66.7 million for the program, while the Senate Appropriations Committee had approved the level sought by the Administration. The Joint Explanatory Statement for P.L. 113-76 does not specify funding levels for the functions in the NEET program. These include Crosscutting Technology Development, for which $13.9 million was requested, Nuclear Energy Advanced Modeling and Simulation, which had a request of $9.5 million and a final appropriation of $13.4 million, and the Energy Innovation Hub for Modeling and Simulation (separate from the Nuclear Energy Advanced Modeling and Simulation subprogram), with an appropriation of $24.3 million, the same as the request. The Modeling and Simulation Hub is creating a computer model of an operating reactor to allow a better understanding of nuclear technology, with the benefits of such modeling extending to other energy technologies in the future, according to the budget justification. The FY2014 appropriation included $19.6 million for the National Scientific User Facility, $5.0 million above the request and $500,000 above the FY2012 appropriation. This Idaho National Laboratory activity supports partnerships by universities and other research organizations to conduct experiments "at facilities not normally accessible to these organizations," according to the justification. In addition to previously awarded projects, one new long-term project is expected to be fully funded in FY2014, under the budget request. Fossil Energy Research and Development41 For FY2014, the Obama Administration requested $420.6 million for the Fossil Energy Research and Development Program with the provision that it remain available until expended and that $115.753 million remain available until September 30, 2015, for program direction. The request represents a 17% decrease from the FY2013 Appropriation ( Table 10 ). The final appropriation ( P.L. 113-76 ) provided $562.1 million, 25% more than the Administration request, and almost 10% more than the FY2013 appropriation. The Obama Administration proposed a new budget structure for the FY2012 Fossil Energy Research and Development (FE R&D) program that emphasized coal with a focus on carbon capture and storage (CCS) technologies. The FY2012 appropriations bill adopted the new structure. The CCS program intends to demonstrate advanced clean coal technologies on a commercial-project scale, and build and operate near-zero atmospheric emissions power plants that capture and store carbon dioxide (CO 2 ). A Carbon Capture sub-program focuses on separating CO 2 in both pre-combustion, post-combustion, and oxy-combustion systems, as well as direct carbon capture. The Carbon Storage sub-program focuses on long-term geologic storage of CO 2 , including small- and large-scale CO 2 injection tests. An Advanced Energy Systems sub-program focuses on improving the efficiency of coal-based power systems to capture CO 2 . The Advanced Energy Systems sub-program focuses on improving the efficiency of coal-based power systems, enabling affordable CO 2 capture, increasing plant availability, and maintaining the highest environmental standards. The Cross-Cutting Research activity serves as a bridge between basic and applied research by fostering the development and deployment of innovative systems. For FY2014, the final version appropriates more than both the Senate and the House bills would have provided for FE R&D. The act directs DOE to use $8.5 million in prior-year balances, slightly less than proposed in the budget request. The omnibus act breaks out: $392.3 million for Coal with $92.0 million applied to Carbon Capture (under which no funding shall be applied to a Natural Gas Capture Prize) and $108.9 million applied to Carbon Storage (to include $10.0 million for additional support of Enhanced Oil Recovery). Carbon Storage also includes $57 million for the Regional Carbon Sequestration Partnerships. $99.5 million for Advanced Energy Systems, with not less than $25.0 million applied to solid oxide fuel cell systems, $5.0 million to coal-biomass to liquids activities, and $8.0 million to continue activities improving advanced air separation technologies. $41.9 million for Cross Cutting Research, with $5.0 million applied to Advanced Ultra Super Critical Program. $50.0 million for NETL Coal Research and Development with $15 million applied to research in recovering rare earth elements from coal. $120.0 million for Program Direction. $20.6 million for Natural Gas Technologies, with $8.0 million for research into the cost-effective and responsible extraction of methane hydrates, $12.6 million applied to collaborative research and development regarding hydraulic fracturing, of which $2.2 million is for continuing the Risk Based Data Management System. Of the $12.6 million for hydraulic fracturing research and development, not more than $6 million would be made available for the joint research effort with the Environmental Protection Agency and U.S. Geological Survey until the Department submits a finalized interagency research plan to the House and Senate Appropriations Committees. $15 million for Unconventional Fossil Energy Technologies, of which $10 million would be available for improving the economic viability, safety, and environmental responsibility for offshore exploration and production, for exploration and production from unconventional natural gas and other petroleum resources, and production by small producers. Strategic Petroleum Reserve42 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. The SPR provides strategic and economic security against foreign and domestic disruptions in U.S. oil supplies via an emergency stockpile of crude oil. The program fulfills U.S. obligations under the International Energy Program, which avails the United States of International Energy Agency (IEA) assistance through its coordinated energy emergency response plans, and provides a deterrent against energy supply disruptions. By early 2010, the SPR's maximum capacity reached 727 million barrels. The federal government has not purchased oil for the SPR since 1994. Beginning in 2000, additions to the SPR were made with royalty-in-kind (RIK) oil acquired by the Department of Energy in lieu of cash royalties paid on production from federal offshore leases. In September 2009, the Secretary of the Interior announced a transitional phasing out of the RIK Program. In the summer of 2011, the President ordered an SPR sale in coordination with an International Energy Administration sale under treaty obligation. The U.S. sale of 30.6 million barrels reduced the SPR inventory to 695.9 million barrels. The Bipartisan Budget Act of 2013 (P.L. 113-67) rescinded all available funds in the "SPR Petroleum Account," and permanently repealed the federal government's authority to accept oil through royalty-in-kind. The Consolidated Appropriations Act of 2014 ( P.L. 113-76 ) prohibited the waiver of the navigation and vessel-inspection under the Jones Act (46 U.S.C. 501(b)) for transporting crude oil distributed from the SPR until the Secretary of Homeland Security takes adequate measures to ensure the use of United States flag vessels. For FY2014, the Administration requested $189.4 million to operate the SPR, a decrease from the $192.7 million enacted in for FY2012. The Consolidated Appropriations Act of 2014 makes $189.4 million available until expended. Science45 The DOE Office of Science conducts basic research in six program areas: advanced scientific computing research, basic energy sciences, biological and environmental research, fusion energy sciences, high-energy physics, and nuclear physics. Through these programs, DOE is the third-largest federal funder of basic research and the largest federal funder of research in the physical sciences. Table 11 includes the FY2013 current plan, FY2014 request, House and Senate appropriations committee recommendations, and enacted FY2014 funding for Office of Science accounts. The Consolidated Appropriations Act, 2014 ( P.L. 113-76 ) provides $5.071 billion to the Office of Science in FY2014. This amount represents an increase of 8.3% ($390 million) over the FY2013 current plan amount of $4.681 billion. The Obama Administration initially sought $5.153 billion for the Office of Science in FY2014. The Senate Committee on Appropriations would have provided the requested amount. As passed by the House in July 2013, H.R. 2609 (Energy and Water Development and Related Agencies Appropriations Act, 2014) would have provided $4.653 billion to the Office of Science. A Joint Explanatory Statement (JES)—published in the January 15, 2014, Congressional Record —accompanied P.L. 113-76 . Unless otherwise noted therein, the JES adopts DOE provisions from both House and Senate appropriations committee reports. H.Rept. 113-135 , which accompanied H.R. 2609 , raised general concerns about the percentage of Office of Science funding that is committed to ongoing projects each year. The House report and bill included language designed to limit this practice. P.L. 113-76 includes a provision stating that no FY2014 Office of Science funding may be used for a multiyear contract, grant, cooperative agreement, or Other Transaction Agreement of $1,000,000 or less unless the contract, grant, cooperative agreement, or Other Transaction Agreement is funded for the full period of performance as anticipated at the time of award. Since FY2006, overall increases in the Office of Science budget have been at least partially driven by the "doubling path" policy. Under this policy, Congress and successive Administrations sought to double the combined funding for the Office of Science, the National Science Foundation, and the National Institute of Standards and Technology's core laboratory and construction accounts (collectively "the targeted accounts"). However, actual funding for the targeted accounts has not typically reached annual authorized levels. The current authorization ended in FY2013. It is unclear whether policymakers will continue the doubling path policy in FY2014. Basic Energy Sciences FY2014 funding for the largest Office of Science program, Basic Energy Sciences (BES), is $1.713 billion. This amount is $162 million (10.4%) more than the FY2013 current plan funding level of $1.551 million. The Administration initially sought $1.862 billion for BES in FY2014. Most of the requested BES increase would have funded scientific user facilities (59%) and Energy Frontier Research Centers (EFRC)/Energy Innovation Hubs (32%). The request for scientific user facilities included, among other things, increased operations funding for Synchrotron Radiation Light Sources, High-Flux Neutron Sources, and Nanoscale Science Research Centers. As requested, construction funding for the LINAC Coherent Light Source-II (LCLS-II) would have increased by $65 million, and funding for the National Synchrotron Light Source-II (NSLS-II) would have decreased by $125 million (compared to FY2012 funding levels). DOE indicated that it would issue a solicitation for new and existing EFRCs in FY2014. The House would have provided $1.583 billion for BES in FY2014. The Senate Committee on Appropriations recommended $1.805 billion. Both House and Senate appropriations committees recommended the requested level ($24 million each) for the Fuels from Sunlight and Battery and Energy Storage Energy Innovation Hubs. The committees differed on funding for the Experimental Program to Stimulate Competitive Research (EPSCoR)—which the Senate committee would have funded ($20 million) and the House committee would have not—and on funding for EFRCs. The Senate report recommended $100 million for EFRCs in FY2014. The House would have provided $60 million. Neither committee appeared to provide requested one-time funds for EFRCs. The House report cautioned the department against assuming BES budget growth in future years and provided funding for certain BES activities, including the NSLS-II Experimental Tools ($25 million) as well as an unspecified amount for the first year of funding for the LCLS-II two-tunnel upgrade. The JES provides the requested amount ($24 million) for the Fuels from Sunlight and Battery and Energy Storage Energy Innovation Hubs, $10 million for EPSCoR, and up to $100 million for EFRCs. It also provides $45 million for major items of equipment, $20 for the Advanced Photon Source Upgrade, and $25 million for NSLS-II Experimental Tools. For facilities, the JES contains $779 million in funding for Synchrotron Radiation Light Sources, High-Flux Neutron Sources, and Nanoscale Science Research Centers, including $56 million for NSLS-II early operations and $10 million for LCLS-II. The JES also includes $76 million for LCLS-II construction funding, and expressly provides no direction regarding a novel free-electron laser array light source. Fusion Energy Sciences In percentage terms, the largest increase in the FY2014 Office of Science budget request was for the Fusion Energy Sciences (FES) program. The FY2014 request was for $458 million. Most of the requested increase would have funded facilities (as opposed to scientific research). The requested increase for FES facilities was driven by the request for the U.S. contribution to the International Thermonuclear Experimental Reactor (ITER). ITER is a fusion research facility currently under construction in France. The FY2014 request for the U.S. contribution to ITER was $225 million, an increase of $120 million over the FY2012 level. Funding for domestic fusion activities would have decreased under the request; including funding for the Alcator C-Mod tokamak, a fusion reactor that the Administration sought to shut down in FY2013. Policymakers and fusion researchers have long been concerned about the impact of ITER's funding needs on the availability of resources for the domestic fusion program. Enacted funding for FES in FY2014 is $506 million. This amount is $128 million (33.9%) more than the FY2013 current plan funding level of $378 million and equal to the House-passed funding level. The Senate Committee on Appropriations recommended $458 million, the requested level, for FES in FY2014. The House sought to include $22 million for the Alcator C-Mod; the Senate report specifically excluded funding for this project. The Senate report recommended $75 million for the Princeton Plasma Physics Laboratory, $77 million for the DIII-D fusion reactor, $15 million for High Energy Density Laboratory Plasmas, and $12 million for the Fusion Simulation program. With respect to ITER, both the House and Senate appropriations committee reports included language seeking an updated project baseline and cost schedule for ITER. The Senate report further stated that funds would not be available for the U.S. contribution to ITER until the DOE submits these materials. The House would have provided $218 million for ITER in FY2014; the Senate Committee on Appropriations recommended $184 million. Both appropriations committees directed DOE to submit a 10-year plan for the FES program. The JES provides $306 million for the domestic fusion program, including $63 million for the National Spherical Torus experiment, $75 million for DIII-D, and $22 million for the Alcator C-Mod. The agreement also provides smaller amounts for various other FES activities, including $8.5 million for High Energy Density Laboratory Plasmas. The JES does not specify a funding level for a Fusion Simulation program; rather, it directs DOE to submit a plan with research goals and resource needs for a Fusion Simulation program. The JES includes $200 million for ITER. However, provisions in P.L. 113-76 limit U.S. cash contributions to ITER to $23 million until the project's governing board adopts the recommendations of the Third Biennial International Organizations Management Assessment Report. High Energy Physics P.L. 113-76 includes $798 million—or $70 million (9.6%) more than the FY2013 current plan level—in funding for the Office of Science's High Energy Physics (HEP) program in FY2014. The Administration initially sought $777 million for this program. DOE restructured the HEP budget request in FY2014. According to the request, in FY2014 HEP sought to shift funding from research categories to support full operations of existing facilities and experiments, the planned construction funding profile of the Muon to Electron Conversion Experiment (Mu2e), and fabrication of an experiment to measure the muon anomalous magnetic moment. Funding was also requested to support the Large Synoptic Survey Telescope camera—a joint activity with the National Science Foundation—and U.S. contributions to the upgrade of the Belle detector in Japan. The House would have provided $773 million for HEP in FY2014. The Senate Committee on Appropriations recommended $807 million. Both committees recommended $35 million for Mu2e. The House would have included $8 million for Long Baseline Neutrino Experiment (LBNE) project engineering and design, but would have excluded funding for long-lead procurement and construction. The Senate report recommended $20 million for LBNE project engineering and design as well as $10 million for research and development. The JES provides $15 million to support sustaining operations at the Homestake Mine in South Dakota, $10 million for Accelerators Stewardship, and $26 million for the LBNE (including research and development, as well as project engineering and design). The JES expressly provides no funds for long-lead procurements or construction activities for the LBNE project. Biological and Environmental Research FY2014 funding for Biological and Environmental Research (BER) is $610 million—or $50 million (8.8%) more than the FY2013 current plan funding level of $561 million. The Administration initially sought $625 million for BER in FY2014. About two-thirds of the Administration's requested increase for BER would have gone to Foundational Genomics Research (40%), Terrestrial Ecosystem Science (15%), and the Atmospheric Radiation Measurement Climate Research Facility (10%). The FY2014 budget request sought to reduce funding in Radiological Sciences and to establish a new Mesoscale to Molecules program. Other Biological Systems Science programs were generally near FY2012 levels. The Administration sought a 7% reduction from the FY2012 level for the Environmental Molecular Science Laboratory funding. Most other Climate and Environmental Sciences programs were near FY2012 levels. The House would have reduced BER funding (compared to the FY2013 current plan) by $67 million in FY2014. The Senate Committee on Appropriations recommended the requested level. The House report expressed support for biomass research and recommended the requested level ($75 million) for BioEnergy Research Centers. Among other things, the Senate report recommended the requested levels of $321 million and $304 million, respectively, for Biological Systems Science and Climate and Environmental Sciences. The JES provides $75 million for BioEnergy Research Centers, $5 million for nuclear medicine research with human applications, and $500,000 for the DOE to engage universities more directly in climate analysis. Nuclear Physics Nuclear Physics (NP) is funded at $570 million in FY2014. This amount is $63 million (12.4%) more than the FY2013 current plan funding level and equal to the Administration's request. The request directed most of the increase in Nuclear Physics program funding to Medium Energy Nuclear Physics (MENP) operations and the Facility for Rare Isotope Beams at Michigan State University (FRIB). The FY2014 budget request for MENP included funding for, among other things, initiation of beam development and commissioning activities at the Continuous Electron Beam Accelerator Facility (CEBAF). The request indicated that these increases in CEBAF operations funding were at least partially offset by planned construction funding decreases for the 12GeV CEBAF Upgrade. Funding increases for the FRIB were to support the continuation of planned construction activities and major procurements. The House would have provided $552 million to NP in FY2014. The Senate Committee on Appropriations recommended the requested level. Both committee reports recommended $55 million for FRIB construction, $26 million in construction funds for the 12 GeV CEBAF Upgrade, and $165 million to support approximately 22 weeks of operations for the Relativistic Heavy Ion Collider (RHIC). (These amounts were equal to requested levels for these activities.) Additionally, the Senate report recommended $17 million for the Argonne Tandem Linac Accelerator System. The JES provides $165 million for Relativistic Heavy Ion Collider operations, for a 22-week run time, and provides $55 million in funding for FIRB. Advanced Scientific Computing Research FY2014 funding for Advanced Scientific Computing Research (ASCR) is $479 million, an increase of $74 million (18.2%) over the FY2013 current plan funding level of $405 million. The Administration's FY2014 ASCR request was $466 million. The Administration sought increased funding for most ASCR programs. Two ASCR programs—Leadership Computing Facilities and High Performance Network Facilities and Testbeds (ESNet)—would have received decreases. The House would have provided $432 million to ASCR in FY2014. The Senate Committee on Appropriations recommended $494 million. Almost half of the increase over requested levels ($12.5 million) in the Senate report was driven by increased funding for exascale computing. The Senate report recommended a total of $150 million, $81 million of which would have come from the ACSR account, for exascale computing in FY2014. The House would have provided $69 million in ACSR funding for exascale computing (the requested level) in FY2014. For Leadership Computing Facilities the House would have provided $149 million (slightly more than the request) while the Senate report recommended $160 million, or $13 million more than the request. The Senate report recommended $66 million, equal to the request, for High Performance Production Computing. The House would have provided $62 million. The House would also have provided the requested level ($33 million) for ESNet. The Senate report recommended $6 million for the Computational Science Graduate Fellowship (CSGF), which the Administration had proposed terminating and funding through the National Science Foundation instead. The House implicitly accepted the termination of the CSGF program. The JES provides $93 million for the Oak Ridge Leadership Computing Facility, $67 million for the Argonne Leadership Computing Facility, $66 million for the National Energy Research Scientific Computing Center at Lawrence Berkeley National Laboratory, $33 for the Energy Sciences Network, and not less than $76 million for the exascale initiative. The JES funds the CSGF under the Office of Science's Workforce Development for Teachers and Scientists program. ARPA-E59 The Advanced Research Projects Agency–Energy (ARPA-E) was authorized by the America COMPETES Act ( P.L. 110-69 ) to support transformational energy technology research projects. It received its first funding in FY2009, mostly through the American Recovery and Reinvestment Act of 2009 ( P.L. 111-5 ), and announced its first round of contract awards in October 2009. DOE budget documents describe ARPA-E's mission as overcoming long-term, high-risk technological barriers to the development of energy technologies. The FY2014 request for ARPA-E was $379 million, an increase of $128 million over the FY2013 current plan funding level. As in FY2013, the FY2014 ARPA-E request included two research thrust areas: Transportation Systems ($197 million requested) and Stationary Power Systems ($148 million requested). The Consolidated Appropriations Act, 2014 ( P.L. 113-76 ) provided $280 million to ARPA-E in FY2014. This amount is $29 million (11.7%) more that the FY2013 current plan funding level. As amended on the floor of the House, H.R. 2609 (Energy and Water Development and Related Agencies Appropriations Act, 2014) would have provided $70 million to ARPA-E in FY2014. As reported by the Senate Appropriations committee, S. 1245 (Energy and Water Development and Related Agencies Appropriations Act, 2014) would have provided $379 million to the energy research program. S.Rept. 113-47 directed ARPA-E to evaluate the success of the first set of projects and report to the Appropriations Committee on the findings of the evaluation. Nuclear Waste Disposal61 The final FY2014 appropriation includes no funding for DOE's Office of Civilian Radioactive Waste Management (OCRWM), which was established by the Nuclear Waste Policy Act of 1982 (NWPA, 42 U.S.C. 10101 et seq.) to dispose of highly radioactive waste from nuclear power plants and defense facilities. OCRWM had been developing a permanent nuclear waste repository at Yucca Mountain, NV, as specified by an NWPA amendment in 1987. Funding for OCWRM ended after FY2010, so the office has been closed and activities at the Yucca Mountain site halted. No funding was requested for FY2014. The Obama Administration "has determined that developing the Yucca Mountain repository is not a workable option and the Nation needs a different solution for nuclear waste disposal," according to the DOE FY2011 budget justification. To develop alternative waste management strategies, the Administration established the Blue Ribbon Commission on America's Nuclear Future, which issued its final report to the Secretary of Energy on January 26, 2012. The Blue Ribbon Commission recommended that future efforts to develop nuclear waste facilities follow a "consent based" approach and be carried out by a new organization, rather than DOE. The commission said the new nuclear waste entity should have "assured access" to the Nuclear Waste Fund, which holds fees collected from nuclear power plant operators to pay for waste disposal. Under NWPA, those funds cannot be spent without congressional appropriations. DOE released its Strategy for the Management and Disposal of Used Nuclear Fuel and High-Level Radioactive Waste in January 2013 in response to the Blue Ribbon Commission report. The strategy calls for a pilot interim storage facility for spent fuel from closed nuclear reactors to open by 2021 and a larger storage facility, possibly at the same site, to open by 2025. A site for a permanent underground waste repository would be selected by 2026, and the repository would open by 2048. Storage and disposal sites would be selected by a new waste management organization through a consent-based process, as recommended by the Blue Ribbon Commission. With the dismantlement of OCRWM, DOE's Office of Nuclear Energy (NE) was given the responsibility to "lead all future waste management activities," according to the FY2011 budget justification. NE's Fuel Cycle R&D Program (discussed in the Nuclear Energy section above) includes funding under the Used Nuclear Fuel Disposition subprogram to begin implementing the DOE waste management strategy. DOE requested $60.0 million for the Used Fuel subprogram in FY2014, $2.1 million above the FY2012 funding level. The final appropriation increased the Fuel Cycle R&D program by $21.4 million over the request but did not specify an amount for the Used Fuel subprogram. The House Appropriations Committee had excoriated the Obama Administration's termination of the Yucca Mountain project as "blatant political maneuverings." The House bill would have eliminated DOE's $60 million request to implement its new nuclear waste policy and added $25 million for Yucca Mountain. It would also have authorized funding from the Nuclear Waste Fund to be transferred to the Nuclear Regulatory Commission for Yucca Mountain licensing. The Senate Appropriations Committee had approved the Administration's proposed funding level for Used Fuel without mentioning Yucca Mountain. The committee had included a provision from its FY2013 Energy and Water bill that would have authorized DOE to conduct a pilot program to develop one or more high level radioactive waste storage facilities, with the consent of state, local, and tribal governments. However, that provision was not included in the final FY2014 bill. The FY2014 budget request included a proposal to change the nuclear waste funding system along the lines proposed by the Blue Ribbon Commission. Discretionary funding (annual appropriations by Congress) would continue to pay for "regular and recurring" expenses of the nuclear waste program. In the past, discretionary appropriations for the program have come from both the Nuclear Waste Fund, to pay for disposal of commercial reactor waste, and from the General Fund, to pay for defense waste disposal. Beginning in FY2017, under the Administration proposal, the discretionary appropriations would be supplemented by mandatory appropriations, first from incoming nuclear waste fee revenues and eventually from past fees and interest that have accumulated in the Waste Fund. If Congress enacted such mandatory appropriations, the specified funding would be automatically provided to the waste program without the need for annual congressional approval. None of the House, Senate, or final bills included the proposed change. DOE had filed a license application with the Nuclear Regulatory Commission (NRC) for the proposed Yucca Mountain repository in June 2008 but filed a motion to withdraw the application on March 3, 2010. An NRC licensing panel rejected DOE's withdrawal motion June 29, 2010, on the grounds that NWPA requires full consideration of the license application by NRC. The full NRC Commission deadlocked on the issue September 9, 2011, leaving the licensing panel's decision in place and prohibiting DOE from withdrawing the Yucca Mountain application. However, the commission ordered at the same time that the licensing process be halted because of "budgetary limitations." No funding was provided in FY2012 or FY2013 or requested for FY2014 to continue Yucca Mountain licensing activities. However, the U.S. Court of Appeals for the District of Columbia Circuit ruled on August 13, 2013, that NRC must continue work on the Yucca Mountain license application as long as funding is available. The Court determined that NRC has at least $11.1 million in previously appropriated funds for that purpose. 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 would eventually exceed $20 billion if DOE were to begin removing waste from reactor sites by 2020, the previous target for opening Yucca Mountain. (For more information, see CRS Report R42513, U.S. Spent Nuclear Fuel Storage , by [author name scrubbed]; CRS Report RL33461, Civilian Nuclear Waste Disposal , by [author name scrubbed]; and CRS Report R40996, Contract Liability Arising from the Nuclear Waste Policy Act (NWPA) of 1982 , by [author name scrubbed].) Loan Guarantees and Direct Loans67 DOE's Loan Programs Office provides loan guarantees for projects that deploy specified energy technologies, as authorized by Title XVII of the Energy Policy Act of 2005 (EPACT05, P.L. 109-58 ), and direct loans for advanced vehicle manufacturing technologies. No funding for additional loans and loan guarantees was requested or provided for FY2014. However, $42 million was appropriated for loan guarantee administrative expenses, $6 million below the Administration request, to be offset by $22 million in fees. An additional $6 million, with no offsets, was appropriated to the vehicle manufacturing loan program, the same as requested. Two major loan guarantee programs are currently administered by the DOE Loan Programs Office: Section 1703 innovative clean energy technology loan guarantees . Loan guarantees are provided for "new or significantly improved technologies," as compared to existing commercial technologies, that "avoid, reduce, or sequester" air pollutants and greenhouse gas emissions. Eligible technology categories include renewable energy, advanced fossil energy, advanced nuclear energy, energy efficiency, and pollution control. Section 1705 renewable energy, electric transmission, and advanced biofuels loan guarantees . Established by Section 406 of the American Recovery and Reinvestment Act (ARRA, P.L. P.L. 111-5 ), the Section 1705 program was designed as a temporary economic stimulus measure available through the end of FY2011. Unlike the Section 1703 program, which is limited to innovative technologies, loan guarantees are available to already-commercialized renewable energy and electric transmission technologies. Title XVII allows DOE to provide loan guarantees for up to 80% of construction costs for eligible energy projects. Under such loan guarantee agreements, the federal government would repay all covered loans if the borrower defaulted. This would reduce the risk to lenders and allow them to provide financing at below-market interest rates. DOE currently has two conditional loan guarantee commitments pending under Section 1703, totaling $10.33 billion for nuclear power and nuclear fuel projects. Under Section 1705, final loan guarantees have been issued for 24 projects, totaling about $14.4 billion. DOE's first loan guarantee under Section 1705 was issued in September 2009 to Solyndra Inc., a manufacturer of photovoltaic equipment. Solyndra's bankruptcy announcement on August 31, 2011, prompted strong congressional criticism of the Administration's management of the loan guarantee program. Solyndra's DOE loan guarantee totaled $535 million, and the company's bankruptcy placed most or all of that amount at risk. (For details, see CRS Report R42058, Market Dynamics That May Have Contributed to Solyndra's Bankruptcy , by [author name scrubbed].) Subsidy Costs Title XVII requires the estimated future government costs resulting from defaults on guaranteed loans to be covered up-front by appropriations or by payments from project sponsors (borrowers). These "subsidy costs" are calculated as the present value of the average possible future net costs to the government for each loan guarantee, on a case-by-case basis. If those calculations are accurate, the subsidy cost payments for all the guaranteed projects together should cover the future costs of the program. However, the Congressional Budget Office has predicted that the up-front subsidy cost payments will prove too low by at least 1% and is scoring bills accordingly. As a result, appropriations bills that provide loan guarantee authorizations include an adjustment totaling 1% of the loan guarantee ceiling. Subsidy costs for Section 1703 loan guarantees must usually be paid by project sponsors, because no appropriations for that program were provided before FY2011 (as described below). However, ARRA appropriated $6 billion to cover the subsidy costs of Section 1705 loan guarantees, so subsidy cost payments were not required from project sponsors under that program. However, $2 billion of the Section 1705 subsidy cost appropriation was subsequently transferred to the "cash for clunkers" automobile trade-in program by P.L. 111-47 , and another $1.5 billion was rescinded to help pay for the Education Jobs and Medicaid Assistance Act ( P.L. 111-226 ), leaving $2.5 billion. Of the $2.5 billion available for subsidy costs, $1.9 billion was obligated by the end of FY2011. Authorized Loan Guarantee Amounts Under the Federal Credit Reform Act (FCRA), federal loan guarantees cannot be provided without an authorized level in an appropriations act or an appropriation for the subsidy costs. Pursuant to FCRA, the FY2007 continuing resolution ( P.L. 110-5 ) established an initial cap of $4 billion on loan guarantees under the Section 1703 program, without allocating that amount among the various eligible technologies. Additional loan guarantee authority was subsequently provided for specific technologies and then further modified as described below. Unobligated appropriations for subsidy cost payments under the Section 1705 loan guarantee program were no longer available after FY2011, as noted above. However, the FY2011 Continuing Appropriations Act provided $170 million, with no expiration, to pay subsidy costs for renewable energy and efficiency projects under the Section 1703 program. The act also provided authority for up to $1.183 billion in loan guarantees for those renewable energy and efficiency projects, in addition to the $32.8 billion in Section 1703 authority remaining from earlier appropriations acts for all technologies. The additional loan guarantee authority and subsidy cost appropriation provided by the FY2011 Continuing Appropriations Act is available to projects that applied under the expiring Section 1705 before February 24, 2011. Following is a summary of the various elements of the current DOE loan guarantee program, as modified by the FY2011 Continuing Appropriations Act (CR): $8.3 billion ceiling in CR on non-nuclear technologies under Section 1703, reduced from ceilings set in FY2009. $2 billion for unspecified projects from FY2007 under Section 1703, not affected by CR. $18.5 billion ceiling for nuclear power plants ($8.3 billion conditionally committed). $4 billion allocated for loan guarantees for uranium enrichment plants ($2 billion conditionally committed). $1.183 billion ceiling for renewable energy and energy efficiency projects under Section 1703, in addition to other ceiling amounts, which can include pending applications under Section 1705. An appropriation of $170 million for subsidy costs for renewable energy and energy efficiency loan guarantees under Section 1703. If the subsidy costs averaged 10% of the loan guarantees, this funding could support loan guarantees totaling $1.7 billion. $2.5 billion for Section 1705 subsidy costs appropriated by ARRA. As noted above, about $1.9 billion of this funding was used to pay the subsidy costs for $14 billion in loan guarantees with final commitments under Section 1705, for which the deadline was September 30, 2011. Therefore, the remainder is not currently available to the program. Advanced Technology Vehicle Manufacturing Loans DOE also administers the Advanced Technology Vehicles Manufacturing (ATVM) Loan Program established by the Energy Independence and Security Act of 2007 ( P.L. 110-140 ). The FY2009 Continuing Resolution appropriated $7.5 billion to allow DOE to issue up to $25 billion in direct loans. The program was designed to provide loans to eligible automobile manufacturers and parts suppliers for making investments in their plant capacity to produce vehicles with improved fuel economy. Along with the EPACT loan guarantee programs, the ATVM Loan Program is administered by the DOE Loan Programs Office. DOE reports that five ATVM loans have been issued, totaling $8.4 billion. Nuclear Weapons Stockpile Stewardship75 Congress established the Stockpile Stewardship Program in the FY1994 National Defense Authorization Act ( P.L. 103-160 ). The goal of the program, as amended by the FY2010 National Defense Authorization Act ( P.L. 111-84 , §3111), is to ensure "that the nuclear weapons stockpile is safe, secure, and reliable without the use of underground nuclear weapons testing." 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). Stockpile stewardship consists of all activities in NNSA's Weapons Activities account, as described below. Table 12 presents Weapons Activities funding. NNSA manages two programs outside of that account: Defense Nuclear Nonproliferation, discussed later in this report, and Naval Reactors. Most stewardship activities take place at the nuclear weapons complex (the "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 National Security Complex, TN); and the Nevada National Security Site (formerly Nevada Test Site). NNSA manages and sets policy for the complex; contractors to NNSA operate the eight sites. NNSA proposed many changes to the budget structure for FY2014. It would create an Office of Infrastructure and Operations to be the landlord of the nuclear weapons complex sites, with program offices as tenants. As a result, NNSA proposed to eliminate Readiness in Technical Base and Facilities (RTBF) and split its functions between a greatly increased Site Stewardship program and a new Nuclear Programs, as described below. P.L. 113-76 retained RTBF, kept Site Stewardship at a level close to that of FY2013, and did not fund Nuclear Programs. NNSA also proposed moving Nuclear Counterterrorism Incident Response and National Security Applications to Defense Nuclear Nonproliferation, an appropriations account separate from Weapons Activities. P.L. 113-76 retained the former in Weapons Activities and made no mention of the latter. P.L. 113-76 also moved Domestic Uranium Enrichment Research, Development, and Demonstration from Defense Nuclear Nonproliferation to Weapons Activities. Nuclear Weapons Complex Reconfiguration Although the nuclear weapons complex currently consists of eight sites, it was much larger during the Cold War in terms of number of sites and personnel. Despite the post-Cold War reductions, many in Congress have for years wanted the complex to change further, in various ways: fewer personnel, greater efficiency, smaller footprint at each site, increased security, and the like. After numerous exchanges between DOE and the appropriating and authorizing committees, such issues still remain. According to a White House document of May 2010, the President provided Congress with a classified report (the "1251 report") required by the FY2010 National Defense Authorization Act, Section 1251, "on the comprehensive plan to: (1) maintain delivery platforms [that is, bombers, missiles, and submarines that deliver nuclear weapons]; (2) sustain a safe, secure, and reliable U.S. nuclear weapons stockpile; and (3) modernize the nuclear weapons complex." According to that document, "the Administration intends to invest $80 billion in the next decade to sustain and modernize the nuclear weapons complex." The Administration submitted a revised Section 1251 report in November 2010, projecting weapons stockpile and infrastructure costs for FY2011-FY2020 at between $85.4 billion and $86.2 billion. Its estimate for FY2013 was $7.9 billion. For FY2013, the Administration requested $7,577.3 million for Weapons Activities, less than the amount in the November 2010 1251 report. The request brought criticism from some Members, but the House and Senate Appropriations Committees recommended the amount requested. The Consolidated and Further Continuing Appropriations Act for FY2013 ( P.L. 113-6 ) funded Weapons Activities at a rate equivalent to an annual $7,577.3 million, the amount requested by the Administration for FY2013. However, the Budget Control Act of 2011 ( P.L. 112-25 ) mandated a sequester unless Congress took certain actions. Since Congress did not take those actions, the Office of Management and Budget calculated sequester amounts for programs, projects, and activities. The FY2013 amounts used in this section reflect both the sequester and an across-the-board rescission. They do not, however, include adjustments made during execution such as reprogrammings and international contributions. In contrast to the FY2013 request, the FY2014 request included out-year figures. As Table 13 shows, the projected Weapons Activities requests for FY2015-FY2018 are within 2% of the amounts projected in the November 2010 1251 report update. 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; conducting 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 through design, certification, manufacture, and replacement of components. An LEP for the B61 mods 7 and 11 bombs was completed in FY2009. (A "mod" is a modification or version of a bomb or warhead type.) An LEP for the W76 warhead for the Trident II submarine-launched ballistic missile is ongoing, as is an LEP for the B61 mod 12. The FY2013 appropriation was $218.3 million for the W76 LEP and $324.4 million for the B61 LEP. The FY2014 request for Life Extension Programs (which NNSA proposed renaming Life Extension Programs and Major Alterations) contained four elements. The request for the B61-12 LEP was $537.0 million to continue development engineering and ramp up system development testing. NNSA plans to make the first production unit in FY2019. The House Appropriations Committee recommended $560.7 million; the increase was to address a funding gap resulting from "efficiencies" in the program that NNSA did not specify. The Senate Appropriations Committee recommended $369.0 million. It expressed concern that the LEP option proposed "is not the lowest cost, lowest risk option that meets military requirements and replaces aging components before they affect weapon performance." P.L. 113-76 provided the requested amount. It also provided not more than $40.0 million for the B83 gravity bomb pending certification that that bomb "will be retired by fiscal year 2025 or as soon as confidence in the B61–12 stockpile is gained." NNSA requested $235.4 million for the W76-1 LEP. NNSA intends to complete W76-1 production by FY2019. The House Appropriations Committee recommended $248.5 million. The increase addressed several issues: "inadequately fund[ed] activities that are essential to meet production needs of the W76," a proposed reduction in the number of W76s, and estimated cost efficiencies that "are unlikely to be realized." The Senate Appropriations Committee recommended the requested amount. P.L. 113-76 provided $248.5 million, the House bill amount. NNSA requested $72.7 million for the W78/W88-1 LEP. The W78 is a warhead for land-based intercontinental ballistic missiles, while the W88 is a warhead for submarine-launched ballistic missiles. The LEP would produce a common interoperable warhead, i.e., one that could be used on both missiles. The House Appropriations Committee recommended $50.0 million. This amount would fund a study of W78 life extension and "permits continued consideration of an integrated warhead [i.e., the W78/W88-1], but only as part of a continued study of alternatives." The Senate Appropriations Committee recommended the requested amount. It expressed concern about the cost for the LEP, which NNSA projects at $14 billion, and directed NNSA not to preclude a separate LEP for the W78. P.L. 113-76 provided $38.0 million "to continue to study options to extend the life of the W78" and made no mention of the interoperable warhead. NNSA requested $169.5 million for the W88 Alteration (Alt) 370, which includes development engineering to support replacement of the arming, fusing, and firing system and other components, with a first production unit in FY2019. The House and Senate Appropriations Committees recommended the requested amount, which P.L. 113-76 provided. Stockpile Systems. This program involves routine maintenance, replacement of limited-life components, surveillance, assessment, and the like for all weapon types in the stockpile. The FY2013 appropriation was $518.8 million. For 2014, the W78/W88 study and the Alt 370 advanced sufficiently to move to Life Extension Programs. As a result, Stockpile Systems funding requested declined to $454.5 million for FY2014. The House Appropriations Committee recommended the requested amount. The Senate Appropriations Committee recommended $282.8 million. It provided a lump sum rather than a weapon-by-weapon amount, and moved funds requested under Stockpile Systems for warhead surveillance to a new Surveillance budget line, for which it recommended $234.6 million. The FY2014 appropriation retained the Stockpile Systems category and provided specified amounts for each weapon type, totaling $454.5 million. Weapons Dismantlement and Disposition (WDD). The number of warheads has fallen sharply since the end of the Cold War, and continues to decline. WDD involves interim storage of warheads to be dismantled; dismantlement; and disposition (i.e., storing or eliminating warhead components and materials). The FY2013 appropriation was $40.7 million, and the FY2014 request is $49.3 million. The House Appropriations Committee recommended $55.3 million, and stated, "NNSA continues to cut funding for dismantlement, despite a clear requirement to continue to dismantle warheads, sustain production line capacity, and harvest materials for recycling to meet stockpile needs." The Senate Appropriations Committee recommended $56.0 million, with the increase to be used to "reduce the backlog in dispositioning nuclear components from dismantled nuclear warheads." The FY2014 appropriation was $54.3 million. Stockpile Services. This category includes Production Support; R&D Support; R&D Certification and Safety; Management, Technology, and Production; and Plutonium Infrastructure Sustainment. NNSA states, "Stockpile Services provides the foundation for the production capability and capacity within the nuclear security enterprise. All enduring systems, LEPs, and dismantlements rely on Stockpile Services to provide the base development, production and logistics capability needed to meet program requirements. In addition, Stockpile Services funds research, development and production activities that support two or more weapons-types, and work that is not identified or allocated to a specific weapon-type." The FY2013 appropriation was $844.3 million. The FY2014 request was $910.2 million. The House Appropriations Committee recommended $1,180.0 million, with reductions to large requested increases in certification on grounds that NNSA has not demonstrated the need for such increases, and increases due to inclusion in Stockpile Services of certain funds requested elsewhere in the budget. The Senate Appropriations Committee recommended $838.5 million and moved several programs into or out of Stockpile Services. The FY2014 appropriation was $940.3 million; among other things, it reduced funds for R&D Certification and Safety from $191.3 million requested to $151.1 million, and moved Tritium Readiness from the Readiness Campaign ($91.7 million requested) to Stockpile Services ($80.0 million appropriated). 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 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 FY2013 and FY2014 requests included five campaigns: Science Campaign. The FY2013 appropriation was $321.2 million; the FY2014 request was $397.9 million. Within this campaign, the largest increases went to (1) Advanced Certification, which among other things conducts experiments to help "select technologies for re-use of existing pits in LEP designs using Insensitive High Explosive (IHE)"; Primary Assessment Technologies, which among other things "address[es] plutonium aging and material compatibility issues associated with pit re-use"; and Dynamic Materials Properties, which among other things will conduct "increased experimental efforts on plutonium as a function of age in existing pits intended for reuse" because they "are required in order to enable upcoming LEPs without the need to build significant numbers of new pits." For FY2014, the House Appropriations Committee recommended the requested amount. The Senate Appropriations Committee recommended $374.7 million. P.L. 113-76 provided $369.7 million. The Explanatory Statement directed NNSA to commission a study of use of insensitive high explosives in all future LEPs. Engineering Campaign. This campaign "funds activities that assess and improve fielded nuclear and non-nuclear engineering components without further underground testing." For FY2013, $127.7 million was appropriated; the FY2014 request was $149.9 million. The House Appropriations Committee recommended the requested amount. The Senate Appropriations Committee recommended $90.0 million, and recommended moving certain funds from this campaign to a new Technology Maturation Campaign. P.L. 113-76 provided the requested amount and did not include a Technology Maturation Campaign. 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. NNSA states, "Virtually all of the energy from a nuclear weapon is generated while in the high energy density (HED) state. High-energy density physics (HEDP) experiments conducted at ICF facilities are required to validate the advanced theoretical models used to assess and certify the stockpile without nuclear testing. The National Ignition Facility (NIF) extends HEDP experiments to include access to thermonuclear burn conditions in the laboratory, a unique and unprecedented scientific achievement." The centerpiece of this campaign is NIF, the world's largest laser. While NIF was controversial in Congress for many years and had significant cost growth and technical problems, controversy waned as the program progressed. The facility was dedicated in May 2009. Between February 20, 2011, and March 20, 2011, NIF personnel conducted 34 "successful target shots … in support of HEDSS [High Energy Density Stockpile Stewardship]." In 2011, personnel conducted a total of 283 NIF shots of all types. However, as experiments proceeded, expectations that NIF would soon achieve fusion ignition faded. After several experiments with relatively low levels of released neutron energy, the House Appropriations Committee in its FY2012 report stated, "the considerable costs [for NIF] will not have been warranted if the only role the National Ignition Facility (NIF) serves is that of an expensive platform for routine high energy density physics experiments." The Senate Appropriations Committee expressed its concern over the prospects of NIF achieving ignition by the end of FY2012 and directed NNSA to establish an advisory committee on this and related topics. In August 2013 the Lawrence-Livermore National Laboratory announced an improved experiment at NIF that yielded three times the neutron energy previously recorded. For FY2013, the appropriation for this campaign was $446.7 million. The FY2014 request was $401.0 million. The largest decreases were for Diagnostics, Cryogenics, and Experimental Support, reflecting a reduction in facility operations, and for Facility Operations and Target Production, reflecting a reduction in shot rate at NIF and elimination of support for experiments by external users at NIF and a related facility. The House Appropriations Committee recommended $514.0 million. The increase resulted because NNSA had requested $113.0 million for NIF operations in another budget category (Site Stewardship); by moving those funds to this campaign, the committee "consolidates total funding for NIF facility operations within Campaigns." The Senate Appropriations Committee recommended $528.4 million, including moving $113.3 million for NIF operations from Site Stewardship to Facility Operations and Target Production. The FY2014 appropriation was $514.0 million; it increased funds for Facility Operations and Target Production by $112.9 million, from $232.7 million (requested) to $345.6 million. Advanced Simulation and Computing (ASC) Campaign. This campaign develops computation-based models of nuclear weapons that integrate data from other campaigns, past test data, laboratory experiments, and elsewhere to create what NNSA calls "the computational surrogate for nuclear testing to determine weapon behavior." In addition, "ASC plays an important role in supporting nonproliferation, emergency response, nuclear forensics and attribution activities." Some analysts doubt that simulation can be relied upon to provide the confidence needed to certify the safety, security, and reliability of warheads, and advocate a return to testing. The campaign includes funds for hardware and operations as well as for software. For FY2013, the appropriation was $545.8 million; the FY2014 request was $564.3 million. The House Appropriations Committee recommended the requested amount. The Senate Appropriations Committee recommended $600.6 million, of which $69.0 million would be used for the exascale initiative, which is intended to lead to more capable supercomputers. The FY2014 appropriation was $569.3 million, with at least $35.0 million of that sum to be used for the exascale initiative. Readiness Campaign. This campaign "operates the capability for producing tritium to maintain the national inventory needed for the nuclear weapons stockpile." The FY2013 appropriation was $115.3 million. The FY2014 request increased to $197.8 million. Tritium Readiness increased to $91.7 million because of "cost premiums for enrichment of unobligated reactor fuel" and "preparations for continued increases in production to meet mission requirements." Nonnuclear Readiness funds were realigned to a new subprogram, Component Manufacturing Development, "to restore the full capability to mature production processes and technologies." The House Appropriations Committee recommended no funds for this campaign, providing funds for programs in this campaign under Directed Stockpile Work "since those activities directly support stockpile production needs." The Senate Appropriations Committee recommended replacing the Readiness Campaign with the Technology Maturation Campaign, and recommended $253.7 million for the latter, which includes funds from Stockpile Services and the Engineering and Readiness Campaigns while moving funds for tritium activities to Stockpile Services. The FY2014 appropriation provided no funds for Component Manufacturing Development, moved Tritium Readiness to Stockpile Services, and provided $55.4 million for Nonnuclear Readiness. Readiness in Technical Base and Facilities (RTBF) This program funds infrastructure and operations at nuclear weapons complex sites. For FY2013, the appropriation was $1,972.6 million. NNSA would abolish this program in its FY2014 request, transferring its programs to the newly created Nuclear Programs and the much-expanded Site Stewardship. These two programs are discussed below; for comparison, the total FY2014 request for them was $2,450.5 million. P.L. 113-76 retained RTBF and provided $2,067.4 million for it. RTBF has several subprograms. The largest is Operations of Facilities (FY2014 appropriation, $984.5 million). The second largest is Construction (FY2014 appropriation, $422.1 million). A controversial activity in the Weapons Activities account was the Chemistry and Metallurgy Research Facility Replacement (CMRR) project at Los Alamos National Laboratory. The project involves two buildings, the Radiation Laboratory/Utility/Office Building (RLUOB), which was completed in 2009, and the Nuclear Facility (NF), which has been designed but not built. CMRR would replace the Chemistry and Metallurgy Research (CMR) building, most of which was built in 1952. Among other things, CMR houses research into plutonium and supports pit production at Los Alamos, such as by conducting analytical chemistry to monitor the quality of plutonium at various stages during the manufacture of a pit. Since 2005, cost estimates for CMRR increased several-fold, and some critics argue that it is not necessary. For FY2012, NNSA requested $300 million for CMRR but the conference report directed that "no construction activities are funded for the CMRR-Nuclear Facility during fiscal year 2012." NNSA requested no funds for FY2013 or FY2014 for CMRR. According to the FY2013 request justification, NNSA has determined, in consultation with the national laboratories, that existing infrastructure in the nuclear complex has the inherent capacity to provide adequate support for plutonium chemistry, plutonium physics, and special nuclear materials. NNSA proposes deferring CMRR Nuclear Facility construction for at least five years. Studies are ongoing to determine long-term requirements. Instead of the CMRR Nuclear Facility, NNSA will maximize use of existing facilities and relocate some nuclear materials. Estimated cost avoidance from FY 2013 to FY 2017 totals approximately $1.8 billion. The House and Senate Appropriations Committees recommended no funds for CMRR-NF for FY2014, and the FY2014 appropriation contained no funds for it. Meanwhile, NNSA continues to explore a strategy for producing pits. Another controversial project, the Uranium Processing Facility (UPF), was intended to replace old facilities at the Y-12 National Security Complex, some of which dated back to World War II. It would conduct operations involving enriched uranium for nuclear weapons and naval reactors. It would also conduct downblending of enriched uranium (i.e., reducing the fraction of fissile uranium-235 and increasing the fraction of non-fissile uranium-238) to make it unusable for weapons in support of nuclear nonproliferation. The FY2013 appropriation was $312.8 million. For FY2014, NNSA renamed UPF the Uranium Capabilities Replacement Project and requested $325.8 million for it. The House Appropriations Committee recommended the requested amount, but expressed concern about "the steep escalation in costs to complete design of the facility." The Senate Appropriations Committee recommended the requested amount, while expressing concern about project management. "Most recently, a space fit issue that required raising the roof of the building by 13 feet to fit critical equipment resulted in more than $500,000,000 in additional costs." The FY2014 appropriation was $309.0 million. This amount is to "support the full funding requirements for continued facility design and is an adjustment due to the Department of Energy's recent decision to consider additional alternatives to meet the uranium infrastructure needs at Y-12 that might save costs and lead to a replacement facility for Building 9212 [a World War II-era building] in a shorter period of time." Nuclear Programs This program focuses on processing and managing Special Nuclear Materials (i.e., uranium highly enriched in isotope 235 and plutonium). Its goals are to supply required quantities of these materials; recycle, recover, and store these materials; and sustain program skills. It has three elements: (1) Nuclear Operations Capability, which among other things includes Plutonium Metal Reprocessing, "a new funding line to receive pits from Pantex and process plutonium to establish an inventory of purified metal alloy that will support manufacturing 30 pits per year and help mitigate the risk of the decision to defer the construction" of CMRR-NF; (2) Capabilities Based Investments, which seek to sustain capabilities supporting weapons activities; and (3) Construction. The FY2014 request for this new program was $744.5 million. The House Appropriations Committee was sharply critical of NNSA's use of this new budget category. It would not "consider changing the congressional budget structure … for bureaucratic reorganizations and not for new funding lines that are poorly justified." Accordingly, it "selectively funded the activities requested under Nuclear Programs using the existing budget structure." The Senate Appropriations Committee "has renamed the two new accounts that encompass previous RTBF functions to provide greater clarity: (1) Nuclear Operations and Capital Construction and (2) Site Operations and Maintenance." The committee recommended $688.0 million for Nuclear Operations and Capital Construction, of which $439.0 million is for major capital construction projects as requested. P.L. 113-76 provided no funds for Nuclear Programs. Instead, it provided funds under RTBF, as described above. Site Stewardship The FY2013 appropriation for this program was $72.8 million. The FY2014 budget request would expand this program to $1,706.0 million and restructure its mission. Almost all—$1,660.8 million, or 97.4%—of Site Stewardship would be for Enterprise Infrastructure, the major elements of which were Site Operations ($1,112.5 million requested), Site Support ($109.6 million requested to fund nuclear safety, R&D and waste management, among other things), and Sustainment ($433.8 million requested to fund some of NNSA's direct maintenance activities). Four other programs in Site Stewardship had requests of less than $18 million. The House Appropriations Committee recommended $154.8 million for Site Stewardship, but declined to fund certain programs under it. "The reduction below the request is due to continued funding of infrastructure under Readiness in Technical Base and Facilities. The NNSA should not request funding for site facility operations, maintenance, or recapitalization within Site Stewardship." The Senate Appropriations Committee did not provide funds under Site Stewardship, instead providing most of the requested funds, $1,535.9 million, under Site Operations and Maintenance. The FY2014 appropriation was $87.3 million. Other Programs Weapons Activities includes several smaller programs in addition to DSW, Campaigns, Nuclear Programs, and Site Stewardship. Among them: Secure Transportation Asset provides for safe and secure transport of nuclear weapons, components, and materials. It includes special vehicles for this purpose, communications and other supporting infrastructure, and threat response. For FY2013, the appropriation was $201.5 million. The FY2014 request was $219.2 million. The House and Senate Appropriations Committees recommended the requested amount; the appropriation was $210.0 million. Nuclear Counterterrorism Incident Response "responds to and mitigates nuclear and radiological incidents worldwide and has a lead role in defending the Nation from the threat of nuclear terrorism." The FY2013 appropriation was $232.8 million. For FY2014, NNSA transferred this program to Defense Nuclear Nonproliferation "to align all NNSA funding for reducing global nuclear dangers in one appropriation," and the House Appropriations Committee did not consider funding for it under Weapons Activities. In contrast, the Senate Appropriations Committee recommended $260.2 million for this program, and did not approve transferring this account to Defense Nuclear Nonproliferation. P.L. 113-76 provided $228.2 million and retained the program in Weapons Activities. Defense Nuclear Security provides operations, maintenance, and construction funds for protective forces, physical security systems, personnel security, and the like. It "provides protection from a full spectrum of threats, especially terrorism, for NNSA personnel, facilities, nuclear weapons, and information." The FY2013 appropriation was $666.5 million. Prior to FY2014, this program was a component of Safeguards and Security. In the FY2014 request, NNSA abolished Safeguards and Security and made Defense Nuclear Security a standalone program. The FY2014 request was $679.0 million, of which $14.0 million was for a security upgrade at the Device Assembly Facility (DAF) in the Nevada National Security Site. NNSA, in its request, noted that various security enhancements had been taken or were underway in response to the July 2012 security breach at Y-12. The House Appropriations Committee recommended $665.0 million. It noted that some of the reduction from the FY2013 level was due to removal of special nuclear material from Lawrence Livermore National Laboratory, and deferred funding for the DAF upgrade. The Senate Appropriations Committee recommended the requested amount, and the FY2014 appropriation provided that amount. NNSA CIO [Chief Information Officer] Activities was a new program for FY2013 that sought to consolidate cyber security and information technology programs. Elements included cyber security, enterprise secure computing, and Federal Unclassified Information Technology. The latter will provide "commodity computing infrastructure" that will support a "shift from a traditional, costly desktop support model to a cloud-provisioned virtualized desktop-based solution." The FY2013 appropriation was $141.6 million. The FY2014 request for NNSA CIO Activities was $148.4 million. The House Appropriations Committee recommended $150.0 million and renamed the budget line Information Technology and Cyber Security (ITCS) "to more clearly describe the purposes for which the funds may be used." The Senate Appropriations Committee recommended the requested amount and also renamed the budget line ITCS. The appropriated amount for ITCS was $145.1 million. The National Security Applications program is directed toward "national security science, technology and engineering." The FY2013 appropriation was $9.5 million. For FY2014, NNSA transferred activities funded by National Security Applications from Weapons Activities to Defense Nuclear Nonproliferation. Legacy Contractor Pensions: For many decades, the University of California (UC) operated Los Alamos and Lawrence Livermore National Laboratories. Since laboratory employees were UC employees, they could participate in the university's pension plan. When the two labs were privatized, the contracts between DOE and the laboratory operators included provisions that in effect mirrored the pension that lab staff who were UC employees when the labs were privatized would have received had the labs remained with UC. These pensions were larger than those provided to employees hired after privatization. To make up the difference, NNSA paid into the pension plan for the UC employees. For Weapons Activities, the FY2013 appropriation for this payment was $170.2 million, and the FY2014 request was $279.6 million. (NNSA requested an additional amount for this purpose under Defense Nuclear Nonproliferation.) The House Appropriations Committee recommended the amount requested, but noted its concern "about the continually escalating costs of contractor pensions and other postretirement benefits and their impacts on programmatic activities." The Senate Appropriations Committee recommended the amount requested. The FY2014 appropriation provided the requested amount. Domestic Uranium Enrichment Research, Development, and Demonstration: The FY2014 appropriation provided $62.0 million for this program and moved it from Defense Nuclear Nonproliferation to Weapons Activities. It stated that additional FY2014 funding "shall be considered" after submission of a request to do so, but noted, "The Department has yet to provide a clear explanation of its strategy to ensure the continued supply of tritium and enriched uranium to meet defense needs." Nonproliferation and National Security Programs82 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 FY2013 was $2,243.1 million after the March 1, 2013, sequester. The request for FY2014 was $2,140.1 million, but that total includes two programs that the Administration proposes transferring from the Weapons Activities program: the Nuclear Counterterrorism Incident Response program and the Counterterrorism and Counterproliferation program. Without those two activities, the Nuclear Nonproliferation program request would be $1,884.2 million. The final bill did not include the transfer of those programs. It appropriated $1,954 million for the Nuclear Nonproliferation programs. The Nonproliferation and Verification R&D program was funded at $429.6 million for FY2013. The request for FY2014 was $388.8 million. The Administration proposed renaming the program Defense Nuclear Nonproliferation R&D. The House bill would have funded the program at the requested level. The Senate Appropriations Committee recommended $408.8 million. The final bill appropriated $398.8 million. Nonproliferation and International Security programs include international safeguards, export controls, and treaties and agreements. The FY2014 request for these programs was $141.7 million, compared with $143.1 million appropriated for FY2013. The House bill would have appropriated $128.7 million; the Senate committee recommended $128.0 million. The final bill appropriated the House amount. International Materials Protection and Control (IMP&C), which is concerned with reducing the threat posed by unsecured Russian weapons and weapons-usable material, was funded at $526.7 million in FY2013; the FY2014 request was $369.6 million. The decrease, according to DOE's budget justification document, reflects a shift "to a sustainability phase with the Russian Federation" in which "security costs are increasingly transitioned to the Russian side." It also included a reduction in the so-called Second Line of Defense Activities, mostly border and port detection programs, by $122 million, while the programs were under a strategic review. The House bill would have appropriated the requested amount. The Senate bill would have increased the funding to $419.7 million. The final bill appropriated the Senate amount. The goal of the Fissile Materials Disposition (FMD) program is disposal of U.S. surplus weapons plutonium by converting it into fuel for commercial power reactors, and a similar program in Russia. The U.S. side of the program originally included construction of three projects at Savannah River, SC: a facility to fabricate "mixed-oxide" (MOX) reactor fuel; a pit disassembly and conversion facility (PDCF), and a waste solidification facility. However, controversy developed over whether the pit disassembly project is necessary. The FY2012 request for the Fissile Materials Disposition program was $892.2 million, including $172 million for the PDCF, but the final bill appropriated $685.4 million for the program, and included no funding for the PDCF project, because, the conference report stated, "NNSA has not completed a study of alternatives or a conceptual design report with a cost and schedule estimate." The FY2013 request for FMD programs was $921.3 million. No funding was asked for the PDCF; NNSA said it would use existing facilities for pit disassembly. The waste solidification facility was completed and no further funding was requested. The major cause of the increase was the planned cold start-up of the MOX facility. However, no funding increase for the MOX project was included in the FY2013 continuing resolution, and the start-up was delayed. The actual FY2013 MOX appropriation was $401.0 million; the total FMD appropriation was $631.6 million. In the meantime estimated total cost for the facility was increased from $4.8 billion to $7.7 billion, in part to expand its capability to carry out the functions of the cancelled PDCF plant. In its FY2014 budget request, NNSA decided to slow down completion of the MOX plant, and begin a process of "evaluating alternatives for a new and affordable plutonium disposition strategy." It asked for a total of $502.6 million for FMD programs, including $320 million for the MOX plant. The House bill would have appropriated the requested amount, but the House Appropriations Committee report said no additional funding would be provided to study alternatives to the MOX plant, since NNSA had not submitted any alternatives that had not been "exhaustively studied" or would likely cost less. The Senate Appropriations Committee rejected the pause in MOX construction, funding the facility at $430.6 million and total FMD programs at $669.2 million. The final appropriations bill, P.L. 113-76 , provided $343.5 million for MOX construction, and a total of $526.1 million for the whole FMD program. The Global Threat Reduction Initiative is aimed at converting research reactors around the world from using highly enriched uranium, removing and disposing of excess nuclear materials, and protecting nuclear materials from theft or sabotage. The FY2013 appropriation for this program was $460.7 million. The FY2014 request was $424.5 million. The House bill would have appropriated $408.3 million. The Senate committee recommended $497.5 million. The final bill appropriated $442.1 million. Cleanup of Former Nuclear Weapons Production Facilities and Civilian Nuclear Energy Research Facilities83 The development and production of nuclear weapons for national defense purposes for over half a century since the beginning of the Manhattan Project resulted in a legacy of wastes and contamination that continues to present substantial challenges today. In 1989, DOE established the Office of Environmental Management to consolidate its responsibilities for the cleanup of former nuclear weapons production facilities that had been administered under multiple offices. These cleanup efforts are broad in scope and include the disposal of large quantities of radioactive and other hazardous wastes generated over decades; management and disposal of surplus nuclear materials; remediation of extensive contamination in soil and groundwater; decontamination and decommissioning of excess buildings and facilities; and safeguarding, securing, and maintaining facilities while cleanup is underway. The Office of Environmental Management also is responsible for the cleanup of DOE facilities that were involved in civilian nuclear energy research, which also generated wastes and contamination. These research facilities add a non-defense component to the office's mission, albeit smaller in terms of the scope of their cleanup and associated funding. Efforts to clean up the environmental legacy of nuclear weapons production and nuclear energy research represent the single largest environmental liability of the United States, exceeding the cleanup liability of Department of Defense facilities. The need for annual appropriations of several billion dollars for ongoing cleanup efforts at nuclear weapons production and nuclear energy research facilities has generated continuing interest within Congress about the long-term financial liability of the United States to address potential risks at these sites. How to ensure the protection of public safety, human health, and the environment in the most expedient and cost-effective manner has been a perennial issue in the appropriations debate. DOE has identified in excess of 100 facilities in over 30 states that historically were involved in the production of nuclear weapons and nuclear energy research for civilian purposes. The geographic scope of these facilities is substantial, collectively encompassing a land area of approximately 2 million acres. Cleanup remedies are in place and operational at the majority of these facilities. The responsibility for their long-term stewardship has been transferred to the Office of Legacy Management and other offices within DOE for the operation and maintenance of cleanup remedies and monitoring. See the "Office of Legacy Management" section of this report. Some of the smaller sites for which DOE initially was responsible were transferred to the Army Corps of Engineers in 1997 under the Formerly Utilized Sites Remedial Action Program (FUSRAP). The cleanup of these sites is funded within the civil works budget of the Corps. (See Table 4 .) Once the Corps completes the cleanup of a FUSRAP site, it is transferred back to DOE for long-term stewardship under the Office of Legacy Management. Much work remains to be done at the facilities that are still administered by the Office of Environmental Management. DOE expects cleanup to continue for several years or even decades at some of these facilities, necessitating billions of dollars to fulfill the cleanup liability of the United States. As of the beginning of FY2013, the Office of Environmental Management had completed cleanup activities at 90 facilities in 30 states and the Commonwealth of Puerto Rico, and remains responsible for the cleanup of 17 facilities in 11 states at which cleanup was not yet complete. Although cleanup is scheduled to be complete at some of these facilities over the next several years, cleanup is expected to continue at some of the larger and more complex facilities for decades. The Hanford facility in the state of Washington has the lengthiest estimated time frame, with cleanup scheduled to continue possibly as late as 2066 based on more conservative assumptions. DOE estimates that the costs to complete the cleanup of these 17 facilities could range between $187.0 billion and $223.4 billion from FY2013 into the future, exceeding the past costs already incurred across the entire inventory of facilities. A substantial proportion of these funding needs and lengthy time frames is due to challenges in managing, treating, and disposing of millions of gallons of high-level radioactive wastes stored in hundreds of tanks at Hanford, the Savannah River facility in South Carolina, and the Idaho National Laboratory. Over time, DOE periodically has revised its estimates as project baselines and assumptions change. These estimates have varied widely over the years by many billions of dollars. For example, the above estimates of future costs are several billion dollars higher than DOE presented just the previous fiscal year. DOE typically estimates a range of costs, rather than a single dollar amount, to reflect uncertainties in the cleanup process. For example, final decisions have yet to be made at some facilities to determine the actions that will be necessary to remediate contamination. Methods to dispose of vast quantities of wastes, and the scheduling of these actions, also could affect cleanup costs and time frames. The costs of long-term stewardship also are excluded from the above cost estimates. Long-term stewardship entails an even greater degree of uncertainty considering the lengthy time frames of maintenance and monitoring once cleanup remedies are in place and operational, especially at sites where the cleanup method may entail the permanent containment of radioactive wastes in perpetuity. FY2014 appropriations for the Office of Environmental Management and Office of Legacy Management are discussed separately below. Office of Environmental Management Three appropriations accounts fund the Office of Environmental Management: Defense Environmental Cleanup, Non-Defense Environmental Cleanup, and the Uranium Enrichment Decontamination and Decommissioning (D&D) Fund. The Defense Environmental Cleanup account constitutes the vast majority of the funding for the Office of Environmental Management and is devoted to the cleanup of former nuclear weapons production facilities. The Non-Defense Environmental Cleanup account funds the cleanup of wastes and contamination resulting from civilian nuclear energy research. Title XI of the Energy Policy Act of 1992 ( P.L. 102-486 ) established the Uranium Enrichment D&D Fund to pay for the cleanup of three federal facilities that were used to enrich uranium for national defense and civilian purposes and to reimburse uranium and thorium licensees for their costs of cleaning up sites that supported these facilities. These three federal uranium enrichment facilities are located in Paducah, Kentucky; Piketon, Ohio (Portsmouth plant); and Oak Ridge, Tennessee. P.L. 113-76 appropriated a total of $5.83 billion for these three accounts combined to fund the Office of Environmental Management in FY2014. As passed by the House, H.R. 2609 would have provided $5.53 billion, and S. 1245 as reported by the Senate Appropriations Committee would have provided $5.93 billion. The President had requested $5.62 billion. All of these amounts were an increase above the FY2013 enacted appropriations of $5.29 billion for the Office of Environmental Management (post-sequestration and post-rescission). Although there were varied issues in the FY2014 appropriations debate regarding funding levels among individual DOE facilities, the overall adequacy of funding for the Office of Environmental Management to attain cleanup milestones across the facility inventory was an overarching issue. Cleanup milestones are enforceable measures incorporated into compliance agreements negotiated among DOE, the Environmental Protection Agency (EPA), and the states. These milestones establish time frames for the completion of specific actions to satisfy applicable requirements at individual facilities. According to DOE, the President's request of $5.62 billion for the Office of Environmental Management would have been sufficient to attain all cleanup milestones due in FY2014. The enacted appropriations of $5.83 billion in P.L. 113-76 provided additional resources, an increase of $208.9 million above the request. The House had proposed a decrease below the request, but in its report on H.R. 2609 , the House Appropriations Committee noted the "need to ensure progress toward cleanup milestones" and stated that the bill would "sustain the pace of cleanup across the sites." The Senate Appropriations Committee had expressed a differing view and asserted that the House markup would have caused "major cleanup milestones to be missed in Washington, New Mexico, South Carolina, Idaho, and Tennessee." As both the House and Senate had proposed, P.L. 113-76 did not include the $463 million that the President requested within the Defense Environmental Cleanup account to resume the federal payment to the Uranium Enrichment D&D Fund. Congress ceased the federal payment in FY2012. This payment historically has been treated as an offset to the funding for the Office of Environmental Management because the payment does not become available to DOE until Congress subsequently appropriates it out of the Uranium Enrichment D&D Fund. The President also proposed to resume assessments on nuclear utilities in FY2014 to generate additional revenues, which would subject to the enactment of reauthorizing legislation. The authority to collect these assessments expired in October 2007. As authorized in the Energy Policy Act of 1992, both federal payments and nuclear utility assessments originally financed the Uranium Enrichment D&D Fund based on the premise that the federal government and the nuclear utilities benefited from services provided by federal uranium enrichment facilities and that both therefore should share the costs of the cleanup of these facilities. The Office of Management and Budget (OMB) estimated an existing balance of $3.5 billion in the Uranium Enrichment D&D Fund accrued from past nuclear utility assessments and federal payments that would be available for appropriation in FY2014. P.L. 113-76 appropriated $598.8 million from the Uranium Enrichment D&D Fund in FY2014, leaving nearly $3.0 billion for appropriation in future fiscal years (plus accrued interest on the balance). DOE estimated in 2010 that the balance of the fund would be exhausted by FY2020 without additional revenues, leaving a shortfall of $11.8 billion to complete the cleanup of federal uranium enrichment facilities over the long-term. If the Uranium Enrichment D&D Fund were fully expended, DOE still is responsible for the cleanup costs under existing law, subject to appropriations. Among the individual DOE facilities and supporting program activities, the various proposals considered in the FY2014 appropriations debate reflected differing funding priorities for the Office of Environmental Management. Table 15 presents the three appropriations accounts that fund the Office of Environmental Management with a breakout by facility and program activity. The table presents a breakout of appropriations enacted for FY2014 in P.L. 113-76 , passed by the House in H.R. 2609 , reported by the Senate Appropriations Committee in S. 1245 , and requested by the President, compared to appropriations enacted for FY2012 and FY2013 (post-sequestration and post-rescission). The table also presents the net total program funding level for the Office of Environmental Management for the three accounts combined, accounting for offsets including the federal payment to the Uranium Enrichment D&D Fund that the President proposed to resume in FY2014, but which Congress did not approve in P.L. 113-76 . Office of Legacy Management Once cleanup remedies are in place under the Office of Environmental Management, DOE's Office of Legacy Management administers the long-term stewardship of the facilities that do not have a continuing mission. The Office of Legacy Management also is responsible for the long-term stewardship of sites that had been transferred from DOE to the Army Corps of Engineers under the FUSRAP program in 1997. Once the Corps completes the cleanup of a site under this program, it is responsible for the initial two years of operation and maintenance, after which time the site is transferred back to DOE's Office of Legacy Management for long-term stewardship. The Office of Legacy Management also manages the payment of pensions and retirement benefits of former contractor personnel who worked at DOE facilities that do not have a continuing mission, among other supporting activities. The federal role in the management of these former contractor pensions and benefits stems from the long-term nature of the projects and the associated length of employment for the personnel who performed the work for DOE. These pensions and benefits are earned and accrued by contractor employees while in active employment at DOE facilities and are payable after their employment ends. The Office of Legacy Management has been funded entirely within DOE's Other Defense Activities account since FY2009. P.L. 113-76 provided $177.0 million for the Office of Legacy Management in FY2014, the same as the President had requested and the Senate Appropriations Committee recommended in S. 1245 . As passed by the House, H.R. 2609 would have provided $173.0 million. All of these amounts were an increase above the enacted appropriations of $155.7 million in FY2013 (post-sequestration and post-rescission). During FY2014, the Office of Legacy Management plans to continue its management of three major closure sites and almost 90 other small sites, and to add six new sites to its inventory for long-term stewardship responsibility by the end of that fiscal year. DOE reports that funding needs for new sites, other new actions, and inflationary increases for various program elements have been partially offset in the near term through improvements in program and administrative efficiencies and a decrease in the need to contribute to former contractor workers' pension funds. However, funding needs for the Office of Legacy Management are likely to increase more significantly over the next decade, as additional facilities are cleaned up and transferred from the Office of Environmental Management and the FUSRAP program for long-term stewardship. DOE projects that the total number of facilities administered by the Office of Legacy Management will increase to 129 facilities by FY2020. Estimating the long-term funding needs for the Office of Legacy Management is inherently challenging because of the lengthy time horizons that are involved. For example, actions may be necessary for many decades to operate and maintain cleanup remedies and monitor contaminant levels to ensure the effectiveness of the remedies over time. At sites where the cleanup entails the permanent containment of radioactive wastes, long-term stewardship may continue indefinitely because of the time needed for radioactive elements to decay to acceptable levels. Enforcement of land use restrictions or other institutional controls also may be necessary in perpetuity at facilities that are not cleaned up for unrestricted use, in order to prevent potentially harmful exposures. These and other factors make it difficult to reliably estimate the financial liability of the United States for long-term stewardship of sites contaminated from the historic production of nuclear weapons and civilian nuclear energy research in the 20 th century. Power Marketing Administrations111 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 Obama Administration's FY2014 request for the PMAs was $85 million. This is the same level as the FY2012 appropriation, and slightly more than the FY2013 total of $79 million (post sequestration, post rescission). The FY2014 budget request continues a change enacted in FY2010 that reclassified receipts from the PMAs from mandatory to discretionary. This change offsets many of the expenses of WAPA, SWPA, and SEPA that were previously paid for with discretionary appropriations. As a result of the change, two PMAs require discretionary funding in addition to their receipts: SWPA requests $11.9 million and WAPA requests $95.9 million. Receipts for SEPA are expected to offset all operating costs in FY2011. In addition, $400,000 is requested for Falcon and Amistad operations and maintenance, and collections of $23 million from Colorado River basins score as an additional offset toward the net discretionary appropriation for WAPA. P.L. 113-76 appropriated the requested amount for PMAs, $85 million. 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 with the Treasury, which was increased in FY2003 from $3.75 billion to $4.45 billion (a $700 million increase). ARRA further increased the amount of borrowing that BPA conducts under the Transmission System Act by $3.25 billion to the current authority for $7.7 billion in bonds outstanding to the Treasury. ARRA also provided WAPA borrowing authority for the purpose of planning, financing or building new or upgraded electric power transmission lines to facilitate the delivery of renewable energy resources constructed by or expected to be constructed after the date of enactment. The authority to borrow from the United States Treasury had not previously been available to WAPA. It is now available on a permanent, indefinite basis, with the amount of borrowing outstanding not to exceed $3.25 billion. 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 Commission114 For FY2014 the Nuclear Regulatory Commission (NRC) was appropriated $1.0559 billion ($125.2 million net, including the inspector general's office), $0.9 million above the request and $17.8 million above the FY2012 funding level. Major activities conducted by NRC include safety regulation and licensing of commercial nuclear reactors and oversight of nuclear materials users. The House bill and the Senate Appropriations Committee recommendation had provided the requested amount. The NRC budget request included $240.5 million for new reactor activities, $24.9 million below the FY2012 level. Until 2007, no new commercial reactor construction applications had been submitted to NRC since the 1970s. However, volatile fossil fuel prices, the possibility of controls on carbon emissions, and incentives provided by the Energy Policy Act of 2005 prompted electric utilities and other generating companies to apply for licenses for 30 new reactors. Several of those applications were subsequently withdrawn or suspended, though, as falling natural gas prices reduced the competitiveness of nuclear power. NRC issued combined construction and operating licenses for four new reactors at two sites in Georgia and South Carolina in early 2012. NRC's proposed FY2014 budget included no funds for licensing DOE's previously planned Yucca Mountain nuclear waste repository. Because the Obama Administration wants to cancel the Yucca Mountain project and filed a motion to withdraw the license application on March 3, 2010, the NRC's FY2011 appropriation was used to close out its licensing activities. As discussed in the Nuclear Waste section of this report, the U.S. Court of Appeals for the District of Columbia Circuit ordered NRC on August 13, 2013, to continue reviewing the Yucca Mountain license application, using $11.1 million in leftover funding. Similarly, the House Appropriations Committee had directed NRC to use prior-year funds to complete the Yucca Mountain license application, and contended that NRC was required by law to find additional resources as needed. For regulation of operating reactors, NRC's FY2014 budget request included $571.9 million, $37.2 million above the FY2012 level. Those activities include reactor safety inspections, license renewals and modifications, collection and analysis of reactor performance data, and oversight of security exercises. The Fukushima nuclear disaster in Japan increased congressional and public concern about the safety of U.S. nuclear power plants. NRC established a task force 10 days after the accident to review NRC's regulatory system. NRC issued the first regulatory orders resulting from that review on March 12, 2012, and is currently working on additional regulations. 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 FY2014 appropriation result in a net appropriation of $125.2 million, $3.2 million below the FY2012 enacted level.

The Energy and Water Development appropriations bill provides funding for civil works projects of the Army Corps of Engineers (Corps), for the Department of the Interior's Bureau of Reclamation (Reclamation), the Department of Energy (DOE), and several independent agencies. FY2013 Energy and Water Development appropriations were considered in the context of the Budget Control Act of 2011 (BCA, P.L. 112-25), which established discretionary spending limits for FY2012-FY2021. On March 26, 2013, the President signed H.R. 933, the FY2013 Defense and Military Construction/VA, Full Year Continuing Resolution (P.L. 113-6). The act funded Energy and Water Development accounts at the FY2012 enacted level for the rest of FY2013, with some exceptions. However, under BCA, an automatic spending reduction process, consisting of a combination of sequestration and lower discretionary spending caps, went into effect March 1, 2013. For FY2014, as in previous years, the level of overall spending was a major issue. President Obama's FY2014 budget request for Energy and Water Development was released in April 2013. The request totaled $34.4 billion. On June 26 the House Appropriations Committee reported a bill, H.R. 2609, with a total of $30.4 billion; the bill passed the House, with amendments, on July 10. The Senate Appropriations Committee reported out a bill, S. 1245, on June 27, with a total of $34.4 billion. On October 16, 2013, Congress passed the Continuing Appropriations Act, 2014, H.R. 2775, P.L. 113-46, extending funding for all federal programs, including Energy and Water Development, through January 15, 2014, at the FY2013 post-sequestration spending level. On December 26 the President signed H.J.Res. 59 (P.L. 113-67), which contained the Bipartisan Budget Act establishing less stringent spending caps for FY2014 and FY2015 than the BCA and easing the way for an appropriations agreement. On January 17, 2014, the President signed H.R. 3547, the Consolidated Appropriations Act, 2014 (P.L. 113-76), containing appropriations for all 12 FY2014 appropriations bills, including Energy and Water Development programs (Division D). In addition to funding levels, issues specific to Energy and Water Development programs included the distribution of appropriations for Corps (Title I) and Reclamation (Title II) projects that have historically received congressional appropriations above Administration requests; alternatives to the proposed national nuclear waste repository at Yucca Mountain, Nevada, which the Administration has abandoned (Title III: Nuclear Waste Disposal); proposed FY2014 spending levels for Energy Efficiency and Renewable Energy (EERE) programs (Title III) that were more than 50% higher in the Administration's request than the amount appropriated for FY2012; and, funding for the nuclear weapons program and other defense activities, which make up half of the total Department of Energy budget.

Introduction One-minute speeches (commonly called "one minutes") provide one of the few opportunities for non-legislative debate in the House, where debate is almost always confined to the pending legislative business. Recognition for one-minute speeches is the prerogative of the Speaker. A period for one minutes usually takes place at the beginning of the legislative day after the daily prayer, the Pledge of Allegiance, and approval of the previous day's Journal . During this time, Representatives ask unanimous consent to address the House for one minute on a topic of their choice. In addition, one minutes are often permitted after legislative business ends but before special order speeches begin. This report examines current House practices governing recognition for one-minute speeches, the delivery of one minutes, and their insertion in the Congressional Record . The report also discusses various uses of one minutes and reform proposals. Governing Authorities One-minute speeches are not provided for in the rules of the House. Instead, they have evolved as a unanimous consent practice of the chamber. Members must ask unanimous consent to address the House for one minute (for more information, see " Delivering One-Minute Speeches ," below). During one-minute speeches, Members must abide by the rules of the House, the chamber's precedents, and the "Speaker's announced policies," in that order. Relevant House rules include those governing debate, decorum, and the Speaker's power of recognition. House precedents discuss how the chamber has interpreted and applied its rules. Under House precedents, for example, individual Members can be recognized for a one-minute speech only once each legislative day. The term Speaker's announced policies refers to the Speaker's policies on certain aspects of House procedure, such as decorum in debate, the conduct of electronic votes, and recognition for one minutes and special orders. These policies are usually announced on the opening day of a new Congress. The Speaker's current policies on recognition for one minutes are those that were first announced on August 8, 1984. These policies have been followed in each succeeding Congress. Recognition for One-Minute Speeches Recognition for one-minute speeches is the prerogative of the Speaker. Under his power of recognition (House Rule XVII, clause 2), the Speaker decides when he will entertain unanimous consent requests to address the House for one minute, and how many one-minute speeches he will allow. According to the Speaker's announced policies, the chair "reserves the right to limit one-minute speeches to a certain period of time or to a special place in the program on any given day, with notice to the leadership." When pressing legislative business is before the House, the Speaker may decide to limit the number of one-minute speeches, to postpone one minutes until after legislative business, or to forego them altogether. A period for one-minute speeches (hereinafter referred to as "the one-minute speech period") usually takes place at the beginning of each legislative day after the daily prayer, the Pledge of Allegiance, and approval of the previous day's Journal . The Speaker determines the number of one minutes permitted during this period. This number varies from day to day. The Speaker might allow an unlimited number of speeches one day and then limit the number the following day (e.g., allow only 10 one minutes on each side of the aisle). The majority and minority leadership usually receive advance notification of any limitations. A majority party Representative appointed as "Speaker pro tempore " usually presides in the chair during the one-minute speech period. In recent practice, the chair often announces how many one minutes will be allowed before the one-minute speech period begins. Representatives seeking recognition for one minutes sit in the first row on their party's side of the chamber. From the chair's vantage point, Republican Members sit on the left side of the chamber and Democratic Members on the right side. In recognizing Members for one minutes, the chair observes the following announced policies of the Speaker: The chair will alternate recognition for one-minute speeches between majority and minority Members, in the order in which they seek recognition in the well under present practice from the Chair's right to the Chair's left, with possible exceptions for Members of the leadership and Members having business requests. Because the chair moves from his right to left in recognizing Members, the Republican Member seated closest to the center aisle is recognized first on the Republican side , and the Democratic Member seated closest to the Speaker's lobby is recognized first on the Democratic side . Recognition alternates from majority to minority throughout the period for one minutes. In addition to the one-minute speech period, Members can usually ask unanimous consent to deliver a one minute after legislative business ends but before special order speeches begin. Coordination Role of Party Leadership Members do not have to reserve one-minute speeches in advance through their party's leadership. Nevertheless, the party leadership communication arms—known as the "Democratic Message Group" and the "Republican Theme Team"—sometimes coordinate party Members to deliver one minutes on the issue designated as the party's daily message. On days when the number of one-minute speeches is limited, these party Members usually receive priority seating for recognition purposes (i.e., on the right side of the party's first row). The daily message usually presents the party's views on specific legislation before the House or its position on a policy or political issue. Delivering One-Minute Speeches When recognized by the chair, individual Members ask unanimous consent to address the House for one minute and to revise and extend their remarks. Permission is almost always granted. Members speak from the well of the chamber. They are limited to one minute and cannot ask unanimous consent for additional time. When the chair announces that one minute has expired, the Member can finish the sentence underway but must then stop speaking. The chair's calculation of time consumed during a one-minute speech "is not subject to challenge on a point of order." When Members cannot finish their remarks in one minute, the permission to extend allows them to complete their speech in writing in the Congressional Record . The undelivered portion of their speech appears in a distinctive typeface. Permission to extend also authorizes Members to insert extraneous material such as a newspaper article or a constituent letter during a one-minute speech. The inserted material appears in a distinctive typeface. Joint Committee on Printing regulations for publication of the Congressional Record provide that "any extraneous matter included in any statement by a Member" be printed in the "Extensions of Remarks" section of the Congressional Record but noted in the Members' remarks. This requirement is not always observed. A review of 10 one minutes containing extraneous matter from January to July 1997 found that in each case the extraneous matter was printed in the House section (not in the "Extensions of Remarks") of the Congressional Record along with the one-minute speech. The Joint Committee on Printing's regulations also require that one-minute speeches longer than 300 words "delivered during the morning business" (i.e., during the one-minute speech period at the start of the day) be printed "following the business of the day." In practice, these one minutes usually appear in the House section of the Congressional Record immediately before the five-minute special orders. Inserting One-Minute Speeches Instead of delivering a one-minute speech on the House floor, a Member may insert the speech in the House section of the Congressional Record alongside the one minutes delivered on the floor that day. The Representative asks unanimous consent to insert the one-minute speech in the Congressional Record and yields back his time. The inserted speech is published in a distinctive typeface. The practical difference between inserting and delivering a one-minute speech is the speech's audience. Inserted one minutes are available to readers of the hard copy and online versions of the Congressional Record . By contrast, delivered one minutes reach a larger audience through C-SPAN's televised coverage of House floor proceedings. Various Uses of One Minutes The unrestricted content and short length of one-minute speeches make them an attractive communication tool for individual Members and the party leadership. In addition, the usual position of one minutes at the start of day means they can be covered by broadcast news organizations in time for evening news programs. Individual Members often use one minutes to share information with colleagues such as announcing a new bill they have introduced or explaining a floor amendment they will offer later that day. In practice, these one minutes serve as a visual "Dear Colleague" letter. Representatives also use one-minute speeches to deliver eulogies and tributes concerning individuals and organizations in their congressional district. One minutes also provide Members with an opportunity to express their views on bills, policy issues, and local, national, and international events. For junior Members, one-minute speeches provide a valuable debate opportunity. Representative Chabot highlighted this point in a 105 th Congress one-minute speech on the importance of one minutes: "As my colleagues know, a freshman or sophomore Member might sit at a committee meeting for two hours before being able to pose one question to a witness. He or she, if lucky, might get 30 seconds to debate a pending bill on the floor. One-minute speeches give these Members and the people they represent back home a chance to be heard." Some Representatives have made one-minute speeches a regular part of their media and communication strategy. By delivering one minutes, they reach a national audience of C-SPAN television viewers and webcast users, including constituents. Some Members also disseminate their one-minute speeches through other channels, such as mailing constituents a copy of the speech printed in Congressional Record or providing local news organizations with a video press release. As mentioned earlier, the Democratic Message Group and the Republican Theme Team sometimes use one-minute speeches as a vehicle for transmitting the party's daily message. The one-minute speech period provides a forum where different Members of the party can speak on the designated theme to a national audience. This use of one minutes has been criticized by some Representatives and congressional observers. During a 104 th Congress special order speech on civility in the House, one Member stated that one minutes in the morning had "become theme-team efforts just to excite and aggravate, to get sound bites for television, rather than a healthy discourse on the issues." Reform Proposals Breaches in decorum during one-minute speeches in the 104 th and 105 th Congresses have prompted some reform proposals that range from eliminating one minutes to postponing them until the completion of legislative business. These proposals have been advanced in letters to the Speaker, in testimony at congressional hearings, and in the Civility in the House of Representatives report that was prepared for the March 1997 bipartisan retreat of House Members. The 1999 report updated the data for the 105 th Congress but did not contain recommendations. Letters to the Speaker In August 1996, Representative Archer and former Representative Beilenson sent a letter to the Speaker urging him to stop recognizing Members for one-minute speeches at the start of the day. Signed by a bipartisan group of 50 Members, the letter proposed that one minutes only be permitted after the completion of legislative business. The letter noted that one minutes had increasingly become "a series of sound-bite assaults often prepared not by Members themselves, but by Republican and Democratic political staff who have found this format to be highly conducive to the kinds of attacks that used to be reserved for campaign commercials." Postponing one minutes until after legislative business, the letter's signatories argued, would reduce this manner of using one minutes. On September 5, 1996, the proposal in the letter was discussed at a joint hearing of the two subcommittees of the House Rules Committee. Representative Archer testified that "Partisan and poisonous 1-minute speeches unfavorably set the tone for our legislative business.... If we move 1-minutes to the conclusion of the day, Members will be less inclined to focus on the negative, politically charged messages, and 1-minutes would once again turn to their original positive intent." In separate testimony, Representative Beilenson noted that one-minute speeches "often contain purposefully written, catchy phrases that make good sound bites." Moving one minutes to the end of the day, he argued, would "negate their usefulness to news operations" and remove the incentive to envelop one-minute speeches in sound bites. At the start of the 105 th Congress, a letter advancing the same reform proposal was sent to the Speaker and to the minority leader by Representatives Archer and Hamilton. A bipartisan group of 59 Members signed the letter. A similar letter was circulated in the 106 th Congress. Civility in the House of Representatives Report Civility in the House of Representatives (hereinafter referred to as Civility ) examined the public's perception of rising incivility in the House and suggested ways to reduce both this perception and actual breaches in decorum. The report point out that incivility was more likely to take place during one-minute and special order speeches than during other periods of House floor proceedings. Civility recommended that the House either eliminate one-minute speeches or move these speeches to another time of the day (i.e., to a time other than the start of the day). Holding one minutes in the morning, the report argued, "can set a hostile tone for debate." The report noted the "advent of theme teams" and the concerns that some Members have about using one minutes to communicate a party's daily message. External factors such as "the rise of sound-bite politics" and the incentive of media coverage were also cited as encouraging partisan attacks and breaches of decorum during House floor debate. "Civility" Hearings The House Rules Committee's Subcommittee on Rules and Organization of the House held hearings on April 17, 1997, and May 1, 1997, to discuss issues raised in Civility . Dr. Kathleen Hall Jamieson, author of Civility and dean of the Annenberg School for Communication at the University of Pennsylvania, testified along with several other congressional experts. By coincidence, the April 17 hearing was interrupted by a House vote on the question of striking unparliamentary words spoken in a one-minute speech. Witnesses and subcommittee Members referred to this incident throughout the May 1 hearing. Civility's recommendation that one-minute speeches be either eliminated or postponed until after legislative business was examined at both hearings. Two alternative recommendations were advanced in testimony. First, the idea of holding one-minute speeches only once a week was proposed. Second, it was recommended that the Speaker allow one-minute speeches of a "factual nature" in the morning and those of a "political nature" after the completion of legislative business. Both hearings explored reinstating the so-called Oxford-style debates—another Civility recommendation—as a supplementary reform to changing House practices for one minutes. In testimony on April 17, 1997, Dr. Jamieson recommended that "if we move or eliminate one-minute speeches, we conventionalize Oxford debates as an additional forum available. In Oxford debate, strong partisanship would be the rule, but in an environment in which the debate structure increases the likelihood that one arbitrates evidence and doesn't engage in personalities." Suggestions for improving future Oxford-style debates, such as giving these debates a different name and allowing more Members to participate in them, were offered by witnesses at both hearings. The House Rules Committee held hearings on the 1999 report on April 29, 1999.

Recognition for one-minute speeches (commonly called "one minutes") in the House of Representatives is the prerogative of the Speaker. A period for one minutes usually takes place at the beginning of the legislative day after the daily prayer, the Pledge of Allegiance, and approval of the previous day's Journal. During this time, Representatives ask unanimous consent to address the House for one minute on a topic of their choice. In addition, one-minute speeches are often permitted after legislative business ends, but before special order speeches begin. The rules of the House do not provide for one-minute speeches. Instead, one minutes have evolved as a unanimous consent practice of the chamber. During one-minute speeches, Members must abide by the rules of the House, the chamber's precedents, and the "Speaker's announced policies," in that order. The term Speaker's announced policies refers to the Speaker's policies on certain aspects of House procedure, such as recognition for one minutes. Representatives seeking recognition for one minutes sit in the first row on their party's side of the chamber. From the chair's vantage point, Republican Members sit on the left side of the chamber and Democratic Members on the right side. The chair moves from his right to left in recognizing Members on each side of the aisle. When recognized by the chair, individual Members ask unanimous consent to address the House for one minute and to revise and extend their remarks. Permission is almost always granted. Members deliver one-minute speeches from the well of the chamber. They are limited to one minute and cannot ask unanimous consent for additional time. Instead of delivering a one-minute speech on the House floor, a Member may ask unanimous consent to insert the speech in the House section of the Congressional Record. Members need not reserve one-minute speeches in advance through their party's leadership. Nevertheless, the party leadership communication arms—known as the "Democratic Message Group" and the "Republican Theme Team"—sometimes coordinate party Members to deliver one minutes on the issue designated as the party's daily message. These party Members usually receive priority seating for recognition purposes. This report will be updated if rules and procedures change.

Introduction It is often difficult, if not impossible, to enforce child support obligations in cases where the custodial parent and child live in one country and the noncustodial parent lives in another. International cases are often challenging and very time consuming for CSE workers because there are no agreed upon standards of proof, uniform procedures or methods of communication. The United States has not ratified a multilateral child support enforcement treaty dealing with this issue. This report provides an overview of the current Child Support Enforcement (CSE) system, including a discussion of how international CSE cases are handled. It provides a summary of the 2007 Hague Convention on the International Recovery of Child Support and Other Forms of Family Maintenance and contains current status information on the Convention/Treaty. It also provides a section-by-section summary of H.R. 1896 , a bill in the 113 th Congress that includes provisions to implement the Hague Convention on International Recovery of Child Support and several other unrelated child support provisions. H.R. 1896 was introduced by Representative David Reichert and nine co-sponsors on May 8, 2012. Nearly identical legislation ( H.R. 4282 ) passed the House by voice vote in the 112 th Congress on June 5, 2012. Proponents of ratification of the Hague Convention provisions related to child support and family maintenance note that many Americans who live abroad may owe child support and that, in addition, there are thousands of foreigners with children who live in the United States for whom child support should be provided. They contend that a noncustodial parent's residence in a foreign country should not negate his or her children from receiving the child support to which they are entitled. Overview of the Current Child Support Enforcement (CSE) Program3 The CSE program was enacted in 1975 ( P.L. 93-647 ) as a federal-state program (Title IV-D of the Social Security Act). Its purpose is to help strengthen families by securing financial support for children from their noncustodial parent on a consistent and continuing basis and by helping some families remain self-sufficient and off public assistance. The CSE program has evolved over time from a "welfare cost-recovery" program into a "family-first" program that seeks to enhance the well-being of families by making child support a more reliable source of income. Child support orders require noncustodial parents to fulfill their financial responsibility to their children by contributing to the payment of childrearing costs. The CSE program provides seven major services on behalf of children: (1) parent location, (2) paternity establishment, (3) establishment of child support orders, (4) review and modification of child support orders, (5) collection of child support payments, (6) distribution of child support payments, and (7) establishment and enforcement of medical support. All 50 states, the District of Columbia, and three U.S. territories (Guam, Puerto Rico, and the U.S. Virgin Islands) operate CSE programs and are entitled to federal matching funds. The federal government reimburses each state (and the jurisdictions listed above) 66% of the cost of operating its CSE program. In addition, the federal government pays states (and jurisdictions) an incentive payment to encourage them to operate effective programs. State CSE programs are usually operated at the county-level of government in the human services department, department of revenue, or the State Attorney General's office. States must comply with a comprehensive set of requirements as a condition for receiving federal funds for operating state CSE programs. The CSE program is administered at the federal level by the Office of Child Support Enforcement (OCSE) in the Department of Health and Human Services (HHS). Domestic Enforcement of Child Support State CSE programs have authority to use a vast array of methods/tools to collect/enforce the payment of child support. Collection methods used by CSE agencies include income withholding, intercept of federal and state income tax refunds, intercept of unemployment compensation, liens against property, security bonds, and reporting of child support obligations to credit bureaus. All states, the District of Columbia, Guam, Puerto Rico, and the U.S. Virgin Islands also have civil or criminal contempt-of-court procedures and criminal nonsupport laws. Moreover, the 1996 welfare reform law ( P.L. 104-193 ), officially known as the Personal Responsibility and Work Opportunity Reconciliation Act of 1996 (PRWORA), required states to implement expedited procedures to allow them to secure assets to satisfy an arrearage by intercepting or seizing unemployment and workers' compensation; lottery winnings; awards, judgments, or settlements; and assets of the debtor parent held in public or private retirement funds and financial institutions. It required states to implement procedures to withhold, suspend, or restrict use of driver's licenses, professional and occupational licenses, and recreational and sporting licenses of persons who owe past-due support or who fail to comply with subpoenas or warrants relating to paternity or child support proceedings. In addition, the 1996 law authorized the Secretary of State to deny, revoke, or restrict passports of debtor parents. Many CSE administrators contend that the most difficult child support orders to enforce are interstate cases. Family law traditionally has been under the jurisdiction of state and local governments, and citizens fall under the jurisdiction of the courts where they live. Thus, although federal CSE law requires states to cooperate in interstate child support enforcement, problems often arise because of the autonomy of local courts. P.L. 104-193 required states to enact and implement the Uniform Interstate Family Support Act (UIFSA). UIFSA was drafted by the National Conference of Commissioners on Uniform State Laws (NCCUSL) and approved by the Commissioners in August 1992. The NCCUSL revised the act in 1996, 2001, and again in 2008. UIFSA limits the jurisdiction that can properly establish and modify child support orders and addresses the enforcement of child support obligations within the United States. When multiple states are involved in establishing, enforcing, or modifying a child or spousal support order, UIFSA is used to resolve jurisdictional issues of the courts in the different states. UIFSA also establishes which state's law will be applied in proceedings under UIFSA, an important factor as support laws vary greatly among the states. UIFSA is designed to deal with desertion and nonsupport by instituting uniform laws in all 50 states and the District of Columbia. The core of UIFSA is limiting control of a child support case to a single state, thereby ensuring that only one child support order from one court or child support agency is in effect at any given time. It follows that the controlling state will be able to effectively pursue interstate cases, primarily through the use of long arm statutes, because its jurisdiction is undisputed. UIFSA provides procedural and jurisdictional rules for three types of interstate child support proceedings to (1) establish a child support order; (2) enforce a child support order; and (3) modify a child support order. UIFSA implements the "one-order system." This means that only one state's order governs, at any given time, an obligor's support obligation to any child. Further, only one state has continuing jurisdiction to modify a child support order. This requires all other states to recognize the order and to refrain from modifying it unless the first state has lost jurisdiction. P.L. 104-193 required that the 1996 version of UIFSA be adopted. It has been adopted in every state, the District of Columbia, Puerto Rico, and the U.S. Virgin Islands. As mentioned above, the NCCUSL approved additional amendments to UIFSA in August 2001. However, there is no federal mandate for states to enact the 2001 amendments. To date (almost 12 years later), only 21 states and the District of Columbia have adopted the 2001 amendments to UIFSA. In July 2008, the NCCUSL approved amendments to the 2001 UIFSA (referred to as UIFSA 2008), to integrate the appropriate provisions of the Convention, which were adopted at the Hague Conference on Private International Law on November 23, 2007. Similarly, there is no federal mandate for states to enact UIFSA 2008. To date, 11 states have adopted the 2008 amendments to UIFSA. States that have adopted UIFSA 2008 now stand ready to immediately implement the Convention if it is ratified. International Enforcement of Child Support Before 1996, there was no mandate, direct or indirect, for the states or the federal government to become involved in international arrangements for child support. Prior to P.L. 104-193 , states used the system that they had developed for interstate child support cases to collect child support on behalf of children whose noncustodial parent lived abroad. According to various CSE documents, the arrangements developed between the individual states and various foreign countries to enforce child support obligations were based on the principles of comity—the voluntary recognition and respect given to the acts of another nation's government—as well as formal statements of reciprocity. P.L. 104-193 established procedures for international enforcement of child support. Pursuant to 42 U.S.C. 659A(a), the Secretary of State, with the concurrence of the Secretary of HHS, is authorized to declare any foreign country (or political subdivision thereof) to be a foreign reciprocating country if the foreign country has established, or undertakes to establish, procedures for the establishment and enforcement of child support owed to persons who are residents of the United States, and such procedures are substantially in conformity with the standard ... Reciprocating countries must have procedures for (1) establishing paternity; (2) establishing support orders; (3) enforcement of support orders; (4) collection and distribution of payment under support orders; (5) providing administrative and legal assistance where necessary without cost to the U.S. resident; and (6) establishing a "Central Authority" to facilitate implementation of support enforcement in cases involving U.S. residents. Currently, the CSE program has reciprocal agreements regarding child support enforcement with 15 countries, including Australia, Canada (12 provinces/territories), Czech Republic, El Salvador, Finland, Hungary, Ireland, Israel, Netherlands, Norway, Poland, Portugal, Slovak Republic, Switzerland, and the United Kingdom of Great Britain and Northern Ireland. According to the U.S. State Department, the United States has held discussions with over 30 countries since 1997, and negotiations are continuing with many of those countries at this time. Moreover, in the absence of a federal-level international agreement for child support enforcement, there may be a state-level arrangement with a country. These state-level arrangements were formerly authorized by the Uniform Reciprocal Enforcement of Support Act (URESA), and are now authorized pursuant to UIFSA. However, such state-level arrangements may not be as comprehensive as the federal-level agreements. Further, not all states have similar arrangements with all countries; most states have arrangements with only a few countries. Based on information from the federal Office of Child Support Enforcement and the Census Bureau, about 1%-3% of CSE cases are international cases in that a noncustodial parent lives outside of the United States. The 2007 Hague Convention on the International Recovery of Child Support and Other Forms of Family Maintenance The United States has not ratified any of the long-standing multinational treaties or conventions related to the recognition and enforcement of child support obligations, such as the Hague conventions on maintenance obligations. According to some commentators, the United States has not joined these treaties primarily because of fundamental differences in how jurisdiction is obtained over the involved parties. In most foreign countries, jurisdiction in child support cases is based on the habitual residence of the custodial parent. In contrast, in the United States although the child support order is established in the home state of the custodial parent, child support enforcement relies on the ability of the court to obtain personal jurisdiction over the noncustodial parent. Summary of the Convention The Convention contains procedures for processing international child support cases that are intended to be uniform, simple, efficient, accessible, and cost-free to U.S. citizens seeking child support in other countries. It is founded on the agreement of countries that ratify the Convention to recognize and enforce each other's child support orders. As discussed earlier in this report, similar procedures (via UIFSA) are already in place in the United States for processing interstate child support cases. The Convention offers the United States the opportunity to join a multilateral treaty, saving the time and expense that would otherwise be required to negotiate bilateral agreements with individual countries around the world. Many provisions of the Convention were drawn from the U.S. experience with UIFSA. In fact, most cases under the Convention would be handled in the United States in accordance with UIFSA, which, pursuant to the 2008 amendments includes procedures for handling interstate cases as well as international cases. Below are some of the main provisions of the Convention. Reciprocity Pursuant to the Convention, the United States will be able to obtain the same or corresponding treatment (reciprocity) from other signatory countries. For many international cases, U.S. courts and state CSE agencies already recognize and enforce child support obligations, whether or not the United States has a reciprocal agreement with the other country. However, many foreign countries will not enforce U.S. child support orders in the absence of a treaty obligation. Settlement of Jurisdiction Issue The Convention addresses jurisdictional barriers that have prohibited the United States from joining other child support conventions. Existing maintenance conventions base jurisdiction to order support on the habitual residence of the creditor (custodial parent or child) rather than on minimum contacts with the debtor (noncustodial parent), as required by U.S. constitutional standards of due process. The Convention provides flexibility for a U.S. court having jurisdiction over the noncustodial parent to establish a new order in circumstances where U.S. jurisdictional requirements were not met in the country issuing the initial order that is sought to be enforced. Coordinated Expedited Enforcement Pursuant to the Convention, countries will have the ability to effectively coordinate the enforcement of international child support cases with contracting countries through central authorities. Central authorities will be required to receive and transmit applications for services. Through administrative cooperation, the authorities will facilitate the transfer of documents and case information—using electronic technology where feasible—so that the necessary information is available for expeditious resolution of international child support matters. No Cost or Low Cost Access to CSE Services in Other Countries The Convention provides for access to cost-free services for U.S. citizens needing assistance with child support enforcement in a contracting country. However, a few countries are required by their own internal procedures to assess fees for these CSE services. In such cases, the involved country must use a means test based on the income of the child, not the parents. This will generally result in relatively minimal fees as compared to current practice where custodial parents must often retain local private counsel in order to establish or enforce a child support order. No Change to States' Authority over Child Support Law Issues The Convention and the 2008 conforming amendments to UIFSA will not affect intrastate or interstate CSE cases in the United States. They will apply only to cases where the custodial parent and child live in one contracting country and the noncustodial parent lives in another contracting country. Similarly, the Convention will not affect substantive child support law, which is generally left to the individual states. The primary focus of the Convention and the 2008 conforming amendments is on uniform procedures for enforcement of CSE decisions and for cooperation among countries. While HHS will be the central authority for the United States under the Convention, it is expected that HHS will designate state CSE agencies as the public bodies responsible for carrying out, under its supervision, many of its central authority functions, such as transmitting and receiving applications for services, and initiating and facilitating proceedings. Current Status of the Convention On November 23, 2007, after four years of deliberation, the Hague Convention on the International Recovery of Child Support and Other Forms of Family Maintenance was adopted at the conclusion of the Twenty-First Diplomatic Session of The Hague Conference on Private International Law at The Hague, The Netherlands. The United States delegation was the first country to sign the Convention. The other signatories are Albania, Bosnia and Herzegovina, the European Union, Norway, and Ukraine. As noted earlier, in July 2008, the National Conference of Commissioners on Uniform State Laws (NCCUSL) approved amendments to the 2001 Uniform Interstate Family Support Act, referred to as UIFSA 2008, to integrate the appropriate provisions of the Convention with federal U.S. law. In the United States, a treaty must be consented to by the Senate. The Senate does not ratify a treaty, but it provides its opinion on the treaty in question and then votes whether or not to consent to the treaty's provisions. A two-thirds majority is required for the Senate to give its consent. On September 29, 2010, the U.S. Senate approved the Resolution of Advice and Consent regarding the Hague Convention on the International Recovery of Child Support and Other Forms of Family Maintenance. According to the Office of Child Support Enforcement, the following additional steps must occur before the Convention/Treaty can enter into force for the United States. (1) Congress must adopt, and there must be enacted, implementing legislation for the Treaty. (2) Pursuant to the implementing legislation, all states must enact UIFSA 2008 by the effective date noted in the legislation. In addition, the implementing legislation would require states to make minor revisions to their CSE state plan. (3) The President must sign the instrument of ratification for the Treaty. (4) Finally, after all these activities are completed, the United States will be able to deposit its instrument of ratification with the Ministry of Foreign Affairs of the Kingdom of the Netherlands, which is the depository for the Treaty. (5) If at least one other country has deposited its instrument of ratification, acceptance or approval, the Treaty will enter into force for the United States on the first day of the first month that is not less than three months after the date of the U.S. deposit. If the United States is the first country to deposit its instrument, the Treaty will enter into force on the first day of the first month that is not less than three months after a second country deposits its instrument. Once the Treaty is in force, it will apply to cases being worked between countries that are party to the Treaty. In the 112 th Congress, H.R. 4282 was introduced in the House on March 28, 2012. H.R. 4282 contained implementing language for the Convention. The House passed H.R. 4282 , by voice vote, on June 5, 2012, but the Senate took no action on the bill. In the 113 th Congress, H.R. 1896 , almost identical to H.R. 4282 , was introduced in the House on May 8, 2013. H.R. 1896 contains implementing language for the Convention. H.R. 1896, the International Child Support Recovery Improvement Act of 2013 H.R. 1896 was introduced in the House on May 8, 2013, by Representative Dave Reichert and nine co-sponsors. H.R. 1896 was passed by the House on June 18, 2013, by a vote of 394-27. Although H.R. 1896 includes provisions that would implement the Convention, it includes many other provisions as well. Section 1 of the bill provides a title (name) for the bill; Section 2 provides the amendments needed for the Convention/Treaty; Section 3 provides for the development of a standard format for exchange of CSE data; Section 4 allows certain researchers under certain circumstances to use the National Directory of New Hires Database with personal identifiers; and Section 5 provides information related to the budgetary effects of the bill. The stated purpose of the bill is to ensure that the United States has the legal authority to comply fully with the obligations of the Convention, and for other purposes. Section 1. Short Title; References H.R. 1896 is called the International Child Support Recovery Improvement Act of 2013. The references in H.R. 1896 generally refer to amendments made to the Social Security Act, or to a section or provision in the Social Security Act. Section 2. Amendments to Ensure Access to Child Support Services For International Child Support Cases (a) Authority of the Secretary of HHS to Ensure Compliance with Multilateral Child Support Conventions H.R. 1896 would require the Secretary of HHS to use federal and, if necessary, state child support enforcement methods to ensure compliance with any United States treaty obligations associated with any multilateral child support convention to which the United States is a party. The Treaty will not affect intrastate or interstate child support cases in the United States. It will only apply to cases where the custodial parent and child live in one country and the noncustodial parent lives in another country. (b) Access to the Federal Parent Locator Service H.R. 1896 would expand the definition of an "authorized person" to include an entity designated as a Central Authority for child support enforcement in a "foreign reciprocating country" or in a "foreign treaty country" in cases involving international enforcement of child support. Under current federal law, the Federal Parent Locator Service (FPLS) is only allowed to transmit information in its databases to "authorized persons," which include (1) child support enforcement agencies (and their attorneys and agents); (2) courts; (3) the resident parent, legal guardian, attorney, or agent of a child owed child support; and (4) foster care and adoption agencies. The FPLS is an assembly of systems operated by the Office of Child Support Enforcement (OCSE), to assist states in locating noncustodial parents, putative fathers, and custodial parties for the establishment of paternity and child support obligations, as well as the enforcement and modification of orders for child support, custody, and visitation. The FPLS assists federal and state agencies to identify overpayments and fraud, and assists with assessing benefits. Developed in cooperation with the states, employers, federal agencies, and the judiciary, the FPLS was expanded by the PRWORA to include the following: The National Directory of New Hires (NDNH): a central repository of employment, unemployment insurance, and wage data from State Directories of New Hires, State Workforce Agencies, and federal agencies. The Federal Case Registry (FCR): a national database that contains information on individuals in child support cases and child support orders. The Federal Offset Program (FOP): a program that collects past-due child support payments from the tax refunds of parents who have been ordered to pay child support. The Federal Administrative Offset Program (FAOP): a program that intercepts certain federal payments in order to collect past-due child support. The Passport Denial Program (PDP): a program that works with the Secretary of State in denying passports of any person that has been certified as owing a child support debt greater than $2,500. The Multistate Financial Institution Data Match (MSFIDM): a program that allows child support agencies a means of locating financial assets of individuals owing child support. In addition, the FPLS also has access to external sources for locating information such as the Internal Revenue Service (IRS), the Social Security Administration (SSA), Veterans Affairs (VA), the Department of Defense (DOD), National Security Agency (NSA), and the Federal Bureau of Investigation (FBI). The expansion of access to and use of personal information contained in the FPLS, especially in the National Directory of New Hires, could potentially lead to privacy and confidentiality breaches, financial fraud, identity theft, or other crimes. There is also concern that a broader array of legitimate users of the NDNH may conceal the unauthorized use of the personal and financial data in the NDNH. Moreover, concerns about data security and the privacy rights of employees have been a point of contention in many of the debates regarding expanded access to the NDNH. (c) State Option to Require Individuals in Foreign Countries to Apply Through Their Country's Appropriate Central Authority H.R. 1896 would give states the option to require individuals in foreign countries to apply for CSE services through their country's appropriate central authority for child support enforcement. If the individual resides in a foreign country that is not a "reciprocating" or "treaty" country, the state may choose to accept or reject the application for CSE services. H.R. 1896 would amend Section 454(32)(A) of the Social Security Act (SSA) to include requests for CSE services by a "foreign treaty country" that has a reciprocal arrangement with a state as though it is a request by a state. It would also amend Section 454(32)(C) of the SSA to include a "foreign treaty country" and a "foreign individual" as entities that do not have to provide applications, and against whom no costs will be assessed, for CSE services. (d) Amendments to International Support Enforcement Provisions H.R. 1896 would establish a definition for three terms: (1) "foreign reciprocating country," (2) "foreign treaty country," and (3) "2007 Family Maintenance Convention." The bill would define a "foreign reciprocating country" as a foreign country (or political subdivision thereof) with respect to which the HHS Secretary has declared as having or implementing procedures to establish and enforce duties of support for residents of the United States at no cost or at low cost. The bill would define a "foreign treaty country" as a foreign country for which the 2007 Family Maintenance Convention is in force. The bill would define the term "2007 Family Maintenance Convention" to mean the Hague Convention of 23 November 2007 on the International Recovery of Child Support and Other Forms of Family Maintenance. The bill would amend Section 459A(c) of the SSA by using the new terms "foreign reciprocating countries" and "foreign treaty countries" in describing cases for which the HHS Secretary is responsible. In other words, it would be the responsibility of the HHS Secretary to facilitate support enforcement in cases involving residents of the United States and residents of "foreign reciprocating countries" or "foreign treaty countries." H.R. 1896 would amend Section 459A(c)(2) of the Social Security Act to include "foreign treaty countries" as entities which can receive notification as to the state of residence of the person being sought for child support enforcement purposes. H.R. 1896 would also amend Section 459A(d) of the Social Security Act to include "foreign reciprocating countries" and "foreign treaty countries" as entities that states may enter into reciprocal arrangements with for the establishment and enforcement of child support obligations. (e) Collection of Past-Due Support from Federal Tax Refunds H.R. 1896 would amend federal law so that the federal income tax refund offset program is available for use by a state to handle CSE requests from foreign reciprocating countries and foreign treaty countries. The Federal Income Tax Refund Offset program collects past-due child support payments from the income tax refunds of noncustodial parents who have been ordered to pay child support. The program is a cooperative effort between the federal Office of Child Support Enforcement (OCSE), the Internal Revenue Service (IRS), and state CSE agencies. Under the Federal Income Tax Refund Offset program, the IRS, operating on request from a state filed through the Secretary of HHS, intercepts tax returns and deducts the amount of certified child support arrearages. The money is then sent to the state CSE agency for distribution. (f) State Law Requirement Concerning the Uniform Interstate Family Support Act (UIFSA)—(1) In General H.R. 1896 would amend Section 466(f) of the Social Security Act to read as follows: "In order to satisfy Section 454(2)(A), each State must have in effect the Uniform Interstate Family Support Act, as approved by the American Bar Association on February 9, 1993, including any amendments officially adopted as of September 30, 2008 by the National Conference of Commissioners on Uniform State Laws." This means that for a state to receive federal CSE funding, each state's UIFSA must include verbatim any amendments officially adopted as of September 30, 2008, by the NCCUSL. States would be required to adopt the 2008 amendments verbatim to ensure uniformity of procedures, requirements, and reporting forms. In the past, collecting child support across state lines was difficult. Laws varied from state to state, often causing complications that delayed the establishment and/or enforcement of child support orders. The U.S. Congress recognized this problem and mandated (pursuant to PRWORA) that all states adopt UIFSA to facilitate collecting child support across state lines. One of the most important aspects of UIFSA is its provisions related to continuing, exclusive jurisdiction. Consistent with UIFSA's policy of "one order, one time, one place," only one court is authorized to establish or modify a child support order at a time. UIFSA provides that the court or administrative agency that issues a valid child support order retains "continuing, exclusive jurisdiction" to modify an existing order, as long as the custodial parent, the noncustodial parent, or the child remains in the issuing state. This provision limits the number of duplicate and conflicting orders, and reduces "forum" shopping by parents seeking to increase or decrease the amount of child support payments. Given that roughly 33% of all CSE cases involve more than one state, it is generally considered important that states have the same basic laws for handling interstate cases. One could contend or assert that the CSE program would be more effective if all states were required to adopt the most current version of UIFSA. Such a policy would increase the likelihood that all interstate cases are handled under a similar statutory framework, thus moving closer to the "one-order" world in which a child would not be seriously disadvantaged in obtaining child support just because his or her parents do not live in the same state. (f) State Law Requirement Concerning the Uniform Interstate Family Support Act (UIFSA)—(2) Conforming Amendment to the Full Faith and Credit Child Support Orders Act H.R. 1896 would clarify current law by stipulating that a state court that has established a child support order has continuing, exclusive jurisdiction to modify its order if the order is the controlling order and (1) the state is the child's state of residence or that of any individual contestant or (2) the contestants consent in a record or in open court that the court may continue to exercise jurisdiction to modify its order. The bill would also clarify that a state no longer has continuing, exclusive jurisdiction of a child support order if the state is not the residence of the child or an individual contestant, and the contestants have not consented in a record or in open court that the court of the other state may continue to exercise jurisdiction to modify its order. Federal law requires states to treat past-due child support obligations as final judgments that are entitled to full faith and credit in every state. This means that a person who has a child support order in one state does not have to obtain a second order in another state to obtain child support due should the noncustodial parent move from the issuing court's jurisdiction. Congress passed P.L. 103-383 , the Full Faith and Credit for Child Support Orders Act (FFCCSOA; 28 U.S.C. §1738B) in 1994 because of concerns about the growing number of child support cases involving disputes between parents who lived in different states and the ease with which noncustodial parents could reduce the amount of the obligation or evade enforcement by moving across state lines. P.L. 103-383 required courts of all United States territories, states, and tribes to accord full faith and credit to a child support order issued by another state or tribe that properly exercised jurisdiction over the parties and the subject matter. P.L. 103-383 addressed the need to determine, in cases with more than one child support order issued for the same obligor and child, which order to recognize for purposes of continuing, exclusive jurisdiction and enforcement. P.L. 103-383 restricted a state court's ability to modify a child support order issued by another state unless the child and the custodial parent have moved to the state where the modification is sought or have agreed to the modification. The 1996 welfare reform law ( P.L. 104-193 ) clarified the definition of a child's home state and made several revisions to ensure that the full faith and credit laws could be applied consistently with UIFSA. The bill would provide further clarification (as noted above) of under what conditions a state could modify a child support order. (f) State Law Requirement Concerning the Uniform Interstate Family Support Act (UIFSA)—(3) Effective Date; Grace Period for State Law Changes As mentioned earlier, H.R. 1896 would stipulate that each state's UIFSA must include any amendments officially adopted as of September 30, 2008, by the NCCUSL. Given that this provision must be approved by state legislatures, the bill contains a grace period tied to the meeting schedule of state legislatures. In any given state/jurisdiction, the bill would become effective no later than the effective date of laws enacted by state legislatures implementing the UIFSA amendments, but in no event later than the first day of the first calendar quarter beginning after the close of the first regular session of the state legislature that begins after the date of enactment. In the case of a state that has a two-year legislative session, each year of such session shall be deemed to be a separate regular session of the state legislature. Section 3. Data Exchange Standardization for Improved Interoperability (a) In General H.R. 1896 would require the Secretary of HHS to issue a rule designating standard data exchange elements for any category of information required to be reported under the CSE program. The rule would be developed by HHS in consultation with an interagency workgroup established by the Office of Management and Budget (OMB) and with consideration of state and tribal perspectives. To the extent practicable, the standard data exchange elements required by the rule would be non-proprietary, permit data to be exchanged, and incorporate the interoperable standards developed and maintained by recognized international bodies, intergovernmental partnerships, and federal entities with authority over contracting and financial assistance. To the extent practicable, the data reporting standards required by the rule would incorporate a widely accepted, non-proprietary, searchable, computer-readable format; be consistent with and implement applicable accounting principles; be capable of being continually upgraded as necessary; and, to the extent practicable, incorporate existing nonproprietary standards, such as the "eXtensible Business Reporting Language." According to testimony related to data standards and electronic information exchange in the CSE program: Sound standards establish a technological vocabulary that allows parties with various perspectives to speak the same language when discussing electronic information and data exchanges. Further, the existence of quality standards provides a level playing field for the vendors that provide software and services to the governmental entities using them.... As the quantity and complexity of the systems we operate increases, standards can help to insure that a common vocabulary exists for all of us to use in facilitating good and efficient government. Because CSE data and information are often stored in disconnected systems across a multitude of data centers and because data elements are defined differently by various organizations and entities, it is often hard to exchange data and correctly understand its meaning. The purpose of this provision is to develop a standard format so as to improve the ability of two or more systems or entities to exchange information and to correctly use the information that has been exchanged. According to the Commissioner of the Office of Child Support Enforcement (OCSE), data exchange standardization requirements "will eventually establish a common set of data elements and definitions in a format easily exchanged between different human services systems, and in fact with any system." The Commissioner further states: "With interoperable systems, we may do a better job of serving the whole person and the whole family; we may more effectively share services, streamline information and business systems, and minimize duplicative costs to build, maintain and update redundant computer systems." (b) Effective Dates H.R. 1896 would require the HHS Secretary to issue a proposed rule on the data exchange elements within 24 months after enactment. The rule would be required to identify federally required data exchanges, include specification and timing of exchanges to be standardized, and address the factors used in determining whether and when to standardize data exchanges. In addition, the rule would be expected to include state implementation options and likely future milestones. Section 4. Efficient Use of the National Directory of New Hires Database for Federally Sponsored Research Assessing the Effectiveness of Federal Programs in Achieving Positive Labor Market Outcomes H.R. 1896 would allow the HHS Secretary to provide access to data in each component of the Federal Parent Locator Service (FPLS) as well as information reported by employers via the National Directory of New Hires for (1) research undertaken by a state or federal agency (including through grant or contract) for purposes found by the Secretary to be likely to contribute to achieving the goals of Title IV-A of the Social Security Act (which includes the TANF block grant program and the Healthy Marriage and Responsible Fatherhood programs) or the CSE program (Title IV-D of the Social Security Act) and (2) an evaluation or statistical analysis undertaken to assess the effectiveness of a federal program in achieving positive labor market outcomes (including through grant or contract), by a specified federal department or agency. H.R. 1896 would stipulate that applicable data or information may include a personal identifier only if the state and federal agency conducting the relevant research or the federal department or agency undertaking the evaluation or statistical analysis enters into an agreement with the HHS Secretary regarding the security and use of the data or information. H.R. 1896 would require the agreement to include such restrictions or conditions with respect to the use, safeguarding, disclosure, or re-disclosure of the data or information (including by contractors or grantees) as the Secretary deems appropriate. H.R. 1896 would also require that the data or information be used exclusively for the purposes described in the agreement. In addition, H.R. 1896 would require the Secretary to determine that the provision of data or information is the minimum amount needed to conduct the research, evaluation, or statistical analysis and that it will not interfere with the effective operation of the CSE program. (Note that these provisions are in addition to the current law provisions concerning disclosure and use of research information as well as information integrity and security.) According to testimony on behalf of MDRC: Research firms that are funded by federal agencies to evaluate programs often rely on data collected by states from employers on employment and earnings, data that the states already report to the federal government for certain child support enforcement and other purposes. These data are housed in accessible form at the federal level within the National Directory of New Hires (NDNH) database. However, research contractors are generally unable to access this essential database for assessing whether federally supported programs actually work. Instead, they are forced to get the very same data directly from the states, at great cost to the federal government and at considerable burden in duplicative reporting for the states. If the NDNH database were made available to evaluators (with appropriate privacy safeguards), it would enable Congress and the federal agencies to assess the impact that social programs have on jobs and earnings at much less cost and burden to the federal government and the states. H.R. 1896 would also stipulate that any individual who willfully discloses a personal identifier (such as a name or social security number) in any manner to an entity not entitled to receive the data or information, shall be fined under title 18, United States Code, imprisoned not more than five years, or both. In addition, H.R. 1896 would require that new hire reports be deleted from the National Directory of New Hires 48 months after the date of entry. Under current law new hire reports must be deleted from the National Directory of New Hires 24 months after the date of entry. The reporting and deletion requirements result in a constant cycling of wage and employment data into and out of the National Directory of New Hires. H.R. 1896 would not change the existing provision of federal law that allows the HHS Secretary to keep samples of data entered into the National Directory of New Hires for research purposes. Section 5. Budgetary Effects The final section of H.R. 1896 includes instructions related to the budgetary effects of the bill.

It is often difficult, if not impossible, to enforce child support obligations in cases where the custodial parent and child live in one country and the noncustodial parent lives in another. The United States has not ratified a multilateral child support enforcement treaty dealing with this issue. P.L. 104-193 (enacted in 1996) established procedures for international enforcement of child support. Currently, the federal Office of Child Support Enforcement (OCSE, within the Department of Health and Human Services (HHS)) has reciprocal agreements regarding child support enforcement with 15 countries, including Australia, Canada (separate agreements with 9 of the 10 Canadian provinces and with all 3 Canadian territories), Czech Republic, El Salvador, Finland, Hungary, Ireland, Israel, Netherlands, Norway, Poland, Portugal, Slovak Republic, Switzerland, and the United Kingdom of Great Britain and Northern Ireland. The Hague Convention on the International Recovery of Child Support and Other Forms of Family Maintenance (referred to hereinafter as the Convention or Treaty) was adopted at the Hague Conference on Private International Law on November 23, 2007. The Convention contains procedures for processing international child support cases that are intended to be uniform, simple, efficient, accessible, and cost-free to U.S. citizens seeking child support in other countries. For many international cases, U.S. courts and state Child Support Enforcement (CSE) agencies already recognize and enforce child support obligations, whether or not the United States has a reciprocal agreement with the other country. However, many foreign countries will not enforce U.S. child support orders in the absence of a treaty obligation. The United States was the first country to sign the Convention. The other signatories are Albania, Bosnia and Herzegovina, the European Union, Norway, and Ukraine. However, the United States has not yet ratified the treaty. Although it is not the Senate's role to ratify treaties, it provides its advice and consent to a treaty's provisions. On September 29, 2010, the U.S. Senate approved the Resolution of Advice and Consent regarding the Convention. According to OCSE, the following additional steps must occur before the Convention can enter into force for the United States: Congress must adopt, and there must be enacted, implementing legislation for the Convention. Pursuant to the implementing legislation, all states must enact the 2008 version of the Uniform Interstate Family Support Act (UIFSA) by the effective date noted in the legislation. In addition, the implementing legislation would require states to make minor revisions to their CSE state plan. The President must sign the instrument of ratification for the Convention. Finally, after all these activities are completed, the United States will be able to deposit its instrument of ratification with the Ministry of Foreign Affairs of the Kingdom of the Netherlands, which is the depository for the Convention. Once the Treaty is in force, it would apply to cases being worked between countries that are party to the Treaty. H.R. 1896 (the International Child Support Recovery Improvement Act of 2013) was passed by the House on June 18, 2013, by a vote of 394-27. It would implement the Convention. H.R. 1896 would require the Secretary of HHS to use federal and, if necessary, state CSE methods to ensure compliance with any U.S. treaty obligations associated with any multilateral child support convention to which the United States is a party. H.R. 1896 would amend federal law so that the federal income tax refund offset program is available for use by a state to handle CSE requests from foreign reciprocating countries and foreign treaty countries. It would require states to adopt the 2008 amendments to the Uniform Interstate Family Support Act (UIFSA) verbatim to ensure uniformity of procedures, requirements, and reporting forms. In addition, H.R. 1896 would provide for the development of a standard format for data exchange of CSE data. It would also allow certain researchers to use the National Directory of New Hires database with personal identifiers for the purposes of the Temporary Assistance for Needy Families (TANF) or CSE programs or of evaluating whether federal reemployment programs are working as intended.

Background The National Transportation Safety Board (NTSB) was established in 1967 as part of the newly formed U.S. Department of Transportation (DOT). Congress made it responsible for investigating all civil aviation accidents and certain accidents in other modes of transportation, with the intent of identifying safety improvements to prevent future accidents. In 1974, Congress passed the Independent Safety Board Act of 1974 (in P.L. 93-633 ), making the NTSB completely independent of DOT. As an independent agency, the NTSB can carry out unbiased investigations and make recommendations regarding safety regulations and oversight practices of DOT without inherent conflicts of interest. The NTSB's main functions are determining the causes of accidents and recommending safety improvements that could prevent such accidents from recurring. Additionally, the NTSB provides assistance to victims' families in major airline and passenger rail disasters and serves as a board of appeals for certain transportation regulatory actions by the Federal Aviation Administration (FAA) and the U.S. Coast Guard. The agency has no authority to require implementation of its recommendations. It does not regulate or oversee safety practices in the transportation sector; those responsibilities are assigned to DOT; DOT modal agencies including FAA and the Federal Railroad Administration; and other federal and state agencies. NTSB Organization and Functions The NTSB consists of a five-member board and a staff of approximately 420. About three-quarters of the staff are located at the NTSB's Washington, DC, headquarters. In addition, the NTSB maintains four regional offices in Ashburn, VA; Denver, CO; Federal Way, WA; and Anchorage, AK. The NTSB also has a training center in Ashburn, VA. The NTSB Reauthorization Act of 2006 ( P.L. 109-443 ) included a provision that requires the NTSB to maintain at least one full-time employee in every state located more than 1,000 miles from the nearest NTSB regional office to provide initial investigative response to accidents. This measure directly impacts the state of Hawaii, where the NTSB does not have a field office. Since passage of this legislation, the NTSB has maintained one aviation safety investigator in Hawaii. In recent years, NTSB regional staff have become more geographically dispersed, and are physically located in 25 states. The five Safety Board members, presidentially appointed with the advice and consent of the Senate, serve five-year terms and may continue to serve beyond their terms until replacement board members are appointed. Not more than three Safety Board members may be appointed from the same political party, and at least three of the members must be appointed on the basis of technical qualifications, professional standing, and knowledge of transportation safety issues. Investigative and support staff are organized under separate offices for each transportation mode, with the office of research and engineering supporting all of the modal offices. The NTSB also serves as a court of appeals for airmen and mariners who are subject to administrative actions by the FAA or the Coast Guard. Such cases are initially adjudicated by the NTSB's Office of Administrative Law Judges. The NTSB also has an Office of Safety Recommendations and Communications whose responsibilities include working with modal administrations and other recipients of NTSB safety recommendations to track correspondence and actions taken in response to those recommendations. The office also coordinates communications with Congress, transportation stakeholders, and the public regarding Board actions and transportation safety advocacy (see Figure 1 ). Accident Investigation The NTSB investigates the following transportation-related accidents and safety issues: all accidents involving civil aircraft and public aircraft, other than military or intelligence agency aircraft, within the United States and its territories; selected highway and railroad grade crossing accidents; railroad accidents involving passenger trains, loss of life, or significant property damage; pipeline accidents involving significant property or environmental damage, or loss of life; in coordination with the Coast Guard, major marine casualties occurring on the navigable waters or territorial sea of the United States, or involving U.S.-flag vessels, except those involving only public (i.e., government-owned or -operated) vessels; and other selected catastrophic accidents or recurring problems involving transportation safety investigated at the Board's discretion. The Party Process While the NTSB employs investigators and subject matter experts in a number of engineering and technical disciplines, it relies extensively on the expertise of manufacturers, transportation providers, and regulatory agencies connected with an accident to assist with investigations. It does so through what is known as the "party process," in which the NTSB investigator-in-charge designates parties to participate in an investigation. The parties then assign qualified technical personnel to assist the NTSB. A number of safeguards exist to prevent external entities from influencing NTSB findings and conclusions. First, while interested parties may provide technical expertise in the fact-finding phase of an investigation and may submit their own analyses for consideration by NTSB investigators, the NTSB bases its conclusions strictly on analysis and recommendations by NTSB staff. Formal procedures exist for parties to petition the NTSB to reconsider or modify its investigative findings after an investigation has been completed and the final report has been adopted. Other than the FAA in aviation cases, no party has a specific right to hold party status in an investigation; parties can be sanctioned or lose their party status if they do not fulfill assigned duties and comply with rules of conduct. Under provisions of the Government in the Sunshine Act ( P.L. 94-409 ), the Safety Board as a whole must meet in public on most matters pertaining to accident investigations. Board members and senior investigative staff must also provide financial disclosures, and are precluded from maintaining certain financial interests in transportation-related companies. Despite these safeguards, the potential for parties to exert their influence on the NTSB process still exists. Even if the NTSB was not swayed by outside efforts to influence an investigation, a public perception that the agency is not fully impartial could diminish its credibility. Striking a balance between allowing parties to the investigation to provide unique data and technical expertise that often they alone possess while preventing them from attempting to sway the investigative process is a sizable challenge. Moreover, during highly complex and contentious accident investigations, evaluating competing perspectives brought forth by various parties to the investigation can prove challenging for the NTSB, and can stretch out the length of time needed to complete an investigation. International Representation In accordance with international treaties and standard practices for aviation accident investigation set forth by the International Civil Aviation Organization (ICAO), the NTSB participates in investigations of foreign aviation accidents involving any U.S.-manufactured or -registered aircraft. On occasion, the NTSB may also lend its expertise to foreign investigations at the request of another country, even though the United States may have no vested interest or any specific right under international agreements to participate in the accident investigation process. In instances where the NTSB is asked to consult or actively participate in an overseas investigation, the NTSB may be reimbursed for associated costs from outside entities such as a foreign government. P.L. 109-443 included a provision designating such receipts, whether in the form of fees or reimbursements, as offsetting collections available until expended. Prior to this legislative change, only reimbursements related to activities of the NTSB Academy, such as tuition payments or classroom rental fees, were specifically credited as offsetting collections. In addition, the NTSB has recovered some costs associated with foreign aviation accident investigations through DOT's Safe Skies for Africa program. Between FY2012 and FY2015, its costs for participating in international investigations have ranged from just under $1 million to almost $2.4 million annually, of which between roughly $40,000 and $150,000 has been covered under the Safe Skies for Africa program. Safety Recommendations and Advocacy The NTSB has no direct authority to change transportation safety regulations and practices. Its principal means for effecting change in transportation safety is the issuance of safety recommendations to regulators, operators, and users of transportation systems. Since investigations of complex accidents may take several years, the NTSB routinely issues recommendations over the course of an investigation as needed safety improvements are identified. Since 1967, the NTSB has issued over 14,300 safety recommendations to more than 2,300 recipients across all modes of transportation. Historically, about 82% of NTSB recommendations have led to the implementation of safety improvements deemed acceptable by the Board. DOT agencies must provide a formal written response to each NTSB recommendation within 90 days of receipt, detailing how they intend to implement the recommendation in whole or in part, or explaining the reasons for not implementing the recommendation. There is no statutory requirement for agencies and organizations to adopt NTSB-issued safety recommendations. However, the NTSB often publicizes its recommendations and advocates for sought-after transportation safety improvements in order to build public support for their implementation. While most NTSB safety recommendations are eventually implemented, implementation may be prolonged due to lengthy rulemaking processes, as well as concerns about feasibility, costs, and benefits. The NTSB explicitly does not take benefit/cost considerations into account in developing its recommendations. Nor is it charged with weighing the cost of implementing a particular safety recommendation against other safety-related expenditures a transportation carrier or government agency might undertake. Most Wanted Transportation Safety Improvements The NTSB highlights key safety recommendations on a list of "Most Wanted" safety improvements. Currently the list seeks actions to reduce fatigue-related accidents; improve rail transit safety oversight; promote the availability of collision avoidance technologies in highway vehicles; strengthen occupant protection in highway vehicles, passenger trains, and aircraft; minimize operator distractions that cause transportation accidents; prevent loss of control in flight in general aviation; promote completion of rail safety initiatives including positive train control and improved tank car design; end substance impairment in transportation; and require operators to be medically fit for duty. These "Most Wanted" transportation safety improvements typically encompass numerous specific recommendations requesting action from DOT and the states. Often, such action requires statutory and regulatory changes. Ties to Legislation In general, NTSB's safety recommendations and safety advocacy programs have influenced the regulatory agenda of transportation agencies and have had a profound influence on congressional decisionmaking and oversight of transportation safety issues. This influence has been visible in legislation enacted to require positive train control systems on many railroad lines, regulations to reduce airline pilot fatigue, state laws addressing distracted driving, federal safety standards for helicopter air ambulances, and improved safety standards for pipeline safety. For example, a number of provisions in the FAA Extension, Safety, and Security Act of 2016 ( P.L. 114-190 ) draw on NTSB investigations and recommendations: Section 2101 sets a deadline for FAA to implement an industrywide airline pilot records database, an issue the NTSB has addressed in a number of pilot-involved accidents. Section 2102 requires FAA to modify airline pilot training to incorporate processes to verify that pilots are skilled at monitoring automated systems and controlling the aircraft flightpath without autopilot systems engaged. The NTSB raised concerns about whether pilots adequately understand automated systems and whether cockpit automation has led to erosion of flying skills following the July 2013 crash of an Asiana Airlines Boeing 777 at San Francisco International Airport. Section 2103 of the act directs FAA to assess recommendations made by the Pilot Fitness Aviation Rulemaking Committee regarding mental health screening for pilots. The mental health of pilots was the focus of international aviation safety following the March 2015 suicide downing of a Germanwings Airbus A-320 in France, but the NTSB raised the issue far earlier, following investigations of the 1997 crash of SilkAir flight 185 in Indonesia and the crash of EgyptAir flight 990 in the Atlantic Ocean in 1999. Section 2105 includes language requiring FAA to evaluate and update, as necessary, standards for crash-resistant helicopter fuel systems. That provision directly mandates FAA to address a July 2015 NTSB safety recommendation calling for the fuel systems in all newly manufactured helicopters, including those based on older designs, to meet crash-resistance standards that were put in place for newly designed rotorcraft in 1994. Similarly, the Pipeline Safety, Regulatory Certainty, and Job Creation Act of 2011 (Pipeline Safety Act; P.L. 112-90 ) contained a broad range of provisions addressing pipeline safety. Among the most significant were provisions to increase the number of federal pipeline safety inspectors, require automatic shutoff valves for transmission pipelines, mandate verification of maximum allowable operating pressure for gas transmission pipelines, increase civil penalties for pipeline safety violations, and mandate reviews of diluted bitumen pipeline regulation (see CRS Report R44201, DOT's Federal Pipeline Safety Program: Background and Key Issues for Congress , by [author name scrubbed]). The Rail Safety Improvement Act of 2008 (RSIA08; P.L. 110-432 ) requires implementation of positive train control on railroads that carry passengers or have high-volume freight traffic with certain hazardous materials. Positive train control is a communications and signaling system that has been identified by the NTSB as a technology capable of preventing incidents caused by train operator or dispatcher error. It is expected to reduce the number of incidents due to excessive speed, conflicting train movements, and engineer failure to obey wayside signals (see CRS Report R42637, Positive Train Control (PTC): Overview and Policy Issues , by [author name scrubbed]). Also, as previously noted, the NTSB lists among its "Most Wanted" safety improvements actions to minimize operator distractions that cause transportation accidents. Congress established a distracted driving incentive grant program in 2012 to encourage states to prohibit texting by all drivers, and prohibit cell-phone use entirely for drivers under age 18. To qualify for a grant, states were required to have these as primary violations, to have no exception for use while stopped in traffic, and to have a minimum fine for first offenders and an increased fine for repeat offenders. Only one state qualified for a grant under this program in FY2014 and FY2015. In December 2015, a provision in the Fixing America's Surface Transportation (FAST) Act ( P.L. 114-94 ) deleted the requirement for an increased fine for repeat offenders, which is expected to allow more states to qualify for grants (see CRS Report R44394, Federal Highway Traffic Safety Policies: Impacts and Opportunities , by [author name scrubbed]). The status of agency actions to address these and other transportation safety mandates may be of particular interest during NTSB reauthorization proceedings. NTSB Funding Levels Funding for the NTSB has historically consisted of a base authorization or appropriation amount; a set-aside emergency fund to cover unforeseen accident costs such as wreckage recovery, salvage, and storage; and supplemental appropriations to cover the costs of large, complex investigations such as that involving TWA flight 800, which suffered a midair explosion off the coast of Long Island, NY, in 1996, resulting in 230 fatalities. The existing statute provides for the continued maintenance of $2 million in the NTSB's emergency fund and authorizes additional funding to increase the balance of the emergency fund up to an authorized limit of $4 million. The NTSB, however, has not had to use its emergency fund or seek supplemental appropriations in more than a decade. Appropriations levels since FY2007 and the FY2017 funding request for the NTSB are provided in Table 1 . Government Accountability Office Oversight 49 U.S.C. §1138 charges the Government Accountability Office (GAO) with carrying out evaluations and audits of the NTSB's operations and activities with respect to information management and security, resource management, workforce development, procurement and contracting, management practices, and management challenges in completing accident investigations. In general, the NTSB has been responsive to GAO findings, and in the past has fully implemented GAO recommendations. From 2006 through 2008, GAO made 21 specific recommendations to NTSB, and in 2012 GAO found that all of these had been effectively implemented and closed. In 2013, GAO revisited NTSB management and operational practices, finding that the NTSB had made improvements, but needed to continue its efforts to further improve training center utilization, close-out processes for safety recommendations, interagency communications, financial management, and workforce diversity management. In particular, GAO recommended that senior leaders at the NTSB develop a specific strategy for maximizing the utility and utilization of the NTSB's cost accounting system. Reauthorization and Congressional Oversight Issues Current issues that may arise in the context of proposed legislation reauthorizing the NTSB, or in the course of more general congressional oversight, include the adequacy of staffing resources and management of the NTSB Academy. Current safety issues relevant to the NTSB mission include the recoverability of vehicle recorders involved in aviation and maritime accidents, privacy of data collected aboard transportation vehicles or in the course of investigations, and the potential use of recorder data for purposes other than accident investigation and reconstruction. Additionally, legislation considering railroad safety introduced in the 114 th Congress directly addresses NTSB funding and resources for railroad accident investigations. Staffing In 2008, the NTSB had requested a staff increase of roughly 22% starting in FY2008, an increase it believed was necessary to adequately carry out its mission. Over the past decade, NTSB staffing has increased by roughly half that amount, about 12% above the FY2007 headcount of 378. Additionally, the NTSB has developed a five-year strategic human capital plan. That plan endeavors to address gaps in mission-critical competencies, assure leadership succession, and increase workforce diversity. Despite the increased staffing, the NTSB has cited limited resources as a factor in the extended duration of a number of accident investigations and as the reason for its failure to investigate some pipeline accidents and a large number of railroad accidents, especially fatal grade crossing and trespasser accidents that the NTSB is statutorily mandated to investigate. In consideration of the hundreds of annual fatalities that result from railroad trespassing and grade crossing accidents, Congress may debate whether the statutory requirement for the NTSB to investigate all fatal railroad accidents is appropriate or whether additional staffing is needed to meet this requirement. Congress may also consider options to enhance the NTSB's ability to recruit and retain field investigators and specialists in critical science and engineering fields, as well as professionals with unique operational experience in the various transportation modes. The NTSB has raised specific concerns about potential staffing shortages due to retirements and emerging skill gaps in certain management and mission-critical occupations. Data on the NTSB's abilities to meet its statutory requirements for accident investigation suggest that ongoing staffing challenges are most acute in its Office of Railroad, Pipeline, and Hazardous Materials. The NTSB Training Center The National Transportation Safety Board Amendments Act of 2000 ( P.L. 106-424 ) gave the NTSB authority to enter into agreements for facilities, technical services, and training in accident investigation theory and practice. In 2000, the NTSB awarded a 20-year contract for a training site to the George Washington University (GWU). Construction of the NTSB Training Center, located on the Loudon County Campus of GWU in Ashburn, VA, was completed in August 2003. The costs and benefits of the facility have been a long-standing concern. P.L. 109-443 required the NTSB to develop and implement a plan to attain financial self-sufficient operation of the training center. However, the training center has not been able to achieve self-sufficiency, and consistently operates at a deficit. The primary purpose of the training center is to train NTSB staff and transportation industry personnel who may assist the NTSB with accident investigation and in responding to the victims of transportation disasters and their families. The center also provides a facility to host forums and focused meetings on specific transportation safety topics. However, revenues from fees associated with training and transportation safety-related meetings have proven inadequate to cover the costs of the facility. In recent years, the NTSB has increased its reliance on leases and rentals of both its classroom and nonclassroom space for purposes not related to transportation safety, but it has not been able to fully recover training center costs. A GAO study of NTSB finances and business practices in 2006 concluded that "... [the] NTSB may have difficulty increasing revenues or decreasing external training costs enough to ever fully offset the training center's costs." Also, the GAO report noted that the NTSB has been in violation of the Anti-Deficiency Act because it negotiated the lease on the NTSB Academy facility as an operating lease instead of a capital lease, and did not obtain budget authority for the full term of the 20-year lease. Language to remedy this situation was not included in the NTSB reauthorization legislation. Possible remedies identified by the GAO include obtaining a deficiency appropriation for the full amount of the lease, renegotiating the lease contract, terminating the lease, or obtaining authority to obligate lease payments on an annual basis. GAO concluded that vacating the space may be the most cost-effective strategy; however, the potential benefits derived from this facility were not fully considered in GAO's analysis. Because past reauthorization legislation did not address NTSB Academy management practices, weighing the costs and benefits of maintaining the training center remains a specific issue for congressional oversight and possible legislation. In a July 2013 review, GAO found that the NTSB had improved its utilization of the training center. Classroom utilization increased from less than 20% prior to FY2007 to above 60% since FY2009. Additionally, the NTSB has leased some of its unutilized nonclassroom space. The increased utilization and lease revenue has resulted in improved cost recovery, with the annual operating deficit falling from $6.3 million in FY2004 to the $2 million-$2.5 million range in FY2013-FY2015. Nonetheless, the facility still fails to recoup all of its operating costs. Although the utilization and operating costs of the training center may be of interest during oversight hearings, the ability of Congress to make significant changes before the expiration of the NTSB's existing lease agreement may be limited. Data Recorder Issues Data and voice recorders have served as important investigative tools in aviation since they were first introduced in the 1960s. Presently, two main issues exist regarding data recorders. The first involves the ability of investigators to recover accident recorders promptly following mishaps, particularly submerged aircraft and ship recorders. The second issue concerns privacy, particularly when it comes to public disclosures and non-accident related uses of recorder data. Recorder Recovery Recovery of recorders has proven challenging after several recent accidents: Air France flight 447 crashed off the coast of Brazil in June 2009, sinking to a depth of about 13,000 feet, where the recorders remained until they were recovered and their data downloaded in May 2011; EgyptAir flight 804 crashed in the Mediterranean Sea on May 19, 2016, but its recorders were not recovered until June 16, 2016, and then required extensive repair before data could be extracted; and Malaysia Airlines flight 370 remains missing after disappearing during a flight from Kuala Lumpur, Malaysia, to Beijing, China, on March 8, 2014. The recorders have not yet been found or recovered. In January 2015, the NTSB issued aviation safety recommendations A-15-1 through -8 urging that aircraft used for overwater flights be capable of transmitting data on impact location and underwater location and carry recorders or transmitters allowing for the recovery of essential flight data parameters without the need for underwater retrieval. The NTSB urged FAA to work with ICAO and foreign aviation authorities to harmonize technologies and regulations pertaining to location broadcasts and flight data transmissions from accident aircraft. The NTSB also sought protections to prevent disabling of flight recorder devices, as well as the installation and use of cockpit image recorders. The Safe Aviation and Flight Emergency Tracking Act of 2015 ( H.R. 753 ) would require FAA to issue regulations that certain large passenger aircraft be equipped with a means to provide continuous tracking information and technology, such as automatic deployable flight recorders, that would enable timely and cost effective recovery of the flight data and cockpit voice recorders. While the bill is similar to the January 2015 NTSB safety recommendations, it does not cite them specifically. Also, the October 2015 sinking of the U.S.-flag cargo vessel El Faro in the Atlantic Ocean raised concerns over the ability to locate and recover maritime voyage data recorders. The El Faro and its data recorder, which was affixed to its mast, sank to a depth of about 15,000 feet. The recorder was recovered in August 2016, 10 months after the accident. In general, under the International Convention for the Safety of Life at Sea (SOLAS), certain passenger vessels and large cargo vessels making international voyages are required to carry voyage data recorders. The recorders can be either retrievable fixed-mount units, like the one carried on El Faro , or float-free units. Revised regulations implemented in 2014 stipulate that new ships and newly installed recorders must consist of both a retrievable fixed-mount unit and a float-away component in addition to onboard long-term data storage, but ships with previously installed units have not been required to upgrade. Newer recorders must also capture additional parameters and capture data for greater lengths of time. While the NTSB has not made specific recommendations regarding the recovery or survivability characteristics of maritime voyage data recorders, concerns over data recovery may prompt congressional interest in potential options to assist investigators in the recovery of data from vessels lost in deep water. Data Privacy Event recorders are assisting accident investigators across all modes of transportation, including rail, trucking, and passenger cars. The increasing ability to collect data, voice, and video recordings of accident events is, however, raising questions about privacy and the potential use of these data outside the scope of investigative proceedings. The Driver Privacy Act of 2015 ( S. 766 ) would prohibit access to data recorded or transmitted by an event data recorder installed in a passenger motor vehicle by someone other than the owner or lessee of the vehicle, unless retrieved when authorized by a court or other judicial or administrative authority in a manner that comports with standards for admission as evidence; with the owner's or lessee's consent for any specified purpose, including vehicle diagnostics, service, or repair, or enrollment in a subscription service; pursuant to an NTSB or DOT investigation or inspection, provided that personally identifiable information is not disclosed, except for the vehicle identification number, which may be disclosed to the manufacturer; for the purpose of assessing or facilitating emergency medical response to a motor vehicle crash; or for traffic safety research so long as personally identifiable information is not disclosed. The bill would also require the National Highway Traffic Safety Administration to complete a study, provide a report to Congress, and promulgate regulations concerning the appropriate amount of time event data recorders should capture and record for retrieval vehicle-related data needed to investigate the causes of motor vehicle crashes. Railroad Accident Investigation The May 2015 derailment of an Amtrak passenger train in Philadelphia, PA, and a number of derailments of freight trains hauling flammable fuels have prompted increased interest in railroad accident investigations and the implementation of safety recommendations pertaining to railroad safety. As previously noted, the NTSB has stated that it lacks adequate resources to investigate all railroad accidents that it is required by statute to investigate. While specific NTSB reauthorization legislation has not been introduced in the 114 th Congress, the Comprehensive Transportation and Consumer Protection Act of 2015 ( S. 1732 ) specifies specific authorization of appropriations to the NTSB for railroad accident investigations of $6.3 million in FY2016; $6.4 million in FY2017; $6.5 million in FY2018; and $6.6 million in FY2019. The bill would also address several NTSB railroad safety recommendations. It would require the development of specific plans for positive train control systems, and would establish authority for awarding grants to implement these plans. It would also direct DOT to carry out a study examining the possible effectiveness of positive train control systems and related technologies on reducing highway-rail grade crossing accidents.

The National Transportation Safety Board (NTSB) is a small, independent federal agency with responsibility for investigating transportation accidents; conducting transportation safety studies; issuing safety recommendations; aiding victims' families after aviation and passenger rail disasters; and promoting transportation safety. The NTSB makes safety recommendations to federal and state agencies, transportation providers, and manufacturers, which may or may not choose to implement them. In recent years, NTSB recommendations have helped build support for laws enacted to mandate positive train control systems, a safety technology now being installed on certain railroad lines; Federal Aviation Administration (FAA) regulations to address airline pilot fatigue; state laws addressing distracted driving; federal safety standards for helicopter air ambulances; and crashworthiness standards for helicopter fuel systems, which are required under a new federal law. The NTSB was last reauthorized in 2006 when Congress approved a two-year reauthorization measure, covering FY2007 and FY2008 in the National Transportation Safety Board Reauthorization Act of 2006 (P.L. 109-443). Since then, the NTSB has addressed a number of Government Accountability Office (GAO) recommendations to improve its strategic planning, financial and human capital management, risk-based accident response, training, and communications. The agency has also increased staffing to better respond to accident investigation demands. In 2013, GAO cautioned that the NTSB needed to continue its efforts to further improve training center utilization, close-out processes for safety recommendations, interagency communications, financial management, and workforce diversity management, and it recommended that the NTSB develop a formal strategy to maximize the utility of its cost accounting system. Some Members of Congress have expressed an interest in reauthorizing the NTSB. Issues that might be considered in the context of reauthorization include the adequacy of staffing resources and the cost of the NTSB's training center. Additionally, reauthorization could offer a legislative vehicle for addressing a number of transportation safety issues that directly relate to the NTSB mission, including the recoverability of vehicle recorders involved in aviation and maritime accidents, the privacy of data collected from vehicle recorders, and the use of recorder data for purposes other than accident investigation and reconstruction.

Introduction Internet search engine operators such as Google, Microsoft, and Yahoo generate significant revenue by selling words or phrases (referred to as "keywords") that trigger paid advertisements that appear on their search result Web pages. There has been much litigation over the past five years concerning the sale or purchase of trademarks as keywords to trigger sponsored search engine results. Federal courts have struggled to determine whether such trademark usage constitutes actionable trademark infringement. This report first provides a brief general overview of trademark law and then reviews court opinions in this rapidly changing area of law. Background A "trademark" is any word, name, symbol, or device or any combination thereof adopted and used by a manufacturer or merchant (1) to indicate the source of his or her goods or services and (2) to identify and distinguish the goods or services from those offered by others. The principal federal statute governing trademarks is the Trademark Act of 1946 (conventionally known as the Lanham Act). Unlike the other major branches of intellectual property law (copyright and patent), the constitutional basis for federal trademark law is not the Intellectual Property (IP) Clause of the U.S. Constitution, but rather the Commerce Clause. Under the Lanham Act, a merchant or manufacturer that wants to use a particular word or symbol (referred to as a "mark" in trademark law parlance) in association with a product or service must register the mark with the U.S. Patent and Trademark Office to obtain federal protection for the mark. The Lanham Act provides a trademark owner with the right to prevent business competitors from using that mark. The purpose and benefits of trademark law have been described by the U.S. Supreme Court as follows: In principle, trademark law, by preventing others from copying a source-identifying mark, reduces the customer's costs of shopping and making purchasing decisions ... for it quickly and easily assures a potential customer that this item – the item with this mark – is made by the same producer as other similarly marked items that he or she liked (or disliked) in the past. At the same time, the law helps assure a producer that it (and not an imitating competitor) will reap the financial, reputation-related rewards associated with a desirable product. The law thereby encourages the production of quality products ... and simultaneously discourages those who hope to sell inferior products by capitalizing on a consumer's inability quickly to evaluate the quality of an item offered for sale. Trademark Infringement The trademark owner may pursue several federal private causes of action to prevent, and obtain damages for, unauthorized uses of the trademark (called "infringement"). The following sections of the Lanham Act govern federal trademark infringement claims: Section 32(1): "Any person who shall, without the consent of the registrant—use in commerce any reproduction, counterfeit, copy, or colorable imitation of a registered mark in connection with the sale, offering for sale, distribution, or advertising of any goods or services on or in connection with which such use is likely to cause confusion, or to cause mistake, or to deceive ... shall be liable in a civil action by the registrant...." Section 43(a): "Any person who, on or in connection with any goods or services, or any container for goods, uses in commerce any word, term, name, symbol, or device, or any combination thereof, or any false designation of origin, false or misleading description of fact, or false or misleading representation of fact, which—is likely to cause confusion, or to cause mistake, or to deceive as to the affiliation, connection, or association of such person with another person, or as to the origin, sponsorship, or approval of his or her goods, services, or commercial activities by another person ... shall be liable in a civil action by any person who believes that he or she is or is likely to be damaged by such act." In order to establish a violation of either Section 32(1) or Section 43(a) of the Lanham Act, the trademark owner (plaintiff) must demonstrate that the following elements are satisfied: 1. The plaintiff possess a mark that is valid and protectable under the Lanham Act. 2. The defendant used the mark in commerce in connection with any goods or services without the consent of the plaintiff. 3. The defendant's use of the mark is likely to cause consumer confusion concerning the origin or sponsorship of the goods or services. The first element is typically straightforward for the plaintiff to show. According to the Lanham Act, a certificate of registration issued by the U.S. Patent and Trademark Office serves as "prima facie evidence of the validity of the registered mark and of the registration of the mark, of the registrant's ownership of the mark, and of the registrant's exclusive right to use the registered mark in commerce on or in connection with the goods or services specified in the certificate." The second prerequisite to establish a defendant's liability is to show that the defendant's use of the plaintiff's trademark is a commercial use of the mark as a trademark—that is, the defendant used the mark "in commerce," in connection with the sale of goods or services. However, this second element has caused courts interpretive difficulties because there are two relevant statutory definitions that may apply to the phrase "use in commerce." The first definition provides that the word "commerce" means "all commerce which may lawfully be regulated by Congress." The second definition defines the specific phrase "use in commerce" to mean the bona fide use of a mark in the ordinary course of trade, and not made merely to reserve a right in a mark. For purposes of this Act, a mark shall be deemed to be in use in commerce—(1) on goods when—(A) it is placed in any manner on the goods or their containers or the displays associated therewith or on the tags or labels affixed thereto, or if the nature of the goods makes such placement impracticable, then on documents associated with the goods or their sale, and (B) the goods are sold or transported in commerce, and (2) on services when it is used or displayed in the sale or advertising of services and the services are rendered in commerce, or the services are rendered in more than one State or in the United States and a foreign country and the person rendering the services is engaged in commerce in connection with the services. As this report will discuss later, the "use" prong of a trademark infringement claim has been the focus of much of the keyword advertising litigation. Under the third element, "likelihood of confusion," the plaintiff need not show that actual consumer confusion has occurred as a result of defendant's use of the trademark, but rather that consumer confusion as to the source of the goods is probable . The likelihood of confusion analysis is a fact-specific inquiry that examines whether "the allegedly infringing conduct carries with it a likelihood of confounding an appreciable number of reasonably prudent purchasers exercising ordinary care." Evidence to prove or disprove this third element often takes the form of customer surveys. Specific court opinions in each of the federal circuits have set forth a list of factors that courts are to consider in trademark infringement cases when analyzing "likelihood of confusion." For example, the U.S. Court of Appeals for the First Circuit has identified the following eight relevant criteria: the similarity of the marks; the similarity of the goods; the relationship between the parties' channels of trade; the relationship between the parties' advertising; the classes of prospective purchasers; evidence of actual confusion; the defendants' intent in adopting its mark; and the strength of the plaintiff's mark. However, as one federal court has explained, "[n]ot all of the factors are always relevant; nor are they of equal importance in each case.... Consequently, no one factor is dispositive on the determination of likelihood of confusion." Defenses Even if the plaintiff can establish a prima facie case of trademark infringement by satisfying the three elements discussed above, the defendant can assert several defenses to escape liability. One of these defenses is the first sale exhaustion doctrine, in which there is no trademark infringement when the defendant is reselling a "genuine" good that bears the trademark. A second defense is "nominative fair use," in which the defendant is using the plaintiff's trademark to specifically identify the plaintiff for certain purposes—such as comparative advertising or advertising repair services or replacement parts for the plaintiff's goods. In order to qualify for a nominative fair use defense, the following three-part test may be applied: First, the product or service in question must be one not readily identifiable without use of the trademark; second, only so much of the mark or marks may be used as is reasonably necessary to identify the product or service; and third, the user must do nothing that would, in conjunction with the mark, suggest sponsorship or endorsement by the trademark holder. A third defense is "descriptive fair use." Descriptive words that directly inform the consumer of a characteristic, quality, ingredient, or function of a product may be protectable as a trademark if such words have acquired "secondary meaning." For example, if a substantial part of the public has come to regard certain descriptive words as signifying a single and unique source of the product, rather than merely a description of the product itself, then the words or phrase has "secondary meaning." An example of such a trademark is "PARK 'N FLY," which not only is descriptive of the functional aspects of an off-site long-term parking lot near airports, but the mark is associated by frequent air travelers with a particular business that operates such a parking service. The defendant that asserts the "descriptive fair use" defense is claiming that he is using, in good faith, the particular descriptive words to communicate information to the public about the defendant's own goods or services. This defense has been codified in the Lanham Act: [T]he use of the name, term, or device charged to be an infringement is a use, otherwise than as a mark, of the party's individual name in his own business, or of the individual name of anyone in privity with such party, or of a term or device which is descriptive of and used fairly and in good faith only to describe the goods or services of such party, or their geographic origin.... Keyword Advertising Internet search engines such as Google, Yahoo, or Microsoft's Bing generate significant revenue from the sale of keywords to trigger online advertisements that appear on search result pages. These advertisements typically relate to search terms entered by Internet users and appear as "banner" advertisements on the top of the Web page or "sponsored links" that are displayed on the right column of a Web page or before relevant search results; such Web ads, if clicked on, direct the user to the website of the advertiser. For example, General Electric (GE) could purchase the word "refrigerator" from Google in order to have a "sponsored link" advertisement for GE's refrigerators appear next to relevant search results. Someone interested in refrigerators who searches for that generic, descriptive word that has been purchased by GE as a keyword would then be presented with a sponsored advertisement that links to GE's website concerning its refrigerators. If Whirlpool or Frigidaire also wanted to purchase the keyword "refrigerator" from Google, the search engine could follow a priority of request system or conduct an auction for the three refrigerator makers to bid on the term. While the sale of a descriptive word such as "refrigerator" by Internet search engines does not raise trademark concerns, the sale of a competitor's brand name or trademark as a keyword may be actionable as a violation of federal trademark law. For example, Google or Yahoo could choose to sell the trademark name "Whirlpool" to GE, such that an advertisement for GE appliances would appear as a "sponsored link" on the computer screen of a person who searched for "Whirlpool." In response, Whirlpool may file a trademark infringement lawsuit against either the search engine (as the seller of its trademark) or GE (as the purchaser), complaining that such unauthorized use of its trademark may create a likelihood of consumer confusion as to whether GE's advertisement is in some manner sponsored by, endorsed by, approved by, or affiliated with Whirlpool. The prospects of Whirlpool winning such a lawsuit to restrain the practice or obtain damages are unclear, however, due to a lack of case law that has specifically addressed the "likelihood of confusion" element of the trademark infringement claim. While trademark owners may be unhappy that their competitors' advertisements appear in an Internet search for their trademarked names, they also may be upset over having to pay more to secure their own trademarks as keywords in an auction system. However, some observers claim that an Internet search engine's practice of selling trademarks as keywords benefits consumers, as it helps them to discover competing products that may be less expensive or of higher quality. Also, sponsored advertisements allow consumers to comparison shop and may inform consumers about relevant news and criticism about the searched-for trademark name. Litigation Over Keyword Advertising Keyword-triggered advertising cases have involved trademark owners bringing suit against either keyword sellers (Internet search engines) or keyword buyers (advertisers). In trying to hold search engines responsible for trademark infringement, trademark owners have tried two approaches: (1) direct trademark infringement, in which the search engine is making an illegal use of the mark by selling keywords, and (2) contributory infringement, in which the search engine is liable for facilitating the advertiser's direct infringement. Although lawsuits against Internet search engines such as Google may garner more attention in the press, the vast majority of the cases have involved the trademark owner directly suing the keyword buyer, who is usually the advertiser of a competing good or service. Whether a case has been brought against the keyword seller or buyer, courts have treated the trademark infringement issues in generally the same manner. It is important to note that there have been very few final court rulings in keyword advertising cases, as most opinions have involved pre-trial rulings from judges on procedural motions filed by the parties. For example, courts have had to address a threshold question about whether a trademark owner would be able to overcome defense motions to dismiss the case for failure to state a claim for relief (pursuant to Federal Rules of Civil Procedure 12(b)(6)), on the grounds that the use of a trademark as a paid keyword is not a "use in commerce" within the meaning of the Lanham Act. In considering these motions, the courts have had to determine whether genuine issues of material fact exist that would prevent a summary judgment ruling in favor of the alleged infringer. A genuine issue for trial exists if the trademark owner presents evidence from which a reasonable jury, viewing the evidence in the light most favorable to the trademark owner, could resolve the material issue in his or her favor. As the U.S Court of Appeals for the Ninth Circuit has previously explained: The moving party – in this case, the defendants – bears the initial burden of identifying for the court the portions of the materials on file that it believes demonstrate the absence of any genuine issue of material fact. If the moving party meets its initial burden, the burden shifts to the non-moving party to set forth ... specific facts showing that there is a genuine issue for trial. We may not weigh the evidence or determine the truth of the matter but may only determine whether there is a genuine issue for trial. Therefore, judges that have presided over most keyword advertising cases to date have not been concerned about whether a plaintiff will ultimately prevail in the lawsuit, but whether he or she "is entitled to offer evidence to support the claim[]." "Use in Commerce" Until recently, there was a split in opinion among the federal courts in different circuits concerning the use of trademarks as keyword triggers for online advertising. District courts in the Third, Fourth, Seventh, Eighth, and Ninth Circuit have found that the use of a trademark as a keyword trigger (or facilitating such use) does constitute a "use in commerce" for purposes of the Lanham Act. Therefore, a trademark infringement suit brought in those courts would survive a defendant's procedural 12(b)(6) motion to dismiss the case, thus allowing the trademark owner to attempt to show that the defendant's use causes a likelihood of confusion as to the origin of the defendant's goods or services. As one federal district judge explained: I recognize that defendant's use of plaintiff's marks to trigger internet advertisements for itself is the type of use consistent with the language in the Lanham Act which makes it a violation to use "in commerce" protected marks "in connection with the sale, offering for sale, distribution, or advertising of any goods or services," or "in connection with any goods or services." 15 U.S.C. §§ 1114(1) and 1125(a)(1).... By establishing an opportunity to reach consumers via alleged purchase and/or use of a protected trademark, defendant has crossed the line from internal use to use in commerce under the Lanham Act. In the past several years, district courts in the Second Circuit have issued opinions that held that the use of a trademark keyword to trigger an online advertisement is not a "use in commerce" for purposes of satisfying the second prong of a trademark infringement claim, because they believed that such an "internal" use of a trademark (in which the competitor advertisements did not themselves exhibit the trademark) is not a "use in commerce." For example, a federal district court explained: Here, in the search engine context, defendants do not "place" the ZOCOR marks on any goods or containers or displays or associated documents, nor do they use them in any way to indicate source or sponsorship. Rather, the ZOCOR mark is "used" only in the sense that a computer user's search of the keyword "Zocor" will trigger the display of sponsored links to defendants' websites. This internal use of the mark "Zocor" as a key word to trigger the display of sponsored links is not use of the mark in a trademark sense. However, this district court decision, and similar ones issued by district courts in the Second Circuit, were effectively overruled in April 2009 by the U.S. Court of Appeals for the Second Circuit in Rescuecom Corp. v. Google, Inc . In this case, the appellate court reversed the district court's decision to grant Google's motion to dismiss, by ruling that the trademark owner in the case had adequately alleged an actionable claim for trademark infringement under the Lanham Act. Rescuecom Corp. v. Google, Inc. Rescuecom is a computer service franchising company that offers on-site computer services and sales; the trademark name "Rescuecom" was federally registered in 1998. AdWords is the name of Google's program through which advertisers may purchase keywords. Google also offers a Keyword Suggestion Tool, a program that recommends certain keywords to advertisers for purchase. Google had recommended to Rescuecom's competitors through its Keyword Suggestion Tool the trademark "Rescuecom" as a search term to be purchased. Therefore, when a computer user searched for the term "Rescuecom," wanting to be directed to Rescuecom's website, the competitors' advertisements and links appeared on the searcher's screen. Rescuecom filed a trademark infringement lawsuit against Google, alleging that such keyword triggering is "likely to cause the searcher to believe mistakenly that a competitor's advertisement (and website link) is sponsored by, endorsed by, approved by, or affiliated with Rescuecom." The district court in Rescuecom rejected the plaintiff's "use in commerce" argument in concluding the following: Defendant's internal use of plaintiff's trademark to trigger sponsored links is not a use of a trademark within the meaning of the Lanham Act, either because there is no allegation that defendant places plaintiff's trademark on any goods, containers, displays, or advertisements, or that its internal use is visible to the public. By failing to satisfy this gatekeeper matter, the plaintiff was unable to overcome Google's motion, pursuant to Federal Rules of Civil Procedure 12(b)(6), to dismiss the case for failure to state a claim for relief. Rescuecom appealed the lower court's judgment that granted Google's motion to the U.S. Court of Appeals for the Second Circuit. The appellate court vacated the lower court's decision to dismiss the action and remanded the case for further proceedings. The Second Circuit found a "use in commerce" when Google recommends and sells to its advertisers Rescuecom's trademark. Through its Keyword Suggestion Tool, Google displays, offers, and encourages the purchase of of Rescuecom's mark. The Second Circuit was not convinced that so-called "internal uses" of trademarks, in which the trademark is never visibly displayed to customers, is beyond the scope of the Lanham Act's protections, because if that were true, search engine operators could freely use trademarks in ways that could deceive and cause consumer confusion: For example, instead of having a separate "sponsored links" or paid advertisement section, search engines could allow advertisers to pay to appear at the top of the "relevance" list based on a user entering a competitor's trademark—a functionality that would be highly likely to cause consumer confusion. Alternatively, sellers of products or services could pay to have the operators of search engines automatically divert users to their website when the users enter a competitor's trademark as a search term. Such conduct is surely not beyond judicial review merely because it is engineered through the internal workings of a computer program. While the federal appellate court resolved the "use in commerce" issue in favor of the trademark owner, the opinion only permits Rescuecom to proceed with the trademark infringement lawsuit on remand and prove that Google's use of Rescuecom's trademark causes likelihood of confusion or mistake. In an unusual step, the Second Circuit Court of Appeals attached a lengthy appendix to its Rescuecom decision, which is expressly labeled dicta and therefore not a binding opinion of the court. The appendix explored an issue that has caused much confusion among the lower courts—interpretations of the Lanham Act's "use in commerce" requirement. At the end of the appendix, the appellate court opined: "It would be helpful for Congress to study and clear up this ambiguity." The Second Circuit noted that while the phrase "use in commerce" is defined by the Lanham Act's definitions section (codified at 15 U.S.C. § 1127), the court did not believe Congress intended for such definition to apply to trademark infringement claims brought under 15 U.S.C. §§ 1114 and 1125. The appellate court observed that the Lanham's Act's definitions section begins by explaining that the defined terms shall have those assigned meanings in construing the Act "unless the contrary is plainly apparent from the context." In the Second Circuit's opinion, the statutory definition of "use in commerce" is more properly applied in the context of trademark registration and a description of the benefits and protections provided by the Lanham Act, rather than specifying the conduct in which an alleged infringer must engage in order to be liable for infringement. The court explained: [T]he opening phrase of the definition of "use in commerce" ... makes it "plainly apparent from the context" that the full definition set forth in § 1127 cannot apply to the infringement sections. The definition in § 1127 begins by saying, "The term 'use in commerce' means the bona fide use of a mark in the ordinary course of trade, and not made merely to reserve a right in a mark." 15 U.S.C. § 1127 (emphasis added). The requirement that a use be a bona fide use in the ordinary course of trade in order to be considered a "use in commerce" makes clear that the particular definition was not intended as a limitation on conduct of an accused infringer that might cause liability. If § 1127's definition is applied to the definition of conduct giving rise to liability in §§ 1114 and 1125, this would mean that an accused infringer would escape liability, notwithstanding deliberate deception, precisely because he acted in bad faith. A bad faith infringer would not have made a use in commerce, and therefore a necessary element of liability would be lacking. Liability would fall only on those defendants who acted in good faith. We think it inconceivable that the statute could have intended to exempt infringers from liability because they acted in bad faith. Such an interpretation of the statute makes no sense whatsoever. The Second Circuit instead suggested that the "use in commerce" language that appears in the trademark infringement causes of action was a way for Congress to invoke its jurisdiction to regulate this area under the Commerce Clause of the U.S. Constitution. The court observed that the Lanham's Act contains a definition of "commerce" to mean "all commerce which may lawfully be regulated by Congress." The court then noted that the Lanham Act frequently employs the word "use" as either a noun or verb in order to describe what one does with a trademark. The court traced the complex legislative history of the revisions to the Lanham Act, in which the words "commerce" and "use" were joined together. The appellate court believes that Congress did not intend for the statutory definition of "use in commerce" to define conduct that determines an infringer's liability for trademark infringement, but rather Congress wanted "to make clear that liability would be imposed for acts that occur in or affect commerce, i.e. those within Congress's Commerce Clause power." The Second Circuit stated, however, "Congress does not enact intentions. It enacts statutes. And the process of enacting legislation is of such complexity that understandably the words of statutes do not always conform perfectly to the motivating intentions. This can create for courts difficult problems of interpretation." The impact of Rescuecom is significant. First, it clarifies the "use in commerce" requirement for keyword advertising cases brought within the Second Circuit, thereby bringing the circuit in conformity with other judicial circuits on this matter. It also may very well end attempts by defendants to dismiss keyword advertising cases for failure to state a claim on the basis that such trademark use is not a "use in commerce." By allowing such cases to move forward, Rescuecom should permit district courts in the Second Circuit to focus their attention on the more crucial element of a trademark infringement claim, the "likelihood of confusion." In addition, because defendants in keyword advertising cases would need to defend themselves at trial rather than being able to dismiss the case using pre-trial motions, the increased costs of litigation may encourage more settlements of these cases. However, some observers are concerned that Rescuecom may have a "chilling effect" on Internet search engines' keyword advertising practices that will hamper consumers' ability to find information about competitors' products or criticism about the trademark owner. "Likelihood of Confusion" As noted above, establishing that a defendant uses another's mark in commerce is only one element of the infringement claim; for a violation of the Lanham Act to be found, such use must be unauthorized and "likely to cause confusion, or to cause mistake, or to deceive as to the affiliation ... or as to the origin, sponsorship, or approval of ... goods [or] services." There have been relatively few court opinions that have directly ruled on the issue of whether the use of trademarks in keyword-triggered advertising creates a likelihood of confusion, in part because many of the district courts in the Second Circuit had dismissed cases for failing to satisfy the "use in commerce" requirement. However, the courts that have reached this question have issued divergent opinions, depending on the factual circumstances. Trademarks Appearing in the Text of Keyword-Triggered Online Advertisements If the trademark appears within the actual text of the online advertisement, courts have found that there may be a likelihood of confusion. The district court in GEICO v. Google, Inc . stated that the "plaintiff has established a likelihood of confusion, and therefore a violation of the Lanham Act, solely with regard to those Sponsored Links that use GEICO's trademarks in their headings or text." However, while the appearance of trademarks within the text of keyword-triggered online advertisements may be deemed infringing, at least one court has found that such use is subject to the nominative fair use defense. Trademarks Used Solely to Trigger Online Advertisements If the trademark is used only as a keyword to trigger the appearance of an online advertisement (such that the trademark is not visibly displayed within the ad text), then there may or may not be a likelihood of confusion. One federal district court granted a summary judgment for the advertiser defendant, explaining that there is no likelihood of confusion when trademarks are used solely as keywords: [A] link to defendant's website appears on the search results page as one of many choices for the potential consumer to investigate.... [T]he links to defendant's website always appear as independent and distinct links on the search result pages.... Due to the separate and distinct nature of the links created on any of the search results pages in question, potential consumers have no opportunity to confuse defendant's services, goods, advertisements, links or websites for those of plaintiff. Another federal court has suggested that courts may need to consider several new factors in applying the "likelihood of confusion" test to keyword advertising, beyond the traditional eight factors: [U]nder the circumstances here, the likelihood of confusion will ultimately turn on what the consumer saw on the screen and reasonably believed, given the context. This content and context includes: (1) the overall mechanics of web-browsing and internet navigation, in which a consumer can easily reverse course; (2) the mechanics of the specific consumer search at issue; (3) the content of the search results webpage that was displayed, including the content of the sponsored link itself; (4) downstream content on the Defendant's linked website likely to compound any confusion; (5) the web-savvy and sophistication of the Plaintiff's potential customers; (6) the specific context of a consumer who has deliberately searched for trademarked diamonds only to find a sponsored link to a diamond retailer; and, in light of the foregoing factors, (7) the duration of any resulting confusion. In one of the few keyword advertising cases in which a jury has ruled on the issue of likelihood of consumer confusion, the federal court in Fair Isaac Corp. v. Experian Information Solutions, Inc. rejected the plaintiff's keyword advertising claims because it determined that the weight of evidence adduced at trial [did] not support a credible inference that Experian's and Trans Union's purchases of Fair Isaac's trademarks as keyword search terms was likely to confuse consumers. The only evidence adduced at trial in support of the assertion that the keyword advertising was likely to cause confusion—the opinion testimony of Fair Isaac's expert James Berger—lacks credibility. Initial Interest Confusion Several plaintiffs have attempted to invoke the "initial interest confusion" doctrine to show that keyword-triggered advertising creates a likelihood of confusion. This doctrine has been likened to a "bait and switch scheme," and refers to "the distraction or diversion of a potential customer from the Web site he was initially seeking to another site, based on the user's belief that the second site is associated with the one he originally sought." Therefore, the alleged harm that is caused to the trademark owner is the intentional diversion by the defendant of the consumer's attention from one trademarked good to a competitor's good. A federal appellate court has offered this example of "initial interest confusion:" Suppose West Coast's competitor (let's call it "Blockbuster") puts up a billboard on a highway reading – "West Coast Video: 2 miles ahead at Exit 7" – where West Coast is really located at Exit 8 but Blockbuster is located at Exit 7. Customers looking for West Coast's store will pull off at Exit 7 and drive around looking for it. Unable to locate West Coast, but seeing the Blockbuster store right by the highway entrance, they may simply rent there. However, the billboard analogy may not translate in the Internet context, especially in keyword advertising cases in which the defendant does not use the trademarked term in his or her advertisement. A federal court that has examined the applicability of the initial interest confusion doctrine to keyword advertising offered an alternative to the billboard example: Initial interest confusion ... has been invoked in circumstances where one company "piggybacks" on its competitor's trademark, rewarding his search for one particular product with a choice among several similar items. Infringement is not nearly so obvious from this vantage point. Rather than a misleading billboard, this analogy is more akin to a menu – one that offers a variety of distinct products, all keyed to the consumer's initial search. Sponsored linking may achieve precisely this result, depending on the specific product search and its context. When a consumer searches for a trademarked item, she receives a search results list that includes links to both the trademarked product's website and a competitor's website. Where the distinction between these vendors is clear, she now has a simple choice between products, each of which is as easily accessible as the next. If the consumer ultimately selects a competitor's product, she has been diverted to a more attractive offer but she has not been confused or misled. This court then remarked that "[t]rademark infringement would seem to be unsupportable in this scenario. Mere diversion, without any hint of confusion, is not enough." Nevertheless, the court in this case found that the plaintiff had alleged a "plausible likelihood of confusion based on the overall context in which a consumer performs his internet search" and thus allowed the plaintiff to proceed on an initial interest confusion theory. Another federal court has accepted the use of the initial interest doctrine in proving likelihood of confusion in keyword advertising cases because of the misappropriation of the trademark owner's goodwill: [T]he practice of [keyword advertising] may initially confuse consumers into clicking on Nowcom's banner advertisement. Once the consumer arrives at Nowcom's site, he may realize he is not at a Finance Express-sponsored site. However, he may be content to remain on Nowcom's site, allowing Nowcom to misappropriate Finance Express' goodwill.... Such use is actionable. In Morningware, Inc. v. Hearthware Home Products, Inc. , the federal court found that the trademark owner had alleged sufficient facts in its complaint to establish the potential for initial interest confusion on the part of consumers. The plaintiff uses the MORNINGWARE trademark on its counter-top electric ovens. Hearthware is the plaintiff's closest competitor in the counter-top electric oven market; the defendant purchased the plaintiff's trademark as a keyword for use in Google's AdWords program. The district court observed that "initial interest confusion can arise even if consumers who are misled to a website are only briefly confused." In reaching this conclusion, the court relied upon a Seventh Circuit appellate case that had involved the use of trademarks in metatags, rather than keyword-triggered advertising: [A]lthough consumers were not confused when they reach a competitor's website, there is nevertheless initial interest confusion. This is true in this case, because by Equitrac's placing the term Copitrack [Promatek's trademark] in its metatage, consumers are diverted to its website and Equitrac reaps the goodwill Promatek developed in the Copitrak mark. ... That consumers who are misled to Equitrac's website are only briefly confused is of little or no consequence. In fact, "that confusion as to the source of a product or service is eventually dispelled does not eliminate the trademark infringement which has already occurred." ... What is important is not the duration of the confusion, it is the misappropriation of Promatek's goodwill. ... Consumers who are directed to Equitrac's webpage are likely to learn more about Equitrac and its products before beginning a new search for Promatek and Copitrak. Therefore, given the likelihood of initial consumer confusion, the district court was correct in finding Promatek could succeed on the merits. However, several courts have not been persuaded by the plaintiff's "initial interest confusion" argument. Conclusion The legality of using trademarks as keywords to trigger online advertising has been much litigated in recent years, although there is not yet a definitive answer. The courts thus far have appeared to resolve the initial "use in commerce" threshold for purposes of the Lanham Act. However, as discussed above, there is a lack of judicial consensus concerning the more important question of whether such trademark use causes likelihood of confusion. Courts have also not yet fully examined the extent to which a defendant may assert affirmative defenses, nor have they explored what kind of remedies would be appropriate for such infringement. Therefore, this issue will continue to occupy the federal courts and be a source of dispute between trademark owners and keyword buyers and sellers.

The use of trademarks in connection with Internet-based advertising has sparked disputes between trademark owners, advertisers, and Internet search engine operators over whether such activity violates federal trademark law. Specifically, trademark owners have expressed concern over the sale of their trademarks by Internet search engines to third parties that want to have "banner" advertisements, "sponsored links," or "sponsored results" appear on a search results Web page when those trademarked words are entered as a search query. For example, the shoe company Reebok may purchase the trademark "Nike" from the Internet search engine Google as a "keyword." If a consumer conducts a search for the term "Nike" on Google's website, the consumer would be presented with paid advertisements for Reebok's products in the right-hand margin of the Web page immediately next to the search results for Nike's shoes and apparel. Whether the use of trademarks as "keywords" that trigger such online advertisements constitutes actionable trademark infringement is a question that has been the subject of much litigation over the past five years. However, to date there have been very few final court rulings on the legality of keyword advertising; most cases have involved rulings from judges on procedural pre-trial motions filed by the parties. The primary issue for these courts was not whether the trademark owner would prevail in a lawsuit brought against a keyword seller (search engines) or keyword buyer (advertisers), but whether the plaintiff was entitled to proceed to trial to offer evidence in support of the trademark infringement claim. For example, most courts have had to answer a threshold question about whether a trademark owner would be able to overcome defense motions to dismiss the case for failure to state a claim for relief, on the grounds that the use of a trademark as a paid keyword is not a "use in commerce" within the meaning of the Lanham Act. Until recently, there was a split in opinion among the federal courts in different circuits concerning this question. The April 2009 decision of the U.S. Court of Appeals for the Second Circuit in Rescuecom Corp. v. Google, Inc. resolved the circuit conflict in favor of a determination that the use of a trademark as a keyword trigger (or facilitating such use) does constitute a "use in commerce" for purposes of the Lanham Act. However, establishing that a defendant uses another's mark in commerce is only one element of the infringement claim; for a violation of the Lanham Act to be found, such use must be likely to cause consumer confusion or mistake as to the origin, sponsorship, or approval of the goods or services offered by the defendant. So far, there is a lack of judicial consensus on this second element, and thus the legality of using trademarks for keyword-triggered advertising remains unsettled. This report provides a summary and analysis of judicial opinions that have developed the current state of trademark law governing keyword-triggered advertising.

The National Labor Relations Act The NLRA, as amended, provides the basic framework governing labor-management relations in the private sector. The act begins by stating that the purpose of the law is to improve the bargaining power of workers: The inequality of bargaining power between employees ... and employers ... substantially burdens and affects the flow of commerce, and tends to aggravate recurrent business depressions by depressing wage rates and the purchasing power of wage earners ... and by preventing the stabilization of competitive wage rates and working conditions within and between industries.... It is hereby declared to be the policy of the United States to eliminate the causes of certain substantial obstructions to the free flow of commerce and to mitigate and eliminate these obstructions when they have occurred by encouraging the practice and procedure of collective bargaining.... The NLRA gives workers the right to join or form a labor union and to bargain collectively over wages, hours, and other conditions of employment. Under the act, workers also have the right not to join a union. The act requires an employer to bargain in good faith with a union chosen by a majority of employees. To protect the rights of employers and workers, the act defines certain activities as unfair labor practices. The NLRA does not apply to railroads or airlines, federal, state, or local governments, agricultural workers, family domestic workers, supervisors, independent contractors, and others. The definition of "employee" in the NLRA does not exclude unauthorized workers. Thus, unauthorized workers can engage in union activities. National Labor Relations Board (NLRB) The NLRB, which administers and enforces the NLRA, is an independent federal agency that consists of a five-member board and a General Counsel. The board resolves objections and challenges to secret ballot elections, decides questions about the composition of bargaining units, and hears appeals of unfair labor practices. The General Counsel's office conducts secret ballot elections, investigates complaints of unfair labor practices, and supervises the NLRB's regional and other field offices. Bargaining Units A bargaining unit is a group of employees represented, or seeking representation, by a union. A bargaining unit is generally determined on the basis of a "community of interest" of the employees involved. Employees who have the same or similar interests with respect to wages, hours, and other working conditions may be grouped together into a bargaining unit. A bargaining unit may include the employees of one employer, one establishment, or one occupation or craft. A bargaining unit may include both professional and nonprofessional employees, provided a majority of professional employees vote to be members of the unit. Guards cannot be included in the same bargaining unit as other employees. A union and employer may agree on the appropriate bargaining unit. If not, the issue is settled by the NLRB. Specialty Healthcare and Rehabilitation Center of Mobile In August 2011, the board reviewed a case in which an employer argued that the group of employees petitioning to be represented by a union was not an appropriate bargaining unit. In this case, certified nursing assistants (CNAs) at the Specialty Healthcare and Rehabilitation Center of Mobile, AL, petitioned to be represented by the United Steelworkers (USW). The NLRB Regional Director found that the petitioned-for unit of CNAs was an appropriate bargaining unit. However, the employer requested a review of the decision, contending that the appropriate bargaining unit should include all other nonprofessional service and maintenance employees. The duties of the CNAs at the healthcare center typically consist of assisting residents with day-to-day functions such as dressing, grooming, and bathing. The CNAs also help move residents throughout the facility, accompany them to appointments outside the center, record vital signs, and monitor daily intake of food and liquids. The CNAs wear nursing uniforms, are directly supervised by licensed practical nurses, are part of the facility's nursing department, and work one of three eight-hour shifts. The CNAs are required to obtain and maintain certification from the state of Alabama. The employer argued that other employees should be included with the CNAs in the bargaining unit. The other employees include resident activity assistants who design and lead resident activities, a staffing coordinator who prepares work schedules for employees, a maintenance assistant who is responsible for building upkeep, a medical records clerk who maintains residents' medical records, and cooks. These employees have similar educational requirements as the CNAs (e.g., a high school degree). The CNAs and service and maintenance employees also receive annual evaluations under the same system, are eligible for pay raises based on their evaluations, and are eligible for the same benefits, such as health and life insurance. Unlike the CNAs, the other employees are not part of the nursing department and are not required to work one of three eight-hour shifts. The board voted in favor (3-1) of the CNAs, determining that the CNAs' petitioned-for bargaining unit was appropriate. The board agreed with the Regional Director's original conclusion that the CNAs shared a community of interest because of their "[d]istinct training, certification, supervision, uniforms, pay rates, work assignments, shifts, and work areas." The board also concluded that the employer had not shown that the CNAs shared an "overwhelming community of interest" with the other service and maintenance employees. Organizing Campaign Rules Campaign rules differ for employers, employees, and union organizers. Rules also differ for soliciting union support (e.g., expressing support for a union or handing out authorization cards ) and for distributing union literature. Because of exceptions to the basic rules, the rules that apply to a specific union organizing campaign may differ from the general rules described here. Employers Employers may campaign against unionization. Employers may require employees to attend meetings during work hours where management can give its position on unionization. These meetings are called "captive audience" meetings. Employers cannot hold a captive audience meeting during the 24-hour period before an election. Supervisors can give employees written information (including memos and letters) and hold individual meetings with employees. Employees During work hours, employees can campaign for union support from their coworkers in both work and nonwork areas (e.g., a coffee room or the company parking lot). But employees can only campaign on their own time (e.g., at lunchtime or during breaks). If an employer does not allow the distribution of literature in work areas, employees may only distribute union literature in nonwork areas. If an employer allows the distribution of other kinds of literature in work areas, employees may also distribute union literature in those areas. An employer may prevent employees from using the employer's e-mail for union activities (e.g., organizing and bargaining), provided the employer does not allow employees to use their work e-mail to solicit support for other causes or organizations. Conversely, if an employer allows employees to use their work e-mail to solicit support for other causes or organizations, employees may also use their work e-mail for union activities. Union Organizers In general, union organizers cannot conduct an organizing campaign on company property. A union cannot reply to an employer's captive audience speech if the union has other means of reaching employees. Nonemployee union organizers may be allowed in the workplace if the site is inaccessible (e.g., a logging camp or remote hotel) or if the employer allows nonemployees to solicit on company property. Union organizers may meet with employees on union property. They may hand out literature or solicit support on public property (e.g., on public sidewalks outside of a business. Organizers may also contact employees at home by phone or mail or may visit employees at home. Under a neutrality agreement (described later in this report), an employer may allow organizers onto company property. Unfair Labor Practices To protect the rights of both employees and employers, the NLRA defines certain activities as unfair labor practices. Employers Although employers have the right to campaign against unionization, they cannot interfere with, restrain, or coerce employees in their right to form or join a union. An employer cannot threaten employees with the loss of their jobs or benefits if they vote for a union or join a union. An employer cannot threaten to close a plant should employees choose to be represented by a union. An employer cannot raise wages to discourage workers from joining or forming a union. An employer cannot discriminate against employees with respect to the conditions of employment (e.g., fire, demote, or give unfavorable work assignments) because of union activities. An employer must bargain in good faith with respect to wages, hours, and other working conditions. Unions Employees have the right to organize and bargain collectively. But a union cannot restrain or coerce employees to join or not join a union. A union cannot threaten employees with the loss of their jobs if they do not support unionization. A union cannot cause an employer to discriminate against employees with respect to the conditions of employment. A union must bargain in good faith with respect to wages, hours, and other working conditions. A union cannot boycott or strike an employer that is a customer of or supplier to an employer that the union is trying to organize. An unfair labor practice may be filed by an employee, employer, labor union, or any other person. After an unfair labor practice charge is filed, regional staff of the NLRB investigate to determine whether there is reason to believe that the act has been violated. If no violation is found, the charge is dismissed or withdrawn. If a charge has merit, the regional director first seeks a voluntary settlement. If this effort fails, the case is heard by an NLRB administrative law judge. Decisions by administrative law judges can be appealed to the five-member board. Remedies The NLRA attempts to prevent and remedy unfair labor practices. The purpose of the act is not to punish employers, unions, or individuals who commit unfair labor practices. The act allows the NLRB to issue cease-and-desist orders to stop unfair labor practices and to order remedies for violations of unfair labor practices. If an employer improperly fires an employee for engaging in union activities, the employer may be required to reinstate the employee (to their prior or equivalent job) with back pay. If a union causes a worker to be fired, the union may be responsible for the worker's back pay. In FY2011, $60.5 million in backpay or reimbursement of fees, dues, and fines was awarded. Backpay can be awarded to workers who were fired, demoted, denied work, or were otherwise discriminated against for union activities. Estimates of the number of workers who are illegally fired for union activities range from 1,000 to 3,000 a year, with more firings in the 1980s than in later years. In a study of 400 NLRB election campaigns conducted in 1998 and 1999, Kate Bronfenbrenner concluded that workers are fired for union activities in 25% of union campaigns. Figure 1 shows the trend in the number of unfair labor practice charges filed from FY1970 to FY2012. During this period, the number of charges filed peaked at 44,063 in FY1980. The number stood at 21,629 in FY2012. In FY2012, 36.4% of the unfair labor practice charges filed were found to have merit. Union Certification and Recognition Section 9(a) of NLRA states that a union may be "designated or selected for the purposes of collective bargaining by the majority of the employees" (emphasis added). Currently, there are three ways for employees to join or form a union. First, a union that is selected by a majority of employees in an election conducted by the NLRB is certified as the bargaining representative of employees in the bargaining unit. Second, an employer may voluntarily recognize a union if a majority of employees in a bargaining unit have signed authorization cards. Finally, the NLRB may order an employer to recognize and bargain with a union if a majority of employees have signed authorization cards and the employer has engaged in unfair labor practices that make a fair election unlikely. A union must be certified through a secret ballot election or recognized by an employer before collective bargaining can begin. As discussed below under "Certification," a union that is certified as the result of a secret ballot election has certain advantages over a union that is recognized by an employer without an election. Secret Ballot Elections The NLRB conducts a secret ballot election when a petition is filed requesting one. A petition can be filed by a union, worker, or employer. Employees or a union may petition the NLRB for an election if at least 30% of employees have signed authorization cards. An employer may request an election if a union has claimed to represent a majority of its employees and has asked to bargain with the employer (and the union itself has not requested an election). An employer is not required to give a reason for requesting an election. If a majority of employees voting (i.e., not a majority of employees in the bargaining unit) in an NLRB-conducted election choose to be represented by a union, the union is certified by the NLRB as the employees' bargaining representative. The NLRA does not provide a timetable for holding an election. Certification of a union by the NLRB does not require that a union and employer reach an initial contract agreement. After a petition is filed requesting an election, the employer and union may agree on the time and place for the election and on the composition of the bargaining unit. If an agreement is not reached between the employer and union, a hearing may be held in the regional office of the NLRB. The regional director may then direct that an election be held. The regional director's decision may be appealed to the board. In a secret ballot election, employees choose whether to be represented by a labor union. If an election has more than one union on the ballot and no choice receives a majority of the vote, the two unions with the most votes face each other in a runoff election. The right of an individual to vote in an NLRB election may be challenged by either the employer or union. If the number of challenged ballots could affect the outcome of an election, the regional director determines whether the ballots should be counted. Either the employer or union may file objections to an election, claiming that the election or the conduct of one of the parties did not meet NLRB standards. A regional director's decision on challenges or objections may be appealed to the board. A union and employer may also agree to a secret ballot election conducted by a third party, such as an arbitrator, clergyman, or mediation board. The NLRB also conducts secret ballot elections to decertify a union that has previously been certified or recognized. A decertification petition may be filed by employees or a union acting on behalf of employees. A decertification petition must be signed by at least 30% of the employees in the bargaining unit represented by the union. Under what is called a "certification bar," a union that is certified after winning a secret ballot election is protected for a year from a decertification petition and from an election petition filed by another union. A secret ballot election is required for decertification. NLRB Changes in Representation Procedures In June 2011, the NLRB published a Notice of Proposed Rulemaking (NPRM) in which it proposed a number of changes to current procedures for filing a petition requesting union representation, determining whether there is a question of union representation, conducting secret ballot elections, and resolving challenges and objections. On December 22, 2011, the NLRB issued a final rule that made selected changes to current representation procedures. The changes took effect on April 30, 2012. But, in response to a May 14, 2012 decision by the U.S. District Court for the District of Columbia, the NLRB suspended implementation of the changes. The December 22, 2011, final rule gave hearing officers the discretion to limit pre-election hearings to matters "relevant to the existence of a question of representation." According to the NLRB, current regulations give parties the right to present evidence at pre-election hearings that are not related to the question of representation. The rule also gave hearing officers the discretion to limit the filing and subject matter of legal briefs filed after a pre-election hearing. The December 22, 2011, rule consolidated pre-election and post-election requests for review of decisions by regional directors. Currently, requests for review of pre-election decisions are filed before the election, while requests for review of post-election issues are filed after the election. Under the new rule, pre- and post-election requests for review will be filed after an election. Although the December 22, 2011, rule consolidated pre-election and post-election requests for review, a party could request special permission for review of pre-election decisions. Under the final rule, the board would have granted special permission to appeal pre-election rulings by hearing officers or regional directors only in "extraordinary circumstances where it appears that the issue will otherwise evade review." According to the NLRB, current regulations do not provide a standard for the board to grant special permission for review. Currently, a regional director normally does not schedule an election until 25 days after the direction of an election. In part, the 25-day waiting period is intended to allow the board to consider requests for review of pre-election decisions. The December 22, 2011 rule eliminated the 25-day waiting period. Finally, under the December 22, 2011, rule, requests for review by the board of decisions by regional directors on challenges and objections to elections would have been discretionary. Currently, under a stipulated election agreement board review of post-election disputes is mandatory. (In a stipulated election, the employer and union agree to an election, but either party may request board review of a regional director's or hearing officer's post-election decisions. ) Number of NLRB Elections Table 1 shows the number of secret ballot elections conducted by the NLRB from FY1994 to FY2010 (the most recent figures available). In FY2010, the NLRB conducted 1,823 elections. Unions won 62.3% of these elections, which was up from 46.6% in FY1994. In most elections conducted by the NLRB, the employer and union agree on the composition of the bargaining unit and on the time and place for an election. In FY2010, 89.3% of elections were based on consent or stipulated agreements between the two parties. Although the NLRA does not provide a specific timetable for holding an election, most elections are held within two months of the filing of a petition. In FY2012, 93.9% of initial representation elections were conducted within 56 days of filing a petition. The median time to proceed to an election from the filing of a petition was 38 days. In FY2011, post-election objections and/or challenges were filed in 115 cases. For objections and/or challenges that resulted in an investigative hearing (45 of 115) in FY2011, it took a median of 62 days to issue a decision or supplemental report; for those decisions and/or challenges that could be resolved without a hearing (70 of 115), it took a median of 21 days to issue a decision or supplemental report. First Contract Agreements Following Certification The NLRB does not collect data on how long it takes for a union and employer to reach a first contract agreement after a union wins an NLRB election. Nor does the NLRB collect data on whether the parties reach a first contract agreement. However, a recent study estimated that, within two years of winning an NLRB election, a contract had not been reached in over two-fifths of cases. This is a higher percentage than found in estimates published in previous studies. Estimates from several studies are shown in Table 2 . Voluntary Card Check Recognition The NLRA does not require secret ballot elections. An employer may voluntarily recognize a union when presented with authorization cards signed by a majority of employees in a bargaining unit ("card check"). An employer may also enter into a card check agreement with a union before union organizers begin to collect signatures. A card check agreement between a union and employer may require the union to collect signatures from more than a majority (sometimes called a supermajority) of bargaining unit employees. A neutral third party often checks, or validates, signatures on authorization cards. A collective bargaining contract may include a card check arrangement for unorganized (including new) branches, stores, or divisions of a company. Under voluntary recognition, employees have 45 days to file a decertification petition or an election petition requesting representation by another union. After 45 days, an election petition cannot be filed for "a reasonable period of time." (See the section on " NLRB Review of Voluntary Recognition " later in this report.) Neutrality Agreements A card check arrangement may be combined with a neutrality agreement. Not all neutrality agreements are the same. However, in general, under a neutrality agreement an employer agrees to remain neutral during a union organizing campaign. The employer may agree not to attack or criticize the union, while the union may agree not to attack or criticize the employer. The agreement may allow managers to answer questions or provide factual information to employees. A neutrality agreement may give a union access to company property to meet with employees and distribute literature. An employer may also agree to give the union a list of employee names and addresses. A neutrality agreement may cover organizing drives at new branches of a company. Corporate Campaigns To gain an agreement from an employer for a card check campaign—possibly combined with a neutrality agreement—unions sometimes engage in "corporate campaigns." A corporate campaign may include a call for consumers to boycott the employer; rallies and picketing; a public relations campaign (e.g., press releases, Internet postings, news conferences, or newspaper and television ads); charges that the employer has violated labor or other laws; public support from political, civic, and religious leaders; and other strategies. Bargaining Orders The final way that a union may be recognized by an employer is through a bargaining order. The NLRB may order an employer to recognize and bargain with a union if a majority of employees have signed authorization cards and the employer has committed unfair labor practices that make it unlikely that a fair election can be held. A bargaining order may be issued without conducting a secret ballot election. An election may also be set aside because of employer unfair labor practices before the election. According to Feldacker, "[h]ard and fast rules are not possible in determining the situations in which the Board will issue a bargaining order. Each case is based on the specific facts of the employer's violations." Bargaining orders may be appealed to the U.S. Court of Appeals and to the U.S. Supreme Court. Certification Versus Recognition A union that wins a secret ballot election is certified by the NLRB as the bargaining representative of employees in that bargaining unit. Voluntary recognition or a bargaining order do not result in certification by the NLRB. The Taft-Hartley Act of 1947 (P.L. 80-101) eliminated certification through any method other than an election conducted by the NLRB. Certification gives a union certain advantages. For instance, a union that is certified after winning a secret ballot election is protected for a year from a decertification petition and from an election petition requesting representation by another union (the "certification bar"). Under voluntary card check recognition, employees have 45 days to file a decertification petition or an election petition requesting to be represented by a different union (the "recognition bar"). The duration of an employer's duty to bargain also depends on whether a union has been certified by the board or has been recognized voluntarily by the employer. If a union wins an NLRB election (or under a bargaining order), the employer is required to bargain in good faith for a year. Under voluntary card check recognition, the employer is required to bargain with the union for "a reasonable period of time." Withdrawal of Recognition Under certain circumstances, an employer may withdraw recognition of a union before a contract agreement has been reached. After one year, if an employer and a certified union have not reached a contract agreement, the employer may withdraw recognition of the union if both parties have engaged in good faith bargaining and the employer doubts, on the basis of objective information (e.g., a petition signed by a majority of employees and given to the employer), that a majority of employees no longer support the union. Under a voluntary recognition, if no contract agreement has been reached after a reasonable period of time, an employer may withdraw recognition if the employer has reasonable doubt on the basis of objective information that a majority of employees support the union. Joy Silk Doctrine Before the Taft-Hartley Act of 1947, only a union or employee could request a secret ballot election. Section 9(c) of the Taft-Hartley Act gave employers the right to request an election. Soon after Taft-Hartley was enacted, a U.S. Appeals court ruled that an employer's right to request an election was limited to instances where the employer had "good faith" doubt that the union was supported by a majority of employees. An employer had good faith doubt if he believed that signatures on authorization cards were obtained through misrepresentation or coercion. An employer who did not have good faith doubt that the union was supported by a majority of employees was required to recognize the union or face a bargaining order for refusing to bargain with a union chosen by a majority of employees. This approach was known as the "Joy Silk doctrine." By 1969, the board said that it had abandoned the Joy Silk doctrine. Thereafter, if a majority of employees signed authorization cards, an employer could voluntarily recognize the union or could insist on an election, either by requesting the union to file an election petition or by filing a petition himself. In a 1974 ruling, the U.S. Supreme Court said that, if an employer insists on an election, the union must take the next step and file an election petition. NLRB Review of Voluntary Recognition In recent years, the NLRB has considered cases involving voluntary recognition. The United Auto Workers (UAW) and the Dana and Metaldyne Corporations In June 2004, the board voted 3-2 to review two cases where bargaining unit employees filed a decertification petition within weeks after the employer recognized a union under a card check agreement. In the first case, the United Auto Workers (UAW) and Metaldyne Corporation entered into a card check and neutrality agreement in September 2002. Metaldyne recognized the UAW as the bargaining representative of production and maintenance workers at its St. Marys, Pennsylvania plant in December 2003. In the second case, the UAW and Dana Corporation entered into a card check and neutrality agreement in August 2003. The company recognized the union at its Upper Sandusky, Ohio plant in December 2003. In both the Dana and Metaldyne cases, the UAW and the employers entered into card check and neutrality agreements before signatures on authorization cards were collected. The signatures were validated by a neutral third party. In both cases, employees filed decertification petitions after the UAW was recognized by the employer, but before an agreement was reached on a contract. Regional NLRB directors dismissed both decertification petitions, saying that they were inconsistent with the board's "recognition bar" doctrine. Under this doctrine, following an employer's voluntary recognition of a union, employees or another union cannot file a petition for an election for a "reasonable period of time." Employees at both Dana and Metaldyne Corporations petitioned the NLRB to review the dismissals. The employees were represented by the National Right to Work Legal Defense Foundation. The NLRB granted the request, saying that the issue was whether voluntary recognition should prevent employees from filing a decertification petition within a reasonable time in cases where an employer and union enter into a card check agreement. In September 2007, the board issued a decision in both cases. The board said that, following a voluntary recognition, employees have 45 days to file a petition to decertify the union. Similarly, a rival union has 45 days to file an election petition. The petitions must be signed by at least 30% of bargaining unit employees. Employees must also receive notice of the voluntary recognition and their right to petition for a decertification or representation election. If a petition is not filed within 45 days of notice of the voluntary recognition, an election petition cannot be filed during the recognition bar period (i.e., for a reasonable period of time). Lamons Gasket Company On August 26, 2011, the board reversed its decision in the Dana and Metaldyne cases. In July 2003, Lamons Gasket and the United Steelworkers (USW) entered into a card check agreement. In November 2009, Lamons Gasket voluntarily recognized the USW as the sole representative of a unit of employees. Within 45 days following the voluntary recognition, a bargaining unit employee filed a petition for a decertification election, supported by authorization cards signed by at least 30% of employees. In a 3-1 decision, the board overruled the Dana and Metaldyne decisions and returned to the previously established rule that, following a voluntary recognition, an election petition is barred for a reasonable period of time. Additionally, the board defined a reasonable period of time as at least six months, but not more than a year, after the first bargaining session between the employer and union. The board also stated that, in determining whether a reasonable period of time has passed after a voluntary recognition, it would follow standards used in its decision in Lee Lumber and Building Material Corporation. Following the decision in Lamons Gasket, the Chairman of the House Committee on Education and the Workforce and the Chairman of the committee's Subcommittee on Health, Employment, Labor, and Pensions requested that the NLRB provide the committee with a list of cases in which an election petition was filed under the Dana decision and a list of cases that have been dismissed as a result of the decision in Lamons Gasket. The committee also requested a list of cases in which an election petition was filed under the Dana decision and an unfair labor practice charge was filed, a list of cases that have been dismissed as a result of the decision in Lamons Gasket and an unfair labor practice was filed, and the ballots in cases that were dismissed because of the decision in Lamons Gasket. NLRB Review of Withdrawal of Recognition Once a union and employer enter into a collective bargaining agreement, election petitions are subject to a "contract bar." A contract of up to three years bars an election petition for the duration of the contract. The election petition may be for a decertification election or for representation by another union. In August 2007, the board issued a decision allowing an employer to withdraw recognition of a union after the third year of a longer-term contract. In January 1999, Shaw's Supermarkets entered into a five-year contract with the UFCW. After three years, a majority of employees signed a petition requesting a decertification election. Instead of going forward with a decertification election, Shaw's withdrew recognition of the union. The action was appealed to the NLRB. Under current rules, neither the employer nor the incumbent union can initiate an election petition (requesting decertification or representation by another union) for the duration of a contract. Under a three-year "contract bar," employees or another union (but not the employer or existing union) can file an election petition after three years of a contract of more than three years. Thus, the General Counsel of the NLRB argued that Shaw's should not be allowed to withdraw recognition of the union during the term of the five-year contract. By a vote of 2-1 the board disagreed with the General Counsel. The majority members of the board concluded that Shaw's had acted properly when it withdrew recognition of the union. The majority said that the employer relied on evidence of a loss of majority support for the union (i.e., signatures of a majority of employees). The dissenting member said that the NLRB should have gone forward with a decertification election. Collective Bargaining Disputes: Use of Mediation and Arbitration Once a union is certified or recognized, the union and employer are not required to reach an initial contract agreement. When a union and employer cannot reach an agreement on a collective bargaining agreement, the dispute is called an impasse. An impasse may lead to a work stoppage. Workers may strike or the employer may lock out employees. Instead of resorting to a strike or lockout, a union and employer may use a neutral third party to help them reach a contract agreement. A neutral third party may be used to reach an agreement on either an initial or successor contract. Mediation When mediation is used to resolve a collective bargaining impasse, a mediator tries to help the union and employer reach an agreement. A mediator does not have the authority to impose a settlement on the parties. Instead, a mediator can help the two sides reach an agreement by defining the issues underlying the impasse, identifying alternative solutions, and suggesting areas where the parties can compromise. Arbitration In arbitration, the union and employer each present their positions to an arbitrator who decides how the issues will be resolved. Arbitration can take different forms. In grievance or "rights" arbitration, an arbitrator resolves disputes over the terms and conditions of an existing collective bargaining agreement. In contract or "interest" arbitration, an arbitrator determines the terms and conditions of an initial or successor contract. Interest arbitration can take different forms: voluntary or compulsory, conventional or final-offer, and binding or nonbinding. In addition, in final-offer arbitration, the arbitrator may choose between the complete final offers of the employer and union (i.e., the entire package) or between the final offers from each side on each issue. Voluntary versus compulsory . In voluntary interest arbitration, the union and employer agree to use arbitration to resolve a bargaining impasse. With compulsory arbitration, the law requires the parties to use arbitration. Conventional versus final-offer . In conventional arbitration, the arbitrator is free to decide on a final contract agreement. The settlement may be a compromise between each side's final offer, or the arbitrator may choose the final offer from either one of the parties. With final-offer arbitration, the arbitrator must choose either the union's or the employer's final offer. Package versus issue-by-issue arbitration . In final-offer arbitration, the arbitrator may be required to choose the complete final offer (i.e., package) of either the union or the employer. Alternatively, the arbitrator may be allowed to choose between the final offers from each side on each issue. Binding versus nonbinding . In binding arbitration, the arbitrator's decision is imposed on both parties. With nonbinding arbitration, the parties may choose to accept or reject the decision of the arbitrator. The different forms of arbitration can be combined. For example, conventional arbitration may be voluntary or compulsory. Final-offer arbitration may be binding or nonbinding. Med-Arb Med-Arb combines the role of mediator and arbitrator. As a mediator, a neutral third party tries to facilitate an agreement. If the parties cannot reach a settlement, the neutral party becomes the arbitrator and decides on a settlement. With Med-Arb, a neutral party's recommendations for a settlement may become the settlement that is imposed. Knowing this, the parties may be more willing to negotiate an agreement. Advantages and Disadvantages of Interest Arbitration in Resolving Bargaining Impasses The use of interest arbitration to resolve bargaining impasses has occurred mainly in the public sector, where the right to strike is generally limited or prohibited. In the private sector, the legal right of employees to strike and of employers to lock out employees can encourage the parties to reach a contract agreement. Nevertheless, in the private sector, a union and employer may voluntarily agree to use interest arbitration to settle bargaining impasses. The use of interest arbitration in contract negotiations may have both advantages and disadvantages. The main advantage is that it may deter or prevent a strike or lockout. The main disadvantages are that it may change negotiating behavior and may become the normal way to settle bargaining impasses. Strike Impact When a union and employer reach a bargaining impasse, they can resort to mediation or arbitration. But employers can also lock out employees or workers can go on strike. The main reason for using interest arbitration to resolve contract disputes is to avoid the use of strikes or lockouts. A strike over wages, hours, or working conditions is called an economic strike. Employers can permanently replace striking workers. Replaced workers can only be rehired when jobs become available. Thus, a strike can impose costs on both workers and employers. "Chilling" Effect An adverse effect of interest arbitration is that it may have a "chilling" effect on negotiations. The availability of interest arbitration to resolve bargaining impasses may affect the willingness of the two sides to engage in serious bargaining. If either side believes that it can gain a better settlement through arbitration than through negotiation, it may not bargain seriously. If the parties expect an arbitrator to split the difference between their final offers, they may take extreme positions during negotiations and be unwilling to compromise. "Narcotic" Effect A second adverse effect of interest arbitration is that it may have a "narcotic" effect on contract negotiations. Interest arbitration may become habit-forming. If negotiations over a contract end with binding arbitration, the parties may come to rely on it and not engage in serious negotiations on future contracts. Possible Responses to the Chilling and Narcotic Effect of Arbitration A common criticism of conventional arbitration is that it may prevent the parties from engaging in serious negotiations. Each side may take an extreme position and may not make the kinds of compromises needed for a negotiated settlement. One proposal for dealing with the chilling effect of conventional arbitration is to require final-offer arbitration. The argument for using final-offer arbitration is that, if an arbitrator is limited to selecting the last offer of either the union or employer, each side may be more willing to make an offer that it believes will be acceptable to the arbitrator. If both parties are more willing to compromise, they may also reach a contract settlement on their own. Under final-offer arbitration, the arbitrator could be restricted to choosing between the complete final offer of either the union or employer. Alternatively, the arbitrator could be allowed to choose between the final offers of each party on each issue. The latter approach would give an arbitrator greater discretion in fashioning the terms of an agreement and may also encourage the parties to bargain and make concessions on each issue. Small Business The NLRA does not include a statutory exemption for small businesses. However, the NLRB does not certify bargaining units of only one employee. Nor does it assert jurisdiction over employers with annual revenues or sales below certain standards. Size of Bargaining Unit The board does not certify a bargaining unit that consists of only one employee. The principle of collective bargaining presupposes that there is more than one employee who wants to bargain collectively. Jurisdictional Standards The NLRB has statutory jurisdiction over employers whose operations affect interstate commerce. Thus, the board can certify the results of an election where the employer's operations affect commerce. However, in addition to this statutory requirement, the NLRB has established administrative standards that an employer must meet before the board will assert jurisdiction over a question of union representation. These jurisdictional standards are generally based on an employer's annual sales or gross revenue. For example, a retail business must have annual sales of at least $500,000 before the board will assert jurisdiction. Hotels and motels must have at least $500,000 in gross revenues. A nonretail business must have either $50,000 in annual direct or indirect sales to buyers in other states or make $50,000 in direct or indirect purchases from sellers in other states. Private colleges and symphony orchestras must have at least $1 million in annual revenue. These standards have been in effect since August 1, 1959. The board's ability to establish jurisdictional standards was codified by the Labor-Management Reporting and Disclosure Act of 1959, which added Section 14(c)(1) to the NLRA (29 U.S.C. 164(c)(1)). In part, Section 14(c)(1) states: The Board, in its discretion, may ... decline to assert jurisdiction over any labor dispute involving any class or category of employers, where, in the opinion of the Board, the effect of such labor dispute on commerce is not sufficiently substantial to warrant the exercise of its jurisdiction: Provided, That the Board shall not decline to assert jurisdiction over any labor dispute over which it would assert jurisdiction under the standards prevailing upon August 1, 1959. In other words, the board must assert jurisdiction over a labor dispute where the employer meets the jurisdictional standards that were in effect on August 1, 1959 (provided the employer's operations affect commerce). But the board may decline to assert jurisdiction over a labor dispute that does not have a substantial effect on interstate commerce. If the board does not assert jurisdiction over smaller employers, employees at these companies may be able to unionize through other means. An employer could voluntarily recognize a union if a majority of employees sign authorization cards or a secret ballot election could be supervised by a third party other than the NLRB. In addition, Section 14(c)(2) of the NLRA (29 U.S.C. 164(c)(2)) states, in part: Nothing in this subchapter shall be deemed to prevent or bar any agency or the courts of any State or Territory ... from assuming and asserting jurisdiction over labor disputes over which the Board declines ... to assert jurisdiction. A report by the Government Accountability Office (GAO) estimated that, in February 2001, because of the jurisdictional standards, 5 million employees of small employers do not have collective bargaining rights under the NLRA (excluding supervisors and managers who are excluded by statute from coverage under the NLRA). If more recent data were used, the 5 million estimate could be higher or lower today. Because the dollar amounts for the jurisdictional standards are not adjusted for inflation, employers who met the standards in 1959 would probably not meet them today. On the other hand, there are more businesses today, many of which would meet the standards. Potential Effects of Changes in Union Certification Procedures In recent Congresses, legislation has been introduced that, if enacted, would change current union certification procedures. Some proposals would require the NLRB to certify a union if a majority of employees signed authorization cards. Other legislation would require secret ballot selections. This section summarizes the most common arguments made in favor of requiring secret ballot elections and the most common arguments made in support of card check certification. These changes could affect the level of unionization in the United States. The section also reviews research on the effects of different union certification procedures on union success rates. Supporters and opponents of card check certification sometimes use similar language to support of their positions. Employers argue that, under card check certification, employees may be pressured or coerced into signing authorization cards and that employees may only hear the union's point of view. On the other hand, unions argue that during an election campaign, employers may pressure or coerce employees into voting against a union. Proponents of secret ballot elections argue that unlike signing an authorization card, casting a secret ballot is private and confidential. Unions argue that during an election campaign, employers have greater access to employees (e.g., captive audience meetings and access to employees on company property). Unions argue that card check certification is less costly than a secret ballot election. But employers maintain that unionization may be more costly to employees, because union members must pay dues and higher union wages may result in fewer union jobs. (See Table 3 .) Research Findings Little research has been done comparing the effects of requiring card check certification versus the effects of requiring secret ballot elections. The research that exists, however, suggests that changes in union recognition procedures could affect the level of unionization in the United States. Research suggests that the union success rate is greater with card check certification than with secret ballots. Unions also undertake more unionization drives under card check certification. The union success rate under card check certification is greater when a card check campaign is combined with a neutrality agreement. Evidence from Canada suggests that the union success rate is higher under automatic card check recognition than under secret ballots. In Canada, each of the 10 provinces has laws governing union recognition. In 1976, all 10 provinces allowed card check recognition. Beginning with Nova Scotia in 1977, five provinces currently require secret ballot elections. British Columbia changed from card check recognition to requiring secret ballot elections in 1984, repealed mandatory voting in 1993, and restored mandatory voting in 2001. Under mandatory voting a union must receive a majority of votes in a secret ballot election to be recognized as the bargaining agent. Under card check recognition, a union is automatically recognized if the number of employees who sign authorization cards meets a minimum threshold. In general, a union is automatically recognized if more than 50% to 65% of employees, depending on the province, sign authorization cards. A study of the union success rate under mandatory voting and automatic card check recognition concluded that the union success rate in Canada is nine percentage points higher under card check recognition than under secret ballots. The study examined 171 union organizing campaigns between 1978 and 1996 in nine provinces. In the province of British Columbia, union recognition based on card checks was allowed until 1984. From 1984 through 1992, union certification required a secret ballot election. Card checks were again allowed beginning in 1993. (As noted above, mandatory voting resumed in 2001.) The union success rate fell almost 19 percentage points (from 93.1% to 74.5%) after mandatory voting was adopted in 1984 and increased by about the same amount when card check recognition was reinstated in 1993. In addition, during the period when mandatory voting was in effect, there were about 50% fewer attempts to organize workers. After 1993, the number of union organizing drives did not return to their pre-1984 levels. In the province of Ontario, card check recognition was allowed before 1995. Since November 1995, secret balloting is required. A study of 3,564 certification applications before and after the switch to secret ballots found that the certification rate was higher with the use of card checks. After the change to secret ballots, the union success rate fell from 72.7% to 64.3%. On the other hand, under secret balloting, larger bargaining units were organized. The average size of units certified under secret balloting was 63.1 workers, compared to an average of 36.3 employees under card check recognition. The average size of the bargaining units where organizing drives were held was also larger after secret balloting was initiated; 63.1 workers versus 39.7 workers under card check recognition. Under card check recognition, a union was certified if 55% of employees signed cards. Under secret balloting, elections are normally held within five working days after the date of an application. The study included both private and public sector employers, but excluded the construction industry. A study based on unionization in Canada concluded that each one percentage point increase in unionization raised the short-term unemployment rate by 0.30 to 0.35 percentage points. The study was based in union membership data in the 10 Canadian provinces over the period from 1976 to 1997. Evidence also suggests that card check recognition may be more successful under a neutrality agreement. A study of union organizing drives in the United States concluded that union success rates are higher when a card check agreement is combined with a neutrality agreement. The study examined 57 card check agreements involving 294 organizing drives. Unions had a success rate of 78.2% in drives where card check recognition was combined with a neutrality agreement and a 62.5% success rate in cases where there was only a card check agreement. The union success rate may be higher under card check recognition because, in part, employers have less of an opportunity to campaign against unionization. Unions may initiate more organizing drives under card check recognition because a card check campaign costs less than a secret ballot election. A secret ballot election may take longer than a card check campaign and employer opposition may be greater (requiring a union to expend more resources). Unions may have a higher success rate when card check recognition is combined with a neutrality agreement because there may be less employer opposition to unionization under a neutrality agreement. (Some research has concluded that management opposition is a key factor affecting union success rates in NLRB conducted elections.) Requiring card check certification if a majority of employees sign authorization cards may increase the union success rate. Whether or not requiring card check certification would reverse the decline in private sector unionization in the United States is not certain. Shrinking employment in unionized firms and decertifications may offset any increase in union membership due to requiring card check recognition. In addition, requiring card check recognition may increase employer opposition during the collection of authorization cards. Public Opinion According to an annual Gallup poll, Americans are generally supportive of unions. The latest poll, from August 2008, concluded that 59% of Americans approve, while 31% disapprove, of unions. According to a March 2009 Gallup poll, 53% of Americans favor a law that would make it easier for labor unions to organize; 39% of those polled said they opposed such a law; and 8% said they had no opinion. According to a poll from Rasmussen Reports, also from March 2009, 33% of respondents agreed that Congress should change the law to make it easier for workers to form or join a union; 40% disagreed and 27% were not sure. Sixty-one percent of respondents agreed when asked the following question: "Under current law, if enough workers express interest in forming a union, a secret ballot is held. Is it fair to require a secret ballot to determine if workers want to form a union?" Thirty-two percent of respondents agreed to the following question: "Some people believe that a secret ballot vote is not necessary and that a union should be formed whenever a majority of workers sign a card saying they want one. If a majority of a company's workers sign a card saying they want to form a union, is it fair to form a union without having a vote?" At the same time, 57% of respondents thought that it is "very difficult" or "somewhat difficult" to form a union. Two other surveys provide information about secret ballot elections and card check recognition. According to a March 2006 survey conducted for the Center for Union Facts (a business group), 75% of 1,000 persons surveyed said that they believe that a secret ballot election is the most fair and democratic way for employees to decide whether or not to join a union. By contrast, 12% of respondents said that card check recognition is the most fair and democratic way to form a union. According to a 2005 survey conducted by American Rights at Work (a labor group), 22% of 430 workers who had gone through a union organizing campaign said that they experienced a "great deal" of pressure from management. By contrast, 6% of workers said that they experienced a great deal of union pressure. Among workers who signed authorization cards in the presence of a union organizer, 5% said that the presence of the organizer made them feel pressure to sign the cards. Is There an Economic Rationale for Protecting the Rights of Workers to Organize and Bargain Collectively? The NLRA gives private sector workers the right to organize and bargain collectively over wages, hours, and other working conditions. It also requires employers to bargain in good faith with a union chosen by a majority of employees. The act says that the purpose of the law is to improve the bargaining power of workers. This section considers whether there is an economic rationale for protecting the rights of workers to organize and bargain collectively. Government Intervention in Labor Markets Governments may intervene in labor markets for a number of reasons. One of these reasons is to improve competition. According to standard economic theory, competitive markets generally result in the most efficient allocation of resources, where resources consist of individuals with different skills, capital goods (i.e., buildings and equipment and associated technology), and natural resources. In turn, an efficient allocation of resources generally results in greater total output and consumer satisfaction. In competitive labor markets workers are paid according to the value of their contribution to output. Under perfect competition, wages include compensation for unfavorable working conditions. The latter theory, called the "theory of compensating wage differentials," recognizes that individuals differ in their preferences or tolerance for different working conditions—such as health and safety conditions, hours worked, holidays and annual leave, and job security. If labor markets do not fit the model of perfect competition, increasing the bargaining power of workers may raise wages, improve benefits (e.g., for health care and retirement), and improve working conditions to levels that would exist under competitive conditions. In labor markets where a firm is the only employer (called a monopsony) unionization could, within limits, increase both wages and employment. On the other hand, increasing the bargaining power of employees in competitive labor markets may result in a misallocation of resources—and reduce total economic output and consumer satisfaction. In competitive labor markets, higher union wages may reduce employment for union workers below the levels that would exist in the absence of unionization. If unions lower employment in the unionized sector, they may increase the supply of workers to employers in the nonunion sector, lowering the relative wages of nonunion workers. It is difficult, however, to determine the competitiveness of labor markets. First, identifying the appropriate labor market may be difficult. Labor markets can be local (e.g., for unskilled labor), regional, national, or international (e.g., for managerial and professional workers). Second, measuring the competitiveness of labor markets is difficult. Finally, labor markets may change over time because of demographic, economic, technological, or other changes. Distribution of Earnings A second reason governments may intervene in labor markets is to reduce earnings inequality. Competitive labor markets may allocate resources efficiently, but they may result in a distribution of earnings that some policymakers find unacceptable. Unionization may be a means of reducing earnings inequality. Some economists argue that, during a recession, greater earnings equality may increase aggregate demand and, therefore, reduce unemployment. Collective Voice Finally, some economists maintain that unions give workers a "voice" in the workplace. According to this argument, unions provide workers an additional way to communicate with management. For instance, instead of expressing their dissatisfaction with an employer by quitting, workers can use dispute resolution or formal grievance procedures to resolve issues relating to pay, working conditions, or other matters. Conclusion The economic impact of requiring card check certification or secret ballot elections may rest on the desired objectives of policymakers. By bargaining collectively, unionized workers may obtain higher wages, improved benefits, and better working conditions than if each worker bargained individually. But, depending on how well labor markets fit the model of perfect competition, collective bargaining may improve or harm the allocation of resources (i.e., economic efficiency). If labor markets are competitive, increasing the bargaining power of workers may reduce economic output and consumer satisfaction, but may increase equality. On the other hand, if labor markets are not competitive, increasing the bargaining power of workers may improve the allocation of resources as well as increase equality. By requiring card check certification, the number of organizing campaigns and the union success rate may increase. Conversely, by requiring secret ballot elections, the number of organizing drives and the union success rate may decline. Thus, compared with existing recognition procedures, requiring secret ballot elections may lower the level of unionization, whereas requiring card check certification may raise it. Accordingly, depending on the competitiveness of labor markets, requiring card check certification may either improve or harm economic efficiency. Similarly, requiring secret ballot elections may either improve or harm efficiency. If either change were enacted, it may be difficult, however, to predict or measure the size of the effects. Regardless of the competitiveness of labor markets, requiring secret ballot elections may increase earnings inequality—if fewer workers are unionized. Requiring card check certification may reduce inequality—if more workers are unionized. Again, the size of the effects may be difficult to predict or measure.

The National Labor Relations Act of 1935 (NLRA) gives private sector workers the right to join or form a labor union and to bargain collectively over wages, hours, and other working conditions. An issue before Congress is whether to change the procedures under which a union is certified as the bargaining representative of a union chosen by a majority of workers. Under current law, the National Labor Relations Board (NLRB) conducts a secret ballot election when a petition is filed requesting one. A petition can be filed by a union, worker, or employer. Workers or a union may request an election if at least 30% of workers have signed authorization cards (i.e., cards authorizing a union to represent them). The NLRA does not require secret ballot elections. An employer may voluntarily recognize a union if a majority of workers have signed authorization cards. Once a union is certified or recognized, the NLRA does not require the union and employer to reach an initial contract agreement. When a union and employer cannot reach an agreement on a contract, instead of a strike or lockout the parties may use mediation and arbitration to resolve the dispute. In recent Congresses, legislation has been introduced that, if enacted, would change current union certification procedures. For example, the Employee Free Choice Act (EFCA), which was introduced in the 111th Congress, would have required the NLRB to certify a union if a majority of employees signed authorization cards (i.e., "card check"). The Secret Ballot Protection Act, which was introduced in the 113th Congress, would have made it an unfair labor practice for an employer to recognize or bargain with a union without a secret ballot election. Supporters and opponents of card check sometimes use similar language to support their positions. Employers argue that, under card check certification, workers may be pressured or coerced into signing authorization cards and may only hear the union's point of view. Unions argue that, during an election campaign, employers may pressure or coerce workers into voting against a union. Supporters of secret ballot elections argue that casting a secret ballot is private and confidential. Unions argue that, during an election campaign, employers have greater access to workers. Unions argue that card check certification is less costly than a secret ballot election. Employers maintain that unionization may be more costly to workers, because union members must pay dues and higher union wages may result in fewer union jobs. Requiring card check certification may increase the level of unionization, while requiring secret ballot elections may decrease it. Research suggests that, where card check recognition is required, unions undertake more union drives and the union success rate is higher. The union success rate is also greater where recognition is combined with a neutrality agreement (i.e., an agreement where the employer agrees to remain neutral during a union organizing campaign). To the extent that requiring secret ballot elections or requiring certification when a majority of employees sign authorization cards would affect the level of unionization, the economic effects may depend on how well labor markets fit the model of perfect competition. Requiring card check certification may improve worker benefits and reduce earnings inequality—if more workers are unionized. Requiring secret ballot elections may increase inequality in compensation—if fewer workers are unionized.

Introduction The Elementary and Secondary Education Act (ESEA) is the primary source of federal aid to K-12 education. The ESEA was last reauthorized by the Every Student Succeeds Act (ESSA; P.L. 114-95 ) in 2015. The Title I-A program has always been the largest grant program authorized under the ESEA and was funded at $15.5 billion for FY2017. Since its enactment in 1965, Title I-A has provided assistance to meet the special needs of educationally disadvantaged children. Title I-A grants provide supplementary educational and related services to low-achieving and other students attending elementary and secondary schools with relatively high concentrations of poverty. In recent years, Title I-A 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 conditions for receiving Title I-A grants. The U.S. Department of Education (ED) determines Title I-A grants to local educational agencies (LEAs) based on four separate funding formulas: Basic Grants, Concentration Grants, Targeted Grants, and Education Finance Incentive Grants (EFIG). The Title I-A formulas have somewhat distinct allocation patterns, providing varying shares of allocated funds to different types of LEAs or states (e.g., LEAs with high poverty rates or states with comparatively equal levels of spending per pupil among their LEAs). The Basic Grant formula is the original Title I-A formula, and has received appropriations each year since FY1966. The Basic Grant formula is the primary vehicle for providing Title I-A funds: it is the formula under which the largest share of Title I-A funds are allocated (42% of FY2017 appropriations) and under which the largest proportion of LEAs participate. Over time, the Concentration Grant, Targeted Grant, and EFIG formulas have been added to Title I-A to provide additional funds to areas with high numbers or percentages of children from low-income families. As the share of Title I-A funds allocated under these three formulas has grown, Title I-A grants have become increasingly targeted on concentrations of poverty. This report begins with an overview of key issues that have factored prominently in the evolution of the Title I-A formulas. This part of the report highlights underlying tensions related to the allocation of funds that have surfaced as the Title I-A formulas have evolved. The report then traces, in detail, the evolution of the Title I-A formulas in statute and identifies the reasons offered for changes to them, as expressed in committee reports, floor debates, and, to a limited extent, congressional hearings. Please note that the term "Title I-A" is used to refer to various incarnations of programs that are similar in purpose and scope to the program currently referred to as Title I-A of the ESEA. The report concludes with three appendices. Appendix A provides historical appropriations data for the Title I-A formulas dating back to FY1980. Appendix B provides a summary of major changes that have been made to the factors that comprise each of the four Title I-A formulas that are currently authorized from their initial enactment through the ESSA. Appendix C provides a list of selected acronyms used in this report. Key Issues Related to the Title I-A Formulas Since the program's inception, Title I-A funds were intended to serve poor children in both public and private schools. Congress initially accomplished this by allocating Title I-A funds through one formula—Basic Grants. Over time, Congress added three additional formulas that essentially provide supplemental funding to LEAs that serve concentrations of students from low-income families. That is, Congress has tried to target funds to areas with higher concentrations of poverty, first through the Concentration Grant formula, which provided supplemental funds to areas with a high number or percentage of children from low-income families; and later through the Targeted Grant and EFIG formulas, which provide more funding per formula child (i.e., children included in the grant determination process) to LEAs with higher numbers or percentages of children from low-income families. Since FY1966, every formula under the program has included some type of population factor and expenditure factor. Over the years, the children included in the determination of the population factor (referred to as formula children) have changed. The expenditure factors have changed as well. Changes in both areas have substantial implications for state and LEA grant amounts. In addition, while continuing to focus on the targeting of Title I-A dollars on areas with the greatest concentrations of poverty, Congress has periodically taken steps to help provide smaller states with additional funding to run Title I-A programs through state minimum grant provisions. Congress has also modified the Title I-A allocation formulas over time to include hold harmless provisions to prevent LEAs from receiving less than a certain amount of funding from year-to-year, provided appropriations are sufficient to make hold harmless payments. The inclusion of state minimum grant and hold harmless provisions does not necessarily further the overarching goal of targeting Title I-A funds on areas with concentrations of poverty, but it does allow Congress to address other issues that are considered important to many locales. This section of the report provides a synthesis of themes identified through a CRS review of historical materials. A more in-depth depiction of the materials reviewed and of the formula-related amendments to the ESEA is provided in the following section, "Historical Overview of the Title I-A Formulas." Measuring Poverty and Identifying Formula Children Throughout the history of the Title I-A program, its focus has remained on providing funds to areas with concentrations of poverty. Thus, Congress has needed to identify which children should be considered children living in poor or low-income families. This has required determining a definition of poverty, identifying a data source to use to measure poverty, and deciding which "other" categories of children, if any, should be included in the determination of Title I-A grants. These choices all have implications for state and LEA grant amounts. During initial consideration of the ESEA, there was debate about whether to rely solely on the 1960 Decennial Census data or also include children in certain families receiving Aid to Families with Dependent Children (AFDC) in grant determinations. Ultimately, Congress decided to include both children identified as low-income via the Census data and children in families receiving AFDC in the determination of grant amounts. One year later, Congress expanded the formula child eligibility criteria to include neglected, delinquent, and foster children and increased the threshold at which a child would be considered living in a poor family. While these changes increased the number of formula children, they also raised concerns about the potential increase in the cost of the program. Over the next several decades, debates over the structure of the formula child count continued as Congress changed the poverty threshold, changed when new poverty thresholds could be applied, altered when new Decennial Census data could be applied, and used data in addition to the Census data in determining counts. While the data issues and debate over measures of poverty have diminished over time, particularly with the use of LEA-level estimates of poverty from the Census Bureau's Small Area Income and Poverty Estimates (SAIPE) data in 1999, issues related to which areas may be favored by a particular formula child definition have not. More specifically, there has been an ongoing debate about whether the Title I-A formulas are more favorable to more or less densely populated areas. For example, changes made to the count of AFDC children used in the determination of the number of formula children in the 1970s was a direct response to this debate when the counts were initially viewed as favoring urban areas (resulting in two-thirds of the actual number of AFDC children being counted) and then subsequently viewed as being unfavorable to urban areas (resulting in a full count of AFDC children). In addition to the debate about which data to use to construct poverty measures, a debate over the relative emphasis that should be placed on the percentage versus the count of formula children in an LEA has persisted and continues under the current formulas. Under current law, two formula child weighting scales are used in the determination of grants under the Targeted Grant and EFIG formulas: one based on formula child rates (determined by dividing an LEA's number of formula children by the number of children ages 5-17 residing in the LEA), the other based on formula child counts. Higher weights are applied to the LEAs with the highest formula child rates than are applied to the LEAs with the highest formula child counts. As intended, these weighting schemes result in LEAs that have a high formula child count, a high formula child rate, or both receiving more funding per formula child. Based on the statutorily specified weights used in determining weighted child counts, the weighting process would appear to favor LEAs with higher formula child rates (often rural LEAs) over LEAs with higher numbers of formula children (typically urban LEAs). However, due in part to the way the weights are applied, LEAs with high numbers of formula children often receive more funding per formula child than LEAs with a high formula child rate. State Expenditures on Public Education: High Spending States Versus Low Spending States Every Title I-A formula includes a factor that accounts for how much money states spend on public K-12 education. This expenditure factor has consistently been based on state average per pupil expenditures (APPE) or national APPE since the initial enactment of the ESEA. When initially debated, proponents of the inclusion of an expenditure factor argued that the factor was needed to compensate states where the cost of educating a child was higher. The expenditure factor was also intended to compensate states with a higher cost of living. Opponents argued that the inclusion of an expenditure factor disproportionately benefitted wealthy states and counties. In part, the debate also focused on whether Title I-A funds should be spread broadly across the country or concentrated in the areas of greatest need. It was also a debate that pitted the higher spending states that argued their costs of education and living were higher than those in other states against lower spending states that argued they could not afford to spend more on education and, therefore, needed more Title I-A funding. In the mid-1970s, Congress put bounds on the expenditure factor that increased the expenditure factor used in grant determinations for low-spending states and reduced the expenditure factor used in grant determinations for high-spending states. This change effectively provided a benefit to lower spending states, as it raised their expenditure factor for purposes of grant determinations, and penalized higher spending states, as their expenditure factor could not exceed the upper bound. It did not, however, end the debate regarding if and how to account for spending on public K-12 education in Title I-A formulas. In 1994, Congress created two additional Title I-A formulas (Targeted Grant and EFIG formulas) that were intended to target Title I-A funds more effectively on LEAs with concentrations of poverty. When the EFIG formula was initially enacted, it did not include that same expenditure factor that was included in the other three formulas. Rather, the EFIG formula included an effort factor and an equity factor. The effort factor is based on a state's education spending relative to personal income, essentially considering the share of available resources a state is dedicating to public K-12 education. The equity factor is based on variation in education spending among LEAs within a state. The more equitable spending is among LEAs in a given state, the higher a state's grant will be. These factors were included in the formulas due to concerns about disparities in funds and resources among LEAs in many states and to provide an incentive for states to reduce those disparities. The new EFIG formula was enacted in tandem with the new Targeted Grant formula, which included the same expenditure factor that was being used in the determination of Basic Grants and Concentration Grants. However, concerns were raised that the new formulas disadvantaged the southern states (traditionally lower spending states). In addition, prior to funding the Targeted Grant and EFIG formulas in FY2002, the EFIG formula was changed to include an expenditure factor similar to that of the other three formulas. Thus, the EFIG formula incorporates state spending on public K-12 education in three ways (expenditure, equity, and effort factors), while the other three formulas account for it only through an expenditure factor. More recently, during consideration of ESSA in the Senate, a fifth formula was proposed that would have been similar to the EFIG formula in several ways but would have changed the expenditure factor from being based on state APPE to national APPE, essentially eliminating the expenditure factor. Similar to the addition of bounds on the expenditure factor, this change would have assisted states that spend less on public K-12 education as lower spending states would have had their expenditure factor raised to the national APPE, while higher spending states would have had their expenditure factor lowered to the national APPE. The fifth formula ultimately was not included in the bill, but it demonstrated that accounting for state spending on public K-12 education in the Title I-A formulas continues to be a congressional concern. State Minimum Grants and LEA Hold Harmless Provisions Under current law, all of the formulas include both state minimum grant provisions and LEA hold harmless provisions that have been added over time. State minimum grant provisions serve to increase the amount of funding that is provided to small states to operate Title I-A programs. State minimum grant provisions are funded by reducing the amount of funding provided to all the other states in order to support the smaller states. LEA hold harmless provisions prevent LEAs from losing more than a certain percentage of funding from year-to-year, which provides some stability in grant amounts. As with the state minimum grant provision, LEAs that receive grants in excess of their hold harmless amount have their grant amounts reduced to provide other LEAs with a hold harmless grant amount. These provisions have also been included in formulas to mitigate losses to states and LEAs that may result from changes in the Title I-A formula factors. For example, the first hold harmless provision was added to Basic Grants by the 1974 amendments to help offset any losses that could result from changes made to the expenditure factor. Subsequently, when Concentration Grants were added to Title I-A in the 1978 amendments, the Senate Committee on Human Resources added a requirement that no state receive less than 0.25% of the amount appropriated for Concentration Grants to protect the amount of funding received by rural districts. By shifting the distribution of funds under the formulas, especially under the Concentration Grant, Targeted Grant, and EFIG formulas, the inclusion of state minimum grant and LEA hold harmless provisions may reduce the targeting of funds on LEAs with higher concentrations of poverty by reducing grant amounts to LEAs that would have otherwise received more funding. That is, state minimum grant provisions and LEA hold harmless provisions disrupt the formula provisions that were enacted to target funds on LEAs with higher concentrations of poverty. At the same time, however, these provisions may serve other purposes valued by Congress, including providing small states with a larger grant than they would have otherwise received to run their Title I-A programs and providing LEAs with stability from year to year. In addition, both types of provisions have been used to gain support for changes to the Title I-A formulas by helping to mitigate any losses that may result from the changes. Targeting Title I-A Funds on Concentrations of Poverty Since its initial enactment, the Title I-A program has been intended to serve poor children in both public and private schools. As previously discussed, there were issues related to how to count poor and other disadvantaged children and how to factor in state spending on public K-12 education when determining grant amounts. Another issue that has consistently attracted substantial attention is how to target Title I-A funds more effectively on LEAs with concentrations of poverty (either in terms of having a high number or a high percentage of formula children). While there are clearly some concerns about whether having a high number or high percentage of formula children should result in larger LEA grants per formula child, as evidenced by the current urban versus rural LEA debate discussed above, there has also been a more global debate about how best to target Title I-A funds on areas with concentrations of poverty. This debate has played out over several decades through the addition of three formulas to the original Basic Grant formula. The Education Amendments of 1978 ( P.L. 95-561 ) added the Grants to LEAs in Counties with Especially High Concentrations of Children from Low Income Families. These grants are more commonly known as Concentration Grants and were modeled on an earlier Title I-A grant program that essentially had the same purpose. As the title indicates, this formula was added to Title I-A to provide additional funding to areas with high concentrations of children from low-income families. In adding the formula to Title I-A, proponents argued that areas with concentrations of poverty needed "more intensive remedial effort than the average school district." Two additional formulas were added to the ESEA in 1994. The House Committee on Education and Labor added the Targeted Grants formula to target Title I-A funds more effectively on areas with concentrations of poverty, but it retained the Basic Grant and Concentration Grant formulas to continue to provide funding to "other less poor but still needy communities." The Senate Committee on Labor and Human Resources took a different approach, arguing that the Basic Grant and Concentration Grant formulas should be replaced by a new formula (EFIG) that would better target funding on concentrations of poverty. Ultimately, both the Targeted Grant and EFIG formulas were added to the ESEA and the Basic Grant and Concentration Grant formulas were retained. Historical Overview of the Title I-A Formulas Title I-A was enacted in 1965 as part of the "War on Poverty." The program was intended to address a national problem that was reflected in men being rejected by the military draft, employment and manpower retraining problems, low levels of education for many adults, high unemployment rates for 18 to 24 year olds, and concerns expressed by institutions of higher education and vocational and technical educators regarding the quality of elementary and secondary education. According to House Report 89-143, which accompanied H.R. 2362 (the bill that ultimately became the Elementary and Secondary Education Act of 1965), "[t]he heart of the problem lies in our elementary and secondary school systems where there are concentrations of America's children of poverty." Title I (now referred to as Title I-A) was viewed as another tool to eradicate "poverty and its effects." The committee report stated the following: The major thrust of this legislation is contained in title I where it is proposed that approximately $1.06 billion be provided to local school districts for the purpose of broadening and strengthening public school programs in the schools where there are concentrations of educationally disadvantaged children. As initially enacted, Title I-A funds were allocated to LEAs via the Basic Grant formula, which was based on (1) the number of children from low-income families (commonly referred to as formula children) and (2) each state's APPE for public K-12 education. The Concentration Grant formula was added in the 1970s in an attempt to provide additional funding for LEAs with concentrations of poverty. During the consideration of ESEA reauthorization in the early 1990s, the House and the Senate proposed formulas (Targeted Grants and EFIG, respectively) intended to target concentrations of poverty more effectively by providing more funding per child to LEAs with higher numbers or percentages of formula children. As both of these formulas were enacted into law, and the Basic Grant and Concentration Grant formulas were retained, funds are allocated through four formulas under current law. Title I-A has also periodically included a Special Incentive Grant formula, intended to incentivize state and local education spending on elementary and secondary education. This formula was last funded in FY1975. Figure 1 shows the years in which each of the formulas was authorized and funded. Additionally, Figure 1 indicates the ESEA reauthorizations that made substantial changes to the Title I-A formulas. In some instances, formulas have been funded every year they have been authorized to receive appropriations, and in years in which the authorization of appropriations has expired (e.g., Basic Grants). In other instances, formulas were not funded until a subsequent reauthorization of the ESEA made substantial changes to the originally enacted formulas (e.g., EFIG). As with the original Basic Grant formula, grant amounts under each formula in current law are generally determined by multiplying a "formula child count," consisting primarily of estimated numbers of school-age children in poor families, by an "expenditure factor" based on state APPE. After initial grant awards are calculated, grant amounts are reduced to equal the level of available appropriations for each formula, taking into account a variety of state and LEA minimum grant and hold harmless provisions. Initial grant amounts have had to be reduced every year except FY1966 to equal the level of available appropriations. LEAs must also have a minimum number and/or percentage of formula children to be eligible to receive a grant under a specific formula. Grants have always been allocated by ED to LEAs via state educational agencies (SEAs). However, prior to FY1999 sufficient data were not available for ED to calculate grants at the LEA level, so ED calculated grants at the county level and SEAs suballocated county totals to LEAs. LEAs receiving grants subsequently distribute funds to schools, often based on the percentage of children in each school eligible for free or reduced-price lunch. This section of the report describes the Title I-A formulas as initially enacted by the ESEA and changes made to the formulas by major ESEA reauthorization bills. Additionally, a short description of the debates surrounding the formulas is included for reauthorizations that made substantial changes to the formulas. For a timeline of changes to the formula factors and the factors used in the current Title I-A formula see Appendix B . Initial Enactment of the ESEA (P.L. 89-10, 1965) In 1965, Congress passed and President Johnson signed the ESEA, which authorized the first federal general aid to elementary and secondary education. Prior to the enactment of the ESEA, there were two main federal programs for elementary and secondary education: (1) funding under Aid to Federally Impacted Areas (hereinafter referred to as Impact Aid) to offset the impacts that military bases and tax-exempt federal property had on LEAs, and (2) funding under the National Defense Education Act of 1958 (NDEA), which was intended to strengthen math and science education after the launch of the Soviet satellite Sputnik. After World War II, Congress introduced a number of bills to provide general federal aid to schools, but they were all defeated over concerns about aid to private schools, aid to segregated schools, or federal control over K-12 education. The first major step toward the passage of the ESEA came in 1964, when the Civil Rights Act banned federal funding to segregated programs. With respect to elementary and secondary education, this meant that federal funds could not be provided to segregated schools. Thus, the issue of aid to segregated schools was no longer an obstacle to the passage of a federal education bill providing general aid. Soon thereafter, the Johnson Administration came up with a compromise on the private school issue whereby aid would be targeted to children in poor families, regardless of the type of school they attended. The aid would be provided to the public schools, but also be available to benefit both public and private school students. Due to the resolution of the segregation and private school issues, the ESEA passed through Congress relatively quickly. In addition, the ESEA had the advantage of spreading funds to every state and a majority of congressional districts, thereby undercutting much of the opposition to the bill. Initial Title I-A Formulas48 The central component of the ESEA—the Title I-A program—was intended to meet the "special educational needs of children from low-income families" and to address "the impact that concentrations of low-income families have on the ability of local educational agencies to support adequate educational programs." Title I-A funds were to be allocated to LEAs via the Basic Grant formula for FY1966 and the Basic Grant and Special Incentive Grant formulas for FY1967 and FY1968. However, the Special Incentive Grant formula was never funded. Title I-A grants could be used for projects designed to meet the special educational needs of educationally deprived students, including for the acquisition of equipment and, where necessary, the construction of school facilities. LEAs were required to develop procedures, including objective measures of educational achievement, for annually evaluating the effectiveness of the program. Recipient LEAs were also required to provide, from state and local sources, a level of funding for public elementary and secondary education for the preceding fiscal year that was at least as much as the level of funding provided in FY1964. This type of requirement is commonly referred to as "maintenance of effort" (MOE). In addition, LEAs were required to provide services on an equitable basis to students attending private schools (commonly referred to as equitable participation). Title I-A funding for and the provision of these services remained under public control; the funds were not provided directly to private schools. In practice, as LEA-level data were not available, Basic Grants were calculated by the Department of Health, Education, and Welfare (HEW) on a county basis. SEAs then received the aggregate funds for counties in the state and reallocated the county amounts to individual LEAs. SEAs could also reserve up to 1% of their Basic Grant allocation for administration, technical assistance, and evaluation before suballocating to LEAs. LEAs receiving grants subsequently distributed funds for Title I-A projects to schools in areas with high concentrations of children from low-income families. HEW regulations further stipulated which schools or "project areas" would be eligible for Title I-A funds. Basic Grants The Basic Grant formula determined grants based on the number of children from low-income families (formula children) multiplied by an expenditure factor based on state APPE. To be eligible to receive a grant, LEAs were required to have at least 100 formula children or formula children had to account for more than 3% of the children ages 5-17 in the LEA (commonly referred to as the formula child rate), provided that there were at least 10 formula children. When data were unavailable at the LEA level (as was the case), grant amounts were calculated using the same formula on a county basis. Additionally, grants to Puerto Rico and the Outlying Areas (Guam, American Samoa, the Virgin Islands, and the Trust Territory of the Pacific Islands) were provided via a reservation of up to 2% of total Basic Grant appropriations. The ESEA authorized Basic Grants for three years but only specified the allocation formula for FY1966, the first year of the program. For that year, the expenditure factor was set to 50% of the state's APPE for public elementary and secondary education, while the formula child count consisted of children ages 5-17 in families with an annual income below $2,000 based on data from the 1960 Decennial Census plus children in families with income at or above $2,000 as a result of receiving Aid to Families with Dependent Children (AFDC). , Thus, an LEA's Basic Grant was equal to 50% of its state APPE multiplied by the sum of the number of children in families earning below $2,000 and the number of children in families that would be earning below $2,000 if they were not receiving AFDC. For FY1967 and FY1968, the expenditure factor and poverty threshold were left unspecified for future congressional determination. Special Incentive Grants The ESEA authorized Special Incentive Grants for FY1967 and FY1968 for LEAs in which the APPE from nonfederal sources exceeded that for the previous year. However, the authorization for this program was repealed in 1966 (see " Elementary and Secondary Education Amendments of 1966 (P.L. 89-750, 1966) " below), before the formula was ever funded. Special Incentive Grants would have been based on an LEA's average daily attendance and APPE. Legislative Debate In 1964, President Johnson established a task force to propose broad ideas for the reform of American education, and in November of that year the task force delivered a report to the President on the nation's educational needs. Subsequently, in January 1965 President Johnson sent Congress a proposal for the ESEA, which was introduced in the House as H.R. 2362 and in the Senate as S. 370. The House Education and Labor Committee made two changes to the Administration's proposal with respect to the Title I-A formulas: (1) children in families with annual incomes at or above $2,000 as a result of receiving AFDC funds were added to formula child counts, which had previously only included children in families earning less than $2,000; and (2) discretion to change the expenditure factor and the poverty threshold for FY1967 and FY1968 was given to Congress as opposed to the Secretary. No other amendments were added to the Title I-A formulas (although some were offered) and H.R. 2362 passed the House and Senate relatively quickly. In support of the formula, the Administration justified the use of the $2,000 poverty threshold because it clearly identified "an unquestioned hard core of poverty," had the administrative advantage of being able to be determined using available Census data, and correlated with the $1 billion the Administration was willing to commit to the program. The Administration justified its use of family income (as opposed to property value per child or per capita income) in the formula because it met four criteria: (1) it identified a distinct poverty group and was broad in its coverage, (2) it applied uniformly among states and local units, (3) gathering and using the data was administratively feasible, and (4) it was convertible into numbers of disadvantaged children at the desirable geographic level of allocation. The expenditure factor was needed, it was argued, to compensate states where the cost of educating a child was higher. The expenditure factor also compensated states with a higher cost of living as "a $2,000 level of family income in rural Mississippi [was] not the same level of poverty as a $2,000 family income in New York City." On the other hand, critics of the formula argued that it disproportionally benefitted wealthy states and wealthy counties, and the reliance on "outdated" Census data would not reflect changes in local need. Additionally, the inclusion of AFDC data in the formula child counts was seen by some as creating inequity because children in families receiving other benefits, such as disability payments, were not being counted. The "patently foolish" formula, it was charged, reflected a "political decision" to spread the funds as broadly as possible, rather than concentrating them in the areas of greater need, to build a "powerful lobby" for the continuation and expansion of the program. Amendments to Public Laws 81-815 and 81-874 (P.L. 89-313, 1965) On October 15, 1965, just a few months after the enactment of the ESEA, Congress passed H.R. 9022 to amend the Impact Aid program and the ESEA. The bill was subsequently signed into law by the President on November 1. The primary purpose of the law was to provide federal aid for construction and the temporary operation of public schools damaged by a major disaster. Among other changes, the law created a new program to provide grants to SEAs for the education of children with disabilities. With respect to the Title I-A formulas, the law made almost no changes. Of note was an increase in the reservation of funds for state administration of Title I. Elementary and Secondary Education Amendments of 1966 (P.L. 89-750, 1966) On October 20, 1966, at President Johnson's request, Congress passed H.R. 13161 to reauthorize the ESEA and extend the Title I-A program for two years (through FY1968). Amid concerns that the program favored wealthier states over their poorer counterparts, the amendments modified the Basic Grant program formula child counts, expenditure factor, and eligibility requirements. These changes expanded the size of the program and increased the cost of providing all eligible LEAs with their maximum grant amounts. In addition, the authority for Special Incentive Grants, scheduled to go into effect in FY1967, was eliminated as Congress and the President felt that these grants would fail to help the neediest school districts with the largest numbers of disadvantaged children. By repealing this program, about $400 million became available for Basic Grants. Additionally, the 1966 amendments added two grant programs for SEAs to Title I-A: a program to provide grants to SEAs to support the education of children of migratory workers and a program to provide grants to SEA for the education of institutionalized neglected and delinquent children. Thus, under the 1966 amendments three SEA programs were authorized under Title I-A in addition to the grants for LEAs: (1) one for children with disabilities, (2) one for migrant children, and (3) one for neglected or delinquent children. Summary of Changes to the Title I-A Formulas Under the 1966 amendments, Title I-A funds were allocated via one formula: Basic Grants. The LEA eligibility threshold was lowered to 10 formula children (compared to 100 formula children or a formula child rate of more than 3% provided there were 10 formula children). The formula was modified to add neglected, delinquent, and foster children to the counts of formula children used to determine grants. The income level used to determine eligible children was set at $2,000 for FY1967 and $3,000 for FY1968. In addition, the expenditure factor was changed to 50% of the greater of state or national APPE beginning in FY1968. Thus, beginning in FY1968 an LEA's Basic Grant was equal to 50% of the greater of state or national APPE multiplied by the sum of (1) the number of children in families earning below $3,000, (2) the number of children in families that would be earning below $3,000 if they were not receiving AFDC, and (3) the number of children in institutions for neglected or delinquent children or in foster homes. However, many of these formula changes were delayed by the 1967 amendments, discussed below. The 1966 amendments made three other changes of note to the Title I-A program. The amendments added authority to provide grants to the Bureau of Indian Affairs (BIA) for disadvantaged Indian children from the reservation of funds from the total appropriation made available for grants to Puerto Rico, Guam, American Samoa, the Virgin Islands, and the Trust Territory of the Pacific Islands. A small change was also made to the calculation of the state reservation for administration. Last, the 1966 amendments added a minimum Title I-A program size: LEA programs must have expenditures of at least $2,500. To meet this requirement, an LEA could jointly operate a program with another LEA. Legislative Debate In early 1966, President Johnson requested that the Basic Grant poverty threshold be increased from $2,000 to $3,000 and Special Incentive Grants be repealed. Identical bills based on the President's proposals were introduced in the House (H.R. 13160 and H.R. 13161) and the Senate (S. 3046). The option of using national APPE (as opposed to state APPE) to determine a state's expenditure factor was added to House and Senate bills by the House Education and Labor Committee and the Senate Labor and Public Welfare Committee, respectively. The House committee added children in institutions for neglected and delinquent children to formula child counts and the Senate committee added foster children to formula child counts. In conference, the two formula child count proposals were combined. Debate around these amendments centered on the argument that wealthier LEAs benefitted disproportionately under the allocation formula. It was also argued that funds should be allocated to states in such a way that states could target LEAs with the greatest need, as the use of increasingly outdated Census and AFDC data in the formula did not allow for adjustments for changing circumstances. However, this issue was somewhat addressed by an update to the AFDC data used in the formula. Similarly, the addition of the option of using the national APPE to calculate the expenditure factor was intended to benefit the poorer states and would "go far toward curing the huge disparity in aid as between states." The main argument against these amendments, however, was cost. For example, raising the poverty threshold to $3,000 and adding neglected, delinquent, and foster children to the formula child counts would increase the formula children counts. Allowing states to use national APPE when determining their expenditure factors would increase expenditure factors. As a result of these increases, LEA maximum grants would increase; thus, assuming the program was to be fully funded, program costs would increase. Elementary and Secondary Education Act Amendments of 1967 (P.L. 90-247, 1968) In 1968, President Johnson signed H.R.7819 into law to give "every child in America a better chance to touch his outermost limits." The scope of the amendments included in H.R. 7819 exceeded the President's initial requests; however, the Administration supported most of the changes. The 1967 amendments extended the authorization of the Title I-A program through FY1970 and authorized the use of advanced appropriations for ESEA programs. The amendments also made changes to the Basic Grant formula and re-added and substantially modified the Special Incentive Grant formula. However, these changes had a limited effect on overall Title I-A grant amounts as the Special Incentive Grant formula was not funded until FY1971 and some changes to the Basic Grant formula never went into effect because appropriations thresholds specified in statute were not met. Summary of Changes to the Title I-A Formulas Under the amendments, Title I-A grants were allocated via two formulas: Basic Grants and Special Incentive Grants. The amendments increased the reservation of funds for state administration of Title I, established priorities for providing funding when appropriations were insufficient to fully fund Title I-A, and mandated a study on methods necessary to obtain data for LEA grant allocations that would be more recent than the 1960 Decennial Census data. The Basic Grant and Special Incentive Grant formulas are discussed in more detail below. Basic Grants Although there was substantial debate around the Basic Grant formula, the 1967 amendments made relatively few changes to it. Of note were changes to the poverty threshold. The use of $3,000 as the poverty threshold in identifying formula children was delayed, and it could not take effect until each LEA received its maximum grant amount based on the $2,000 threshold. (This level of funding is commonly referred to as full funding for the Title I-A program.) Any remaining appropriation amounts could then be allocated using the $3,000 threshold. However, this full funding threshold was never met; thus, under the 1967 amendments, the $2,000 threshold was used to determine formula child counts. Prior to the enactment of the 1967 amendments, the FY1968 Labor-HEW appropriations bill had added state minimum grant provisions to the formula, which specified that should Title I-A not be fully funded, no state could receive less than it received in FY1967. Similarly, the 1967 amendments included a state minimum provision specifying that until appropriations reached $1.5 billion, states could not receive less than they did in FY1967. Thus, in FY1968 no state received less than the amount it received in FY1967 for all of its LEAs. Around half of the states received more in FY1968 than in FY1967. The states that saw an increase were, for the most part, those in which state APPE was lower than national APPE. Thus, these states benefitted from the addition of national APPE to expenditure factor determinations, which began in FY1968 as specified in the 1966 amendments. Additionally, the 1967 amendments specified that if appropriations were below the full funding levels for SEA programs in Title I, then these programs would be fully funded by reducing the appropriations level for the Basic Grant program. Special Incentive Grants The ESEA authorized a new Special Incentive Grants program beginning in FY1969 for states wherein the state "effort index" (based on the ratio of nonfederal educational expenditures to personal income) exceeded the national average effort index. Unlike Basic Grants, Special Incentive Grants were formula grants to states and competitive grants to LEAs. Each eligible state was to receive a grant equal to $1 for every percentage point its effort index exceeded the national average, multiplied by its formula child count. However, no state could receive a Special Incentive Grant greater than 15% of the total amount available for grants to states. After receiving funds, SEAs were to distribute Special Incentive Grants to LEAs with the greatest need for additional Title I-A funds. However, this program was not funded until FY1971, after the ESEA had been reauthorized by the 1969 amendments (discussed below). It should be noted that the ESEA had originally included a similar Special Incentive Grant program for LEAs, but that program was never implemented. Legislative Debate During consideration of the 1967 amendments, the Title I-A formulas were debated in both the House and the Senate. When the House Education and Labor Committee reported H.R. 7819, it extended the Basic Grant program for three years (through FY1971), made minor changes to the AFDC data, and required a study of the data used to calculate grants. None of these changes were particularly controversial. Also relatively noncontroversial was the addition of the Special Incentive Grant program by the Senate Labor and Public Welfare Committee. Major controversy, however, attended congressional efforts to respond to problems in the distribution of Title I-A funds due to appropriations falling considerably short of the authorization level for the program. To address this issue, the House committee proposed delaying the scheduled increase of the poverty threshold and the option for LEAs to use the greater of state or national APPE to calculate their expenditure factor (both scheduled to take effect in FY1968) until appropriations were sufficient to fully fund the program. On the House floor, however, the delay of the national APPE option was dropped, benefitting a minority of states with relatively low spending on elementary and secondary education. , And, it was the deletion of this provision that spurred the inclusion of the state minimum grant provision in the FY1968 Labor-HEW appropriations bill (discussed above). The Senate, on the other hand, changed the Title I-A formula to stipulate that should appropriations be insufficient to fully fund Title I-A, each LEA would receive what it did for the prior fiscal year and the remaining funds would be allocated using a poverty threshold of $3,000 and the greater of state or national APPE. Additionally, the Senate committee prioritized funding for the Title I state agency programs over Title I-A grants to LEAs and authorized the use of advanced appropriations for ESEA programs to address complaints from LEAs that the school year was usually well under way before they knew how much federal money they would receive. In conference, the Title I-A formula was rewritten to create a compromise between the House and Senate provisions. In addition to the changes to the Title I-A formulas, the other major controversy related to Title I-A was a proposed amendment to convert multiple ESEA programs (including Title I-A) into a block grant program. This amendment did not pass. Elementary and Secondary Education Act Amendments of 1969 (P.L. 91-230, 1970) In 1970, President Nixon signed H.R. 514 into law. The 1969 amendments extended most ESEA programs through FY1973, modified the Title I-A Basic Grant program, extended the Special Incentive Grant program, and included a provision to provide Special Grants to Urban and Rural Schools, which provided additional funding to areas where there were high concentrations of disadvantaged children (similar to what is now known as Concentration Grants). Summary of Changes to the Title I-A Formulas Under the 1969 amendments, Title I-A grants were allocated via three formulas: Basic Grants, Special Incentive Grants, and Special Grants. The amendments also required that all applications and other pertinent LEA documents be made available to the public. In addition, the Commissioner of Education (hereinafter referred to as the Commissioner) was required to study the effectiveness of the program in meeting the needs of the disadvantaged and report the findings to Congress. The amendments also mandated a study of the LEA grant allocation formula and established the National Advisory Council on the Education of Disadvantaged Children. Two new fiscal requirements were also added to the statute: (1) a comparability requirement under which each LEA receiving Title I-A funds had to demonstrate comparable services were provided to both schools receiving Title I-A funds and schools not receiving Title I-A funds, and (2) a supplement, not supplant (SNS) requirement that required LEAs to provide an assurance that Basic Grant funds were not supplanting nonfederal funds in their districts. The Basic Grant, Special Incentive Grant, and Special Grant for Urban and Rural Schools formulas are discussed in more detail below. Basic Grants The 1969 amendments did not make substantial changes to the Basic Grant formula due, in part, to the funding level for the program. Since FY1967, Title I-A had not received sufficient appropriations to provide LEAs with their maximum grant amounts. As a result, Congress retained the Basic Grant FY1967 state grant minimum provisions and the provisions prioritizing funding for state agency programs over Basic Grants included in the 1967 amendments. Additionally, while the amendments increased the poverty threshold used to determine formula child counts, this change never went into effect due to insufficient appropriations. One change the 1969 amendments did make was to give the Commissioner the option to use data from the Census Bureau's 1970 Decennial Census (as opposed to the 1960 Decennial Census) to determine grant amounts beginning in FY1973. Additionally, under the amendments Basic Grants could be used for salary bonuses for teachers serving in schools with large numbers of disadvantaged students. Special Incentive Grants The 1969 amendments did not make major changes to the Special Incentive Grant program, which, in 1970 (when the 1969 amendments were enacted), had yet to be funded. Special Incentive Grants to SEAs were based on an effort index and the state formula child count. After receiving funds, SEAs were required to distribute Special Incentive Grants to LEAs with the greatest need for additional Title I-A funds on a competitive basis. Special Grants Beginning in FY1970, the 1969 amendments authorized new Special Grants for Urban and Rural Schools (commonly referred to as Special Grants) for school districts with high concentrations of poverty. To be eligible to receive a Special Grant, an LEA's formula child rate had to be at least 20% or the LEA had to have at least 5,000 formula children (if this constituted at least 5% of the total number of school-age children served by the LEA). The maximum grant for an LEA was equal to 30% of its maximum Basic Grant amount for FY1970 and 40% of its maximum Basic Grant amount for all subsequent years. If appropriations were insufficient to pay maximum grant amounts, these amounts were reduced. Funds could only be used for programs and projects designed to meet the needs of educationally deprived children in preschool and in elementary schools serving areas with the highest concentrations of low-income families. Funds could be used in secondary schools serving areas with the highest concentration of low-income families if there was an urgent need for such projects and there was "satisfactory assurance" that the projects would be at least as effective as elementary school programs. It should also be noted that appropriations for Special Grants were limited to no more than 15% of Title I appropriations in excess of $1.39 billion. Legislative Debate The major debate over Title I-A centered on the length the program should be extended. The Administration proposed that Title I-A be extended through FY1972 to give it time to thoroughly review the program and to permit data from the 1970 Decennial Census to be considered in the subsequent reauthorization of the program. However, the House Education and Labor Committee reported an amended version of H.R. 514, which contained a five-year extension of the ESEA to give LEAs more stability for long-term planning. On the House floor, the bill was revised to limit the extension of programs to two years. The Senate Labor and Public Welfare Committee replaced this with a four-year extension. The other Senate committee amendments to Title I-A—raising the poverty threshold, a new Special Grant program, and limiting of the use of the 1970 Census data—were relatively non-controversial. In conference, the extension was modified to three years and the Senate's other Title I-A amendments were adopted. It should be noted that on the House side, there was also continuing concern over the funding "inequities" created by the Basic Grant formula. The AFDC count was seen by some as being "worthless in comparing the needs of one State with those of another" because of the variation in AFDC programs at the state level; the 10 year old 1960 Census data were argued to be "woefully inadequate to measure the highly changeable economic and population status of individual counties and communities"; and the expenditure factor was said to favor the wealthier states, thus allowing "the rich [to] get richer." Conversely, it was argued that the formula was "the most effective means of distributing funds uniformly throughout the country where educational deprivation exists," and the greatest need was not for revision of the formula but for full funding of the program. There were also concerns that making changes to the formula would reopen the debate over serving children attending private schools. Education Amendments of 1972 (P.L. 92-318, 1972) No substantial changes were made to the Title I-A formulas by the 1972 amendments. Education Amendments of 1974 (P.L. 93-380, 1974) Congress passed the 1974 education amendments nearly a decade after the original passage of the ESEA. Under these amendments, Title I-A grants continued to be allocated via three formulas: Basic Grants, Special Incentive Grants, and Special Grants. However, the amendments made a number of changes to the Title I-A formulas, many of which reflected congressional concern that the formulas were more favorable to urban areas than rural areas. Summary of Changes to the Title I-A Formulas The 1974 amendments made several changes to the Basic Grant and Special Grant formulas and extended the Title I-A program through FY1978. A new provision was also added that required that federal funds be used only for the excess costs of activities to meet the special educational needs of educationally deprived children. Additionally, the amendments made changes to school eligibility for Title I-A and state reservations for the administration of Title I. The changes made to the Basic Grant, Special Incentive Grant, and Special Grant formulas are discussed in more detail below. Basic Grants Although Congress retained the structure of the Basic Grant formula as originally enacted, the 1974 amendments changed every factor in the formula. The formula child count used to determine Basic Grants was changed to be the sum of (1) counts of children ages 5-17 in families at or below the poverty thresholds that were applied by the Census Bureau in compiling the 1970 Census, (2) two-thirds of the children in families receiving AFDC payments above the poverty threshold (i.e., the total number of eligible AFDC children multiplied by two-thirds); and (3) neglected, delinquent, and foster children. The expenditure factor was changed to 40% of state APPE (as opposed to 50% of the greater of state or national APPE). However, a floor and ceiling were applied to the expenditure factor that raised the expenditure factors of relatively low-spending states and lowered the expenditure factors of relative high-spending states. Thus, for FY1975 through FY1978, an LEA was entitled to a Basic Grant equal to 40% of the state's APPE (subject to floor and ceiling constraints) multiplied by the new formula count detailed above. In addition to changing the population and expenditure factors, the amendments included provisions to prevent LEAs from seeing large losses in their grant amounts from year to year. The amendments included a hold harmless provision that required each LEA to receive a grant equal to at least 85% of its grant from the previous year, assuming appropriations were sufficient. The amendments also authorized a separate appropriation of $15.7 million each year to be used at the discretion of the Commissioner to help LEAs whose Basic Grants in any year were less than 90% of their grant amount in the previous year. The 1974 amendments also stipulated that Puerto Rico was to be treated as a state under Basic Grants; funds were allocated to Puerto Rico via the Basic Grant formula as opposed to through a set aside. Consequently, the 2% reservation for Basic Grants to Puerto Rico, the Outlying Areas, and the BIA was changed to a 1% reservation for Basic Grants to the Outlying Areas and the BIA. In addition, the amendments kept the full funding requirements for SEA Title I programs; if appropriations for all Title I programs should be less than total maximum grants, allocations for SEA programs in Title I could not be reduced below the full funding levels. Special Incentive Grants The 1974 amendments extended the Special Incentive Grant program, which benefited states whose educational effort exceeded the national average. However, the amendments provided, as before, that the program would only take effect when Title I appropriations exceeded $1.396 billion and further provided that total entitlements under the program could not exceed $50 million. Special Grants136 Congress rewrote the formula for Special Grants, but provided that the program would end in FY1975. To be eligible to receive a grant, LEAs were required to be located in counties with at least 10,000 formula children (provided these children accounted for at least 5% of the school age population) or the number of formula children in the county had to be at least 200% of the average number of formula children in the state. Additionally, the maximum grant an LEA was entitled to receive was changed from a percentage of its Basic Grant amount to a formula child count multiplied by an expenditure factor. The formula child count consisted of children (1) in families with an annual income below $3,000; (2) in families with income at or above $3,000 as a result of receiving AFDC; and (3) in institutions for neglected or delinquent children or in foster homes. The expenditure factor was equal to 50% of the state APPE. The authorization level for Special Grants was also changed from 15% of the Title I appropriation in excess of $1.396 billion to a separate authorization of $75 million for FY1975. Legislative Debate Congressional consideration of the 1974 amendments began in 1973 in the House. The House Committee on Education and Labor considered proposals to allocate $300 per formula child before allocating the remaining funds via the Basic Grant formula (H.R. 69), consolidate programs into an education-revenue sharing plan (H.R. 5823), and allocate funds based on the number of children in each state failing to meet standards in reading and math (H.R. 5163). After a year of debate, the committee reported a modified version of H.R. 69. The committee had called the Title I program an "immense success" but had criticized almost every aspect of the Basic Grant formula. The formula child counts were seen as being dominated by AFDC children and thus more favorable to wealthier states that provided larger AFDC benefits. As a result, the committee altered the formula to use updated poverty data, use a more updated definition of poverty (commonly referred to as "the Orshansky index"), and limit the count of AFDC children to two-thirds. Additionally, the expenditure factor was seen as causing "grave inequities," as there was no maximum on the state APPE that could be used. Thus, the committee adopted a new expenditure factor: 40% of state APPE, limited to a range of 80% to 120% of the national APPE. To help mitigate any losses that would result from these changes, the committee added an 85% hold harmless factor. The House committee's changes to the formula were criticized because they would have a negative impact on urban areas. Several modifications to the Title I-A formulas were proposed on the House floor, particularly with respect to the limitation in the count of AFDC children, but all were defeated. The Senate Labor and Public Welfare Committee's version of the bill (S.1539) differed substantially from the House version, providing greater benefits to areas with high concentrations of AFDC children and revamping and extending both the Special Incentive Grant program and the Special Grant program, both of which the House version proposed to terminate. On the Senate floor, however, the Basic Grants formula was amended to conform to the House version. In conference, the Senate's revisions of the Special Grants program were accepted, but the program was extended for only one year. The Special Incentive Grant program, on the other hand, was extended for four years with only minor modifications. One-Year Extension of the ESEA (P.L. 95-112, 1977) The authorization of appropriations for a number of ESEA programs was scheduled to expire on October 1, 1978. A one-year extension was requested by the Carter Administration so it could study the programs before another comprehensive reauthorization. Congress passed the extension in September 1977. No major changes were made to the ESEA. Education Amendments of 1978 (P.L. 95-561, 1978) In 1978, Congress passed H.R. 15 to "extend and amend expiring elementary and secondary education programs." Congressional consideration of the 1978 amendments was informed to some extent by a study on the Title I-A program conducted by the National Institute of Education (NIE) in 1977. The study found, among other things, that per-pupil Title I expenditures were higher in predominantly urban and suburban states and the inclusion of AFDC children in the formula provided the largest benefits to large northeastern cities. The 1978 amendments extended Basic Grants for five years and made changes to the allocation formulas generally benefitting urban areas. The amendments also added a new Concentration Grant program to provide supplemental funds to areas with especially high concentrations of poverty. In addition, the amendments converted the Special Incentive Grant program to a federal matching grant program for state compensatory education expenditures beginning in FY1980. The Special Grant program was not retained. Summary of Changes to the Title I-A Formulas Under the 1978 amendments, Title I-A grants were allocated via three formulas: Basic Grants, Concentration Grants, and Special Incentive Grants. The amendments increased Title I state administration grants, reorganized and elaborated on existing Title I administrative provisions, and required a study of alternatives to LEA compliance with comparability requirements. With respect to Title I-A allocations to schools, the amendments permitted LEAs to allocate funds to schools with a high incidence of educational deprivation in addition to schools with concentrations of children from low-income families. The amendments also stipulated that if LEA grants were insufficient to provide funding to all eligible schools, the LEA was to rank its schools by concentration of children from low-income families and serve the schools in rank order. Additionally, schools could be automatically qualified to participate in Title I-A if their percentage of students from low-income families was at least 25%. , The Basic Grant, Concentration Grant, and Special Incentive Grant formulas are discussed in more detail below. Basic Grants Beginning in FY1980, the amendments changed the Basic Grant formula child population in two respects. First, children in families receiving AFDC payments above the poverty level were counted in full (as opposed to two-thirds). Second, half of the funds available for Basic Grants in excess of the FY1979 appropriations level were allocated to states on the basis of counts of children in families with income below 50% of the median income for a four-person family, according to the 1976 Survey of Income and Education (SIE). In addition, schools receiving Basic Grant funds that had a poverty rate of 75% or higher were permitted to operate schoolwide programs allowing them to implement a project to upgrade their entire educational program in a school. The amendments also required that data needed for making Basic Grants be compiled from the 1980 Census and made a change to the treatment of Puerto Rico. Concentration Grants The amendments also provided for Grants to LEAs in Counties with Especially High Concentrations of Children from Low Income Families (these grants are more commonly known as Concentration Grants). Concentration Grants were essentially a new version of the Special Grants program authorized under the 1969 and 1974 ESEA amendments. Concentration Grants were intended to provide additional funding to areas with high concentrations of children from low-income families. Eligibility for the program was based on the number or proportion of formula children relative to the total population ages 5-17 in the county in which the LEA was located. An LEA was eligible to receive a grant if the number of formula children in its county exceeded 5,000 or accounted for over 20% of the total school-age population. A county was entitled to receive a Concentration Grant equal to the number of children residing in the county in excess of the eligibility thresholds multiplied by its maximum Basic Grant per formula child. A county's maximum Basic Grant per formula child was equal to a county's maximum grant amount calculated under the Basic Grant formula divided by the total number of formula children in the county. Thus, a county's Concentration Grant amount was equal to its formula child count in excess of 5,000 or 20% of the total number of children in the county multiplied by its maximum Basic Grant amount and divided by its formula child count. If appropriations were insufficient to pay these amounts, they were reduced. Additionally, no state could receive less than 0.25% of the total amount available for state grants. Once county Concentration Grants were made, these funds were allocated to LEAs within those counties by the SEA. All LEAs in each eligible county would receive a share of the county's Concentration Grant. County grants were allocated to LEAs in proportion to each LEA's number of formula children, with a higher weight given to formula children in LEAs with higher formula child rates. Special Incentive Grants Beginning in FY1980, the amendments converted the Special Incentive Grant program to a federal matching program for state compensatory education expenditures. To be eligible to receive a Special Incentive Grant, an LEA had to be eligible for a Basic Grant and be in a state with a compensatory education program. An eligible LEA was entitled to $1 in federal funds for every $2 the state spent on programs for the disadvantaged. However, no state could receive a grant greater than 10% of its maximum Basic Grant. Additionally, it should be noted that unlike the other Title I-A formulas, Special Incentive Grants appropriations were authorized at "such sums as may be necessary." Legislative Debate The Carter Administration initiated two of the proposals enacted in the 1978 amendments: the conversion of the Special Incentive Grant program to a federal matching program and the Concentration Grant program. Both the House Education and Labor Committee and the Senate Committee on Human Resources concurred on these initiatives. Funding under the previous Special Incentive Grants program was seen as "exceedingly unpredictable" and federal incentives to promote state compensatory education programs were considered "more consistent" with the goals of Title I. With respect to Concentration Grants, proponents argued that an area with a concentration of poverty needed "more intensive remedial effort than the average school district." To protect rural districts, the Senate committee initiated the proposal that no state receive a Concentration Grant that was less than 0.25% of the appropriations level. The House adopted the same provision in a floor amendment. The House and Senate committees agreed as well on extending Title I for five years and restoring AFDC children to a full count (as opposed to counting each eligible AFDC child as two-thirds of a child). Proponents of the AFDC change argued that it was needed to address "the inequities ... to major urban areas" that resulted from the 1974 amendments. Moreover, it was said a full count was needed to account for shifts in poverty that had occurred since the 1970 Census. On the other hand, critics of the change argued it would benefit only a handful of states. There was less agreement between the House and Senate committees, however, on using SIE data to allocate Title I funds. In the House, the SIE data were seen as "a more accurate State-level estimate of children in poverty than data from the 1970 Census." The Senate committee, on the other hand, rejected SIE as a base for Basic Grant allocations because the data were "of questionable statistical accuracy." Ultimately, the Senate agreed in conference to the new Basic Grant formula based on SIE data for half of the appropriations in excess of FY1979 appropriations levels. Education Consolidation and Improvement Act of 1981 (ECIA, Title V, P.L. 97-35, 1981)182 In 1981, President Reagan sought to convert existing elementary and secondary education programs into block grants. However, this proposal met with only limited success in Congress and the ECIA ultimately included only one education block grant, replacing a group of relatively small categorical education programs. In general, the ECIA either changed or consolidated the statutory provisions for every ESEA program. ESEA Title I became Chapter 1 of the ECIA (Financial Assistance to Meet Special Educational Needs of Disadvantaged Children), while the rest of the ESEA was consolidated into Chapter 2 of the ECIA (Consolidation of Federal Programs for Elementary and Secondary Education). Under Chapter 1, the Basic Grant, Concentration Grant, and Special Incentive Grant programs were retained. Although no major changes were made to the allocation formulas, the Title I-A program was modified in several ways. Among the changes was a simplification of the LEA application requirements; a change in the MOE requirement for LEAs, making it easier for LEAs to comply with the requirement; a change in SNS and comparability requirements to exclude certain costs when determining compliance; elimination of the excess cost requirements; elimination of the existing requirements or recommendations related to how projects should be implemented or administered; and removal of several provisions that explicitly authorized flexibility in how programs were implemented. The comparability requirements that were first included in the 1970s were also amended. Education Consolidation and Improvement Act Technical Amendments Act of 1983 (P.L. 98-211, 1983) The 1983 amendments were designed to clarify language, resolve questions of legislative intent, and eliminate drafting errors in the ECIA. The amendments explicitly restored authority for certain forms of flexibility in program administration that had been included in ESEA Title I. For Chapter 1 programs, the amendments added and extended certain requirements. For example, the amendments extended SNS requirements to SEAs and other state agencies and required SEAs to evaluate programs receiving assistance at least once every two years. The National Institute for Education (NIE) was also required to conduct an assessment of compensatory education programs. Education Amendments of 1984 (P.L. 98-511, 1984) The 1984 amendments were primarily focused on the Bilingual Education Act and English language learners (ELLs). No substantial changes were made to the Basic Grant program or other Chapter 1 programs. Augustus F. Hawkins-Robert T. Stafford Elementary and Secondary School Improvement Amendments of 1988 (P.L. 100-297)195 In 1988, Congress reauthorized the ESEA and generally extended programs through FY1991. The 1988 amendments repealed the ECIA, returned provisions that had previously been moved to the ECIA back to the ESEA, modified various ESEA programs, and added several new programs. The Title I-A program was reauthorized as Title I, Chapter I-A. The amendments updated the Basic Grant formula and made large changes to the Concentration Grant formula to be more favorable to rural areas. While both formulas were modified by the amendments, most of the debate and attention was focused on the Concentration Grant formula. Summary of Changes to the Title I-A Formulas Under the 1988 amendments, Title I-A funds (now authorized under Title I, Chapter 1-A) were allocated via modified versions of the Basic Grant and Concentration Grant formulas. The amendments also added requirements for SEA and LEA program improvement plans, expanded requirements for parental involvement, added a competitive grant program for the Outlying Areas and freely associated states, and expanded comparability provisions. Additionally, the amendments increased Chapter 1 state administration grants. The Basic Grant and Concentration Grant formulas are discussed in more detail below. Basic Grants The 1988 amendments made three changes to the Basic Grant allocation formula. First, references to the 1970 Census poverty thresholds were removed, allowing the 1980 Census poverty thresholds to be applied to the 1980 Census data and allowing the 1990 Census poverty thresholds and data to be used when those data became available. Second, the amendments removed the provisions requiring half of the funds above the FY1979 appropriations level to be allocated based on the 1976 SIE data. Finally, the amendments added minimum grant provisions to the Basic Grant formula: if appropriations exceeded $700 million and the Concentration Grant formula was not funded, no state would receive less than 0.25% of the total funding available for grants. Thus, under the 1988 amendments a county was entitled to a Basic Grant equal to its expenditure factor (based on state APPE) multiplied by its formula child count, subject to state minimum grant provisions. Should appropriations be insufficient to provide maximum grant amounts, grants were ratably reduced. SEAs continued to suballocate county grants to individual LEAs. Concentration Grants Under the 1988 amendments, Concentration Grants, which had not been funded since FY1981, were required to receive all Chapter 1-A appropriations between $3.9 billion and $4.3 billion, plus 10% of appropriations in excess of $4.3 billion. The amendments also substantially modified the Concentration Grant formula and eligibility criteria. The county eligibility thresholds were changed from 5,000 formula children or a formula child rate of 20% to 6,500 formula children and a formula child rate of 15%. When allocating grants, all formula children were counted if the county met the 15% threshold, but only those above 6,500 were counted if the county did not meet the 15% threshold. Additionally, the amendments modified the 0.25% state minimum grant amounts by adding a series of caps and added an "absolute" minimum grant amount of $250,000 that was not subject to any caps. Thus, under the 1988 amendments a county was entitled to a Concentration Grant equal to its formula child count (only counting formula children above the 6,500 formula child count threshold if the county's formula child rate was below 15%) multiplied by its maximum Basic Grant amount per formula child. The 1988 amendments also made changes to the distribution of funds among LEAs within eligible counties. Funds were no longer distributed to every LEA in an eligible county. Rather, only the LEAs that met either the 6,500 or 15% thresholds were eligible to receive a share of the county's Concentration Grant. If no LEA in the county met those criteria, then the Concentration Grant would be shared by all LEAs in the county that had a number or percentage of formula children above the county average. In addition, states could reserve up to 2% of their Concentration Grants to distribute to LEAs with relatively high numbers or percentages of formula children located in counties that were not eligible for Concentration Grants. Legislative Debate During congressional consideration of the 1988 amendments, a great deal of attention was paid to the Concentration Grant formula. Under the House bill ( H.R. 5 ), the eligibility thresholds were changed to 6,500 formula children or a 15% formula child rate (a change that generally favored rural districts). Additionally, to account for more heterogeneous counties, the House bill included provisions allowing states to reserve 2% of funds for LEAs with concentrations of poverty in counties not eligible for Concentration Grants. The Senate bill ( S. 373 ) also made changes to the formula to "improve the targeting of Chapter 1 dollars to ... areas that have a particularly high number of educationally disadvantaged and low-income students." Under the Senate bill, half of the funds would be distributed based on a formula similar to the existing formula. The other half would be allocated to states under the Basic Grant formula and then to LEAs with high numbers or percentages of formula children within states (referred to as the Senate Concentration Grant formula). Both the House and Senate bills included a reservation of Chapter 1 funds for Concentration Grants (which had not been funded since FY1981) as opposed to a separate appropriation to help ensure the formula would be funded. In conference, the House conferees rejected the Senate Concentration Grant formula in favor of the House version primarily because the Senate version benefited large urban areas over rural areas (particularly rural areas in the South). Debate over the proposal was reportedly influenced by Representative Natcher, who chaired the appropriations subcommittee with jurisdiction over education and had promised to fund the House plan but not the Senate plan. With respect to the Basic Grant formula, the only major point of debate was the inclusion of AFDC children in formula child counts. The Senate bill would have removed AFDC children from the formula as "variances among State [AFDC] criteria raised questions of equity with regard to nationwide distribution of a portion of chapter 1 funds." However, AFDC children were returned to formula child counts during Senate floor consideration to prevent an abrupt change in formula child counts for states with high AFDC counts (e.g., California, Washington) and to give GAO time to study the use of AFDC data in the formula. Improving America's Schools Act (IASA, P.L. 103-382, 1994) On October 20, 1994, President Clinton signed the IASA into law. The bill was a substantially modified version of the proposal offered by the Clinton Administration nearly a year earlier. The IASA made several changes to the existing Title I-A formulas: Basic Grants and Concentration Grants. The Title I-A program was also amended to include two new formulas—Targeted Grants (developed by the House) and Education Finance Incentive Grants (EFIG; developed by the Senate)—in an attempt to target Title I-A funds more effectively on concentrations of poverty. In addition, the IASA merged the SEA program for students with disabilities into the Individuals with Disabilities Education Act (IDEA) and removed the full funding requirements for SEA programs. Summary of Changes to the Title I-A Formulas The IASA included four formulas for allocating Title I-A funds: Basic Grants, Concentration Grants, Targeted Grants, and EFIG. Beginning in FY1996, all Title I appropriations above the FY1995 level ($6.6 billion) were to be allocated via Targeted Grants and a separate appropriation was to be made for EFIG. However, neither the Targeted Grant nor the EFIG formula was funded prior to the enactment of the No Child Left Behind Act in FY2002 (discussed below). In addition to the changes to the allocation formulas, the IASA expanded and added requirements for states, LEAs, and schools receiving Title I-A funds. Most notably, the IASA attempted to raise the instructional standards of the Title I-A program, and the academic expectations for participating students, by adding requirements related to reading and mathematics standards and assessments that states, LEAs, and schools had to comply with to receive Title I-A funds. Other changes included adding a competitive grant program for the freely associated states, expanding the number of schools eligible to operate Title I-A programs on a schoolwide basis, changing the allocation process to schools to focus funds on fewer schools, expanding planning requirements, increasing the focus on professional development, and expanding parental involvement requirements. Additionally, LEAs were now permitted to use Title I-A funds for public school choice programs. With respect to the fiscal accountability requirements, the IASA also made changes to the comparability requirements under which LEAs had to demonstrate an equal distribution of nonfederal resources to Title I-A and non-Title I-A schools within their districts. As previously discussed, ED had historically calculated Title I-A grants by county and then the states suballocated county totals to LEAs, as sufficient LEA-level data were not available. However, beginning in FY1999 the IASA stipulated that all grants were to be calculated on the basis of formula child count data for LEAs, and ED began calculating Title I-A grants by LEAs not counties. Basic Grants Three changes were made to the Basic Grant formula. First, the state minimum grant level was effectively raised for the formula. Second, in addition to serving at least 10 formula children, LEAs were no longer eligible for Basic Grants unless their formula child rate was greater than 2%. Third, a 100% LEA hold harmless applied to Basic Grants for FY1996. For FY1997 through FY1999, a hold harmless rate of 85-95% of an LEA's prior-year grant (the higher an LEA's formula child rate was, the higher its hold harmless percentage would be) applied to Basic Grants. Concentration Grants Three changes were made to the Concentration Grant formula. First, like Basic Grants, the state minimum grant level was effectively raised for the Concentration Grant formula. Second, a change was made to the way formula children were counted: if a county (or LEA beginning in FY1999) met the 6,500 poor child threshold but not the threshold of 15% of its children living in poverty, then all formula children, not just those above 6,500 (as in prior law), would be counted in calculating Concentration Grants. Third, as with Basic Grants, a 100% LEA hold harmless applied to Concentration Grants for FY1996. This hold harmless provision then dropped to 85% of the previous-year grant for FY1997 through FY1999. Targeted Grants The new Targeted Grant formula was similar to the Basic Grant formula except that formula children it counted were assigned weights based on the formula child count or rate for counties (for FY1996-FY1998) or LEAs (beginning in FY1999). , As a result, the higher a county's or LEA's formula child rate or number of formula children was, the higher its Title I-A grant per child would be. There was also a somewhat higher LEA eligibility threshold for Targeted Grants than for Basic Grants (5% formula child rate for Targeted Grants compared to 2% formula child rate for Basic Grants). Aside from these two differences, Targeted Grants, like Basic Grants, were based on each eligible LEA's share (compared to the national total) of a formula child count multiplied by an expenditure factor, LEA hold harmless provisions, and a state minimum. Education Finance Incentive Grants (EFIG) Under the new EFIG formula, allocations were first calculated for each state overall, and state totals were subsequently suballocated to LEAs within a given state using a different formula. Grants were allocated to states based on total school-age population (not just formula children) multiplied by an effort factor and an equity factor (but no expenditure factor). Similar to the effort index included in the Special Incentive Grant formula under the 1967 ESEA amendments, the EFIG effort factor for each state was based on APPE for public K-12 education relative to personal income per capita (PCI) for each state compared to the nation as a whole. In general, the effort factor benefitted states that had a higher level of spending on education relative to PCI in their state. The equity factor for each state was determined based on variations in APPE among the LEAs in the state. The application of the equity factor resulted in higher grants to states with less variation in APPE among their LEAs and lower grants to states with more variation in APPE among their LEAs. No state could receive less than 0.25% of the total amount available for state grants. State grants were then suballocated to LEAs in proportion to total LEA grants under the other Title I-A formulas. Legislative Debate The Title I-A formulas were one of the dominant issues in the debates over the IASA. The Clinton Administration's version of the IASA would have made several changes to the Basic Grant and Concentration Grant formulas to increase the targeting of Title I-A grants to high poverty areas. However, these proposals were not accepted by Congress, mainly due to the relatively large reductions in grants that would have occurred for many states and LEAs. In H.R. 6 , the House Committee on Education and Labor added the Targeted Grant formula to target Title I-A funds more effectively on areas with concentrations of poverty while retaining Basic Grants and Concentration Grants to aid "other less poor but still needy communities." The bill also stipulated that ED would calculate grants on an LEA basis using data updated biennially to help "reduce the drastic funding shifts which have occurred in this program following each Census." In S. 1513 , the Senate Committee on Labor and Human Resources replaced all of the existing Title I-A formulas with one formula—EFIG—in response "to recent research findings that the achievement of all students, both poor and non-poor, suffers in schools with poverty rates exceeding 30 percent." The committee sought to meet the original purpose of the ESEA to provide financial assistance to LEAs serving areas with concentrations of children from low-income families. Based on reports at the time, including one from ED, the committee noted the following: Under current law, funds are spread thinly, indeed to almost every school district regardless of its level of poverty, while at the same time many high-poverty schools go unserved because funds received by their respective district are insufficient to provide services in any but the highest poverty schools. Under the EFIG formula proposed by the Senate committee, each state would be entitled to a grant equal to a weighted formula child count multiplied by an expenditure factor, an equity factor, and an effort factor. The equity and effort factors were included in the formulas because of concerns about disparities in funds and resources among LEAs in many states and to provide an incentive for states to reduce those disparities. The Senate proposal also included state hold harmless provisions to prevent sharp decreases in Title I-A funding levels. A compromise on a single new formula was not reached; nor was there agreement on eliminating the existing formulas. As a result, in conference all four formulas were included in the IASA. However, the EFIG formula was substantially modified (e.g., the expenditure factor was eliminated) and most formula changes were postponed until FY1996. Criticisms of the formula compromise included that it disproportionately disadvantaged southern states and that the formulas would not target funds enough, as they were "only a slight change from current law." Conversely, proponents of the compromise argued that it was "a fair compromise that makes better use of scarce Federal dollars by better targeting funds to States with the greatest need, while mitigating the dislocation to States that have benefited for so long from the old, failed, and flawed formula." No Child Left Behind Act (NCLB, P.L. 107-110, 2002) The 106 th Congress extensively considered proposals to comprehensively reauthorize the ESEA, but none were adopted. The issue remained on the agenda for the first session of the 107 th Congress, and NCLB was enacted in January 2002. As with the IASA, NCLB included four different formulas for allocating Title I-A funds: Basic Grants, Concentration Grants, Targeted Grants, and EFIG. Summary of Changes to Title I-A Formulas NCLB made small changes to the Basic Grant, Concentration Grant, and Targeted Grant formulas and substantial changes to the EFIG formula. Additionally, NCLB provided for the use of poverty data that were updated annually, rather than every other year. NCLB also made changes to the accountability requirements states and LEAs had to meet to receive Title I-A funds and added new requirements regarding highly qualified teachers, paraprofessionals, and participation in the National Assessment of Educational Progress (NAEP). Other changes included expanding the number of schools eligible to operate Title I-A programs on a schoolwide basis, authorizing most LEAs to transfer up to 50% of their grants from other ESEA programs into Title I-A, and altering eligibility for the competitive grant program for the freely associated states. Although the Targeted Grant and EFIG formulas were enacted in 1994 under the IASA, they had not been funded. In an effort to fund these formulas, NCLB specified that any increases in appropriations for Title I-A over the FY2001 appropriations level had to be allocated under the Targeted Grant and EFIG formulas. Thus, the proportion of Title I-A funds allocated under the Targeted Grant and EFIG formulas has steadily increased since FY2002. Basic Grants NCLB made few changes to the Basic Grant formula. Notably, the cap on Puerto Rico's grant amount was slightly increased. Additionally, the state minimum grant amount was increased from 0.25% to 0.35%, but only with respect to funds above the FY2001 level. As all increases in Title I-A funds above the FY2001 appropriations level were required to be allocated via Targeted Grants and EFIG, this change had no effect on grant amounts. Concentration Grants Under NCLB, the Concentration Grant formula was modified to mirror the Basic Grant formula. The Basic Grant expenditure factor (40% of state APPE subject to minimum and maximum provisions) was applied to Concentration Grants. Previously, the Concentration Grant expenditure factor had been equal to the maximum Basic Grant amount per formula child. Additionally, the tiered hold harmless provisions that had previously only applied to Basic Grants and Targeted Grants (a prior-year hold harmless of 85%-95% depending on the LEA's formula child rate) was applied to Concentration Grants. Unlike Basic Grants, however, NCLB added a special provision to Concentration Grants that expanded the hold harmless provisions. LEAs that met the eligibility requirements to receive a Concentration Grant in one year but failed to meet the requirements in a subsequent year would continue to receive a grant based on the hold harmless provisions for four additional years. Thus, under NCLB an LEA was entitled to a Concentration Grant equal to its formula child count multiplied by 40% of state APPE (subject to minimum and maximum provisions), adjusted by state minimum grant amounts and LEA hold harmless provisions. It should be noted that, as with Basic Grants, the state minimum grant amount was increased from 0.25% to 0.35%, but only with respect to funds above the FY2001 level. As all increases in Title I-A funds above the FY2001 appropriations level were required to be allocated via Targeted Grants and EFIG, this change had no effect on grant amounts. Targeted Grants The allocation formula for Targeted Grants essentially remained the same under NCLB. One change of note was that the ranges used to weight formula child counts were updated based on the distribution of formula children among all LEAs according to the latest available data in 2001. Additionally, the state minimum grant amount was raised from 0.25% to 0.35% and the cap on Puerto Rico's grant amount was raised slightly. Education Finance Incentive Grants (EFIG) NCLB made substantial changes to the EFIG formula. First, in the allocation of funds to states the population factor was changed from total school-age children to the same formula child count used to calculate Basic Grants, Concentration Grants, and Targeted Grants. Second, an expenditure factor based on state APPE similar to the one used in the other three formulas was added to the EFIG state allocation formula. Third, state totals were suballocated to LEAs based on the LEA's proportional share of a weighted formula child count (similar to the formula child counts used in Targeted Grants) as opposed to each LEA's share of funds under Basic Grants, Concentration Grants, and Targeted Grants. Fourth, the tiered hold harmless provisions that had previously only applied to Basic Grants and Targeted Grants (a prior-year hold harmless of 85%-95% depending on the LEA's formula child rate) were applied to EFIG. Fifth, the minimum grant provisions that applied to Targeted Grants (a minimum grant of 0.35% of total state grants, subject to a cap) were also applied to EFIG. Thus, state total grants under EFIG were based on each state's share, compared to the national total, of a formula child count multiplied by an expenditure factor, an effort factor, and an equity factor, adjusted by a state minimum. Then, each LEA's share of the state's total grant under EFIG was based on a weighted formula child count for the LEA compared to the total for all LEAs in the state, adjusted by LEA hold harmless provisions. Legislative Debate In January 2001, the George W. Bush Administration sent Congress a proposed plan for the reauthorization of the ESEA. The proposal for NCLB included expansions of the accountability and testing requirements but did not include changes to the Title I-A formulas. To target funds more effectively on areas with concentrations of poverty, the Administration requested funding for the Targeted Grant formula. The Administration also criticized the Concentration Grant formula for having a "cliff effect," as LEAs lost eligibility by missing the "15-percent poverty threshold by even the smallest margin." On May 23, 2001, the House passed H.R. 1 , which eliminated the yet-to-be-funded EFIG formula. H.R. 1 made only minor changes to the three remaining formulas as "the significant changes made to the formula in the 1994 amendments [had] not been implemented due to extraordinary hold harmless provisions and lack of funding for the Targeted Grant formula." The House bill also added an 85% prior-year hold harmless to Concentration Grants and increased the cap on Puerto Rico's grant amounts. Subsequently, in June 2001 the Senate passed its version of H.R. 1 . The Senate bill retained the EFIG formula, as there were concerns that states were not doing enough to equalize funding between rich and poor LEAs. The Senate bill also increased the minimum grant amount for Targeted Grants and EFIG from 0.25% to 0.5% and added a hold harmless provision for total Basic Grants, Concentration Grants, and Targeted Grants based on the greater of (1) 100% of FY2001 grants or (2) grants calculated without hold harmless provisions. In conference, the Title I-A formulas were rewritten to create a compromise between the House and the Senate provisions. It should be noted that NCLB also called for a substantial increase in Title I-A funding, as "such funding ... is critical to helping schools close the achievement gap and low-income students achieve and succeed academically." Every Student Succeeds Act (ESSA, P.L. 114-95, 2015) Although the authorization of appropriations for most ESEA programs (including Title I-A) expired in FY2007, the ESEA was not reauthorized until December 10, 2015. Attempts were made to add a fifth formula to Title I-A and to allocate funds to LEAs and schools based solely on children in families below the poverty level. However, almost all of the changes to the Title I-A formulas were removed in conference. One notable change made by the ESSA was an increase in the set-aside for the Bureau of Indian Education (BIE) and Outlying Areas from 1.0% to 1.1%, provided the total amount available for state grants would not be less than the amount available in FY2016. All changes to the Title I-A grant allocation process made by the ESSA took effect in FY2017. The ESSA also made changes to the SNS, MOE, and standards-based accountability requirements that states and LEAs must meet to receive Title I-A funds. In addition, the ESSA provided flexibility in the requirements related to the distribution of Title I-A funds to schools that allows LEAs to allocate Title I-A funds to more high schools. Appendix A. Title I-A Appropriations Figure A-1 details the appropriations levels for Title I-A in current and constant dollars since FY1980. Table A-1 provides the appropriations level for Title I-A in current and constant dollars since FY1980. Following a decrease in Title I-A appropriations in the early 1980s, there has generally been an upward trend in Title I-A appropriations. The largest percentage increases in appropriations since FY1980 occurred in the early 1990s and 2000s. Figure A-2 and Table A-2 provide the appropriations level and share by Title I-A formula since FY1980. As previously discussed, all post-FY2001 increases in Title I-A appropriations have been divided between Targeted Grants and EFIG. Thus, the share of appropriations allocated via the Targeted Grant and EFIG formulas has been steadily increasing while the share of appropriations allocated via the Basic and Concentration Grant formulas has been steadily decreasing. Appendix B. Timeline of Changes to Title I-A Formulas and Related Provisions Table B-1 , Table B-2 , Table B-3 , and Table B-4 provide a timeline of changes to the formula factors and provisions for the Basic Grants, Concentration Grants, Targeted Grants, and EFIG, respectively. Table B-5 provides a timeline of changes to factors and related provisions that generally apply to Title I-A formulas. Appendix C. Selected Acronyms Used in This Report AFDC : Aid to Families with Dependent Children APPE : Average per pupil expenditures ARRA : American Recovery and Reinvestment Act BIA : Bureau of Indian Affairs BIE : Bureau of Indian Education CV : Coefficient of variation ECIA : Education Consolidation and Improvement Act ED : U.S. Department of Education EFIG : Education Finance Incentive Grants ELLs : English language learners ESEA : Elementary and Secondary Education Act ESSA : Every Student Succeeds Act GEPA : General Education Provisions Act HEW : Department of Health, Education, and Welfare IASA : Improving America's Schools Act IDEA : Individuals with Disabilities Education Act LEA : Local educational agency MOE : Maintenance of effort NAEP : National Assessment of Educational Progress NCLB : No Child Left Behind Act NDEA : National Defense Education Act NIE : National Institute of Education PCI : Per capita income SAIPE : Small Area Income and Poverty Estimates SEA : State educational agency SIE : Survey of Income and Education SNS : Supplement, not supplant TANF : Temporary Assistance to Needy Families

The Elementary and Secondary Education Act (ESEA) is the primary source of federal aid to K-12 education. The ESEA was last reauthorized by the Every Student Succeeds Act (ESSA; P.L. 114-95) in 2015. The Title I-A program has always been the largest grant program authorized under the ESEA. Title I-A grants provide supplementary educational and related services to low-achieving and other students attending elementary and secondary schools with relatively high concentrations of students from low-income families. The U.S. Department of Education (ED) determines Title I-A grants to local educational agencies (LEAs) based on four separate funding formulas: Basic Grants, Concentration Grants, Targeted Grants, and Education Finance Incentive Grants (EFIG). The current four formula strategy has evolved over time, beginning with the Basic Grant formula when the ESEA was originally enacted in 1965. The Concentration Grant formula was added in the 1970s in an attempt to provide additional funding for LEAs with high concentrations of poverty. During consideration of ESEA reauthorization in the early 1990s, there was an attempt by the Senate to replace the two existing formulas with a new formula (Education Finance Incentive Grant (EFIG) formula) that would better target Title I-A funds to concentrations of poverty. A compromise on a single new formula was not reached; nor was there agreement on eliminating the existing formulas or only adding one of the new formulas created by the House (Targeted Grant formula) and the Senate (EFIG formula). As a result, funds are allocated through four formulas under current law. This report begins with an overview of key policy issues and underlying tensions that have factored into the evolution of the Title I-A formulas. These include issues related to the selection of poverty measures and identification of formula children, determination of the role state expenditures on public K-12 education would play in allocations, the use of state minimum grant and LEA hold harmless provisions, determination of the relative emphasis to place on percentages versus counts of formula children when targeting Title I-A funds on areas with high concentrations of poverty, and the tradeoff between transparency and complexity with respect to the formulas. The report then traces the evolution of the Title I-A formulas and identifies the reasons offered for changes to them, as expressed in committee reports, floor debates, and to a limited extent, congressional hearings. The report concludes with three appendices. Appendix A provides historical appropriations data for the Title I-A formulas dating back to FY1980. Appendix B provides a summary of major changes that have been made to the factors that comprise each of the four Title I-A formulas that are currently authorized from their initial enactment through the ESSA. Appendix C provides a list of selected acronyms used in this report.

What Is an Earmark? House and Senate rules define the term ea rmark slightly differently ( Table 1 ) but generally emphasize that an y congressionally directed spending, tax benefit, or tariff benefit be considered an earmark if it would benefit a specific entity or state, locality, or congressional district other than through a statutory or administrative formula or competitive award process. For the purposes of this report, from this point forward the term ea rmark includes any congressionally directed spending, limited tax benefit, or limited tariff benefit. What Is the Earmark Moratorium? In the 112 th Congress (2011-2012), the House and Senate began observing what has been referred to as an earmark moratorium or earmark ban. The moratorium does not exist in House or Senate rules, however, and therefore is not enforced by points of order. Instead, the moratorium has been established by party rules and committee protocols and is enforced by chamber and committee leadership through their agenda-setting power. For example, the Rules of the House Republican Conference for the 112 th Congress (2011-2012) included a standing order labeled Earmark Moratorium that stated, "It is the policy of the House Republican Conference that no Member shall request a congressional earmark, limited tax benefit, or limited tariff benefit, as such terms have been described in the Rules of the House." This language has been included in orders adopted by the conference in the 113 th , 114 th and 115 th Congresses (2013-2018). Likewise, in early 2011, the Senate Appropriations Committee issued a press release stating that it would implement a two-year moratorium on earmarks (which was later extended). Additionally, the Senate Republican Conference adopted a resolution on November 14, 2012, that included an earmark moratorium. It stated "Resolved, that it is the policy of the [Senate] Republican Conference that no Member shall request a congressionally directed spending item, limited tax benefit, or limited tariff benefit, as such terms are used in Rule XLIV of the Standing Rules of the Senate for the 113 th Congress." This same rule has been adopted by Senate Republicans in each Congress through the 115 th Congress (2017-2018). How Would Congress Lift the Earmark Moratorium? As noted above, the earmark moratorium is not codified in House or Senate rules. Therefore, lifting the earmark moratorium would not require an amendment to either chamber's rules. Since the moratorium has been established through Republican Party rules and committee protocols and has been enforced by chamber and committee leadership through their agenda-setting power, presumably the moratorium might be "lifted" simply by either or both chambers permitting the development and consideration of legislation that includes earmarks. If the Moratorium Were Lifted, What Rules and Requirements Would Govern the Use of Earmarks? The House and Senate continue to have formal earmark disclosure requirements in their standing rules that were first established in the 110 th Congress (2007-2008) with the stated intention of bringing more transparency to earmarking. A summary of those requirements is presented below. For additional information, see CRS Report RS22866, Earmark Disclosure Rules in the House: Member and Committee Requirements , by [author name scrubbed]; and CRS Report RS22867, Earmark Disclosure Rules in the Senate: Member and Committee Requirements , by [author name scrubbed]. House Rules and Requirements House Rules generally require that certain legislation be accompanied by a list of congressional earmarks, limited tax benefits, or limited tariff benefits that are included in the measure or its report or include a statement that the proposition contains no earmarks. Depending upon the type of measure, the list or statement is to be either included in the measure's accompanying report or printed in the Congressional Record . House earmark disclosure rules apply to any earmark included in either the text of a bill or joint resolution, or the committee report accompanying them, as well as to conference reports and their accompanying joint explanatory statements. The disclosure requirements apply to items in authorizing, appropriations, and tax legislation. Furthermore, they apply not only to measures reported by committees but also to unreported measures, "managers amendments," Senate bills and joint resolutions, and conference reports. Requirements for House Members Submitting Earmark Requests Under the House Code of Official Conduct, a Member requesting a congressional earmark is required to provide a written statement to the chair and ranking minority member of the committee of jurisdiction that includes: the Member's name; the name and address of the intended earmark recipient (if there is no specific recipient, the location of the intended activity should be included); in the case of a limited tax or tariff benefit, identification of the individual or entities reasonably anticipated to benefit, to the extent known to the Member; the purpose of the earmark; and a certification that the Member or Member's spouse has no financial interest in such an earmark. Requirements for House Committees Under House rules, the earmark disclosure responsibilities of House committees and conference committees fall into three major categories: (1) determining if a spending provision is an earmark, (2) compiling earmark requests for presentation to the full chamber, and (3) preserving records related to the earmark requests. Individual committees may establish their own additional requirements in the committee rules they are required to adopt each Congress. Committees of jurisdiction must use their discretion to decide what constitutes an earmark. Definitions in House rules, as well as past earmark designations, may provide guidance in determining if a certain provision constitutes an earmark. House rules state that in the case of any reported bill or joint resolution or conference report, a list of included earmarks and their sponsors (or a statement declaring the absence of earmarks) must be included in the corresponding committee report or joint explanatory statement. In the case of a measure not reported by a committee or a manager's amendment, the committee of initial referral must cause a list of earmarks and their sponsors, or a letter stating the absence of earmarks, to be printed in the Congressional Record before floor consideration. A conference report accompanying a regular appropriations bill must identify congressional earmarks in the conference report or joint explanatory statement that were not specified in the legislation or report as it initially passed either chamber. Each House committee and conference committee is responsible for "maintaining" all written requests for earmarks received—even those not ultimately included in the legislation or report. Furthermore, those requests that were included in any measure reported by the committee must not only be "maintained" but also be "open for public inspection." Rule XXIII does not define these terms. Senate Rules and Requirements Senate rules prohibit a vote on a motion to proceed to consider a measure or a vote on adoption of a conference report unless the chair of the committee or the majority leader (or designee) certifies that a complete list of earmarks and the name of each Senator requesting each earmark is available on a publicly accessible congressional website in a searchable format at least 48 hours before the vote. If a Senator proposes a floor amendment containing additional earmarks, those items must be printed in the Congressional Record as soon as "practicable. " If these earmark certification requirements have not been met, a point of order may lie against consideration of the legislation or vote on the conference report. A point of order could not be raised against a floor amendment. Senate earmark disclosure rules apply to any congressional earmark included in either the text of the bill or joint resolution or the committee report accompanying the measure as well as to conference reports and their accompanying joint explanatory statement. The disclosure requirements apply to items in authorizing, appropriations, and tax legislation. Furthermore, they apply not only to measures reported by committees but also to unreported measures, amendments, House bills, and conference reports. Requirements for Senators Submitting Earmark Requests Under Senate rules, a Senator requesting that a congressional earmark be included in a measure is required to provide a written statement to the chair and ranking minority member of the committee of jurisdiction that includes: the Senator's name; the name and address of the intended earmark recipient (or, if there is no specific recipient, the location of the intended activity); in the case of a limited tax or tariff benefit, identification of the individual or entities reasonably anticipated to benefit to the extent known to the Senator; the purpose of the earmark; and a certification that neither the Senator nor the Senator's immediate family has a financial interest in such an earmark. Requirements for Senate Committees Under the Senate rule, the earmark disclosure responsibilities of Senate committees and conference committees fall into three major categories: (1) determining if a spending provision is an earmark, (2) compiling earmark requests for presentation, and (3) certifying that requirements under the rule have been met. Committees of jurisdiction may use their discretion to decide what constitutes an earmark. Definitions in Senate rules, as well as past earmark designations during the 110 th Congress (2007-2008), may provide guidance in determining if a certain provision constitutes an earmark. Senate Rules state that before consideration of a measure or conference report is in order, a list of included earmarks and their sponsors must be identified through lists, charts, or other means and made available on a publicly accessible congressional website for at least 48 hours. The rule states that the consideration of a measure or conference report is not in order until the applicable committee chair or the majority leader (or designee) "certifies" that the requirements stated above have been met. What Additional Policies or Restrictions Might Congress Institute to Govern the Use of Earmarks? The 116 th Congress may examine what changes, if any, are needed in the area of earmark policy. Congress may choose to keep the earmark moratorium in place but insert it into formal chamber rules. Alternatively, Congress might choose to lift the earmark moratorium but institute any number of policies or restrictions to govern the use of congressional earmarks. Just as in the past, these policies or restrictions might be instituted through formal amendments to House and Senate standing rules or by enacting new provisions in law. Restrictions could also be instituted through party rules, leadership and committee practices and protocols, or standing order. Such policies or restrictions could seek to accomplish a number of goals. For example, some policies could seek to add additional transparency to the earmarking process. In the past the House and Senate Appropriations Committees have required Members requesting earmarks to post information regarding earmarks on their personal websites, including the purpose of the earmark and why it was a valuable use of taxpayer funds. In 2010, the House Appropriations Committee stated that it would "establish a 'one-stop' online link to all House Members' appropriations earmark requests to enable the public to easily view them." Congress could also restrict the purposes for which an earmark might be used or prohibit certain entities from receiving earmarks entirely. For example, according to press reports, the House Appropriations Committee adopted a policy prohibiting earmarks for projects named after the Member of Congress requesting the earmark. In March 2010, the House Appropriations Committee announced that it would no longer consider earmarks directed to for-profit entities. Congress could also limit the amount that might be spent on an earmark. Such a limit could apply to each specific earmark or to the total cost of all earmarks. For example, in January 2009, the House Appropriations Committee articulated a policy of limiting "total funding for non-project based earmarks" to 50% of the 2006 levels and no more than 1% of the total discretionary budget. Congress could also choose to institute new policies or restrictions that would involve the executive branch. This could allow the executive branch to affect the earmarking process by, for example, advising committees on whether a potential earmark constitutes a suitable use of funds. Congress could also involve the executive branch by requiring agency inspectors general to audit spending for earmarked projects in order to ensure that the funds are being used for their intended purpose. Congress could also choose to conduct further research into the practice of earmarking generally. This might involve asking CRS or the Government Accountability Office to perform research or creating a select committee to study earmarks and recommend new policies or restrictions.

While the term earmark has been used historically to describe various types of congressional spending actions, since the 110th Congress (2007-2008) House and Senate rules have defined an earmark as any congressionally directed spending, tax benefit, or tariff benefit that would benefit an entity or a specific state, locality, or congressional district. In the 112th Congress (2011-2012), the House and Senate began observing what has been referred to as an earmark moratorium or earmark ban. The moratorium does not exist in House or Senate chamber rules, however, and therefore is not enforced by points of order. Instead, the moratorium has been established by party rules and committee protocols and is enforced by chamber and committee leadership through their agenda-setting power. In recent years, some Members have expressed interest in lifting the earmark moratorium. Whether or not the earmark moratorium is lifted, the House and Senate continue to have formal earmark disclosure rules that were implemented in the 110th Congress with the stated intention of bringing more transparency to earmarking. These rules generally prohibit consideration of certain legislation unless information is provided about any earmarks included in the legislation. House and Senate rules require that any Member submitting an earmark request provide a written statement that includes the name of the Member, the name and address of the earmark recipient, and a certification that the Member has no financial interest in the earmark. House and Senate rules require that committees determine whether a provision constitutes an earmark, and committees must compile and make accessible certain earmark-related information. If Congress were to lift the current earmark ban, it might also choose to institute any number of policies or restrictions to govern the use of congressional earmarks. These policies or restrictions might be instituted through formal amendments to the House and Senate standing rules, by standing order, or by enacting new law. Such policies might also be instituted through party rules or leadership and committee practices and protocols. Some policies might seek to add more transparency to the earmarking process or prohibit certain types of entities from receiving earmarks. Restrictions might be implemented related to the purposes for which an earmark could be used or limiting the amount of federal dollars that might be spent on earmarks. Other policy approaches might potentially involve the executive branch or the congressional support agencies.

Background On October 12, 2000, the U.S. Navy destroyer Cole (1) was attacked by a small boat laden with explosives during a brief refueling stop in the harbor ofAden,Yemen. (2) The suicide terrorist attack killed 17members of the ship's crew, wounded 39 others, and seriously damaged the ship. (3) The attack has been widelycharacterized as a "boat bomb" adaptation of the truck-bomb tactic used to attack the U.S. Marine Corps barracksin Beirut in 1983 and the Khobar Towers U.S.military residence in Saudi Arabia in 1996. The FBI, in conjunction with Yemeni law-enforcement officials, is leading an investigation to determine who is responsible for the attack. At least six suspects arein custody in Yemen. Evidence developed to date suggests that it may have been carried out by Islamic militantswith possible connections to the terrorist networkled by Usama bin Ladin. (4) In addition to the FBI-ledinvestigation, Secretary of Defense William Cohen has formed a special panel headed by retired GeneralWilliam W. Crouch, former Vice Chief of Staff of the Army, and retired Admiral Harold W. Gehman, Jr, formercommander-in-chief of U.S. Joint ForcesCommand. The panel, in a report released January 9, 2001, avoided assigning blame but found significantshortcomings in security throughout the region andrecommend improvements in training and intelligence designed to thwart terrorist attacks. A Navy investigation,the results of which were released by theCommander of the Atlantic Fleet on January 19, 2001, concluded that many of the procedures in the ship's securityplan had not been followed, but that even ifthey had been followed, the incident could not have been prevented. Consequently, no single individual should bedisciplined for the incident, i.e. blame must bedistributed at a number of administrative levels. Members and staff have also held classified meetings on the attackwith Administration officials. Issues for Congress The attack on the Cole raises potential issues for Congress concerning (1) procedures used by the Cole and other U.S. forces overseas to protect against terroristattacks; (2) intelligence collection, analysis, and dissemination as it relates to potential terrorist attacks; and (3) U.S.anti-terrorism policy and how the U.S. shouldrespond to this attack. These issues are discussed below. Force-protection procedures. Before it arrived at Aden for its brief refueling stop, the Cole, like all visitingU.S. ships, was required to file a force-protection plan for the visit. This plan was approved by higher U.S. militaryauthorities, and was implemented during theship's visit. In accordance with the plan, the Cole at the time of the attack was operating under threat conditionBravo, which is a heightened state of readinessagainst potential terrorist attack. (The lowest condition of heightened readiness is Alpha; Bravo is higher; Charlieis higher still, and Delta is the highest.) Thisthreat condition includes steps that are specifically intended to provide protection against attack by small boats. Members of the House and Senate Armed Services committees and other observers have raised several issues concerning the force-protection procedures beingused by the Cole and by other U.S. military forces and bases in the region, including the following: What were the elements of the Cole's force-protection plan and how were these elements determined? Did the Cole effectively implement all the elements of this plan? If not, why not? If so, does this indicate that the plan was not adequate fordefending against this type of attack? Was the force-protection plan, including the use of threat condition Bravo, appropriate in light of the terrorist threat information that wasavailable to military officials in the days leading up to the ship's visit? Was the ship's threat condition consistentwith the very high threat condition beingmaintained at that time by the U.S. embassy in Yemen? What changes, if any, should be made in force-protection policies for ships and other U.S. military forces and bases overseas, particularly inthe Middle East and Persian Gulf region? Given the need for Navy ships to periodically refuel and receive otherservices from local sources, as well as thepotential difficulty of identifying hostile craft in often-crowded harbors, how much can be done to reduce the riskof future attacks like this one? What can be doneto protect against more sophisticated terrorist tactics for attacking ships, such as using midget or personalsubmarines, scuba divers with limpet mines, orcommand-detonated harbor mines? Should the Navy reduce its use of ports for refueling stops and instead rely moreon at-sea tanker refuelings? How manyadditional tankers, at what cost, might be needed to implement such a change, and how would this affect the Navy'sability to use such stops to contribute to U.S.engagement with other countries? In addition to these issues, members of the House and Senate Armed Services committees at the hearings also raised an underlying question on whether the Cole'srefueling stop was necessary from an operational (as opposed to political/diplomatic) point of view. (5) Intelligence collection, analysis, and dissemination. Members of the Armed Services and Intelligencecommittees as well as other observers have raised several questions relating to the role of intelligence collection,analysis and dissemination in the Cole attack andin preventing other terrorist attacks against the United States. In some cases, these questions have been spurred bypress reports about the existence of informationand analyses from the U.S. Intelligence Community that, some argue, might have helped prevent the attack had itbeen given greater consideration or beendisseminated more quickly. (6) The details of theseclaims are currently under investigation by the Executive Branch and Committees in Congress. Questionsinclude the following: Does the United States have sufficient intelligence collection capacity, particularly in the form of human intelligence (as opposed tointelligence gathering by satellites or other technical means), for learning about potential terrorist attacks,particularly in the Middle East or Persian Gulf? Doesthe attack on the Cole represent a U.S. intelligence failure, or does it instead reflect the significant challenges oflearning about all such attacks soon enough tohead them off? In the days and weeks prior to the attack on the Cole, was all the available intelligence information about potential terrorist attacks in theMiddle East and Persian Gulf given proper weight in U.S. assessments of the terrorist threat in that region? Werereports providing information and analyses ofpotential terrorist attacks in the region disseminated on a timely basis to U.S. military and civilian officials in theregion who have responsibility for providingadvice or making decisions about ship refueling stops or other military operations? Was there adequate coordination, prior to the attack on the Cole, between the Defense Department [including the National Security Agency],the State Department, and the U.S. Central Command (the regional U.S. military command for the Middle East andPersian Gulf) in sharing and using availableintelligence information and analyses on potential terrorist attacks? What actions, if any, should be taken to improve U.S. intelligence collection and analysis, particularly as it relates to potential terroristattacks on U.S. assets in the Middle East and Persian Gulf or elsewhere? U.S. anti-terrorism policy and potential response. Beyond these more specific issues, the attack on the Coleposes several additional potential issues relating to U.S. anti-terrorism policy in general. Some of these issueshighlight dilemmas and concerns inherent inpolicies designed to prevent or mitigate terrorist acts. These issues include the following: Why was Yemen chosen for refueling? U.S. Navy ships began making refueling stops in Aden in January 1999. Since then, Navy ships have stopped there 27 times to refuel, twice to make port visits, and once to take on supplies. Members of the Armed Services Committeesand other observers have asked why the U.S. Central Command decided in 1998 to begin using Yemen for refuelingstops rather than continuing to use nearbyDjibouti on the Horn of Africa (which U.S. Navy ships had used for refueling for several years) - and why CentralCommand continued to use Yemen this year forrefuelings when an April 2000 State Department report on worldwide terrorism characterized Yemen as a havenfor terrorists but did not mention Djibouti. Members and others have asked whether the risk of a terrorist attack against a U.S. ship in Yemen was properlybalanced against the political/diplomatic goals ofimproving relations with Yemen and encouraging its development toward a stable, pro-Western, democratic countrythat does not support terrorism and cooperateswith U.S. efforts to contain Iraq. In response, General Tommy R. Franks, the current Commander-in-Chief of U.S.Central Command, stated the followingregarding the process that led his predecessor, General Anthony C. Zinni, to the decision to use Yemen for refuelingstops: The decision to go into Aden for refueling was based on operational as well as geo-strategic factors and included anassessment of the terrorist and conventional threats in the region. As you know, the Horn of Africa was in greatturmoil in 1998. We had continuing instability inSomalia, the embassy bombings in Kenya and Tanzania, an ongoing war between Ethiopia and Eritrea, and aninternal war in Sudan....As of December 1998, 14 ofthe 20 countries in the USCENTCOM AOR [U.S. Central Command area of responsibility] were characterized as"High Threat"countries. Djibouti, which had been the Navy refueling stop in the Southern Red Sea for over a decade, began to deteriorate as auseful port because of the Eritrea-Ethiopia war. This war caused increased force-protection concerns for our ships,as well as congestion in the port resulting inoperational delays. The judgment at this time was that USCENTCOM needed to look for more refueling options,and Aden, Yemen was seen as a viablealternative. At the time the refueling contract was signed, the addition brought the number of ports available in theUSCENTCOM AOR to 13. Selection of whichof these ports to use for a specific refueling operation involves careful evaluation of the threat and operationalrequirements. The terrorism threat is endemic in the AOR, and USCENTCOM takes extensive measures to protect our forces.... Thethreat situation was monitored regularly in Yemen and throughout the AOR. The intelligence community andUSCENTCOM consider this AOR a High Threatenvironment, and our assessments of the regional threat and the threat in Yemen were consistent in their evaluation.We had conducted a number of threatassessments in the port, and throughout the area. However, leading up to the attack on USS Cole on 12 October,we received no specific threat information forYemen or for the port of Aden that would cause us to change our assessment. Had such warning been received,action would have been taken by the operatingforces in response to the warning. (7) Anticipating new modes of terrorist attack. Truck bombs have been used to attack U.S. targets for at least 17 years. Did U.S. intelligence and counter-terrorism agencies anticipate or consider sufficiently plausible the possible useof the maritime equivalent of a truck bombagainst a U.S. Navy ship in a harbor? If not, what changes, if any, should be made to improve the ability of U.S.intelligence and counter-terrorism agencies toidentify and give sufficient prominence to modes of terrorist attack that have not been previously used? Should U.S.officials reach out more to non-governmentalorganizations and individuals for help in this regard? Protecting against threats posed by persons with legitimate access. What is the best way to defend against terroristattacks by persons with legitimate access to U.S. installations or forces? The Cole was refueled by a private Yemeniship supply company that had advanceinformation on the ship's itinerary. Although it now appears that the attack may have been carried out by personswith no connection to this firm, the attack stillraises questions about the security implications of relying on private foreign companies to refuel U.S. Navy ships. What steps can be taken to reduce the riskposed by relying on such firms? Should, for example, the State Department's Anti-Terrorism Assistance program(ATA) be enhanced so that it can better assistforeign governments, when needed, in personnel screening and security procedures? The role of the FBI in overseas counter-terrorism investigations. Some observers have asked whether (or underwhat circumstances) it is appropriate for the FBI, traditionally a domestic U.S. law-enforcement agency, to take a de facto lead role in overseas investigations ofterrorist attacks. Although the FBI's investigative skills are critical to such investigations, some observers argue thatother skills outside the FBI's area ofspecialization, including having an in-depth understanding of foreign countries and cultures and the diplomaticability to ensure host nation cooperation, areequally important components of such investigations. Clearly, small nations may feel overwhelmed by largenumbers of FBI agents and the political sensitivitiesof their insistence on questioning local witnesses/suspects. Conferees on the FY2001 Foreign OperationsAppropriations bill ( H.R. 4811 ) made $4million for counter-terrorism training in Yemen contingent on FBI certification that Yemen is fully cooperating inthe Cole investigation. Insuring coordination of any retaliatory response. An important challenge facing U.S. counter-terrorism officials isto ensure that U.S. actions for military/economic retaliation for terrorist attacks are adequately planned. The needfor maintaining secrecy in planning militaryactions can discourage interagency coordination, which in turn can create a potential for making a planning mistake. Some observers argue that the U.S. cruisemissile attack on what some believe was a legitimate pharmaceutical factory in Sudan in response to the 1998embassy bombings in East Africa was a mistakecaused in part by lack of interagency coordination that deprived decisionmakers of important data which might haveinfluenced the target-selection process. (8) If itis determined that the attack was linked to Bin Ladin, a major issue is how the U.S. responds and prevents furtherattacks from a network that is believedresponsible for several anti-U.S. attacks since 1992. The U.S. retaliatory attack on Afghanistan in August 1998,a response to the East Africa Embassy bombings,did little to damage Bin Ladin's network or his ability to plan attacks.

On October 12, 2000, the U.S. Navy destroyer Cole was attacked by a small boat ladenwith explosives during a briefrefueling stop in the harbor of Aden, Yemen. The suicide terrorist attack killed 17 members of the ship's crew,wounded 39 others, and seriously damaged theship. Evidence developed to date suggests that it may have been carried out by Islamic militants with possibleconnections to the terrorist network led by Usamabin Ladin. The FBI, Defense Department, and Navy launched investigations to determine culpability for the attackand to review procedures. A broad DoD reviewof accountability was conducted by a special panel. On January 9, 2001, the panel issued its report which avoidedassigning blame but found significantshortcomings in security against terrorist attacks, including inadequate training and intelligence. On January 23,2001, Senate Armed Services CommitteeChairman, John Warner, announced intentions for the Committee to hold its own investigation. Issues for Congressinclude the adequacy of (1) procedures byU.S. forces to protect against terrorist attacks; (2) intelligence related to potential terrorist attacks; and (3) U.S.anti-terrorism policy and response. This report willbe updated if major new developments warrant.

Most Recent Developments On July 29, 2010, the President signed the final version of H.R. 4899 , P.L. 111-212 , which was passed by the House on July 27 and by the Senate on May 27, 2010. The enacted version of the bill includes $59.2 billion in spending for war costs, U.S. disaster assistance, Haiti relief and reconstruction, and new benefits for Vietnam veterans. The House passed this bill under suspension of the rules by a vote of 308 to 114 after receding from (or withdrawing its support of) an amended version passed by the House on July 1, 2010, with $81.8 billion in spending. With both houses adopting the same version of the bill, H.R. 4899 was cleared and sent to the President. Taking into account $380 million in rescissions of previously appropriated budget authority (BA), P.L. 111-212 provides $58.8 billion in new BA, compared to the $65.1 billion in new BA provided in the previous July 1 House version including its rescissions. Although the earlier House version included $22.1 billion more in domestic spending, that was offset by $12.2 billion in offsetting rescissions, and $4.5 billion in mandatory savings over 10 years (see Table 1 ). Rescissions and mandatory savings both offset or reduce the amount of new Budget Authority (BA) required to finance spending. Rescissions cancel previously unobligated appropriated budget authority (BA), and that BA can then be used to finance new spending. Savings in mandatory programs reduce the amount needed for new direct spending. As part of the consideration of H.R. 4899 , the House also debated House Concurrent Resolution 301, proposed by Representative Kucinich and Representative Paul, that would require the President to withdraw all U.S. troops from Pakistan within 30 days of adoption, or no later than December 31, 2010, if the President determines the earlier date would not be safe. The resolution was defeated by a vote of 38 to 372. Earlier, the House, passed H.Res. 1566 , the rule which set up an hour of debate on H.Con.Res. 301 under the War Powers Act, by a vote of 222 to 196. The Senate sent the House its message of disagreement with the July 1 House amended version of the bill on July 22, 2010, after failing by 46 to 51, to adopt a cloture vote on the House July 1 version of H.R. 4899 , signaling an inability to limit debate, and prevent a filibuster. In light of the Senate's opposition to the House version of the bill which would have added $22.5 billion to the Senate version to prevent teacher layoffs, for Pell grants, for agricultural and energy loans, border security, and to settle the Cobell and Pigford II court cases, the House dropped its support of this version and adopted the May 27, 2010, Senate version. The House also adopted the Senate version because of concerns raised by Defense Department officials that the Army would run out of funding in August unless additional funds were transferred from other DOD accounts. The enacted version of H.R. 4899 adopts the $59.2 billion in the Senate's version for war funding, Haiti relief and reconstruction, other foreign aid, and new benefits for Vietnam veterans that were included in its May 27, 2010, version that passed by a vote of 67 to 28. That version includes $59.2 billion for wars, Haiti relief, FEMA and other disaster relief, and new VA benefits, but excludes funds to settle the Pigford II and Cobell court cases requested by the Administration (see Table 1 and Appendix ). Highlights of Congressional Action The House and Senate debate on H.R. 4899 revolved around two main themes – whether additional domestic spending proposals were appropriately considered to be emergencies that would not require offsets, and whether the Administration's new war policy in Afghanistan was likely to succeed. (See Appendix for previous congressional action.) House July 27, 2010, Debate on H.R. 4899 Funding and War Issues In introducing the Senate version of H.R. 4899 for House consideration on July 27, 2010, Representative David Obey, Chair of the House Appropriations Committee (HAC), said that the House had added funds to the FEMA disaster funding in the original March 24, 2010, version of the FY2010 Supplemental, first to include war funding, and then to "do something about other emergencies this year, such as the loss of more than 100,l000 teachers' jobs because of devastating State and local budget cuts," Pell fund shortfalls because more students qualified for aid, and border security, which were "largely paid for with offsets to other programs," but these domestic proposals "fell by the wayside." In stating his opposition to the bill, Representative Obey said that he could not support the war funding in the bill because the governments of Afghanistan and Pakistan were not able to "do their parts" to support the war, and because Congress had not adopted a proposed House amendment that would have required Congress to "vote up or down explicitly on whether or not to continue this policy" after submission of a new National Intelligence Estimate (NIE), but which was not adopted. Nevertheless, Representative Obey believed that the process needed to go forward. Representative Lewis, Ranking Minority of the HAC complimented the Senate for "rejecting billions of dollars of nonemergency spending placed on the backs of our troops," that urged enactment of the bill to "support our men and women in uniform, [and] support disaster assistance for areas of the country in great need." Other members voiced support for particular parts of the bill, including DOD's war funding and the additional disability benefits for Vietnam veterans who incur diseases linked to exposure to Agent Orange. Representative Ike Skelton, Chair of the House Armed Services Committee, supported the bill while Representative Jim McGovern raised concerns about "corruption and incompetence in the Afghan Government ... [and] the role of the Pakistani intelligence services," highlighted in the documents recently released by Wikileaks. Representative Norm Dicks, Chair of the HAC-Defense Subcommittee, and Representative Chris Van Hollen cited concerns raised by Secretary of Defense Robert Gates that funding for the war would run out in August, with the House due to go on recess. Debate on H.Con.Res. 301 Requiring the Withdrawal of U.S. Troops from Pakistan As part of the consideration of H.R. 4899 , the House voted on H.Res. 1556 , which set up an hour's debate on H.Con.Res. 301 , the Kucinich-Paul resolution invoking the War Powers Act and requiring the President to withdraw all U.S. troops from Pakistan within 30 days of passage or no later than December 31, 2010, if the President determined it not to be safe, or earlier if the President determined it to be safe. After a debate about the applicability of the War Powers Act, the implications of expanding the "footprint of our troops" in Pakistan with some 230 U.S. military personnel, and the effectiveness of some $18.1 billion in U.S. aid since FY2002 in light of Pakistan public opinion polls citing hostility to the United States, the resolution was defeated by 38 to 372. Senate Action on July 22, 2010 On July 22, 2010, the Senate failed to adopt cloture and limit debate on the House July 1 version of H.R. 4899 by a vote of 46 to 51, suggesting that the Senate would be unable to pass the House version of the bill. Under the rule adopted, the Senate then sent the House July 1 amended version back to the House with a message stating their disagreement. Final Version of H.R. 4899 and the Administration Request The final version of H.R. 4899 appropriates $59.2 billion in spending, $5.0 billion below the request. The total funding in the final version matches or is close to the Administration's request for the following: $5.1 billion for FEMA's Disaster Assistance Fund; $13.4 billion for Vietnam veterans affected by Agent Orange; and $30.8 billion for the Department of Defense (DOD) war-related funding ($148 million below the request) and $2.1 billion for DOD's non-war request; and $2.9 billion approved ($129 million above the request) for Haiti with small adjustments in individual accounts (see Table 1 ). The chief differences in funding between the enacted version and the Administration's request were: $3.8 billion in funding for war-related foreign aid vs. $4.5 billion requested, a decrease of $710 million; Zero vs. the $4.6 billion requested to settle the Cobell and Pigford II court cases; Zero vs. $600 million requested for border security; Zero vs. $139 million requested to reduce backlogs in the U.S. Trademark and Patent Office; $600 million added by Congress in other foreign aid and humanitarian assistance for Mexico, Jordan, El Salvador, Vietnam, and Congo that was not requested; and $400 million added by Congress for flood and drought relief. In the final version, Congress did not include additional domestic funding to prevent teacher layoffs, provide more Pell grants, fund summer jobs, or provide agricultural and energy grants funding that was not requested by the Administration, but which was included in an earlier version of the bill that the House passed on July 1, 2010, and then receded from (withdrew its support) on July 27, 2010. On July 27, the House adopted the Senate version of the bill that was passed on May 27, 2010 (see Table 1 ). The final version of H.R. 4899 also did not include $600 million for border security, and $129 million to reduce patent backlogs in the Commerce Department that was requested by the Administration after passage of the Senate bill that was ultimately adopted. On July 28, 2010, the House passed separate bills with this funding ( H.R. 5874 and H.R. 5875 ) by voice vote, and those bills went to the Senate. War-Related Funding in the FY2010 Supplemental The FY2010 Supplemental, P.L. 111-212 includes a total of $34.2 billion for the Defense Department and the State Department for the Afghan and Iraq wars. Of this amount, $31.5 billion is for the Afghan war, including $29.8 billion for DOD and $1.7 billion for State/USAID programs; and $2.7 billion for the Iraq war including $1.0 billion for DOD and $1.7 billion for State/USAID programs (see Table 5 and Table 7 ). Taking into account funding already provided in DOD and the State Department's regular FY2010 appropriations bills, as well as funding for war-related VA medical costs, total FY2010 for the Afghan and Iraq war as of the enactment of the FY2010 supplemental, P.L. 111-212 is $$169.9 billion. This amount includes: $104.4 billion is for the Afghan war, including $99.3 billion for DOD, $4.7 billion for State/USAID programs, and $471 million for VA/Medical; and $65.5 billion for the Iraq war including $61.1 billion for DOD and $2.9 billion for State/USAID programs, and $1.5 billion for VA/Medical. These figures do not include some $2.0 billion in non-war funding provided to DOD and $375 million in funding in P.L. 111-212 for foreign aid for Pakistan. Summary of Congressional Action on H.R. 4899 Congress addressed the Administration's $64.3 billion request for supplemental spending for FY2010 in the following actions between March 24, 2010, and July 27, 2010 (see Table 1 ): The House passed H.R. 4899 by a vote of 239-174 of H.R. 4899 on March 24, 2010 (no House report) with $5.1 billion in spending for the Disaster Relief Fund in Federal Emergency Management Agency (FEMA), and $600 million for the Department of Labor's summer jobs program, to be funded by $5.1 billion in new Budget Authority (BA) and $600 million in offsetting rescissions; The Senate passed H.R. 4899 by a vote of 67 to 28 H.R. 4899 on May 27, 2010 ( S.Rept. 111-188 ) with $59.2 billion in spending, for disaster relief, war funding, war-related foreign assistance, Haiti relief and reconstruction, additional benefits for Vietnam veterans exposed to Agent Orange; other disaster relief, other foreign assistance, and oil spill recovery funding, funded with $58.9 billion in new BA and $380 million in offsetting rescissions; The House adopted the Senate's May 25, 2010, version of H.R. 4899 and added funds for the Education Jobs Fund, Pell Grants, summer youth employment, funding for the Cobell and Pigford II court cases on July 1, 2010, with a total of $81.8 billion in spending, funded with $65.1 billion in new BA and $16.7 billion in rescissions and mandatory savings; The Senate failed to invoke cloture on the House's July 1, 2010, amended version, and sent a message of disagreement with that version to the House on July 22, 2010; The House receded from (withdrew its support of) the July 1, 2010, version of H.R. 4899 that it had passed, and adopted the Senate May 27 version by a vote of 308-114 (two-thirds of those present required under suspension of the rules) on July 27, 2010; and The President signed the bill on July 29, 2010, P.L. 111-212 . Overview, Deadlines, and Potential Issues The Administration requested a total of $64.4 billion in supplemental funding in FY2010 to deploy more U.S. troops for the Afghan War, replenish Disaster Assistance Funds, support recovery and foreign aid funds for Haiti in response to the January 2010 earthquake, enhance border security, and settle two recently decided court cases for American Indians and black farmers. Specifically, the FY2010 supplemental requests included: $5.1 billion to replenish the U.S. Disaster Relief Fund administered by the Federal Emergency Management Agency; $33.0 billion for the Defense Department, primarily to deploy 30,000 more troops to Afghanistan; $4.5 billion in foreign assistance for Afghanistan, Iraq, and Pakistan; $2.8 billion for Haiti reconstruction and foreign aid in the wake of January's earthquake; $13.4 billion to compensate veterans exposed to Agent Orange; $243 million for appropriations-related responses to the Deepwater Horizon oil spill; $600 million primarily for additional border security personnel; and $3.4 billion to settle land trust claims of American Indians in the long-standing Cobell case and $1.2 billion to settle the discrimination claims of 70,000 black farmers in the Pigford II case (see Table 1 ). One of the chief issues that arose as the Senate and House considered H.R. 4899 was the effect of this supplemental spending on the federal deficit. Each version had different amounts of rescissions to offset discretionary spending—rescissions cancel earlier appropriations and thus reduce the amount of new Budget Authority (BA) needed—and different amounts of mandatory savings spending, which offset direct spending. In the first version of H.R. 4899 , passed by the House on March 24, 2010, the House bill included $600 million in offsets for the $5.7 billion in spending. In the second version, passed by the Senate on May 27, 2010, the bill included $380 million in offsets to offset the $59.3 billion recommended in the bill. In the third version of the bill, amended by the House on July 1, 2010, H.R. 4899 included $12.2 billion in rescissions and $4.5 billion in mandatory savings to offset the $81.8 billion in proposed spending (see Table 1 ). The effect on the deficit depends on the net amount of new BA needed for each version. Congressional rules require that spending fit within totals set for discretionary and mandatory spending in the annual budget resolution, unless the funds are designated as emergencies. Although the budget resolution cites criteria for emergency spending, it is up to Congress to designate spending as emergency. Of the $45.8 billion in discretionary spending in the final version of H.R. 4899 , almost all the spending was designated as emergency, and thus would not count against the budget caps set in the FY2010 concurrent resolution. If those caps are exceeded, spending could be subject to a point of order, which would need to be waived for the spending to be approved (see discussion below). Federal budget rules distinguish between two types of federal spending, discretionary spending (e.g., annual appropriations acts) and direct (or mandatory) (e.g., Medicare) spending. Of the $64.4 billion in the President's supplemental request, $46.3 billion is discretionary spending and $18.1 billion is mandatory or direct spending (see Table 1 ). The Administration submitted these requests to Congress in supplemental proposals included as part of the Administration's FY2011 budget, and in budget amendments submitted on February 12, 2010, March 24, 2010, April 5, May 12, May 22, and July 12, 2010. Many see emergency supplemental appropriations as undermining budgetary discipline because funding is not subject to annual caps in budget resolutions on overall discretionary spending that often require trade-offs between different types of spending. Section 403 (f) in S.Con.Res. 13 , the FY2010 budget resolution, defines spending as emergency if it is "essential ... sudden ... compelling ... unanticipated," but it is a congressional prerogative to decide where the emergency designation is appropriate. Supplementals are also perceived as receiving less scrutiny than regular appropriations. In the current fiscal environment, some Members are concerned about the impact of this additional spending on the deficit. Budget Rules and Supplemental Requests21 In dealing with any supplemental appropriations request, Congress may debate whether to increase spending above the level already appropriated for that year and, in some cases, levels for subsequent fiscal years. If Congress decides the additional spending is necessary, it must also decide whether the request warrants increasing the budget deficit or whether to offset the additional spending by either cutting federal spending or increasing revenues. Congress considers all spending or revenue legislation, including supplemental appropriations bills, within rules and procedures that are intended to address these policy options. In particular, Congress considered the FY2010 supplemental appropriations request within the constraints set by the FY2010 budget resolution ( S.Con.Res. 13 , H.Rept. 111-89 ), as well as other budget rules, such as congressional pay-as-you-go rules and the recently enacted Statutory PAYGO Act of 2010 ( P.L. 111-139 ). Under these budget rules, Congress could have exempted all or portions of the spending from these constraints by designating the spending as an emergency (or as being for "overseas deployments or other activities" in the House). Alternatively, under congressional rules, the applicable points of order could have been waived, or simply not raised during consideration of the supplemental appropriation measure. While an emergency designation would exempt spending from these budget rules, the emergency designation itself could be subject to a point of order. This applicable point of order may be waived in both houses. In the House, it can be waived by a special rule reported by the House Rules Committee and agreed to by the House, and in the Senate, by waiver motion, which requires a three-fifths affirmative vote of Senators (60 votes if there is no more than one vacancy in the Senate). Potential Deadlines Throughout consideration of H.R. 4899 from late March to late July 2010, the Coast Guard, the Defense Department, the State Department, the Federal Emergency Management Agency, and the plaintiffs in the Cobell and Pigford II cases have all cited deadlines for when the supplemental funding would be needed, although there appears to have been some flexibility in the dates. Concerns that Funds for Coast Guard Oil Spill Response Activities Could Run Out in Mid-June In a June 4, 2010, letter to congressional leaders, Admiral Thad Allen, National Incident Commander for the Deepwater Horizon oil spill, and Department of Homeland Security Secretary Janet Napolitano urged Congress to act on the Administration's proposal to raise the cap on funds that could be drawn from the Oil Spill Liability Trust Fund for these response activities. They stated that "at the current pace of BP/Deepwater Horizon response operations, funding available in the Emergency Fund [from the Oil Spill Liability Trust Fund] will be insufficient to sustain Federal response operations within two weeks." This letter suggested that the Coast Guard could reach the current $150 million annual cap on the amount that can be drawn from the Oil Spill Liability Trust Fund by June 18, 2010. If the Coast Guard were not able to tap other funding sources (such as its regular operating account) to finance its oil spill response activities, additional monies from the trust fund would not be available until October 1, 2010. Concerned about the letter, the House and Senate passed S. 3473 , P.L. 111-191 , on June 9 and June 20, 2010, raising the $150 annual cap on funds that can be drawn from the trust to fund oil spill activities to $1 billion specifically for the Deepwater Horizon Spill. The act allows funds to be withdrawn in $100 million increments and are to be reported to Congress within seven days. Concerns that Defense Department Deadline Could Be Mid-August The Department of Defense (DOD) received $129.6 billion, 80% of its total FY2010 war funding in bridge funds included in its regular appropriations acts enacted last December ( P.L. 111-118 and P.L. 111-117 ), almost double the 45% received in the bridge the previous year. In early May, Secretary of Defense Gates reiterated that DOD would need the additional $33 billion for the 30,000 troops deploying to Afghanistan by Memorial Day, the same date cited in previous years when the funding available was substantially lower. In February testimony, the Secretary of the Army, the department facing the greatest need for war funding, testified that the timeframe for the Army "in which we can comfortably fund this [war funding] would be at the end of June, beginning of July." Based on CRS calculations using DOD data, the Army, Navy and USMC could, if necessary, cover both its regular base activities and war operations through August 2010 based on war obligations to date and the current request, and even later if funds were temporarily transferred from other appropriation accounts using currently available authority. In June 16, 2010, testimony, Secretary of Defense Gates cited his concern about the "lack of progress on the supplemental," and urged passage by the July 4 recess, saying the money that we have in the overseas contingency fund for the Navy and the Marine Corps will begin to run out in July. We will then turn to O&M money in the base budget for them, causing us to disrupt other programs. The Army comes along a little behind that ... we begin to have to do disruptive planning and disruptive actions beginning in July We could reach a pointing August, in early to mid-August, where we actually could be in a position where the money that we have available to us in the base budget runs out and we could have a situation where we are furloughing civilians and where we have active duty military we cannot pay. In mid-July, DOD press spokesman Geoff Morrell said that the Army and Marine Corps could run out of funding sometime in August. In testimony, Under Secretary of the Army, Joseph Westphal testified that the Army had sufficient funds through mid-August and could last through the recess if reprogramming requests were approved. Based on the May 31, 2010, DOD Cost of War report, the latest available during final congressional consideration of H.R. 4899 , each of the services had funds still available in their War Bridge Operation and Maintenance accounts—$1.2 billion for the Marine Corps, $1.5 billion for the Navy, $15.3 billion for the Army, and $2.2 billion for the Air Force. Assuming that monthly spending increased by 20% from the April 2010 level as additional troops arrived in theater, the Army and Marine Corps, the services most heavily taxed by war spending, could rely on already appropriated war bridge funds through August, or somewhat sooner if spending increased more rapidly. Since 2004,the services have tapped funding from their base budget that would be needed at the end of the fiscal year to fund war funding while awaiting passage of supplementals, at which point funds are restored to the base budget accounts. Using base budget funding to finance or "cash-flow" war funding temporarily, and assuming the services need all funding requested in the supplemental, each of the services could have lasted through the end of July and into August and still longer if funds were transferred from other accounts, which DOD has done in previous years when necessary. FEMA Limited Disaster Assistance to Extend Deadline To make the Disaster Relief Fund last longer pending consideration of the FY2010 Supplemental, the Federal Emergency Management Agency (FEMA) limited the release of funds for claims, delayed interagency reimbursements, and recovered funds from previous years. Nevertheless, in May 2010, FEMA estimated that the Disaster Relief Fund would become insolvent the end of June assuming average monthly spending of $350 million and a balance at the end of April 2010 of $600 million. As of June 7, 2010, however, FEMA had a balance of $952 million in the Disaster Relief Fund (DRF) including recoveries of funds from previous years. These funds may have been available in part because FEMA earlier adopted a policy to pay only for those projects necessary to meet immediate needs or respond to life-threatening situations in order to ensure that funds would meet the most urgent needs. If FEMA spent at its normal rate of about $350 million a month, these funds would have lasted another three months or through August 2010. As of June 2010, FEMA had a backlog of $1.4 billion in projects awaiting payment for existing or approved infrastructure and mitigation projects across the nation but these projects did not meet the policy's immediate needs criteria. Concerns about State Department Disaster Funding Running Low The State Department reported that in order to respond to future humanitarian crises, its disaster assistance funding would need to be replenished by June 1, 2010. If not replenished, U.S. capacity to respond to other emergencies could be curtailed. Deadline for Funding Court Settlements Uncertain Congress did not enact the $1.15 billion appropriation by the mid-April 2010 deadline to settle the Pigford II court case to recompense black farmers. Although the claimants could theoretically void the settlement, plaintiffs may be unlikely to exercise that right knowing that the settlement is clearly a priority of both the U.S. Department of Agriculture and the White House. When Congress passed the final version of H.R. 4899 , the latest deadline for Congress to approve the settlement of the Cobell suit for government mismanagement of funds and lands held in trust for individual American Indians is August 6, 2010. While deadlines have been extended several times by mutual agreement, it is not clear whether another extension will be accepted by the parties or the presiding judge. Issues: Emergency Designations, Timelines, and Effectiveness The issues below were raised by Members of Congress during consideration of the FY2010 supplemental: Whether to set a timeline for congressional evaluation of continued spending on the Afghan War; How to prevent corruption and ensure that additional foreign aid for Afghanistan and Iraq is effective and well-spent; How to prevent corruption in Haiti relief and reconstruction funding with additional monitoring; and Whether additional domestic spending was appropriately considered emergency spending or needed to be offset with rescissions of prior year budget authority to prevent spending from increasing the deficit. Federal Emergency Management Agency Request36 The Administration requested $5.1 billion for the Federal Emergency Management Agency's (FEMA) Disaster Relief Fund (DRF) because FEMA anticipated that this fund would run out of funds to meet expected disaster needs and pay unanticipated claims awarded by arbitrators to state, local, and nonprofits for Public Assistance (PA) recovery projects such as debris removal and rebuilding public structures (see Table 1 ). According to FEMA, DRF spending averages about $350 million a month and the current DRF balance is $600 million. Based on these figures, FEMA projected the account would run out in May or June 2010. In response to the anticipated shortage, FEMA sent guidance in February 2010 to reduce the rate of expenditures of the Disaster Relief Fund by limiting payments to arbitration awards and projects considered immediate needs and delaying payments for other projects, like mitigation work. Representative James Oberstar noted in a May 5, 2010, hearing that FEMA limited claims payments, delayed interagency reimbursements, and recovered funds from previous years in order to stretch its available funds. FY2010 Supplemental Issues Congress raised questions about why FEMA had not requested disaster relief monies earlier, which could reflect questions about whether the supplemental was an emergency; and delays in congressional action on the supplemental raised questions about FEMA's arguments that the Disaster Relief Fund was running low. Higher spending levels in the past several years also raise questions about FEMA's budgeting practices. Members did not raise concerns about the limited information FEMA provided about why the Disaster Relief Fund was running low or the likely scope or timing of compensation payments that may result from arbitration rulings. Regular vs. Emergency Budgeting for Disasters In its first budget blueprint, A New Era of Responsibility , the Obama Administration criticized previous administrations as "irresponsible" for unrealistic budgeting practices. In the FY2010 request, the Administration requested $2.0 billion for the DRF. Congress then provided $1.6 billion, $400 million below the request. In FY2011 the Obama Administration is requesting $1.9 billion for the DRF. Compared to previous years, it could be argued that neither request represents significant increases (see Figure 1 ) The rationale for the request and the current moratorium provided by OMB was that 59 disasters have occurred in 2009 and another 18 have already taken place in 2010. By comparison, 74 disasters were declared in 2008 and 63 in 2007. The need for the current supplemental request is mainly additional arbitration rulings, some related to Hurricane Katrina in 2005. In recent years, regular requests have been insufficient to meet needs. Higher levels of funding for the DRF may continue to be necessary to meet the devastation wrought by Gulf Coast hurricanes in 2005 and 2008 because recovery could take five years or longer. Some might argue that given the number of disasters and carryover needs from the Gulf hurricanes, Congress might consider funding the DRF at a higher level to avoid the need for supplemental funding. On the other hand, others would argue that disasters are inherently unpredictable, and hence qualify as emergency needs. If this is so, Congress may choose to maintain the status quo if Members prefer waiting for large-scale disasters to occur before providing disaster funding for recovery. Justifying the Current Estimate Although the replenishment of the DRF may be justified, FEMA provided little information for Congress to use to evaluate its request. The only example cited by FEMA in its current request is an arbitration ruling awarding $475 million to the Charity Hospital in New Orleans, which has been closed since Hurricane Katrina in 2005. To better make the case that there is a need to supplement the DRF, FEMA could provide more information about how the DRF has been drawn down for Katrina and other disasters, and the nature and the scope of pending arbitration cases. Congressional Action on U.S. Disaster Assistance Request P.L. 111-212 , the enacted version of H.R. 4899 provides the $5.1 billion requested for FEMA's Disaster Relief Fund (DRF) as did the previous House and Senate versions (see Table 1 ). The final version also stipulated that $5 million of the funding be transferred to the Department of Homeland Security Office of the Inspector General. In addition, the final version of H.R. 4899 added $396 million in other disaster relief funding for recent floods in Tennessee and Rhode Island, fishery disasters in Alaska, tornado damages in the Midwest, and recovery projects related to the 2005 and 2008 Gulf Coast hurricanes (see below). In its report, the Senate Appropriations Committee (SAC) voiced dissatisfaction with the timeliness of information provided by OMB about disaster relief funding requirements since the supplemental not submitted until February 2010 despite the fact that a shortfall was known in May 2009. The SAC also noted that the FY2011 request is expected to be $1 billion to $2 billion short of requirements for previous disasters including Hurricane Katrina. Other Disaster Assistance In addition to the $5.1 billion for the DRF, the enacted version of H.R. 4899 included the following funding for disaster-relief activities in other agencies. Housing and Urban Development receives $100 million for community development funds for long-term recovery, infrastructure repair, and economic revitalization; Army Corps of Engineers receives $227 million, including $173 million to repair damage to federal projects, $20 million for flood control and coastal emergencies, and $18.6 million for recovery projects involving the Mississippi River and tributaries, and $10 million for drought relief; Commerce Departments' economic development assistance program receives $49 million; Agriculture Department's emergency forest restoration receives $18 million program. The final version of H.R. 4899 also stipulated that the federal cost share for recovery from damages caused by the floods in Rhode Island and Tennessee be no less than 90%. The final version directs FEMA to create an interagency taskforce, comprised of the Army Corps of Engineers and OMB, to track, address, and report quarterly to the relevant congressional committees on resolving community concerns related to FEMA's updates of flood maps. War-Related Supplemental Requests The DOD and State Department/USAID FY2010 supplemental requests provide funding primarily to deploy the additional 30,000 troops being deployed to Afghanistan and for economic assistance intended to reinforce military operations. These two elements are considered essential to the counterinsurgency strategy adopted by the Administration to "clear, build, hold, and transition" as DOD and the State Department focus on population centers in Afghanistan. Department of Defense War Funding Request44 In its FY2011 budget submission, the Obama Administration requested a supplemental appropriation of $33 billion for FY2010, primarily to deploy the additional 30,000 troops to Afghanistan announced by President Obama on December 1, 2009. According to the President, these additional troops are intended to reverse a deteriorating security situation and "break the Taliban's momentum" by targeting the insurgency, securing key population centers, and training more Afghan forces, which, in turn, is expected to "help create the conditions" to transfer responsibility to the Afghans beginning in July 2011. Frequent evaluations were promised. Increases in U.S., NATO Troops, and Afghan Security Forces According to the DOD, as of June 1, almost 94,000 troops were in Afghanistan, or all but about 4,000 of the 30,000 scheduled increase, with the remainder expected to arrive by September 2010, several months later than originally anticipated by the White House. By this fall, some 98,000 troops would be deployed in Afghanistan, trebling the number of U.S. troops from the number deployed in October 2008 (see Figure 2 ). Before leaving office in January 2009, then-President Bush increased the number of troops in Afghanistan in response to requests from the U.S. Commander in Afghanistan concerned about the deteriorating security situation, which brought troop levels close to 46,000 in May 2009. After completion of the Obama Afghanistan strategy review in March 2009, the President approved another increase of about 22,000 troops, bringing the total to 68,000 as of November 2009. The second Obama increase of 30,000 troops now underway will bring the U.S. total to 98,000 by this fall. The FY2011 budget adds another 4,000 support troops in Afghanistan. After repeated requests from the United States, NATO allies troop levels have grown from 38,370 in December 2009 to 48,000 troops in March 2010. By this fall, this will bring the total number of foreign troops in Afghanistan to about 148,000. By that time, plans call for Afghan security forces to total 243,000, bringing the total number of foreign and Afghan forces to 389,000. DOD Request Shifts Bulk of War Funding to Afghanistan The Defense Department's $33 billion requested $30 billion to support the additional troops deploying to Afghanistan; $1 billion more to train Iraq Security Forces; and $2 billion for higher-than-anticipated fuel costs in DOD's regular (baseline) budget. Based on final congressional action, total DOD war spending in FY2010 rises from the $129 billion to $160 billion. Of that total, $99 billion would be for Afghanistan and $61 billion for Iraq, reversing the funding shares for the two wars. The total in FY2010 is about $12 billion more than in FY2009 and almost the same as the FY2011 request ( Table 2 ). Before passage of the FY2010 Supplemental, DOD appropriations enacted for the Afghan War total $284 billion. With passage of the FY2010 Supplemental, that total rises to $314.1 billion. If the FY2011 request is approved, that total would rise to $427.7 billion. By comparison, the enacted total for Iraq is now $705 billion, increasing to $706.2 billion with passage of the FY2010 Supplemental and to $752 billion if the pending FY2011 request is approved. These figures do not include war funding for State/USAID and VA Medical. (See CRS Report RL33110, The Cost of Iraq, Afghanistan, and Other Global War on Terror Operations Since 9/11 , by [author name scrubbed] for complete war costs.) Timeline for U.S. Military's Role in Afghanistan One issue that arose during debate on the FY2010 supplemental was the timeline for evaluating the effectiveness of President's Obama's new strategy (see Appendix ). When President Obama approved the new deployment, he warned that the U.S. commitment was not "open-ended," and "will allow us to begin the transfer of our forces out of Afghanistan in July of 2011" after a review in December 2010. Based on testimony and DOD statements, the timeframe could slip and the U.S. drawdown in July 2011 could be minor. Both Secretary of Defense Gates and Admiral Mullen, Chair of the Joint Chiefs of Staff, have cautioned that the July 2010 date is "a day we start transitioning ... not a date that we're leaving," which would be based on "conditions on the ground." Recently, Secretary Gates said, "I think this is a several-year process." In March 2010, General Petraeus, now head of U.S. Central Command, characterized the initiative as "an 18-month campaign, as we see it," to be evaluated according to JCS Chair Admiral Mullen "eighteen months from now, " which would be September 2011. Members of Congress cited concerns about the timing of the initial evaluation, the length of the new campaign, and the long-term future of U.S. military involvement. During House consideration of H.R. 4899 on July 1, 2100, three amendments were debated and rejected that looked at ways to increase congressional participation in decision making about the extent and nature of the U.S. military commitment. Amendment No. 3 would have cut off all funding for Afghanistan and was defeated 25 to 376. Amendment Number 4 would have limited DOD funding to the withdrawal of U.S. troops and was defeated 100 to 321. Amendment No. 5 required the Administration submit a new National Intelligence Estimate (NIE), a plan by April 4, 2010, with a timetable for the redeployment of troops, and required that if the President's plan is not consistent with beginning an orderly withdrawal of U.S. troops from Afghanistan after July 1,2011 as announced by the President on December 1, 2009, then Congress would have to approve a joint resolution allowing the obligation and expenditure of funds. That amendment was defeated 162 to 260 (see Appendix ). Concerns about Afghanistan have risen since the first operation using the additional U.S. troops to re-take Marjah, a town of 85,000, in Helmand Province in southern Afghanistan, launched on February 13, 2010. While DOD considers Marjah to be free of Taliban, press reports suggest a mixed picture. The next key test was to be the campaign for Kandahar, a Taliban stronghold and city of 1 million in southern Afghanistan, a campaign delayed from its planned summer date, cited by military officials. Most of DOD's Request Is for Afghanistan Of the $33 billion in DOD's supplemental request, $30 billion was for Afghanistan, $1 billion to train Iraqi Security Forces, and $2 billion was to pay for higher fuel prices in DOD's base budget (see Table 3 ). The $30 billion for Afghanistan included $19 billion for "Operations" including Military Personnel and Operation and Maintenance costs to pay, conduct operations and support deployed soldiers; $3.3 billion for force protection; $2.6 billion to accelerate the training of Afghan security forces; $2.0 billion to pay for higher fuel costs in DOD's regular budget; $1.7 billion for reconstitution or reset of war-worn equipment; $1.3 billion for military intelligence; $1.2 billion for national intelligence; $500 million for military construction; $400 million to defeat Improvised Explosive Devices (IEDs) (see Table 3 ). Questions Could Be Raised About Per Troop Costs Some policy makers have suggested that the DOD cost for deploying 30,000 more troops would average $1 million per troop (including both the White House and Secretary of Defense Gates). While dividing the $30 billion request for Afghanistan by the 30,000 additional troops yields an average of $1 million, this does not reflect the different types of activities and programs that DOD is requesting or the factors affecting the cost of these activities. To describe its request, DOD developed functional categories ranging from "Operations," which includes funding for military personnel and O&M costs, to Coalition Support Funds for Pakistan's counter-terror operations. Different categories increase at rates ranging from 123% for Operations to 35% for Coalition Support. Table 3 shows funding between FY2009 and FY2011 for the Afghan war. Unlike other categories, the Operations category would be expected to increase at least roughly in concert with troop levels. DOD estimates differ substantially from CBO's estimates. DOD's reported obligations for the first five months of the fiscal year also suggest that DOD's estimates may be somewhat high unless spending increases substantially later in the year. DOD estimates for the FY2010 cost deploying 30,000 troops to Afghanistan reflect a per troop cost of $875,000 based on the "Operations" category in the FY2010 Supplemental request and taking into account changes in funding since enactment (see Table 3 ). The DOD per troop cost is not quite double the $467,000 in CBO's estimate. Both DOD and CBO assume the same average monthly troop strength which reflects the gradual deployment of troops over the fiscal year, and CBO's estimate builds on DOD reported war obligations. DOD would argue that operations costs in the FY2010 supplemental request are particularly high because the new troops will be deploying primarily to southern Afghanistan where the United States has had few troops, requiring DOD to set up, expand, and operate many more facilities. It is not clear, however, whether these factors are sufficient to account for the difference. In 2009, citing concerns about whether DOD could "accurately budget" for the Afghan and Iraq wars in light of significant changes in military operations, the FY2010 DOD Appropriations Act transferred $5 billion of DOD's request for Operation and Maintenance funding to the Overseas Contingency Operations Transfer Fund (OCOTF) to be held aside until DOD notified congressional defense committees of where the funds were needed. Similar concerns may be raised about DOD's FY2010 request for all of the reasons above. Another indicator that DOD's estimates may be high is the fact that obligations reported in the first five months of FY2010 for operational costs are about 22% of the total amount that DOD has requested assuming the FY2010 supplemental is enacted. To use all these funds, monthly spending would need to more than double in the next seven months, suggesting that DOD estimates—developed last fall—may be somewhat high. Although obligations are typically lower in the first few months of the fiscal year and only some of the 30,000 troops were in-country, the rate of spending still appears to be lower than would be expected. Funds to Accelerate Training Afghan Security Forces To accelerate the training and expand Afghan Security Forces Fund (ASFF), and hence be able to reduce the U.S. role, DOD requested an additional $2.6 billion. This request was approved bringing total FY2010 ASFF funding to $9.2 billion, an increase of 63% (see Table 3 ). Concerns about this request included whether DOD needs all the additional funds requested in FY2010 to meet current plans in light of current spending rates. whether the ramp-up in DOD's plan is achievable and whether there is sufficient oversight given persistent training problems, recent contracting disputes, and possible shortages in trainers. Relating DOD's Plan to Its Funding Request Under the new plan, the Afghan Security forces would reach a total of 243,000 by October 2010—higher levels to be achieved over a year earlier—and 305,600 by FY2011. The Afghan Army would grow from 97,000 in November 2009 to 134,000 in October 2010 and 171,000 in October 2011, a 76% increase in two years. The Afghan Police would grow from 93,800 in November 2009 to 109,000 this October and to 134,000 in October 2011, a 43% increase over two years. In January 2010, NATO partners endorsed these increases. It is not clear whether DOD's FY2010 supplemental request is necessary to meet these levels or entails some forward-financing or requirements—providing funds before they are needed. DOD states that the additional $2.6 billion is necessary to "sustain the growth" of the Afghan Army "on a glide slope that exceeds 134,000," to pay Afghan Army soldiers more, and provide additional infrastructure and equipment. The same question can be raised about DOD's FY2011 request. Altogether, Congress has appropriated $25.5 billion for the Afghan Security Forces thus far. The pending requests for FY2010 and FY2011 would provide another $14.2 billion and bring the total through FY2011 to $39.8 billion (see Table 4 ). DOD has not provided an estimate of the ultimate cost or number of years that the United States would need to support Afghan Security forces. While General Gary McChrystal (ret.), former U.S. NATO Commander in Afghanistan, had proposed doubling the Afghan Army and Police from the current goal of 243,000 to 400,000, General Mullen characterized this as "an aspirational goal out several years from now," that has not been endorsed by the Obama Administration. Problems in Training Afghan Security Forces While DOD has responsibility to train the Afghan Army, DOD and the State Department jointly manage training of the Afghan police. The training of Afghan Security forces is actually carried out by U.S. military personnel, NATO coalition teams, and private contractors DOD and the State Department have experienced a myriad of problems in carrying out this training. For the Afghan Army, problems include attrition rates of about 20%, deficiencies in leadership, frequent absenteeism that can reduce units to 50% of their strength, limited logistical capabilities, and questionable behavior. For the police, training has been hampered by illiteracy, corruption, and the targeting and killing of police recruits and police by insurgents. Hearings in the spring of 2010 on Afghan police training cited the following problems, which have also been identified in GAO, Special Inspector General Reports, audit reports by the State and Defense Departments, and press articles: Difficulties in coordinating DOD, State Department, and NATO coalition training; Persistent problems in relying on private contractors including poor performance and bad behavior, unauthorized use of firearms and inadequate vetting, and shortages of contractor personnel; and Lack of sufficient personnel to manage contracts and insufficient contract oversight including invalid invoices as well as inadequate performance. Although DOD has sent additional trainers, and requested more from NATO allies, there still are reported shortages, which could increase reliance on contractors and raise more concerns among Members. Senator Levin cited concerns about a shortfall in trainers for the Afghan army and police, a shortfall acknowledged in DOD's April 1, 2010, Afghan Section 1230 Metrics report, which noted that 44% of the 4,083 trainers required are currently assigned. To gauge whether sufficient trainers are available and whether the current ramp-up is realistic, Members may want to know How many trainers are needed for initial and follow-on training to meet the higher targets funded in the FY2010 supplemental request for Afghanistan? How is that requirement to be met in terms of the number of U.S. military personnel, coalition partner teams, and contractor personnel? How many of those trainers are currently in-country, scheduled to arrive, pledged but not yet available, or still to be hired? How would DOD's funding change if these personnel are not available as anticipated? These shortfalls could hamper the ramp-up. The plan to speed up training of the Afghan police could also have been affected by a sustained bid-protest, which could have delayed contract award, but Congress included a provision allowing the Secretary of State to continue to rely on a previously awarded contract. Earlier, when asked to describe DOD's plan for providing Afghan police training because there was no longer a contract in effect, DOD Assistant Secretary David Sedney stated that "We don't have a final answer for you on that," and suggested that DOD intended to do a full and open competition, which would have taken more time and delay training, and reduced the funding needed in FY2010. FY2010 Spending Rates Based on DOD's May 31, 2010, Cost of War obligation reports, DOD still has available almost $3.6 billion in funding appropriated in FY2009 and FY2010. In the first eight months of FY2010, DOD obligated funds in these accounts at a rate of about $540 million a month, suggesting that DOD already had an additional six months available for the rest of FY2010 even without the additional $2.6 billion requested in the supplemental. Whether Some of DOD's Request Could Have Been Funded in Regular FY2011 Bill As the wars in Iraq and Afghanistan continue, some Members have raised concerns about whether emergency supplementals for war are still justified, or whether war spending should be included in regular appropriations acts. DOD's original request for FY2010 was enacted as Title IX in the FY2010 DOD Appropriations Act (P.L. 111-118). Because the February 2009 budget submission of FY2010 war funding preceded the Administration's decision in December 2009 to deploy 30,000 more troops, some would argue that an emergency designation for the FY2010 supplemental request is appropriate. Section 403 (f) in S.Con.Res. 13 defines spending as emergency if it is "essential ... sudden ... compelling ... unanticipated," but it is a congressional prerogative to decide where the emergency designation is appropriate. Some of DOD's request, however, including the $1 billion for training in the Iraqi Security Forces Fund (ISFF), the $2 billion to offset fuel increases, and the $1.7 billion for reset or replacement of war-worn equipment is less clearly related to the new deployments, and some could argue should be considered as part of DOD's regular FY2011 appropriation request. With the turnover of responsibility for security to the Iraqi government, and the rise in oil prices in 2008, Congress has become less willing to pay for Iraqi security forces. DOD argued that the $1 billion for the ISFF is necessary to complete and sustain modernization efforts underway, and ensure that Iraq can provide for its security particularly when faced with lower revenues as oil prices have fallen. While these are important policy considerations, its emergency designation could be challenged. Some may also argue that providing $2 billion to cover higher than expected fuel costs in DOD's base budget could be covered in its base budget. Typically, DOD has financed unanticipated increases in fuel prices by using cash resources in the Working Capital Funds, which provide oil to the services, or by transferring funds from less urgent needs. DOD presumably would argue that these actions would be difficult so an infusion of budget authority is needed. Another request that could be considered more loosely tied to the additional 30,000 troops is the $1.7 billion for reset, to replace war-worn equipment, particularly losses. Some might argue that the effect of the additional combat operations on equipment in Afghanistan is likely to be gradual particularly with the phasing-in of troops over the course of the year making it particularly difficult to predict the need to replace war-worn equipment. Others would argue that replacement needs from the additional deployment of troops can be estimated based on past experience. As in the case of the ASFF, DOD also has a substantial backlog of war-related procurement that remains to be spent. Final Congressional Action on the Defense Request The enacted version of H.R. 4899 provided DOD with $32.9 billion, $148 million less than the DOD request. This includes adjustments in particular accounts for funding in excess of requirements, fuel pricing changes, and combat losses including: $108 million decrease to military personnel for excess requirements; $436 million decrease to operation and maintenance reflecting rejection of DOD's request for $350 million in the Overseas Contingency Operations Fund for unspecified requirements, and rejection of funding for contingency construction projects using an authority designed for unanticipated requirements rather than regular military construction funding; $400 million cut rejecting a DOD proposal to fund two Army force protection programs in the Joint Improvised Explosive Device Defeat Fund; and $512 million increase to procurement accounts for additional combat losses not known at the time of the request. These adjustments were included in the Senate May 27, 2010, version of H.R. 4899 , which was ultimately adopted by the House and enacted. Both the House and Senate versions approve the amounts requested to train Afghan and Iraq security forces (see Table 5 ). The final version also includes a requirement that congressional intelligence committees be provided assessments of threats from Guantanamo detainees, but dropped a provision in an earlier House version that allocated $300 million for the Office of Economic Adjustment to deal with base closure related transportation improvements. More Spending for Bases in Afghanistan Raises Questions of Permanency and Execution85 The Administration requested a total of $529 million for military construction in its supplemental request including an additional $521 million for military construction in Afghanistan and a non war-related request of $8 million to pay higher utilities bills for Air Force family housing. Adding the Afghanistan funding to the FY2010 enacted amount would bring the FY2010 total to $1.9 billion for war-related construction—double the FY2009 level—raising questions about whether DOD is building facilities to support the temporary stationing of warfighting troops or creating permanent bases in Afghanistan (see Table 6 ). In recent statutory language, Congress permitted spending for a "long-term presence" but prohibited spending for "permanent stationing" of U.S. troops in Afghanistan (see "War-Related Military Construction Provisions"). In light of current spending rates for military construction in Afghanistan, it is also not clear how urgently the current funds are needed. DOD's $521 million request would create and expand basic infrastructure at various locations in Afghanistan including roads, runways, quarters, and other facilities to support the deployment of 30,000 additional U.S. troops. The justification for the request stated that the construction "will expand airfield capacity for increased airlift and combat operations, increase logistics capacity at key locations, and provide the minimum infrastructure necessary.... " The supplemental request was split roughly evenly between Army and Air Force construction. Army projects are focused in the southern provinces of Helmand, Nimruz, and Kandahar, the area of most new military operations, and Balkh and Kunduz provinces in the north, where Afghanistan borders the three former Soviet republics of Turkmenistan, Uzbekistan, and Tajikistan. Air Force construction is planned for Nimruz province in the south, Balkh province in the north, and Herand province in the west of the country in support of airlift and special operations forces. Army construction included waste and waste water management systems, fuel storage and distribution facilities, utilities infrastructure, gravel roads, and a command and control headquarters at Forward Operating Base (FOB) Tombstone near Lashkar Gah in Helmand in the south. Projects also include perimeter security facilities and a helicopter apron at Kunduz and Mazar e Sharif in the country's extreme north. Air Force construction included a runway and associated apron at FOB Delaram, located in the west approximately halfway between Kandahar and the Iranian border, a Special Operations helicopter apron at FOB Dwyer (in southern Helmand province near the town of Garmsir), helicopter and airlift aprons at Mazar e Sharif in the north, and aircraft aprons and fuel and munitions storage at Shindad Airfield in the west. A fundamental issue for Congress, expressed in legislation over a number of years, is whether spending on construction signals a long-term, indefinite U.S. troop commitment to Afghanistan. Building to Fight vs. Building to Stay: Congressional Restrictions Both appropriators and authorizers in Congress have sought to distinguish between military construction intended to support expeditionary, short-term warfighting and military construction for permanent stationing of troops in Iraq and Afghanistan. As it did in the case of Iraq, Congress has adopted language intended to prevent the establishment of permanent bases in Afghanistan (see "War-Related Military Construction Provisions"). In the FY2010 National Defense Authorization Act ( P.L. 111-84 ), Congress banned " any defense funds " from being "obligated or expended by the United States Government to establish any military installation or base for the purpose of providing for the permanent stationing of United States Armed Forces in Afghanistan [italics added]." The FY2009 Supplemental Appropriation adopted the same language but stated that none of the funds " available by this or any other Act shall be obligated or expended by the United States Government for the purpose of establishing any military installation or base for the purpose of providing for the permanent stationing of United States Armed Forces in Afghanistan [italics added]." There is no definition of the types of projects that would signal permanency. At the same time, Congress carved out an exception to this ban in P.L. 111-84 to permit DOD to use Operation & Maintenance (O&M) funds for military construction that supports a "long-term presence" in Afghanistan, reversing language from prior years that limited such funding to "urgent ... temporary" facilities (see "War-Related Military Construction Provisions").Where the line exists between funding for facilities to support permanent stationing of U.S. troops, which is banned, and facilities to support a long-term presence, which is permitted, may be unclear, as some projects (housing, waste treatment, etc.) could plausibly be devoted to either purpose. Congress has periodically denied funds in supplemental appropriations requests for projects perceived as signaling a permanent presence—a permanent fuel facility and power generation plant at Bagram, for example, in the FY2005 supplemental appropriations request—without first seeing them justified as part of a comprehensive plan for troop stationing. Some of the projects proposed in the FY2010 Supplemental could fall into this category. "Permanent Stationing" and "Long-term Presence" To respond to rapidly changing military situations in Iraq and Afghanistan, DOD requested and received additional flexibility to use already-appropriated O&M funds to build facilities to meet "urgent military operational requirements of a temporary nature[italics added]"starting in FY2004. Congress renewed this authority every year until FY2009 while at the same time capping the amount between $100 million and $200 million and forbidding funds from being used for construction at a military installation "where the United States is reasonably expected to have a long-term presence." Over the years, DOD planners have concluded that some form of U.S. military presence in Afghanistan is likely to continue for several years, possibly even after military operations end. In response, Congress changed the law in 2009 and permitted DOD to use $200 million in O&M funds for projects in U.S. Central Command and an additional $300 million in O&M funds for construction in Afghanistan to meet "urgent military requirements" as certified by the Secretary of Defense, and exempted installations there from the ban on the use of O&M construction funds "deemed as supporting a long-term presence." The FY2010 NDAA again extended the authority to use O&M funding for military construction and continued the $500 million total limit on projects in Central Command (see "War-Related Military Construction Provisions"). Higher Funding and DOD's Proposed Legislative Change Taking O&M funding for military construction into account increases the amount spent for military construction appreciably. For example, in FY2009, DOD added $409 million from O&M accounts for construction in Afghanistan to the $900 million appropriated, raising the total to $1.4 billion. The $1.4 billion for construction in Afghanistan in FY2009 nearly equaled the entire amount spent on construction between FY2003 and FY2008, and in a single year, doubled DOD's construction investment in Afghanistan (see Table 6 ). If DOD dedicated the full $500 million in O&M available to military construction in Afghanistan, the total in FY2010 would reach $2.4 billion, which would again almost double the entire prior seven-year investment. DOD has also submitted new legislative proposal to use 0&M monies for unspecified minor construction in support of contingency operations until October 1, 2012. If that FY2011 proposal is approved by Congress, total funding for military construction in Afghanistan could rise further (see "War-Related Military Construction Provisions"). Another possible sign of DOD's commitment in Afghanistan is the amount invested in certain key bases of the more than 25 identifiable sites. This includes: $1.3 billion invested in Bagram Air Base, $248 million requested for a total of $1.6 billion if the request is approved; $767 million appropriated for Kandahar Air Base, $181 million requested for a total of $948 million if the request is approved; $595 million for Forward Operating Base Tombstone/Bastion (U.S. and U.K funding),$299 million requested for a total of $894 million if the request is approved. DOD has also requested new language for the FY2011 DOD authorization that would permit DOD to use O&M funds in " amounts necessary to carry out unspecified minor military construction projects of up to $3 million each in support of contingency operations" through September 30, 2012 [italics added]. If enacted, this would create a temporary two-year authority allowing DOD to draw on O&M funds up to any amount for unspecified military construction in support of contingency operations anywhere in the world. For these projects, the proposal also raised the current per project cap for unspecified minor construction projects from $750,000 to $3 million, which DOD argued was necessary because construction costs in Afghanistan have grown. Because the proposal says that DOD could spend "amounts necessary," for these types of projects, there would be no limit on the total amount of O&M funds that could be drawn upon for military construction in support of contingency operations anywhere in the world. DOD proposed after-the-fact quarterly reporting to the four congressional defense committees within 60 days rather than the 7-10 day pre-notification required to use O&M funds for Central Command projects. Execution Issues Another issue that could arise is whether the $521 million supplemental request was urgently needed in light of DOD's current spending rates for military construction projects in Afghanistan. While DOD's request identifies individual projects the services consider needed, DOD currently had $2.1 billion in budget authority available from previous appropriation acts that has not yet been obligated (i.e., placed on contract). In FY2009, DOD obligated about $607 million for military construction projects in Afghanistan or an average of about $50 million a month. For the first five months of FY2010, that average fell to $26 million a month for reasons that are not identified in DOD's report. To obligate all of the $2.1 billion in funds available at that time by the end of this fiscal year, DOD would have to increase its monthly average obligations six-fold to $300 million. Not all of those monies have to be obligated before the end of this fiscal year. The $2.1 billion includes $700 million that has to be obligated by September 30, 2010, or the monies return to the Treasury and another $1.4 billion that has to be obligated by September 30, 2011. To spend all of the FY2009 monies before they lapse, DOD would need to increase its current $26 million monthly obligation rate four-fold to $100 million in the second half of this fiscal year. Similarly, to spend the $1.4 billion already available for FY2010 projects, monthly obligations would need to average $116 million, or more than four times as high as the current rate. With the additional supplemental funds, monthly obligations would have to treble from the FY2009 rate (to $150 million a month) and increase six-fold from the current FY2010 rate. Some may argue that in light of how quickly current monies were being spent, the FY2010 supplemental request could be considered as part of DOD's FY2011 war request when there could be additional evidence about current spending rates and the prospects for the Afghan war. Final Congressional Action on the Defense Basing Request Total funding for million for military construction/family housing in the enacted version of H.R. 4899 was $657 including $649 million for war-related construction in Afghanistan, and $8 million for the Air Force request for a non war-related request to cover higher utility bills in Air Force family housing. Matching the May version passed by the Senate, the final military construction funding was $127.5 million above the request in order to accelerate projects that the Air Force proposed to fund in FY2011 using its authority to tap O&M monies for unanticipated contingency-related projects. In adding these funds, the Senate report stated that "If the requirements for contingency construction are known at the time of the budget request, then they should be included in the Military Construction budget request. If they are not known at that time, then the Department of Defense should continue the practice of notifying the Committee when projects and their corresponding funding sources are identified." These military construction funds would be available through September 30, 2011—for two years—rather than the four years requested by the Administration. The final version of the bill also did not include $16.5 million added by the House in its July 1 version to build a new Soldier Readiness Processing Center at Fort Hood, TX, the site of the fatal shootings of November 9, 2009. War-Related Foreign Aid and Diplomatic Operations101 The Administration's FY2010 Supplemental request under the 150 international affairs budget function addressed specific foreign economic assistance and related civilian operational requirements of three strategic frontline nations—Afghanistan, Iraq, and Pakistan. In the case of Iraq, the request was meant to respond to the drawdown of U.S. military forces and the consequent shift of greater responsibility to civilian personnel. In the case of Afghanistan, it reflected a strategy that increases both U.S. military and civilian responsibilities. The Pakistan request addressed the Administration's desire to demonstrate U.S. support to Pakistan and to strengthen the Pakistan government's presence in insurgent areas of the country. The total international affairs budget request for these war-related programs was $4.46 billion, $1.8 billion of which was under the State Department portion of the account and meant to provide personnel and infrastructure to enable diplomatic and assistance programs. The Foreign Operations, i.e. foreign aid, segment, amounting to $2.6 billion, was requested to provide a wide range of aid in support of U.S. security, economic growth, social service, and democratization objectives. For each country, the Administration only requested funding in discrete sub-accounts that address certain needs. It did not request funding for P.L.480 food aid, Global Health/Child Survival, or other accounts. If the request had been approved, the FY2010 total of those specific accounts for the three countries affected by the request would increase by more than two-thirds over the FY2009 figure from roughly $6 billion to $10 billion. In the end, the enacted version raised the FY2010 total level to about $9.2 billion, a 55% increase over the FY2009 appropriation. Congressional Action on War-Related Foreign Aid The enacted version of the FY2010 supplemental provides total international affairs war-related foreign aid and diplomatic operations funding at $3.7 billion, $714 million less than the Administration request (see Table 7 ). Details of congressional action regarding each country are discussed below. Afghanistan103 The Administration's international affairs State, Foreign Operations request for Afghanistan reflected a strategy that asserts the importance of civilian programs in governance, economic growth, and social services, provided in conjunction with U.S. military efforts in the country. While the approach of strengthening the U.S. civilian presence, increasing aid to local government, and enhancing the role of the national government in providing local services, has been in effect for more than a year, the December 2009 "surge" strategy might be seen to have accelerated and heightened the need for civilian assistance delivery, especially as follow-up in insurgent areas being contested by the U.S. military. A major element of the new strategy has been to rapidly increase stability and reduce the strength of the insurgency in problematic provinces by creation of jobs and provision of social services through a more capable and visible Afghan government. The coming months will tell whether this strategy is working. However, key concerns include the extent to which the Afghan government is prepared to provide sufficient leadership, staff, and support to local communities in the forefront of the conflict, the ease of coordination between the U.S. military and civilian aid programs and personnel, and the level of cooperation offered by the local populace. One question is whether high levels of corruption in the Afghan government will impede its ability to provide services effectively. As increasing amounts of aid are made available through the supplemental, the ability of the U.S. government to monitor and insure accountability is an associated concern. The corresponding increase in numbers of U.S. aid personnel as well as an increase in the request for the offices of inspector general reflects U.S. government worries about the impact of corruption on aid programs. The Afghanistan supplemental request was meant to provide a significant boost to total U.S. international affairs funding levels for that country, and, although not as large as the request, P.L. 111-212 does significantly raise aid and State support to Afghanistan. Under the request, the total FY2010 State Department diplomatic operations account, already under the regular FY2010 appropriations a third larger than in FY2009, would rise by nearly 90% above the previous year's level. In the enacted version of H.R. 4899 , the total FY2010 diplomatic operations account has been increased by 86%. The foreign aid portion of the supplemental request would have raised total FY2010 levels of all the major non-humanitarian civilian aid accounts going to Afghanistan by 67% over the equivalent FY2009 level of assistance. The enacted version of the legislation raises total FY2010 aid levels by 55% over the previous year. Elements of the Afghanistan Foreign Aid and Diplomatic Operations Supplemental The Administration sought $1.6 billion in Economic Support Funds (ESF) and $200 million in International Narcotics and Law Enforcement (INCLE) funding under the foreign operations portion of the request, and $211 million in Diplomatic and Consular Programs (D&CP) funds under the State Department portion. ESF is a main source of economic, political, and social aid, mostly channeled through the Agency for International Development (USAID). The ESF request broke downs as follows: Alternative development: $135 million, mostly for agriculture in poppy-production areas; Conflict mitigation and reconciliation: $216 million to support consultative processes in local communities, including quick impact, small grants projects; Rule of law: $50 million to support the judicial system, especially in recently secured areas; Good governance: $760 million to strengthen Afghan government agencies, including $450 million in support of the Afghanistan Reconstruction Trust Fund which funnels funds to the National Solidarity Program, and $115 million in direct budget support to the Ministry of Finance; Health: $50 million to expand Ministry of Health services; Education: $50 million to expand secondary and vocational education; Macroeconomic growth: $7 million to help the Ministry of Finance improve revenue collection through tax administration reform; Trade and investment: $19.5 million to support implementation of trade agreements and support trade infrastructure, such as industrial parks and border facilities; Financial sector: $4.5 million to strengthen branches of the Central Bank; Agriculture: $215 million to build capacity countrywide in the Ministry of Agriculture, and support watershed rehabilitation and irrigation, agriculture credit, extension services, and market development; Private sector development: $60.4 million; and Economic opportunity: $8.6 million to expand credit union services, including Islamic-compliant financing. The INCLE account is implemented by the State Department. Three quarters of the $200 million request was aimed at supporting the justice sector, especially to inject rule of law activities into the provinces. The remainder targeted counter-narcotics programs. The request included $60 million to expand the corrections program; $25 million for model prisons; $50 million to increase the number of judges, prosecutors, criminal investigators; $25 million for the Counter-Narcotics Justice Center, the Criminal Justice Task Fore, the Anti-Corruption Unit and Anti-Corruption Tribunal; $5 million to support legal aid; $8 million specifically for women's justice activities; $22 million for counternarcotics police; and $2 million for drug treatment facilities and support for children. Largely to support the full range of ongoing and proposed international affairs assistance programs, the FY2010 State Department Diplomatic and Consular Programs (D&CP) request of $211 million furthered the growth of civilian personnel begun in the FY2010 regular request. The Supplemental proposed a 457 position increase, in addition to the 764 positions funded in the regular FY2010 appropriations, at a cost of $211 million. These positions included 212 U.S. direct hires to work at the district level and startup funding to hire 245 staff for work with Kabul ministries and in Provincial Reconstruction Teams (PRTs). The Administration stated that it was applying a "whole of government" approach with federal employees drawn on an as-needed reimbursable basis from the Department of State, USAID, Department of Agriculture, Department of Justice, and eight other federal agencies to provide the vital expertise in specialized skills. The Department also proposed the hiring of about 200 locally employed staff (LES) to provide administrative and local knowledge support to American personnel working in the field. A February 2010 Department of State Inspector General's report praised management and personnel working at the U.S. embassy in Kabul, but expressed concern that they were overworked and struggling to meet the demands resulting from a tripling of staff over the past year. The expansion proposed under the supplemental would further strain resources. This rapid expansion has its implications in management of staff and providing for their housing and office space in Kabul or just basic housing and sanitation in the field. Not addressed in the supplemental request were the added security needs that are a further consequence of increased civilian staff. An additional $14 million in funding for the Special Inspector General for Afghanistan Reconstruction (SIGAR) and $3 million for the State Department Inspector General was also requested to support their continuing oversight of the assistance program. Congressional Action on the Afghanistan Request The original version of H.R. 4899 , passed by the House in March, did not include funds for Afghanistan assistance, but the House-amended version, passed in July, adopted funding levels for Afghanistan approved by the Senate in May. The final enacted version of H.R. 4899 provides a total of $1.7 billion for Afghanistan foreign aid and diplomatic operations compared with the $2.0 billion request. There are several major differences between P.L. 111-212 and the Administration request. The enacted version cuts the ESF request by $267 million. The Senate Appropriations Committee, in its report on the bill, recommends specific funding levels for multiple program sectors within the ESF account, most notably slashing proposed good governance activities by $160 million and alternative development by $35 million. The Senate report expresses concerns regarding provision of aid, even in the form of project assistance, directly to the government of Afghanistan, and recommends assessments and reviews of the effectiveness of this type of aid. The Senate report limits direct government budget support, i.e. cash funding, to $100 million. The enacted version cut the INCLE account by $31 million because of concerns, as reported by the Senate Committee, that the political will may not exist in the Government of Afghanistan to justify large investments in reforming the "weak and corrupt" justice system. The enacted version also addresses oversight issues. It rejects the request for SIGAR, because, as Senate appropriators reported, sufficient funding was still available from previous appropriations. In order to extend the availability of that funding to the end of FY2011, P.L. 111-212 rescinds $7.2 million in FY2009 supplemental SIGAR appropriations and re-appropriates it in the FY10 supplemental. The enacted legislation contains a number of conditions on Afghanistan aid. Among these are that aid may be obligated only if the Secretary of State reports that Afghan local and national government representatives, local communities, and civil society have been consulted and participated in the design of projects and will participate in their implementation, and that progress will be measured by specific benchmarks. Further, aid will only be made available if the Secretary determines that the Government of Afghanistan is cooperating in reform efforts, respecting internationally recognized human rights of women, and demonstrating a commitment to removing corrupt officials. Funds to support the Electoral Commission may only be provided if the Commission has no members or employees who participated in or covered up acts of fraud in the 2009 elections. Further, aid is available to support the reconciliation with former combatants, i.e. members of the Taliban, only if the Secretary of State determines that Afghan women are participating in the reconciliation process in all levels of government and their rights are protected in this process and that funds will not protect from prosecution those responsible for war crimes. The enacted version of H.R. 4899 allows up to $300 million in DC&P and Embassy Construction and Maintenance funding to Afghanistan, Iraq, and Pakistan from any year's appropriation to be transferred or merged with funding for activities supporting U.S. civilian security in any of these countries. Iraq106 The Administration's international affairs request for Iraq in the FY2010 supplemental had two components, both reflecting the new strategic environment created by the drawdown of U.S. military forces. The response to this dramatic change in the U.S. role in Iraq was, perhaps counter-intuitively, a significant increase in U.S. assistance and State Department operations. Counting all major non-humanitarian foreign economic aid accounts, the total FY2010 U.S. assistance program to Iraq would have risen by 64% from the FY2009 level under the request. With the enacted version of H.R. 4899 , total Iraq economic aid programs will have been boosted by 89% over the previous year. Taken alone, the State operations account would have risen by 79%. Under the enacted legislation, total FY2010 State operations rise by only 43% over the FY2009 level. Elements of the Iraq Foreign Aid and Diplomatic Operations Supplemental The most significant element in the international affairs component of the supplemental for Iraq `was the request for $517.4 million in INCLE funds (see Table 7 ), a down payment on the transition of responsibility for police training from the Department of Defense to the Department of State, effective October 1, 2011. While the State Department has responsibility for training police forces in most other countries, it ceded that role to DOD in the case of Iraq prior to the invasion. Its new duties will include advising the Ministry of Interior, police, and border forces. According to the State Department, a smooth transition from DOD to the State Department requires that a successor program be in place at the end of FY2010. Training of the Iraqi military remains in the hands of DOD. The INCLE request included the deployment of 350 advisors to work at the Ministry and police colleges, academies, and headquarters throughout the country. It also funded construction of necessary infrastructure and security staff to support expert personnel—INCLE's program ultimately is expected to employ up to 2,000 U.S. government and contractor personnel. To permit efficient staff travel around the country, funding would provide aircraft and expanded aviation facilities. The FY2010 supplemental request also included funding for State Department operational costs under the D&CP account amounting to $1.57 billion. This significant boost in Iraq operations funding was meant to address the problem of maintaining civilian outreach to the provinces following the U.S. military drawdown. Currently, the United States maintains over 1,200 direct-hire Americans employees from 14 civilian agencies in Iraq. These civilian federal employees are posted at the Embassy in Baghdad, the Regional Embassy Office in Basrah, or one of the 16 Provincial Reconstruction Teams (PRTs), often co-located with the military with the logistical and security costs supported by the military. During the 2007 surge, a number of embedded PRTs (ePRTs) were also established that allowed a civilian presence in additional locations protected by the combat battalions with which they were embedded. These civilian federal employees conduct business on a broad range of bilateral and multilateral missions from the regular diplomatic work of furthering U.S. economic and commercial interests, and providing U.S. policy makers with political analysis, public diplomacy outreach, and oversight of U.S. government assistance programs. These employees also support reconstruction and economic assistance efforts, rule of law programs supporting development in the legal and judicial areas, and training and liaison with various Iraqi ministry and local government personnel. As combat battalions have withdrawn from the cities, the embedded PRTs are being phased out, and most regular PRTs are expected to be terminated by 2011. To enable a continued U.S. civilian presence outside of Baghdad, the State Department planned to establish, in their place, two consulates and three temporary Provincial Diplomatic Teams (PDTs). Additionally, two U.S. Forces-Iraq managed PRTs would remain through the end of 2011. The supplemental funding request provided for: realigning infrastructure to transition to the presence of an Embassy, two consulates, three State managed PDTs and two interim Defense Department PRTs. As the State Department assumes greater responsibility for the interim and final infrastructure, costs previously borne by the military, which include utilities, storage, housing, furniture, information technology infrastructure and equipment, building leases, dining, and general support costs, ultimately will have to be assumed by the State Department ($307.8 million); beginning the site and construction development for the planned consulate facilities to meet full Diplomatic Security and Overseas Buildings Operations standards ($526.8 million); and phasing in the security requirements associated with the new field facilities, including physical and technical security and static and movement security ($735.3 million). As the Department of State takes over responsibilities from the Department of Defense for housing, protecting, and maintaining its staff, the Department will have to provide for large increases in contract employees who will provide a vast array of services from security and operations planning and implementation support to maintenance of vehicles in several motor pools, cleaning facilities, and food preparation. In the past, the Department has been criticized for not having appropriate numbers of personnel to manage and oversee its contracts and the implementation of these contracts. As more contracts and task orders are awarded to meet its growing responsibilities in Iraq, it is not clear whether the Department has sufficiently also expanded its capabilities in contract management. Congressional Action on the Iraq Request The original version of H.R. 4899 , passed by the House in March, did not include funds for Iraq assistance, but the House-amended version, passed in July, adopted funding levels for Iraq approved by the Senate in May. The final enacted version of H.R. 4899 provides $1.7 billion for Iraq, $407 million less than the request. P.L. 111-212 cuts the request for diplomatic operations by $540 million, $527 million of which had been intended for site development and construction of permanent consulates in Basrah and northern Iraq to prepare for a greater U.S. civilian presence in the country. In their report, Senate appropriators suggested that these facilities be prioritized within amounts available in regular appropriations bills. The enacted version of H.R. 4899 also increases the amount requested by the Administration for INCLE by $133 million. It reconfigures the use of the INCLE funds, cutting the original $517 million request for one-time startup expenses for police training by about $67 million to $450 million and adding $200 million not requested by the Administration for implementation, management, and security for the police training program. This funding is subject to a determination and report by the Secretary of State that the Iraqi Government supports and is cooperating with such programs. Pakistan Unlike the requests for Afghanistan and Iraq, the Pakistan supplemental request appeared not to reflect any significant change in U.S. policy. Taking all funding sources into account, including DOD aid, there would be only a modest shift in funding for Pakistan from year to year between FY2009 and FY2011, assuming the FY2010 supplemental and FY2011 requests were approved. The Administration's FY2010 supplemental request for Pakistan was largely aimed at specific infrastructure needs meant to demonstrate continued U.S. support to the government of Pakistan and bolster the perception that the Pakistan government is able to meet the needs of its population in areas vulnerable to insurgency and militant extremist ideologies. Elements of the Pakistan Foreign Aid and Diplomatic Operations Supplemental The largest portion of the request was for $244 million in ESF, including $50 million for cash payments made through the government of Pakistan to help people displaced by the military actions taken against extremists in recent months; $65 million for water and sanitation infrastructure; $65 million for agriculture irrigation systems; and $64 million for solutions to Pakistan's energy crisis, including hydro/irrigation infrastructure and alternative energy. The request also included $40 million in INCLE funds, for police training and related infrastructure ($32 million), training and support for the corrections administration ($4 million), and program administration and police advisor positions ($4 million). Foreign Military Financing assistance amounting to $60 million was expected to provide five Bell-412 utility and troop transport helicopters to enhance the Pakistan military's ability to support counterinsurgency operations. In its FY2010 supplemental, the Administration requested $26 million for State Department operations to increase staffing at U.S. diplomatic facilities in Pakistan by 56 positions in addition to the 58 new positions already funded under the FY2010 regular appropriations. These positions would include both U.S. direct-hire personnel and Locally Employed Staff (LES). The increased staffing was intended to serve several purposes including to better manage and support the increased military and economic assistance being provided to Pakistan by providing more contracting and management officers; to increase embassy staff to enhance logistical support with housing, general service, and financial officers to meet the embassy's needs in accommodating the rapid growth of U.S. government civilian personnel in Pakistan; to increase staffing at the U.S. consulates in the provincial capitals of Lahore, Karachi, and Peshawar. The Administration states that the increased staffing is to strengthen U.S. outreach and programs at the provincial and local levels; and to begin meeting FY2011 staffing requirements earlier. Congressional Action on the Pakistan Request The original version of H.R. 4899 , passed by the House in March, did not include funds for Pakistan assistance, but the House-amended version, passed July 1, adopted funding levels for Pakistan approved by the Senate in May. The final enacted version of H.R. 4899 provides $375 million for Pakistan aid and diplomatic operations, $5 million more than the request. This total includes $10 million less than the request for FMF and $15 million more than the request for ESF. The $15 million congressional addition to the ESF request is directed specifically to human rights ($5 million) and the program assisting families affected by military operations ($10 million). The act requires submission of a human rights strategy in Pakistan before any ESF funds can be obligated. The enacted legislation also includes language providing $1.5 million in ESF for leasing of aircraft in order to help USAID and the State Department better monitor its programs in the country. Haiti FY2010 Supplemental Proposal108 The Obama Administration requested $2.8 billion in FY2010 supplemental funding to cover costs associated with relief and reconstruction support for Haiti following the earthquake that devastated parts of Haiti, primarily the capital, Port-au-Prince, on January 12, 2010. The Administration requested that all of the proposed funds be considered as emergency requirements, in response to urgent and essential needs in Haiti. Some of the funds are available until September 30, 2012, others until expended. The supplemental request covered both reimbursement of obligations already incurred and new activities by various U.S. agencies. CRS estimates that about 55% of the total Haiti supplemental request is for reimbursement of relief activities related to the earthquake disaster, 40% for new recovery and reconstruction activities, and 6% for diplomatic operations administration. According to an Inter-American Development Bank study, the Haiti earthquake may have been the most devastating catastrophe that any country has ever experienced. Approximately 3 million people, roughly one-third of the overall population in Haiti, have been affected by the earthquake with more than 2 million displaced. The government of Haiti is reporting an estimated 230,000 deaths and 300,600 injured. The relief effort is expected to last for many months. Prior to the earthquake, the United Nations had already designated Haiti as one of the 50 least developed countries in the world, facing higher risk than other countries of failing to come out of poverty, and therefore needing the highest degree of attention from the international community. Protection of the displaced population is currently one of the most challenging and critical issues. It is estimated that there may be as many as 1.69 million displaced in Port-au-Prince, and up to 597,000 thought to have relocated in areas outside the capital that largely escaped earthquake damage, but were already poverty-stricken and lacking in basic services. Much smaller numbers of Haitians have left the country, some as refugees, for other countries such as the Dominican Republic, nearby islands, and the United States. In Haiti, aid workers are delivering basic necessities to areas with concentrations of Internally Displaced Populations (IDPs), but emergency shelter is in short supply. As the rainy season begins (and with the hurricane season not far behind), providing adequate shelter and sanitation for the displaced has become an urgent priority. Attention is focused on providing waterproof emergency shelter, improving sanitation, and meeting basic needs of the displaced and other vulnerable Haitians. According to the Haiti Post Disaster Needs Assessment conducted by Haiti and international institutions, the total value of recovery and reconstruction needs is $11.5 billion At the international donors conference held March 31, 2010, 48 countries, multilateral institutions, and a coalition of non-governmental organizations pledged nearly $10 billion toward the long-term reconstruction efforts in Haiti. The U.S. pledge of $1.2 billion is included in the FY2010 supplemental request. The Obama Administration, other international donors, the Haitian government, and others have all stated the need for improved accountability of all donor assistance to Haiti, to improve aid effectiveness and reduce the potential for corruption. The government of Haiti made major progress in recent years in reducing corruption, increasing transparency, and improving fiscal management. These improvements qualified Haiti for Heavily Indebted Poor Country (HIPC) debt relief last year. To ensure transparency further, the U.S. Agency for International Development has helped Haiti establish an online system to monitor both donor pledges, and spending and implementation of assistance. Congressional Action on Haiti FY2010 Supplemental Proposal The enacted version of H.R. 4899 , P.L. 111-212 includes a total of $2.93 billion for Haiti, $129 million more than the request. On July 27, 2010, the House adopted the Senate version of H.R. 4899 passed on May 27, 2010. The enacted total includes $1.642 billion for relief activities ($110 million above the request); $1.140 billion for recovery and reconstruction ($26 million above the request); and $147 million for diplomatic operations ($8 million less than the request) (More details are below (see Table 9 , Table 10 , and Table 11 ). Humanitarian Relief Funding115 The Administration requested a total of $1.5 billion in relief and disaster assistance funding for Haiti, to reimburse U.S. government agencies for services provided and for funds already obligated for ongoing relief activities. The humanitarian relief funding request also covered other relief-related assistance. The $1.5 billion request included $350.7 million for USAID International Disaster Assistance (IDA); $150 million for Agriculture Department emergency food assistance; $96.5 million for State Department: Contributions to International Peacekeeping Activities; $655 million for Department of Defense and $45 million for U.S. Coast Guard relief activities; $220 million for Department of Health and Human Services to provide grants to States to cover services to Haitian evacuees; and $15 million for Department of Homeland Security immigration fees (see Table 9 ). Relief Funding: International Disaster Assistance and Emergency Food Aid On January 14, 2010, President Obama announced $100 million in humanitarian assistance (in addition to pre-existing funding appropriated for Haiti) to meet immediate needs. As of June 11, 2010, USAID reported that the United States has provided more than $1.1 billion in humanitarian funding for Haiti. The FY2010 supplemental request included $350.7 million for International Disaster Assistance (IDA). This amount included $126.6 million for USAID, as the lead agency, to reimburse five other U.S. government agencies for providing earthquake relief to Haiti through interagency agreements. In addition, IDA funding would have covered other support, mostly for services already provided, in the amount of $35.6 million for Search and Rescue (SAR) agreements ($11 million); USAID/Disaster Assistance Response Team (DART) Program Support ($0.6 million); and USAID/Office of Foreign Disaster Assistance (OFDA) Relief Commodities ($24 million.) The balance of $188.5 million of the IDA request covered ongoing humanitarian assistance activities that have already been obligated. The United States worked closely with the Government of Haiti, the United Nations, other donor nations, non-governmental organizations (NGOs), and the private sector through the U.N. cluster system. In Haiti, relief activities have been organized into twelve clusters led by various agencies. IDA funding targeted several of these, including humanitarian coordination programs ($9 million); logistics and non-food item programs ($20.7 million); shelter/settlement/livelihoods programs ($93.43 million); health and nutrition programs ($42 million); water, sanitation and hygiene programs ($18 million); and child protection programs ($5.4 million). Under Food for Peace (FFP) Title II Grants, the request included $150 million for emergency food assistance, $68 million of which was to supply the World Food Program (WFP) with 55,000 metric tons of Title II Emergency Food Assistance and $55 million of which would fund proposals from Private Voluntary Organizations. It is currently estimated that up to two million people may need food assistance in Haiti due to the earthquake. As recovery and reconstruction proceed, it is expected that overall food needs will decline, at which time food activities would target the most vulnerable and would also focus on food-for-work programs. Relief operations in Haiti will continue at least through 2010. It is typical in most natural disasters that as recovery begins, there is an overlap in activities that might otherwise be considered purely relief or purely reconstruction. In the recovery and reconstruction part of the supplemental request discussed below, it should be noted that some activities will address humanitarian concerns as well. Key Concerns and Priorities Consequences of Natural Disasters A number of natural disasters have struck Haiti in the last decade, mostly in the form of hurricanes. The international community has provided significant humanitarian assistance in response to these disasters and their ongoing impact. The United Nations, along with other partners, including the United States, has had a strong presence in Haiti, and remains at the forefront of the on-the-ground response for humanitarian assistance. Disaster risks in Haiti are significant. Experts recognize that finding ways to overcome the cycle of disaster and develop a disaster response capacity are critical not only to minimize humanitarian consequences, but also to sustain reconstruction efforts in the future. Replenishing Disaster Accounts Humanitarian assistance generally receives strong bipartisan congressional support and the United States is typically a leader and major contributor to relief efforts in humanitarian disasters. When disasters require immediate emergency relief, the Administration may fund pledges by depleting its disaster accounts intended for worldwide use throughout a fiscal year. To date, disaster accounts are being drawn down to provide relief to Haiti. The State Department reported earlier that in order to respond to future humanitarian crises, these resources would need to be replenished by June 1, 2010. If not replenished, U.S. capacity to respond to other emergencies could be impacted. The relief funding in the current request would provide reimbursement for funding already provided or obligated. Burdensharing and Donor Fatigue The earthquake disaster in Haiti has received worldwide attention and focus. On February 19, 2010, the United Nations put forward its Revised Humanitarian Appeal for Haiti in the amount of $1.44 billion and extended the humanitarian operation through 2010. As of June 4, 2010, commitments of $874 million (58%) had been received. It is not always evident whether figures listing donor amounts represent pledges of support or more specific obligations. Furthermore, pledges made by governments do not necessarily result in actual contributions. It also cannot be assumed that the funds committed to relief actually represent new contributions, since the money may previously have been allocated elsewhere. It will take time for a more complete picture to reveal how the actual costs of the Haiti disaster will be shared among international donors. As the situation in Haiti stabilizes, sustaining donor interest in Haiti (and commitment to honor existing pledges) could be a challenge. Moreover, this challenge is compounded by the need to maintain funding priorities and secure funds needed for other disaster areas worldwide. Coordinating the Relief Response in Haiti Some have criticized the initial response by the international community in the actual delivery of humanitarian assistance as far too slow. Others have argued that there has been a great deal of unfair criticism of the pace of the international aid effort. The weakened capacity of the Haitian government, critically damaged infrastructure, and logistical challenges posed by the influx of massive aid into a city largely destroyed by the earthquake all contributed to delay and difficulties on the ground. Evaluations of the relief response in Haiti will likely continue to be conducted and debated as the humanitarian and recovery efforts move ahead. Some experts remain concerned about bureaucratic red tape in the humanitarian response, the capacity of the Haitian government, the role of the United States, and overall coordination issues between and among members of the international community, including the United Nations. Response to a disaster of this scope is almost certain to run into many obstacles because the challenges on the ground are so daunting. While managing expectations of what is possible under these circumstances is important, so too, are the observations and lessons learned that with time and hindsight may benefit the actions and plans of ongoing relief efforts in Haiti. Department of Defense and U.S. Coast Guard Relief Activities124 The DOD requested $655 million and the U.S. Coast Guard requested $45 million to cover its humanitarian relief efforts in Haiti in Operation Unified Response (OUR) (see Table 9 ). This included funds to reimburse the U.S. Coast Guard, as well as other services, and to provide additional funds for the Overseas Humanitarian, Disaster, and Civic Aid Account (OHDACA), the account used by DOD for humanitarian relief efforts. The request largely covered expenses already incurred through June 15, 2010. The funding provided soldier subsistence; personal, operational, and transportation support; humanitarian relief supplies; and several humanitarian relief projects. DOD's response to the Haitian earthquake was both rapid and extensive. At the height of the operation, over 20,000 U.S. military personnel were in the operational area, both ashore and afloat, transporting emergency relief personnel and supplies; evacuating people, including U.S. citizens residing in Haiti; providing security for the distribution of humanitarian supplies; making repairs to the Port-au-Prince airport and seaports; and recovering the remains of U.S. citizens. DOD's earthquake response mission in Haiti ended June 1, 2010, when the last remaining 300 U.S. military personnel redeployed from Haiti and U.S. Southern Command's Joint Task Force Haiti ceased operations. DOD noted that this did not end its commitment to Haiti. Further assistance to Haiti will fall under the U.S. Southern Command-sponsored "New Horizons" annual humanitarian and civic assistance exercise scheduled to run from June to September 2010. This exercise, which has been ongoing since the mid-1980s, is expected to involve about 500 National Guard and Reserve soldiers and will consist of a number of engineering projects including the construction of schools, clinics, and community centers that can also serve as hurricane shelters. In conjunction with "New Horizons" the U.S.S. Iwo Jima was to arrive in the Port de Paix area in July to provide medical assistance and perform specialized surgeries. Despite the presence of National Guard and Reserve soldiers in Haiti, some are concerned that the withdrawal of U.S. forces that had previously provided security was premature, given the weakened state of Haitian security forces. While some observers also expressed concern that U.N. security personnel have limited capabilities, others state that the U.N. forces demonstrated their ability to reestablish security in the period between Aristide's departure and the earthquake. State Department's Contributions to International Peacekeeping Activities (CIPA)127 The Administration requested $96.5 million for the State Department's Contributions to International Peacekeeping Activities (CIPA) account to fund U.S. assessed contributions to the United Nations Stabilization Mission in Haiti (MINUSTAH), a peacekeeping operation. The increased assessment responded to the U.N. Security Council's January increase in MINUSTAH levels by 3,500, after the earthquake, with military personnel growing from 6,940 to 8,940 and the police component growing from 2,211 to 3,711. On June 4, 2010, the Security Council in its resolution 1927, increased the police component by another 680 to provide "temporary surge capacity." This increases the ceiling on the number of police in MINUSTAH to 4,391. Assistance to Haitian Evacuees and Migrants In addition to relief and reconstruction aid provided in Haiti, the Administration requested funds to aid Haitian evacuees and migrants to the United States, including making them eligible for various benefits programs and waiving fees for processing immigration requests that are described below. Department of Health and Human Services129 The President's request would provide $256.2 million, to be available until expended, for activities of the Department of Health and Human Services (HHS). Of this amount, $220.0 million would be provided directly to HHS for certain completed and ongoing activities. The additional $36.2 million would be provided to USAID to reimburse HHS for certain activities conducted under interagency agreements. According to the President's request, the $220.0 million amount would fund four types of activities, which are described further below: (1) the state share of Medicaid and Children's Health Insurance Program (CHIP) costs for eligible evacuees; (2) costs associated with medical evacuations; (3) cash, medical, and repatriation assistance for eligible evacuees; and (4) costs for HHS public health activities in Haiti. The request did not specify how much funding would be allocated to each of these activities. Also, the request did not propose any changes or expansions in eligibility for assistance or benefits. First, supplemental funds provide payment of the state share of Medicaid and CHIP costs for health care services for eligible medical and non-medical evacuees. (Typically, each state is required to "match" or pay a portion of the costs of care for eligible individuals in the state.) Those Haitians who enter the United States with humanitarian parole status are deemed to be Cuban-Haitian Entrants, and thus are eligible for Medicaid until they have been in the United States for seven years. After the initial seven years, states have the option to continue to provide Medicaid. The request did not specify the proposed duration of this assistance to states. Second, requested funds would be used to reimburse the HHS National Disaster Medical System (NDMS) for costs associated with medical evacuation of seriously injured earthquake victims to the United States, and their subsequent care in U.S. hospitals. Under HHS policy for this incident, NDMS will reimburse hospitals for the costs of care, for 30 days, for any individual who was medically evacuated from Haiti by NMDS, regardless of citizenship or nationality. NDMS does not pay costs beyond 30 days, costs for services provided by non-hospital facilities (such as rehabilitation facilities), or costs for the care of individuals who were not evacuated through the NDMS system. Third, requested funds would be used to provide cash and medical assistance to Haitian humanitarian parolees, and repatriation costs as appropriate. These Haitian parolees are eligible for the federal resettlement assistance program for refugees and entrants, which is partially funded through the Office of Refugee Resettlement (ORR) in HHS. In addition to providing a range of social services, primarily administered by states, the ORR provides funding to states for transitional cash and medical assistance through the Transition and Medical Services program. Haitian parolees who meet the income and resource eligibility requirements for Supplemental Security Income (SSI), Temporary Assistance for Needy Families (TANF), or Medicaid, but are not otherwise eligible (e.g., single males or childless females and couples), may receive benefits under the ORR-funded Refugee Cash Assistance (RCA) and Refugee Medical Assistance (RMA) programs. Finally, requested funds would be used to support certain public health activities in Haiti, including disease surveillance, the reestablishment of laboratory capacity, and environmental health activities. The $36.2 million requested for USAID reimbursements to HHS would pay for a number of medical, surgical, and mortuary assistance teams and associated assets that were deployed to Haiti, including personnel and supplies for a 250-bed hospital. U.S. disaster assistance to other nations does not typically involve the acceptance of large numbers of disaster victims into the United States. Some forms of assistance rendered to Haitian earthquake victims may be without precedent. For example, NDMS was developed to provide the capability for mass medical evacuation of injured U.S. combat forces for treatment in U.S. hospitals, and is also intended as a domestic civilian mass casualty management system. The system had not previously been used to airlift victims of foreign disasters into the United States for medical care. Its use for this purpose required the rapid development of policies regarding patient selection, assignment to domestic hospitals, hospital reimbursement, and other logistical matters. U.S. Citizenship and Immigration Services (USCIS): Waiving Fees142 The President's supplemental request included $15 million for the U.S. Citizenship and Immigration Services (USCIS) to enable the agency to cover the immigration-related costs associated with Haitian migrants affected by the January 12, 2010, earthquake. USCIS funds the processing and adjudication of immigrant, nonimmigrant, refugee, asylum, and citizenship benefits almost entirely through monies generated by the Examinations Fee Account. USCIS charges fees for almost all adjudications and services. Foreign nationals applying for Temporary Protected Status (TPS) pay as well. USCIS traditionally has not charged the Examination Fee for refugees and asylum seekers. For FY2010, USCIS has a budget authority of $2.727 billion, of which $2.503 billion comes from the fees collected (mandatory fee funded offsets). The Department of Homeland Security Appropriations Act 2010 ( P.L. 111-83 ) also provided $224 million in direct appropriations to USCIS, including $50 million for processing refugee applications and asylum claims. The Administration proposed to use the $15 million requested in the supplemental appropriations to reimburse USCIS for fees waived for eligible Haitians granted TPS and those given humanitarian parole to bring medical evacuees and certain categories of Haitians into the United States; and for costs associated with processing the adoption of Haitian orphans. Final Congressional Action on Haiti Relief Funding147 The enacted version of H.R. 4899 , P.L. 111-212 includes $1.6 billion in humanitarian assistance, $110 million above the request, and an amount matching the earlier House and Senate versions (see Table 9 ). The final version provides an additional $110 million beyond the Administration's request for Haiti IDA relief activities, for a total of $460 million. The enacted version matches the Administration's request for $150 million for the P.L. 480-Title II assistance to meet food needs in Haiti. The final version also approves the overall $655 million request for the Department of Defense, including a transfer of $255 million from the Overseas Humanitarian, Disaster, and Civic Aid Account (OHDACA) account to the individual services. The enacted version also adds $5 million to the Coast Guard's request in view of its continuing operations in Haiti ( S.Rept. 111-188 ). The final version also endorses the $96.5 million request for Contributions to International Peacekeeping Activities (CIPA) in Haiti, and approves the requested $220 million to the Department of Health and Human Services (HHS) to provide services and extend various benefits to Haitian evacuees and migrants. The enacted version also approves $10.6 million for the U.S. Citizenship and Immigration Services (USCIS) costs associated with Haitian migrants, $4.4 million below the request on the basis that application requests have been lower than anticipated. Recovery and Reconstruction Funding for Haiti151 The total request for Recovery and Reconstruction funding in this supplemental proposal was $1.1 billion. This was primarily for new activities (see Table 9 ). The 111 th Congress expressed bipartisan support for providing Haiti with substantial assistance in response to the crisis generated by the January earthquake. At hearings in both the Senate and the House, Members and witnesses alike stressed the need for a massive, coordinated international effort not only for immediate humanitarian needs, but also for long-term development. Moving forward, they said, strategies must consider new approaches, aim to create a more sustainable Haiti, and increase Haitian capacity to utilize foreign aid effectively and to provide services and direct its own economy. Key Concerns: Priorities, Decentralization, Poverty Reduction, and Capacity Building Choosing Priorities To coordinate aid programs better, donors have agreed to focus on certain areas of assistance. For this reason, the U.S. programs in the supplemental focus on urgent infrastructure repairs, especially in the energy and agricultural sectors; critical health care; governance; and security. Some observers have expressed concern that U.S. assistance is neglecting other areas crucial to Haitian recovery, such as improving the educational system, which is to be the focus of the Inter-American Development Bank, Canada, and France. While advocates say this approach avoids duplication among donors, critics question the priorities, or the limited approach to aid. Decentralization and Economic Growth: Will they lead to Poverty Reduction? A key element of the revised Haitian development strategy, supported by the supplemental request, is to catalyze economic growth and provide services and opportunities outside of Port-au-Prince. The Haitian government and donors agreed that the current crisis provides an opportunity to correct what had become an unsustainable urban-rural imbalance in the country, with the rest of the country suffering neglect while people, resources, and services were concentrated in the capital. Funds in the supplemental request addressed both short- and long-term elements involved in this decentralization strategy—meeting the immediate needs of newly displaced populations that have migrated to less developed areas of the country, and strengthening local governance, infrastructure, and agriculture to develop new "growth poles" outside of Port-au-Prince. Scientists are helping Haitian authorities to select areas for development that are less vulnerable to natural disasters. While there is general support of this strategy, officials also noted that developing areas long-neglected will be costly. Some also warned that populations should not be forcibly relocated in executing these plans. Experts also warned that economic growth is not sufficient to reduce poverty in Haiti, and that programs specifically targeted at poverty reduction are needed. Effective Capacity Building? Most observers agreed that one goal of aid to Haiti should be to build the capacity of Haitians so they can eventually assume responsibility for the project at hand. Yet there is a tension between the standard definition of effectiveness and efficiency, and the time and money required for capacity building. Aid organizations are pressed to have measureable outcomes and usually operate on short-term contracts. If thorough training and coordinating with Haitian ministries is to be an element of all foreign aid programs, which many experts advocate, there will have to be a recognition that those programs may require more time, funding, and personnel, and measureable results may take longer to achieve. Economic Support Funds for Infrastructure and Other Development Activities The supplemental proposal requested $749 million in Economic Support Funds (ESF) for International Assistance programs in Haiti, to remain available until September 30, 2012. Programs was to focus on helping the Haitian government to rehabilitate infrastructure and provide technical assistance to help improve its public outreach, as well as working on reconstruction projects that provide essential services such as shelter and infrastructure for water, sanitation, healthcare, and electricity, as well as finance projects in agriculture, farm to market roads, and major roads, bridges, and ports. The Administration requested that up to $120 million of the ESF be transferred to the Department of the Treasury to a multi-donor trust fund for Haiti, that could be used to leverage the contribution of significant resources from other donors. The proposal would also allow ESF monies to be transferred to USAID's Operating Expenses account for unanticipated staffing needs and other related expenses. To ensure that other projects are not displaced, the Administration requested that any transfers to the Development Credit Authority (DCA) account would be in addition to already appropriated amounts. Key Concerns Some experts suggested developing small-scale, alternative or clean energy sources at the local level rather than trying to rebuild the previously ineffectual Haitian electricity service would increase the quality of life of many Haitians and have a positive impact on economic growth. Some Members have expressed concern that insufficient funding is being focused on the needs of children, or on psychological support for the traumatized population. There was no additional funding for Global Health and Child Survival in the supplemental request. International Narcotics Control and Law Enforcement Funds for Security Under the Haiti supplemental request, the State Department would receive about $144 million for International Narcotics Control and Law Enforcement (INCLE) activities to meet a renewed need for security in broader areas of Haiti. This funding would strengthen law enforcement by purchasing equipment and adding police advisors for the United Nations Stabilization Mission in Haiti (MINUSTAH) to re-establish and expand its presence in Haiti. Many of MINUSTAH's troops had shifted to development work because security had improved dramatically. INCLE funds would strengthen the Haiti National Police (HNP) by restoring training capacity, providing equipment, supplies, and infrastructure, and by re-building prisons destroyed by the earthquake. Other programs would enhance criminal justice sector support; restore the ability of the HNP and the Haitian Coast guard to conduct counter-narcotics operations; and help prevent and combat human trafficking. USAID and Treasury Funds for Oversight and Advisors To improve accountability and oversight, and reduce corruption as funding for relief, rehabilitation and reconstruction in Haiti rises, the supplemental requested $1.5 million for the Office of the Inspector General of USAID. The Administration also requested $690,000 for a Treasury Department attaché to work with the Ambassador, senior Haitian officials, and other donors, and oversee additional technical advisors. The request included a further $7.1 million for these advisors, who would work with the government to restore basic treasury processes; continue to reduce corruption through improved procurement processes and fiscal transparency; and enhance economic management skills. Because the earthquake killed government officials and destroyed Ministry of Finance and other government buildings, along with records and equipment, much of the financial management progress that had been made has been set back. U.S. Funds for International Donor Trust Fund and Debt Relief The Administration requested that up to $120 million in Economic Support Funds be contributed to a Multi-Donor Trust Fund for Haiti to facilitate better coordination, implementation, and tracking of foreign assistance to Haiti. Although some in Haiti criticize the trust fund as giving too much control to foreign entities, both Haitian President Rene Preval and Prime Minister Jean-Max Bellerive have acknowledged that Haitian capacities were already limited, and considerably diminished by the earthquake. A development authority, with Haitian government and international officials guiding long term development, is also being set up. Providing Multilateral Debt Relief to Haiti155 To help Haiti in its recovery from the earthquake, the Administration proposed U.S. contributions of $252 million to help cancel Haiti's debts of $781 million to three international organizations: the Inter-American Development Bank, World Bank, and International Fund for Agriculture and Development. The Administration requested reallocating up to $40 million from the Treasury Department's Debt Restructuring Account appropriated for the multilateral Heavily Indebted Poor Countries (HIPC) Trust Fund from this or subsequent fiscal years. The Administration also sought new contributions of $212 million for multilateral debt relief. Congressional authorization is required for the $40 million reallocation, and both authorization and appropriations are required for the additional $212 million. Final Congressional Action on Haiti Recovery and Reconstruction Funding The final version of H.R. 4899 , P.L. 111-212 approves $1.140 billion for all FY2010 recovery and reconstruction activities for Haiti, $26 million more than the Administration requested. (The House adopted the Senate-passed version.) Under the act, direct budget support to the Haitian government requires written agreements with clear goals, and mechanisms to prevent the misuse of funds. The act states that any of this funding to the Haitian government should be suspended if those conditions are no longer being met. The final version imposes restrictions and reporting requirements on the two biggest categories of recovery and reconstruction funding which may be difficult to meet. Neither Economic Support Funds (ESF) nor International Narcotics Control and Law Enforcement (INCLE) funds—in this supplemental request or in prior appropriations acts—may be disbursed until the Secretary of State reports that Haitian national, provincial or local governments will be involved in the design and execution of programs. The Haitian government at all of those levels has a limited ability to design and execute programs. ESF and INCLE may only be provided to the Haitian government if the Secretary of State determines that the government of Haiti is carrying out reform, including removing corrupt officials. The act prohibits any funding for "justice programs" until a credible investigation into alleged extrajudicial killings of prisoners by Haitian police in January 2010 is carried out and the Haitian government takes appropriate action. The Haitian judiciary system's ability to carry out such investigations and prosecutions is extremely weak. The enacted version approves $770 million for ESF, $21 million more than the $749.3 million the Administration requested, with the restrictions mentioned above. The Administration's request did not include funding for education programs. The final act provides up to $10 million for the development of "quality, publicly funded" children's education, and directs U.S. agencies to collaborate with Haiti on renewable energy and energy efficient programs. The enacted version provides directives regarding other issues such as shifts in development and governance programs, family based care for orphans, access of small nongovernmental organizations to reconstruction grants, and reforestation as well. The final version approves $148 million for INCLE funding, $4 million more than requested with $2 million more for the construction and improvement of "deplorable conditions" of correction facilities; and $2 million more to combat human trafficking and slavery and replenishment of funds borrowed from other countries' anti-human trafficking programs. P.L. 111-212 approves $3 million, double the Administration's request, for USAID's Office of the Inspector General for oversight of increased funding for Haiti and the requested funding for a Treasury Department attaché and Treasury Department technical advisors. The enacted version also authorizes the requested $120 million contribution for the multi-donor trust fund (using monies appropriated in the Economic Support Fund), requiring consultation on accountability mechanisms, and the amount and purpose of funding before a contribution is made. For debt relief for Haiti, the enacted version recommends authorizes up to $252 million in U.S. contributions for multilateral debt relief, including an additional $212 million, and $40 million transferred from existing funds. The enacted version requires the Secretary of State to submit a report within 90 days, and every 180 days afterwards, until September 30, 2012, assessing progress and U.S. contributions made toward meeting the goals of the Haitian development strategy, and donor coordination. Funding for Diplomatic Operations in Haiti159 The Administration requested $155 million for diplomatic and broadcasting operations in Haiti (see Table 11 ). Of that amount, $149.5 million is requested for the State Department, with $65 million allotted for logistical support and assistance for the additional U.S. government personnel posted to Haiti, and $84.5 million to repair or replace staff housing and other buildings associated with the Embassy. A portion of these funds could be used to reimburse accounts for evacuation of Embassy family members and non-essential personnel, and for repatriation loans to American citizens who needed assistance to return to the United States. The State Department funds would reimburse accounts used for this emergency and also continue staffing support for the relief and reconstruction efforts. Without these reimbursements, shortages could develop in other countries for diplomatic and consular programs and embassy construction and repair. The request also included $5 million for the Broadcasting Board of Governors' (BBG) Creole Language Service which increased its broadcasts five-fold—from 2 to 10.5 hours a day—after the earthquake. The funds are to be used to repair and support the affiliate broadcasting stations used by the Creole Service, hire additional staff, and establish a Reporting Center in Port-au-Prince. These broadcasts have been and continue to be a major source of accurate information for the people of Haiti regarding relief, recovery, and family reunification efforts (see Table 11 ). Congressional Action on Diplomatic Operations Funding in Haiti FY2010 The enacted version of H.R. 4899 includes an additional $147 million for State Department operations and broadcasting in diplomatic operations in Haiti, $8 million less than the Administration requested. Other Foreign Economic and Humanitarian Assistance160 Although the Administration request was limited to Pakistan, Afghanistan, Iraq, and Haiti, the enacted version of H.R. 4899 added $592 million for foreign economic and humanitarian assistance programs for a number of other countries and specific aid accounts (See Table 12 ) . Under the enacted version of H.R. 4899 , Mexico receives $5 million in State Department Diplomatic and Consular Program (DC&P) funding for emergency security support for U.S. diplomats in the country and $175 million in International Narcotics and Law Enforcement (INCLE) funds for judicial reform, anti-corruption, and other activities related to the Merida Initiative. Jordan is provided $100 million in Economic Support Fund (ESF) aid to address Iraqi refugee and other pressing economic issues and $50 million in Foreign Military Financing (FMF) for "urgent security needs." El Salvador receives $25 million in ESF aimed at relief and reconstruction related to Hurricane Ida. P.L. 111-212 also provides the Democratic Republic of Congo with $15 million to assist civilians, particularly victims of rape and other violence, in the eastern region of the country. USAID's Global Health and Child Survival account (GHCS) receives $45 million to address the worldwide threat of pandemic influenza and the State Department's Migration and Refugee Assistance (MRA) account receives $165 million to assist Iraqi, Afghan, Pakistani, Congolese, Burmese, and Somali refugees and Internally Displaced Persons (IDPs). In the Senate Appropriations Committee report, appropriators recommended that Vietnam receive $12 million in ESF funds for the remediation of dioxin contamination at the Da Nang Airport. Other Domestic Program Funding On June 22, 2010, the Administration requested an additional $600 million for border security in response to concerns about a deteriorating security situation. An earlier Administration request also included additional funding for the Capitol Police. The Administration did not request additional funding to prevent layoffs of teachers, law enforcement officers, and firefighters, or to provide additional financing for farmers, energy loans and Pell Grants to aid those affected by limited credit availability, or for mine safety, all matters of considerable congressional concern. Congressional Action Although the House's amended version of the bill passed on July 1, 2010, and earlier June Majority leadership drafts included substantial funding not requested by the Administration primarily to prevent layoffs of teachers, law enforcement officials, and firefighters as well as provide additional Pell Grants, these funds were not included in the final version of H.R. 4899 , P.L. 111-212 enacted July 29, 2010, but funding for these proposals may be included in other bills (see Table 1 ). For example, on August 6, the Senate considered and passed an amendment to H.R. 1586 , the Federal Aviation Administration Air Transportation Modernization and Safety Improvement Act, which provides $10 billion for the Education Jobs Fund, as well as an increase in the federal share of federal Medicaid reimbursements with these funds expected to free up additional funds for states to retain law enforcement and firefighters as well as meet other needs. The House plans to return from recess the week of August 8 to consider this bill. According to CBO, the bill is offset over ten years. Funds to Prevent Layoffs of Teachers, Law Enforcement Officers and Firefighters The Administration did not request additional funds in FY2010 to prevent layoffs of teachers and other school staff, law enforcement officers, or firefighters. In letters to Congress, President Obama and Secretary of Education Arne Duncan emphasized the need for federal funds to prevent teacher layoffs, but a budget request for funds was not been made. Final Congressional Action in the Supplemental on Funds for Teachers164 The final version of H.R. 4899 did not include funds to prevent teacher layoffs because that was not included in the Senate May 27 version that the House passed on July 27. The House July amended version included $10 billion for the Education Jobs Fund that was estimated would save or create 140,000 education jobs during the 2010-2011 school year, but the House withdrew its support of this version on July 27, 2010, and adopted the Senate version (see Table 1 ). The earlier House July amended bill would have provided $10 billion for the Education Jobs Fund and was partly offset by a $500 million cut to funding for Race to the Top grants, a $200 million cut to the Teacher Incentive Fund, and a $100 million cut to the Charter School Program. These proposed offsets triggered a veto threat from the Administration, which argued that the cuts would damage these programs driving current school reform efforts. According to an estimate from the American Association of School Administrators (AASA) based on a May survey of 1,479 school administrators in 49 states, about 275,000 teachers and school staff, including support personnel and administrators, could be laid off in the 2010-2011 school year unless additional funding, like that provided in the American Reinvestment and Recovery Act (ARRA), were provided this year. If these layoffs were to occur, the AASA estimates that pupil-to-teacher ratios will increase from 15:1 to 17:1. However, there is mixed evidence to support the notion that lower class sizes leads to student academic achievement gains. Under the proposed Education Jobs Fund, funds were to be distributed to state governors based on the same population-based formula used for the State Fiscal Stabilization Fund authorized through the ARRA. Although the ARRA did not specifically target preventing teacher layoffs, funds were used for this purpose. To ensure that funds are available before schools open in the fall, the HAC majority draft bill would require the U.S. Department of Education (ED) to distribute funds to states within 45 days of enactment to states that had submitted applications for funding. To receive funds, each state would have to provide assurances that it would meet various maintenance of effort (MOE) requirements. Additional MOE requirements would apply specifically to Texas. Final Congressional Action on Funds for Law Enforcement Officers170 The final version of H.R. 4899 did not include supplemental funding for hiring programs under the Community Oriented Policing Services (COPS) Office, funding that was not requested by the Administration. Although a draft House Appropriations Committee (HAC) bill had proposed that $1.179 billion be appropriated for the COPS hiring program (in addition to the $298 million already appropriated for FY2010), this funding was dropped from the House-amended version approved on July 1, and later receded from by the House on July 27, 2010. While the HAC proposed supplemental funding would have helped law enforcement agencies currently facing budget shortfalls to hire additional or retain current officers, this might provide only a temporary solution. If tax revenues do not rebound, states may again need to lay off officers. In addition, the proposed $1.179 billion might not be enough to meet the current demand for hiring funds in light of recent experience when COPS received over 7,200 applications requesting a total of $8.3 billion to pay for about 40,000 positions in response to the $1 billion provided in the ARRA. Final Congressional Action on Funds for Firefighters174 The enacted version of H.R. 4899 and the Administration request did not include funds for firefighter hiring and retention. An earlier draft proposed by the HAC in a May draft proposed that $500 million be appropriated to the Department of Homeland Security's Staffing for Adequate Fire and Emergency Response (SAFER) program, which provides grants to local fire departments to hire new firefighters and maintain current firefighter staffing levels (e.g., avoiding layoffs) but the House July-amended version provided no funds for this program. Funding for SAFER was $210 million in FY2009, $420 million enacted in FY 2010, and $305 million requested in FY2011. Proponents of an additional $500 million for SAFER argue that budget shortfalls at the state and local level threaten to reduce firefighter staffing levels, posing a risk to local communities. Opponents argue that for FY2010, SAFER is already receiving the highest appropriation in its history, and that current funding should be viewed as appropriate in light of the need to reduce federal spending. Agriculture and Energy Loans and Pell Grants In response to concerns about shortages in credit for agricultural enterprises, and shortages in financing for post-secondary students, along with Administration interest in accelerating both nuclear and innovative energy efficiency projects and energy, the two houses considered the proposals below, but ultimately P.L. 111-212 did not include most of the funding (see Table 1 ). Final Congressional Action in Supplemental on Rural Housing and Agricultural Loans, and Food Programs 177 For the Department of Agriculture, the enacted version of H.R. 4899 contains $32 million in response to concerns about credit shortages in the farm loan program and a rural housing loan guarantee program. These supplemental funds respond to the high demand for government loans since 2008 because banks are making credit less available, which has depleted regular appropriations for the rural housing program by May 2010 and used more than 90% of appropriations for certain farm loan programs. Without supplemental appropriations, otherwise qualified loan applications from farmers or rural homebuyers may go unfunded for the rest of FY2010. The enacted version offsets this $50 million within agriculture by limiting $50 million of outlays from a mandatory bioenergy program (the Biomass Crop Assistance program). For Section 502 rural housing loans, the enacted version raises the fees that banks would pay for receiving loan guarantees and adds $697 million of loan guarantee authority. This is in addition to the $12 billion in guaranteed loans and $1.1 billion in direct loans that are available from regular FY2010 appropriations. For the regular FY2011 appropriation, the Agriculture Department is requesting $75 million for $1.2 billion of direct loans under Section 502, and a new fee structure (like that in the supplemental appropriation) to allow $12 billion of loan guarantees at no cost to the government. For farm loans, the enacted version provides $32 million to support $950 million of loans and guarantees. This is in addition to $5.1 billion in loans and guarantees already available for FY2010. For the regular FY2011 appropriation, the Agriculture Department is requesting $151 million to support $4.7 billion of farm loans. The final version dropped $50 million for The Emergency Food Assistance Program (TEFAP) to purchase commodities for local food distribution networks included in the July House amended version, as well as $979 million of other rescissions from Agriculture Department accounts, including $487 million from reserve funds for the Supplemental Nutrition Program for Women, Infants, and Children (WIC), $422 million from rural development (including $300 million of rural broadband funding from ARRA), and $70 million from unobligated balances from the Natural Resources Conservation Service. Final Congressional Action in Supplemental on Department of Energy Loan Guarantee Program180 While the enacted version of the FY2010 supplemental included no funding for the Department of Energy's Loan Guarantee Program to accelerate part of the FY2011 funding request, the Administration's FY2011 request for these funds is pending. The Administration had hoped to "accelerate our efforts to leverage private sector investment in clean energy projects ..." and to allow up to three nuclear power plant LGP projects currently under review at DOE to "move forward to conditional commitment in 2010." The Office of Management and Budget (OMB) stated that DOE's FY2011 LGP request for $500 million for credit subsidy costs would be reduced by the $180 million it asked the House to include in the supplemental." The earlier House July-amended version included $180 million for the DOE Loan Guarantee Program to support innovative energy technology projects, with $90 million to support advanced nuclear power facilities and $90 million to support renewable energy and energy efficiency technology projects. DOE estimates that a $180 million appropriation could support up to $18 billion in loan guarantee authority. For FY 2011, DOE requested $36.0 billion in additional loan guarantee authority for nuclear power projects and $500 million in appropriated credit subsidy costs to support guarantees for innovative energy efficiency and renewable energy projects. Established in 2005 by P.L. 110-58 to support innovative energy technologies that reduce greenhouse gas emissions, the first real funding (other than for program staff) was in the American Reinvestment and Recovery Act (ARRA) in FY2009 to support projects and create jobs. The Recovery Act appropriated $6 billion solely for commercial renewable energy and related transmission projects—to be expended by the end of FY2011. In July 2009, $2 billion was re-programmed to support the Cash-for-Clunkers program. The Speaker of the House promised to try to restore that $2 billion to LGP. Final Congressional Action in Supplemental on Pell Grants181 The enacted version of H.R. 4899 , P.L. 111-212 does not include the $4.95 billion in additional funds for the Federal Pell Grant Program that had been proposed in the House July amended version of H.R. 4899 to help close a funding gap of $5.7 billion between the FY2010 discretionary funding level and the additional amount needed in FY2011 to maintain the current baseline discretionary maximum award level of $4,860 in award year (AY) 2011-12. Assuming this additional funding is not approved elsewhere, the additional $5.7 billion in funding may be provided in the annual FY2011 appropriation for the program. For instance, The House Appropriations Committee FY2011 subcommittee allocations, or 302(b) allocations, include an additional $5.7 billion for the Federal Pell Grant Program though the Senate Appropriations Committee did not include the additional $5.7 billion for the program, but provides the $4,860 discretionary maximum award level in AY2011-12. Authorized by Title IV of the Higher Education Act of 1965 (HEA), the Federal Pell Grant program is the single largest federal source of grant aid for postsecondary education attendance and is estimated to provide need-based grant aid to approximately 8.3 million undergraduate students in FY2010. The program is funded primarily through annual discretionary appropriations, although mandatory appropriations play a smaller, yet increasing, role in the program. Border Security Request185 Administration Request for Border Security Funds In a June 22, 2010, budget amendment, the Administration requested an additional $600 million for border security along the Southwest Border of the United States, to be partially offset by rescinding $100 million in Department of Homeland Security (DHS) funds for SBInet (commonly known as the "virtual border fence"), which has been suspended pending the outcome of a technical and cost review. The Administration requested that the remainder be designated as emergency requirements. Of the total, $399 million would be for the Department of Homeland Security (DHS) and $201 million would go to the Department of Justice (DOJ). Within the DHS total, $297 million would be used to hire 1,000 new Border Patrol agents, $37 million for two new unmanned aerial detection systems, $53 million for 160 new Immigration and Customs Enforcement (ICE) agents, $6.5 million for 30 new Customs and Border Patrol (CBP) officers, and $6 million for 20 new CBP canine teams to improve border enforcement operations along the Southwest border. The $201 million of DOJ funding would increase the presence of Federal law enforcement in the Southwest border districts by adding seven Bureau of Alcohol, Tobacco, Firearms, and Explosives (ATF) Gunrunner Teams, five FBI Hybrid Task Forces, additional Drug Enforcement Administration (DEA) agents, equipment, operational support, and additional attorneys and immigration judges and to support additional detention and incarceration costs for criminal aliens in coordination with DHS enforcement activities. The amendments would also provide funding to support Mexican law enforcement operations with ballistic analysis, DNA analysis, information sharing, technical capabilities, and technical assistance. Final Congressional Action in Supplemental on Border Security Although the final version of the FY2010 Supplemental, P.L. 111-212 did not include any funding for border security, the House passed H.R. 5875 with $701 million for border security under suspension of the rules on July 28, 2010. This amount is the same as included in the House amended July version and is $100 million more than the Administrations request. Both the Administration and H.R. 5875 include $201 million to DOJ for border security efforts, largely for more law enforcement personnel. Deepwater Horizon Oil Spill Provisions In its May 12, 2010, budget amendment to respond to the Deepwater Horizon oil spill in the Gulf of Mexico, the Administration requested $118 million in discretionary supplemental appropriations primarily to pay for activities that may not be recoverable from the responsible parties under the liability provisions of the Oil Pollution Act of 1990. The Administration also proposed a mandatory funding provision that would increase the current limitation on the amount that the U.S. Coast Guard can receive as "advances" from the Oil Spill Liability Trust fund to pay for its response activities, that was ultimately enacted separately in P.L. 111-191 ( S. 3473 ) on June 15, 2010, in response to concerns raised that the Coast Guard would run out of funds for its response activities (see " Final Congressional Action on Oil Spill Trust Fund and Unemployment Benefit " below). The Administration request included the following programs: $50 million to create an Oil Spill Relief Employment Assistance program to provide National Emergency Grants for temporary employment and expanded employment search assistance, to be paid for by the parties responsible for the oil spill; $29 million for the Department of the Interior to conduct additional inspections, enforcement, studies, and other activities related to the oil spill; $13 million for the National Oceanic and Atmospheric Administration (NOAA) to "mitigate economic impact" on fishermen and fishery-related businesses affected by the oil spill, if the Secretary of Commerce determines that resources provided under other authorities are not sufficient; $10 million for the Department of Justice to carry out enforcement actions under the Oil Pollution Act and Clean Water Act, and defensive litigation under the Federal Tort Claims Act; $7 million for the National Oceanic and Atmospheric Administration for research, including scientific investigations and sampling, in support of the oil spill response; $5 million for the Economic Development Administration to award grants to state and local governments and non-profit entities in affected areas for economic assistance, including the development of economic recovery plans; $2 million for the Environmental Protection Agency to study the long-term impacts of the oil spill and the use of dispersants as part of the cleanup effort; and $2 million for the Food and Drug Administration to purchase new technologies to enhance seafood inspection capabilities. Final Congressional Action on Oil Spill Programs The final version of H.R. 4899 approves a total of $94 million for oil-spill related programs, including all of the Administration's request except for the $50 million request for a new employment assistance program for individuals affected by the oil spill, and adding $26 million for NOAA to provide fisheries disaster relief ($15 million), for an expanded stock assessment of fisheries in the Gulf ($10 million),and for the National Academy of Science to conduct a study of the long-term effects on the ecosytem in the Gulf ($1 million). The earlier House July-amended version had approved the Administration's request for $50 million for an employment assistance program and added $12 million to set up a National Commission on the BP Deepwater Horizon Oil Spill and Offshore Drilling (funds available until September 30, 2011). In addition, the enacted version provides authority for the Army Corps of Engineers to use a portion (dollar amount not specified) of the $129 million in discretionary funds in the bill for dredging and placing dredged material to mitigate the impacts of the oil spill. Mandatory Spending for Veterans' Benefits, Settling Court Cases, and Oil Spill Response Activities The Administration requested a total of $17.9 billion in additional mandatory spending including $13.4 billion to provide additional benefits for veterans exposed to Agent Orange in Vietnam; $3.4 billion to settle the longstanding Cobell case about government responsibility for handling Indian land trusts; $1.2 billion to settle the Pigford II case about discrimination claims of black farmers; and $175 million to increase funding available to the Coast Guard for its response activities and for a proposed new unemployment benefit program for those affected by the spill. In the case of the veterans' benefits, the Secretary of the Department of Veterans' Affairs (VA) currently has the statutory authority to determine whether certain circumstances—such as exposure to hazardous substances like Agent Orange—merit a presumption that specific later health problems are service-connected. Under current scorekeeping conventions, spending for new benefits that is based on exercising current authority is not counted as new, or an increase in, federal spending for budget enforcement purposes. Therefore, the spending for the VA benefits presumably would not be subject to budget procedural constraints, such as PAYGO rules. The Administration also proposed that the additional mandatory funding to respond to the Deepwater Horizon oil spill be categorized as emergency funding, and thus exempt from PAYGO rules. Spending for the two court settlements, however, requires new legislative authority as well as funds and therefore would count as new spending for budget enforcement purposes, and may be subject to certain budget rules, such as PAYGO rules (see " Budget Rules and Supplemental Requests "). Some Members have proposed finding offsets and others have suggested designating the funding as emergency. Additional Benefits for Veterans Exposed to Agent Orange194 The Secretary of the Department of Veterans Affairs (VA) has statutory authority to determine presumptions of service-connection for conditions determined to be associated with exposure to Agent Orange. On October 13, 2009, the Secretary of the VA announced his intention to establish a presumption of service connection for Parkinson's disease, ischemic heart disease, and hairy cell/B cell leukemia for veterans who served in the Republic of Vietnam and were exposed to Agent Orange compounds. Proposed regulations were issued on March 25, 2010. OMB estimated that the costs for the new presumptions of service connection for these conditions will be $13.4 billion in FY2010 (see Table 1 ). The VA estimates that there are approximately 86,000 veterans who will be able to receive retroactive benefits for the new presumptive conditions. In addition, there are veterans who will be eligible for an increase in their current disability rating, or will be able to begin disability compensation based on the new presumptions. Payments of disability compensation related to the new presumptions will begin when final regulations are published. The impact of the presumptions on disability compensation and pensions is in the baseline for FY2011. While the Administration has requested the $13.4 billion as a supplemental appropriation for FY2010 in its FY2011 budget, the Secretary of the VA already has the authority under current law to make this determination, which requires the VA to compensate veterans once regulations are issued. Potential Change in the Estimate CBO has estimated that $5 billion rather than $13.4 billion would be needed in FY2010. The differences between the CBO and OMB estimate for FY2010 is due to the uncertainty about when the final regulations for the service connection presumptions will be released and the length of time for processing disability compensation claims by the VA (179 days in FY2009 for initial disability compensation claims). Final Congressional Action on New Veterans' Benefits The enacted version of H.R. 4899 includes the $13.4 billion for additional veterans benefits related to Agent Orange requested by the Administration. The earlier Senate May version and the House July-amended version also both approved the request. Section 902, offered by Senator Webb, adopted by the Senate, and included in the House July-amended version, prohibits the VA from paying any of these claims related to Agent Orange until the period for Congressional review has expired (generally, 60 days after a report on the new action is submitted to Congress). Unless Congress enacts a joint resolution changing the regulations, there will be no impact on the amount of a veterans disability compensation because these claims would be "back-dated" to the date of eligibility. Resolving Black Farmers and American Indian Trust Lands Court Cases The Administration requested $4.6 billion to settle two longstanding cases against the government: $1.15 billion for the Pigford Black Farmers Discrimination Case; and $3.4 billion for the Cobell Indian Trust Litigation Settlement. In both cases, the claimants argue that unless funds are appropriated before a certain date, the settlements could be voided, but it is not clear that these are hard deadlines. The most recent deadline for the Cobell case is August 6, 2010, but this has been extended several times. Settlement of the Black Farmers Discrimination Case203 The FY2010 budget supplemental requested $1.15 billion in emergency appropriation to settle the Pigford II discrimination case brought by 70,000 black farmers against the U.S. Department of Agriculture, who were not covered by the original 1999 Pigford class-action settlement. A settlement in the Pigford II case was announced on February 18, 2010, by Secretary of Agriculture Tom Vilsack and Attorney General Eric H. Holder, Jr. The Administration had requested $1.15 billion for the claimants in its FY2010 Budget but funds were not appropriated. The Pigford II settlement is final and non-appealable. A provision of the settlement states that should Congress fail to make the $1.15 billion appropriation by March 31, 2010, the claimants could void the settlement. No funds were appropriated by this deadline. Because the settlement is clearly a priority of both the USDA and the White House, plaintiffs are unlikely to exercise their right to void the settlement in the near term. Indian Trust Litigation Settlement206 The Administration requested $3.4 billion in FY2010 supplemental appropriations to settle litigation over mismanagement of individual Indian trust fund accounts in the Cobell v. Salazar case ( Civil No. 96-1285 (JR), D.D.C.)). Of that total, $1.4 billion would be transferred to a fund to distribute to plaintiffs and $2 billion would be used to purchase and consolidate fractionated trust land interests (owned by the plaintiffs) and to award $60 million in education scholarships. The settlement, agreed to by the plaintiffs and the departments of the Interior, Treasury, and Justice on December 7, 2009, requires legislative authorization by August 6, 2010, a deadline recently extended for a fifth time. It is not clear whether further extensions will be accepted by the parties or the presiding judge. The Cobell lawsuit arose from Interior's inability to account accurately for payments into and from Individual Indian Monies (IIM) trust accounts set up in the 19 th century to deposit income from individuals' trust lands as well as other payments. Interior management of these accounts was difficult, not only because of the allotments' age, but also because of the splitting of interests in each tract as each generation of heirs divided their allotments, creating an estimated 384,000 IIM accounts with a current total asset value over $460 million. Both the plaintiffs and the defendants may have reason to support the Cobell settlement in order to end 14 years of "contentious and acrimonious litigation" that has cost both parties millions of dollars. Some Indian organizations and plaintiffs oppose congressional approval of the Cobell settlement, and some approve. Final Congressional Action in Supplemental on Court Cases The enacted version of H.R. 4899 does not include the $4.6 billion appropriation for the Cobell and Pigford II court settlements that the Administration requested. The earlier House version passed on July 1, 2010, included language providing direct spending authority to use the Judgment Fund, a permanent appropriation, to pay for these settlements (31 U.S.C. 1304), and $4.5 billion savings from reducing the government's costs to purchase drugs in mandatory programs (see below). House and Senate rules require that such direct spending must be offset by either increasing revenues or reducing other direct spending. Otherwise, a member could raise a point of order. Similar language providing for use of the Judgment Fund to make payments resulting from the Cobell and Pigford II court settlements was included in an earlier version of H.R. 4213 but was dropped from the final version ( P.L. 111-205 ). Senator Reid's office has said that the Senator may propose to pass these provisions in a separate bill by unanimous consent that could be offered as before the August recess or by attaching them to other bills. Reducing Medical Costs by Increasing Medicaid Drug Rebates and Improving Generic Drug Access If funding is included for the court settlements in some other bill, then offsets or savings in mandatory programs would be required under PAYGO provisions. The final version of H.R. 4899 did not include provisions in the earlier House July amended version that identified $4.68 billion in mandatory savings over ten years from two new provisions intended to reduce government medical care expenditures. One of these provisions would increase the rebates states receive from drug manufacturers by including more forms of drugs in the calculation of Average Manufacturer Price (AMP). The second provision would reduce drug expenditures for federal programs by providing the Federal Trade Commission (FTC) with additional authority to limit the ability of brand name drug manufacturers to make deals with generic drug makers to not offer competing products. Neither provision was included in earlier versions of H.R. 4899 or in the Administration request. Final Congressional Action in Supplemental on Proposed Changes in Drug Purchasing213 The July 1 amended House version of the supplemental appropriations act that was dropped by the House on July 27, 2010, would have amended Medicaid law to include the injected, infused, and inhaled dosage forms of outpatient drugs in determining AMP. AMP is a benchmark price used to calculate rebates for prescription drugs purchased by states on behalf of Medicaid beneficiaries. Drug manufacturers that participate in Medicaid are required to pay rebates to the states for these drugs, which states share with the federal government. Although the new health care reform laws revised the definition of AMP to help ensure that Medicaid rebates would be consistently calculated, certain forms of outpatient drugs were omitted from the AMP definition changes. This proposal would add the injected, infused, and inhaled forms of outpatient drugs to the AMP calculation, which would increase the amount manufacturers would owe in Medicaid drug rebates. The change to Medicaid drug rebates proposed by the House July 1 amended version of H.R. 4899 was not included in either the previous Senate May version or the original House March version of the bill, or in Administration's requests. CBO estimated that this amendment to Medicaid drug law to include injected, infused, and inhaled drugs in the calculation of AMP would reduce federal Medicaid expenditures by $2.1 billion over 10 years, but would not have a measureable impact in FY2010. The Senate did not accept the provisions to add additional drug forms to the definition of AMP that was included in the July 1 House amended version. A similar provision to the AMP changes proposed in that earlier version was included in S.Amdt. 4567 which was offered in the nature of a substitute to H.R. 1586 on July 29, 2010. Improving Access to Generic Drugs by Preventing Pay-for-Delay Agreements216 Sections 4201-4206 of the House July amended version of H.R. 4899 form the Preserve Access to Affordable Generics Act that seeks to stop the practice (known as reverse payments or pay-to-delay arrangements) by which a pharmaceutical product patent holder pays or provides something of value to a generic manufacturer in return for that generic manufacturer's not challenging the patent and not selling a competing generic version of a prescription drug product for a specific time. Under these provisions, an agreement would be presumed to be illegal when a brand-name drug company compensates a generic drug company to delay the entry of a generic drug into the market. Although a similar provision was in H.R. 3962 , the House-passed health reform package, it was not included in the enacted health reform bills. Since the Hatch-Waxman Act in 1984, the Food and Drug Administration has been able to approve a generic version of a drug after the patent period on a new drug ended. Because the generic manufacturer does not have to repeat all of the expensive and time-consuming clinical testing by which the original sponsor-manufacturer had to demonstrate the drug's safety and effectiveness, generic prices generally are much lower than the brand-name product's price. Delays in the availability of generic versions of drugs, therefore, increase the cost to consumers, including the federal government, which both purchases (through programs in the departments of Defense, Veterans Affairs, and Health and Human Services) and pays for (through Medicare, Medicaid, and other programs) drugs. These provisions would, by adding a new section 28 to the FTC Act, make unlawful any agreement involving compensation for delay of research, development, marketing, manufacturing, or sales of a generic drug. This presumption could be overcome according to specified criteria. The provision would give FTC rulemaking authority and would provide for judicial review and civil penalties. CBO estimated that implementing the provision in the July House amended version would, over the 2010-2020 period, reduce spending by $2.42 billion and increase federal revenues by $0.26 billion, in aggregate reducing federal budget deficits by $2.68 billion. The Senate did not accept the Preserving Access to Generic Drugs provisions included in the July House amended version nor were they included in the enrolled bill sent to the President. Targeting Waste, Fraud, and Abuse in Selected Programs218 The enacted version did not include the $538 million for initiatives to reduce waste, fraud, and abuse (WFA) in federal programs that was included in the earlier House July amended version. These funds were to go to the Department of Health and Human Services (HHS), the Internal Revenue Service (IRS), the Department of Labor (DOL), and the Social Security Administration (SSA). The WFA funding included efforts to reduce improper payments, as well as activities to prevent, detect, investigate, and prosecute individuals suspected of illegal activity. Federal agencies are responsible for conducting WFA activities to help ensure that federal expenditures are appropriate and that beneficiaries are entitled to the benefits provided. The $538 million in WFA funding in the House July amended version was to be allocated as follows: $245 million for enhanced tax enforcement by IRS; $250 million for the HHS Health Care Fraud and Abuse Control Account. Approximately half of these funds would be used by the Centers for Medicare & Medicaid Services to conduct WFA activities for Medicare Advantage (Part C), Medicare drug benefits (Part D), Medicaid, and the State Children's Health Insurance Program. About one quarter of the funds ($65 million) would be for the HHS Office of the Inspector General. The balance ($60 million) would be transferred to the Department of Justice to support HHS fraud and abuse investigations; $38 million would be for the SSA to conduct continuing disability reviews of Social Security Disability Insurance beneficiaries and eligibility redeterminations for Supplemental Security Income recipients; and $5 million would be for the DOL to conduct in-person reemployment reviews, eligibility assessments, and unemployment insurance improper payment reviews. These funds were not designated as emergency funding, the funding for the DOL, SSA, and IRS would be available until September 2011, while the HHS funds would be available until September 30, 2012. CBO estimated that the additional PI funding would increase the federal deficit by $538 million in 2010 but did not estimate any savings so the federal budget deficits would be increased by the same amount over the period 2010-2020. Additional Funds for Coast Guard Response Activities and New Unemployment Benefit In addition to discretionary supplemental appropriations to respond to the Deepwater Horizon oil spill discussed earlier in this report, the Administration proposed to expand the funds that the Coast Guard can draw from the Oil Spill Liability Trust Fund to finance its response activities, and to set up a new unemployment assistance program for individuals who are not entitled to other unemployment benefits (such as the self-employed). The Oil Spill Liability Trust Fund permits the Coast Guard to withdraw up to $150 million per year to finance its response activities and is supported by an excise tax on domestic petroleum and petroleum imported for use in the United States. The Administration also proposed a 1 cent increase in the tax per barrel of oil that replenishes the trust fund and a new unemployment benefit program for those affected by the spill, but these proposals are outside the responsibility of the Appropriations Committees. Although the Administration proposal would appropriate "such sums as would be necessary," for the new unemployment benefit program, the parties responsible for the oil spill under the Oil Pollution Act would be liable for reimbursing the U.S. Treasury for all costs of the benefit and its administration. Oil Spill Liability Trust Fund: Advance of Funds for Federal Response Efforts222 The Administration's proposal authorized mandatory appropriations as "advances" from the trust fund. Later withdrawals from the trust fund would not require appropriations. These funds could later be recouped by the federal government from the responsible parties under the liability provisions of the Oil Pollution Act of 1990. CBO estimated that the Administration's proposal would result in $125 million in mandatory appropriations including $150 million in spending offset by $25 million that would be recovered from the responsible parties. The Administration's proposal would authorize the Coast Guard to make one or more advances of $100 million each from the Oil Spill Liability Trust Fund to respond to the Deepwater Horizon oil spill compared to the $150 million annual limitation on the advance of monies from the trust fund. Although the Coast Guard may continue to draw this amount each fiscal year if needed, the total expenditure to respond to an individual incident is limited to a cap of $1 billion in current law. The Administration proposed to increase this cap to $1.5 billion to make more funds available if necessary to respond to the Deepwater Horizon oil spill. The Office of Management and Budget (OMB) has estimated that a total of $1.575 billion in the trust fund would be available for obligation by the end of FY2010. The proposed increase in the limitation on annual advances of monies from the Oil Spill Liability Trust Fund would apply exclusively to the Deepwater Horizon oil spill to enhance federal emergency response capabilities. The limitation on annual advances in existing law would continue to apply to other spills. The Coast Guard would be required to notify Congress of any advanced funds for the Deepwater Horizon oil spill within 7 days, whereas the advance of funds for other spills would continue to require 30 days notice, as in existing law. Final Congressional Action on Oil Spill Trust Fund and Unemployment Benefit The final version of H.R. 4899 included provisions for the Oil Spill Liability Trust Fund that were the same as those in legislation, P.L. 111-191 ( S. 3473 ) that Congress passed separately on June 15, 2010, in response to concerns raised by Admiral Thad Allen, National Incident Commander for the Deepwater Horizon oil spill, and Department of Homeland Security Secretary Janet Napolitano that the Coast Guard would hit the $150 million cap by late June. That legislation, P.L. 111-191 ( S. 3473 ) raises the cap to $1 billion for the Deepwater Horizon spill, and allows $100 million withdrawals with 7-day notifications to Congress, was enacted on June 15 th , 2010. CBO estimated that this legislation would require $50 million in FY2010 that would be offset by $50 million in reimbursements in FY2012, thus not violating PAYGO rules. The actual amount made available to the Coast Guard under Section 2001 would depend on the number of $100 million advances drawn from the trust fund, up to the $1 billion per-incident cap. The reimbursements would depend on the enforcement of liability under the Oil Pollution Act. The final version of H.R. 4899 did not include the Administration's proposed new mandatory unemployment compensation program for those who would not qualify for other programs, which CBO estimated would cost $33 million though the actual amount would have depended on the number eligible who apply. Appendix. Congressional Action on H.R. 4899 Congress addressed the Administration's $64.3 billion request for supplemental spending for FY2010 five times between March 24, 2010, and July 27, 2010 (see Table 1 ) . Congressional action included: The House passed H.R. 4899 by a vote of 239-174 of H.R. 4899 on March 24, 2010 (no House report) with $5.7 billion in spending for the Disaster Relief Fund in Federal Emergency Management Agency (FEMA), and $600 million for the Department of Labor's summer jobs program, and $5.1 billion in new Budget Authority (BA) including $600 million in offsetting rescissions; The Senate passed H.R. 4899 by a vote of 67 to 28 H.R. 4899 on May 27, 2010 ( S.Rept. 111-188 ) with $59.3 billion in spending, for disaster relief, war funding, war-related foreign assistance, Haiti relief and reconstruction, additional benefits for Vietnam veterans exposed to Agent Orange, other disaster relief, other foreign assistance, and oil spill recovery funding, and $58.9 billion in new BA including $600 million in offsetting rescissions; House adopted the Senate May 25, 2010, version of H.R. 4899 and added funds for the Education Jobs Fund, Pell Grants, summer youth employment, funding for the Cobell and Pigford II court cases on July 1, 2010, with a total of $81.8 billion in spending, and $65.1 billion in new BA including $16.7 billion in rescissions and mandatory savings; Senate failed to invoke cloture on House July amended version, and sent a message of disagreement with that version to the House on July 22, 2010; House receded from (withdrew its support of) the July 1, 2010, version of H.R. 4899 it had passed and adopted the Senate May 25 version by a vote of 308-114 (two-thirds required under suspension of the rules) on July 27, 2010; and President signed the bill on July 29, 2010, P.L. 111-212 . Previous congressional action, including floor debate, is described below. House Passed H.R. 4899 on March 24, 2010 In passing H.R. 4899 on March 24, 2010, the House bill totaled $5.7 billion in spending, and focused on disaster relief, and did not include the war-related, Haiti relief or other Administration requests. Senate Passed H.R. 4899 on May 25, 2010 The Senate May 25, 2010, version of H.R. 4899 (which was ultimately adopted by the House in the final version) addressed most of the elements in the Administration request except for the funding for the Cobell and Pigford II court settlements. At that point, funding for these court cases has been included in H.R. 4212 , the Tax Extenders bill. The Senate version included $5.1 billion for FEMA's Disaster Relief Fund, $36.6. billion for DOD's and State Department/USAID war-related activities, $2.9 billion for Haiti relief and reconstruction activities, and about $200 million to respond to the Deepwater Horizon oil spill, and $13.4 billion in mandatory spending for additional benefits for Vietnam veterans exposed to Agent Orange (see Table 1 ). The Senate version added $386 million for other U.S. disaster relief programs to respond to recent floods in Tennessee and Rhode Island, and other natural disasters and $592 million for other foreign aid and humanitarian assistance programs, bringing the total spending to $59.3 billion, which is offset by $300 million in rescissions for a total of $58.9 billion. The Senate total was $4.1 billion below the Administration's request, largely because the SAC did not address the Administration's requests for $4.6 billion to two recently settled court cases (see Table 1 ). The Administration supported passage of the Senate version. Senate Debate on H.R. 4899 The Senate debated H.R. 4899 from May 25-May 27, 2010, focusing primarily on proposed amendments to address border security concerns, responding to the Gulf oil spill, paying for supplemental spending, ensuring funding for recent national disasters, and setting a timeline to withdraw from Afghanistan. Based on a proposal by Majority Leader Senator Reid and adopted by unanimous consent on May 26, 2010, the Senate agreed to consider and vote on six amendments within strict time limits, to be followed by a vote on a cloture motion filed on May 25, 2010. If points of order were raised and sustained, the amendments would be withdrawn. The Senate rejected the six amendments. Senators Kyl and McCain proposed additional funding for 6,000 National Guard and other personnel to reverse a deteriorating security situation on the border. While the White House announced that the President has authorized the deployment of an additional 1,200 National Guard and would be requesting $500 million for border security, that amendment has not yet been submitted. Senators Landrieu and Cochran proposed various measures to respond to the Deepwater Horizon oil spill including providing relief to small businesses by delaying loan or principal payments or providing technical assistance. Senator Menendez proposed a amendment requiring oil polluters to pay the full cost of oil spills. Senators McCain and Coburn proposed amendments to cut $59 billion other federal funding to finance the additional spending in the deficit, arguing the spending did not qualify as an emergency and hence should be offset. Senator Inouye questioned whether these proposals to rescind unobligated balances, cap federal salaries and other measures were realistic. The six amendments receiving individual votes were rejected as follows: McCain amendment to provide $250 million for 6,000 National Guards to secure the southern land border of the United States offset by rescinding unobligated funds in the American Recovery and Reinvestment Act, P.L. 111-5 ) ( S.Amdt. 4214 withdrawn after failure to receive the 60 votes necessary to waive the budget point of order raised; the vote was 51 to 46); Kyl amendment to appropriate $200 million to prevent illegal crossings at the southwest border with an offset from unobligated funds in the American Recovery and Reinvestment Act ( S.Amdt. 4228 , withdrawn after failure to receive the 60 votes necessary to waive the budget point of order raised; the vote was 54-44); Cornyn amendment provides funds from unobligated balances to deploy National Guards on the border ( S.Amdt. 4202 , withdrawn after failure to receive the 60 votes necessary to waive the budget point of order raised; the vote was 54 to 43); Feingold amendment requiring the President to set a timetable to redeploy troops from Afghanistan ( S.Amdt. 4204 rejected by a vote of 18 yeas to 80 nays); Coburn amendment cutting $59 billion in the supplemental bill over 10 years to offset the cost of the supplemental by: a one-year freeze on federal civilian salaries, capping the number of federal employees, reducing "nonessential government travel" and other proposed cuts ( S.Amdt. 4231 as modified, tabled by a vote of 53-45); Coburn amendment to offset the $59 billion in H.R. 4899 by reducing Congress' own budget and disposing of "unneeded Federal property and equipment; and rescinding unspent Federal funds ($45 billion) ( S.Amdt. 4232 , tabled by a vote of 50 to 47); After these amendments were considered, the Senate invoked cloture by a vote of 69 to 20 on May 27, 2010. Other pending amendments were withdrawn. Later that day, by unanimous consent, the Senate voted to adopt 16 amendments in a Managers' amendment. H.R. 4899 as amended was then passed by a vote of 67 to 28, conferees were appointed, and the bill was be sent to the House. Earlier, on May 13, 2010, the Senate Appropriations Committee (SAC) marked up and reported H.R. 4899 , the Disaster Relief and Summer Jobs Act of FY2010 including $58.9 billion in funding. House Amended Version of H.R. 4899 on July 1, 2010 On July 1, 2010, the House passed an amended version of H.R. 4899 which added $22.5 billion in funding for domestic programs to the Senate's May 25, 2010, bill, as well as $16.3 billion in rescissions and mandatory savings. Procedures and Debate In H.Res. 1500 , adopted by the House rule to govern floor consideration of H.R. 4899 , Members voted separately first on the rule itself and then on whether to adopt four separate amendments described in H.Rept. 111-522 . If the rule and at least one of the amendments were passed, then the entire bill, as amended, was enrolled and sent to the Senate. On July 1, 2010, the House adopted the rule by a vote of 215 to 210. Adoption of the rule entailed not only set the procedures governing consideration but also adopted the Senate May version of the bill. In addition, adoption of the rule authorized and funded the two settlement costs of the two court cases ( Pigford II and Cobell ), provided $1 billion for the summer jobs program, set FY2011 total discretionary and mandatory funding levels in the House through a "deeming" resolution, and changed certain transportation grant formulas and tax eligibility rules for cellulosic biofuel producers. After adopting the rule, the House passed House Amendment No. 2 by 239 to 182. That amendment included the additional funding for domestic programs that was not in the Senate bill (see above). During the debate on July 1, 2010, Republican members argued that the House should pass the Senate version of the bill, confining spending to the Administration's request for FEMA disaster assistance, war funding, new VA benefits, and settling the court cases, and that the additional domestic spending was not justifiable in light of current and prospective high deficits. Democratic members argued that the additional domestic spending was justified as a way to prevent layoffs during the current recession and provide additional government-sponsored credit for farmers and energy projects, and for students facing difficulties because of the current tightened lending environment. In considering the three war-related amendments (Amendments 4, 5, and 6 in H.Rept. 111-522 ), debate focused on the wisdom of the current Administration policy in Afghanistan, the need for DOD to get its war funding, and the President's policy announced December 1, 2009, to begin withdrawal of troops from Afghanistan in July 2011. Additional Funding The House amended July 1, 2010, version included the following additional spending: $10.0 billion for the Education Job Funds to prevent teacher layoffs; $5.0 billion for Pell Grants; $701 million for enhanced border security activities; $538 million for Program Integrity initiatives targeting waste, fraud, and abuse in Medicare and Medicaid; $180 million for loans for nuclear and alternative energy; $159 million vs. $94 million for oil spill recovery relief and recovery activities; $82 million vs. $32 million for agricultural and farm loans and emergency food assistance; and $67 million vs. $20 million for other activities including mine safety efforts (see Table 1 ). In addition, the House July-amended version included $2.5 billion compared to $2.0 billion in the Senate May version for non-defense DOD spending, primarily for increased fuel costs for DOD's base budget. The House version also added $300 million for base closure related transportation improvements, and $16.5 million for a Soldier Readiness Center at Fort Hood, site of the recent fatal shootings. Additional Offsets and Savings The House July-amended version also included substantially larger offsets from both rescissions and savings in mandatory programs including $12.2 billion in rescissions, compared to $381 million in the Senate May 25, 2010, version and $4.5 billion in savings from mandatory programs, that are not addressed by the Senate. Rescissions of unobligated authority can be used to offset new spending. Budget authority (BA) is available for obligation from one to five years depending on the type of authority; for example, military construction authority can be obligated over five years whereas military personnel spending must be obligated within one fiscal year. If budget authority remains unobligated at the end of its useful life, then the funds expire and reduce the deficit by that amount. While some rescissions are controversial, others, particularly where the BA is unlikely to be obligated before the end of its fiscal life, are not controversial. The $12.2 billion in rescissions in the House July-amended version of H.R. 4899 included the following: $3.2 billion in DOD funding primarily funds due to expire by September 30, 2010, and $500 million in DOD's Military construction funding from contract savings; $2.2 billion in unused highway contract authority; $2. billion in unused funds for pandemic flu; $1.3 billion in American Recovery Act funding; $800 million in unobligated Education Department funding for the Administration's "Race to the Top" initiative and teacher incentive awards that triggered a veto threat from the Administration; $748 million in unused or frozen disaster assistance funding; $220 million in State Department funding; and $1.8 billion from a variety of other programs. In a Statement of Administration policy issued July 1, 2010, the Office of Management and Budget stated that the President would veto any version of the bill that "undermined his abilities as Commander-in-Chief" to conduct operations in Afghanistan or included the $800 million in rescissions to the Administration's education initiative. In addition to the spending proposals, the House also considered and rejected three amendments that would have restricted funding or required additional votes on war funding in Afghanistan on July 1, 2010. The first war-related amendment would have deleted all DOD war funding and failed by a vote 25 to 376. The second amendment requiring that war funding in the bill be restricted to paying for providing protection to military, civilian, and contractor personnel and beginning the "safe and orderly" withdrawal of these personnel failed by a vote of 100 to 321. The third war-related amendment would have required that funds in the act could not be obligated or expended "in a manner that is inconsistent" with the President's policy to begin the withdrawal of troops by July 1, 2011, unless the Congress votes to explicitly approve such a change under expedited procedures. The amendment also required that the President submit a withdrawal plan by April 4, 2011, conduct a new national intelligence estimate for Afghanistan and Pakistan, and report within 90 days of enactment on recommendations to increase oversight of contractors in Afghanistan. This amendment failed by a vote of 162 to 260. Before floor action, the House leadership deleted proposals to add $1.2 billion for the Community Oriented Policing Services (COPS) program and $500 million for Firefighter Assistance grants that were included in a Majority Leadership draft circulated earlier.

The Administration requested $64.3 billion in FY2010 supplemental appropriations: $5.1 billion to replenish the U.S. Disaster Relief Fund administered by the Federal Emergency Management Agency (FEMA); $33 billion for the Department of Defense (DOD) primarily for deploying 30,000 additional troops to Afghanistan; $4.5 billion in war-related foreign aid; and $2.8 billion for Haiti earthquake-related relief and reconstruction aid; $243 million for activities related to the Deepwater Horizon oil spill; $600 million for border security, and $129 million to reduce backlogs in patent requests; and $13.4 billion to compensate veterans exposed to Agent Orange, and $3.4 billion to settle court cases about trust claims of American Indians (Cobell) and $1.2 billion for discrimination claims of black farmers (Pigford II). Much of the debate about this year's supplemental focused on the effect on the deficit of additional spending and, particularly, whether certain spending should be designated as emergency spending that Congress is not required to offset under congressional rules. Offsets can come from either rescissions, which cancel prior year budget authority (BA), and then apply that BA to new spending, thus reducing the amount of new budget authority required, or from savings in direct spending or mandatory programs. On March 24, 2010, the House passed H.R. 4899, the Disaster Relief and Summer Jobs Act, by a vote of 239 to 175, with $5.7 billion in funding, including $5.1 billion to replenish FEMA's Disaster Assistance Fund and $600 million for a Labor Department summer jobs program. Taking the bill's $600 million in offsetting rescissions into account, the bill required $5.1 billion in new budget authority (BA). A House Appropriations Committee (HAC) markup of an $84.8 billion draft bill with additional domestic spending scheduled for May 26, 2010, was cancelled. On May 27, the Senate passed its version of H.R. 4899 by a vote of 67-28, with $59.2 billion in funding for disaster assistance, war funding, Haiti relief, and new VA benefits, but without funding for the two court cases. Including its $380 million in rescissions, the Senate version required $58.8 billion in new budget authority. On July 1, 2010, the House passed an amended version of H.R. 4899 totaling $81.8 billion for disaster assistance, wars, Haiti relief, and new VA benefits, and additional domestic spending to prevent teacher layoffs, provide agricultural and energy loans, and Pell Grants, in discretionary spending and funding to settle the two court cases. With its $12.2 billion in rescissions and $4.5 billion in 10-year mandatory savings from lower government drug prices, this bill would have required $65.1 billion in new BA. On July 22, 2010, the Senate sent a message to the House disagreeing with the earlier version passed by the House on July 1, 2010. On July 27th, the House passed the Senate's May 27 version, which was signed by the President on July 29, 2010, and became P.L. 111-212. Part of the debate and timing of congressional action was driven by funding deadlines cited by the Department of Defense, FEMA, and the Coast Guard, some which proved to be somewhat flexible.

Introduction " Habeas corpus is a legal procedure that allows prisoners to assert constitutional rights, the procedure itself is not required or controlled by the Constitution. " —U.S. Supreme Court Justice Lewis F. Powell, Jr. (1972-1987) Federal habeas corpus is the statutory procedure under which state and federal prisoners may petition federal courts to review their convictions and sentences to determine whether they are being held contrary to the laws or the Constitution of the United States. The authority of a federal court to issue a writ of habeas corpus has been a part of legal procedure since 1789. In 1867, the writ was extended by Congress to prisoners in state custody. However, although the federal writ of habeas corpus was extended to prisoners in state custody in 1867, it did not become fully available as a means to challenge an unlawful conviction or sentence until the 1940s. In 1996, Congress passed legislation that restricted a prisoner's ability to seek relief through the writ of habeas corpus. Since its passage, the courts have been interpreting the meaning of the Anti-Terrorism and Effective Death Penalty Act (AEDPA). At issue for Congress is whether it should further restrict state prisoners' access to federal habeas corpus relief by limiting the federal role in policing constitutional violations in the states' criminal justice systems. Two issues have emerged as the Congress considers legislation that would further alter the writ of habeas corpus— trial finality and adequate representation . Proponents of habeas corpus reform contend that restricting state prisoners' access to federal habeas corpus relief is necessary due to many prisoners filing excessive and frivolous claims that result in a backlog in the system and substantial delays in the processing of cases. Critics contend, however, that many states' criminal justice systems are flawed, with many indigent defendants lacking proper representation throughout all stages of the criminal justice system. They contend that for many defendants, the writ of habeas corpus plays a key role in restoring justice when the system fails. This report examines the issues surrounding the debate on whether to further restrict state prisoners' access to federal habeas corpus filings. This report does not discuss issues related to federalism and the proper role of the federal court system in overseeing the actions of state courts pertaining to prisoners' constitutional rights. The report opens with a discussion of a commission that was established in 1988 to study and make recommendations of the then-current federal habeas corpus system and the 1996 law that restricted prisoners' access to federal habeas corpus relief. It then provides an analysis of federal habeas corpus petition data since 1990. The report examines whether the number of federal habeas corpus petitions and the time it takes for the federal court system to process these claims have increased since the enactment of the AEDPA. It then discusses legislation introduced in the 109 th Congress that would further restrict state prisoners' access to federal habeas corpus relief. The report concludes with an analysis of two dominant issues that are at the center of this debate: delays caused by habeas corpus petitions and post-conviction representation . Background9 Beginning in the 1970s, the U.S. Supreme Court issued a set of rulings that gradually restricted prisoners' access to federal habeas corpus relief; and in the late 1980s a commission was formed that would set the stage for congressional action. Following is a discussion of early efforts to reform the writ of habeas corpus. The Powell Committee In 1988, Chief Justice Rehnquist formed an ad hoc committee on federal habeas corpus in capital cases (aka the Powell Committee). The Powell Committee analyzed "the necessity and desirability of legislation directed toward avoiding delay and the lack of finality in capital cases." The committee found that the current system (at that time) of collateral review : Is fraught with "unnecessary delay and repetition." The inadequacies of the system are due to the following: (1) a lack of coordination between federal and state legal systems, resulting in prisoners moving back and forth between the two systems before exhausting state remedies; (2) prisoners filing excessive, last minute motions for stays of execution; and (3) the absence of a statute of limitation allows for prisoners to file multiple petitions at any point during their incarceration. Lacks competent and adequately compensated representation. Permits last-minute litigation where claims are meritless and are conducted amidst a pending execution, which leads to the abuse of judicial resources and justices. As a result of its findings, the Powell Committee made several recommendations, some of which were adopted in AEDPA including establishing a separate statutory procedure for federal habeas corpus proceedings in capital cases for states to opt-in if they meet certain requirements that pertain to the appointment of competent counsel and compensation of reasonable litigation expenses for indigent prisoners. The opt-in system would provide a shorter statute of limitation (six months as opposed to one year) for the filing of habeas corpus petition. The federal judiciary would have the final judgment about the adequacy of a state's counsel appointment system. requiring a mandatory stay of execution until the federal habeas corpus proceeding is completed for a prisoner's first request for post-conviction relief. requiring prisoners to file their federal habeas corpus petitions no later than 180 days after an order is entered appointing counsel. limiting federal courts to considering claims that were raised and litigated in state courts and have adequate evidentiary records and findings of facts. In addition to the Powell Committee findings, in a series of rulings that began in the 1970s, the U.S. Supreme Court restricted prisoners' access to federal habeas corpus relief. The reason for this is, in part, due to the number of reported cases of abuse by inmates (i.e., repeat and frivolous filing of petitions). Although the issue was most often associated with death penalty cases (e.g., inmates using the writ of habeas corpus as a means to delay their executions), prisoners sentenced in non-capital cases were reportedly also availing themselves of such petitions. The U.S. Supreme Court developed restrictive procedural doctrines to govern federal habeas corpus proceedings; and in 1996, Congress passed legislation that limited federal court adjudication of prisoners' habeas corpus claims, particularly in capital cases, as discussed below. Antiterrorism and Effective Death Penalty Act of 199617 As discussed above, several of the Powell Committee's recommendations were adopted by Congress. Title II of the Antiterrorism and Effective Death Penalty Act of 1996 (AEDPA; P.L. 104-32 ) codified some of the recommended restrictions on prisoners' access to federal habeas corpus relief, including barring federal habeas corpus reconsideration of legal and factual issues ruled upon by state courts in most instances; creating a general one-year statute of limitation (and a six-month statute of limitation in death penalty cases for states that successfully meet certain requirements related to the appointment of representation and compensation for related litigation in post-conviction proceedings); prohibiting federal evidentiary hearing of claims in most cases; and requiring appellate court approval for repetitious habeas corpus petitions. Federal Habeas Corpus and Capital Cases As discussed below, one of the issues that is at the center of reforming the writ of habeas corpus is the perceived delay in processing these petitions. Many proponents of amending the current federal habeas corpus law point to the amount of time it takes from the initial filing of a habeas corpus petition to disposition. They assert that the current system is abused by inmates who use the writ to delay the final outcome of their sentences. They further contend that such delay only benefits one category of habeas corpus petitioners. According to congressional testimony, "unlike the non-capital defendant who is serving his sentence during the habeas corpus process and has every incentive to proceed as quickly as possible to have a federal court vindicate a constitutional claim that the state courts wrongly decided, the capital defendant is not serving his sentence—he is avoiding it." Although it may be true that some death row prisoners use the writ to avoid death, it is also important to note that the overall number of habeas corpus petitions filed by death row inmates pales in comparison to the number of petitions filed by non-death row inmates, at less than 1% in one study done in 1995. The current debate over whether to reform the federal habeas corpus law is centered around state capital cases. As of December 31, 2004, there were 3,282 prisoners on death row in state prisons. These cases experience some of the lengthier delays that have been highlighted in Congressional testimony, and for many this is where the concern rests. The issue of trial finality becomes apparent in these cases due to the mandated outcome—execution—being suspended pending the outcome of the habeas corpus proceeding. Federal Habeas Corpus Petition Data A 1995 Department of Justice Bureau of Justice (BJS) study examined the time it takes for a state capital case to make its way through the federal habeas corpus appeal process. The study looked at federal habeas corpus petitions in 18 federal district courts located in nine different states. BJS found that federal habeas corpus cases require a range of time for disposition. For example, 25% of federal habeas corpus cases were processed in 83 days or less, whereas 50% of the cases reached disposition in 175 days or less. However, BJS also found that 10% of the cases took 761 days or more to reach disposition. BJS found that the amount of time it took for a federal habeas corpus petition to reach disposition was based on the complexity of the case. Cases that failed to meet basic procedural requirements were dismissed quickly. However, the time for a federal habeas corpus case to reach disposition increased as the number and seriousness of issues raised in the petition increased. The following section analyzes data from various federal sources and is meant to provide a context in which to discuss the effect of AEDPA on the filing of federal habeas corpus petitions by state prisoners. The discussion of the data, however, is limited to the number of federal habeas corpus petitions filed by state prisoners and the median time it took the cases to reach disposition. The data presented in this report do not take into consideration whether there were any unwarranted delays in the current system. In a letter to Congress, the Judicial Conference of the United States urged "that ... analysis be undertaken to evaluate whether there is unwarranted delay occurring in the application of current law in resolving habeas corpus petitions filed in federal courts by state prisoners and, if so, the causes for such delay." Administrative Office of the U.S. Courts Data The Administrative Office of the U.S. Courts (AOUC) collects data on federal habeas corpus cases by federal and state prisoners. Prior to 1989, the AOUC did not distinguish between capital and non-capital cases, thus, our analysis does not include data prior to 1989. Moreover, the AOUC data are not coded to capture case-specific information (i.e., reason for filing, age of case, number of extensions granted, etc.), which prevents the analysis from going beyond the assessment of the number of cases filed and the median time it takes a case to reach disposition. During the period prior to the enactment of AEDPA (1990-1996), on average 12,656 state non-capital federal habeas corpus petitions were filed per year, with a median disposition time that ranged from a low of 5.6 months in 1995 to a high of 6.6 months in 1992 (see Figures 1 and 3 ). During the same period, on average 141 state capital federal habeas corpus petitions were filed per year, with a median disposition time that ranged from a low of three months in 1990 to a high of 12.8 months in 1993 (see Figures 2 and 3 ). Since the enactment of AEDPA (1997), on average, 18,758 state non-capital cases have been filed. The median disposition time for this period (1997-2004) ranged from a low of 5.2 months in 2000 to a high of 6.9 months in 2002 (see Figures 1 and 3 ). Like the period before the enactment of AEDPA, the median disposition time remained fairly steady. Since 1997, an average of 198 state capital federal habeas corpus cases have been filed by prisoners in state custody. The median disposition time during this period ranged from a low of 13.2 months in 1998 to a high of 25.3 months in 2004 (see Figures 2 and 3 ). Following is a more detailed discussion of the data. In 1997 (eight months after AEDPA was enacted), 15,199 state non-capital federal habeas corpus petitions were filed (see Figure 1 ). In 1998, 18,309 state non-capital federal habeas corpus petitions were filed, an increase of 20% over 1997 numbers (see Figure 1 ). The number of state non-capital federal habeas corpus petitions filed peaked in 2000 at 20,354, an increase of 34% over 1997 numbers (see Figure 1 ). Since 2000, the number has declined slightly. In 1990, the median time for a state non-capital federal habeas corpus case to reach disposition after it was filed was 6.4 months (see Figure 3 ). By 1997, the median time slightly decreased by almost a month. The median time for a state non-capital federal habeas corpus case to reach disposition peaked in 1998 to 6.8 months (an increase of 1.1 months from 1997). In 2000 and 2001, when the number of state non-capital federal habeas corpus cases filed was about double than what it was in 1990, the median time for a case to reach disposition after it was filed was 5.1 months and 6.5 months, respectively (see Figure 3 ). During the past four years, the median time for these cases to reach disposition has been over six months for each year. It is not all together clear why there has been a recent peak in the median time it takes for state non-capital cases to reach disposition. State capital federal habeas corpus cases accounted for approximately 1% of all federal habeas corpus cases during the period that was examined. Although the filing of state capital habeas corpus claims increased after the enactment of AEDPA, there were periods of relatively small increases and decreases (see Figure 2 ). For example, in 1997, the first full year after the enactment of AEDPA, 168 state federal habeas corpus capital cases were filed (see Figure 2 ). By 2003, there was an increase of 30% in the number of cases filed (see Figure 2 ). Figure 3 demonstrates that many state capital federal habeas corpus cases are not resolved as quickly as state non-capital federal habeas corpus cases. The median time it took a state capital federal habeas corpus case to reach disposition in 1990 was three months. Generally speaking, since the enactment of AEDPA, there has been an increase in the time for a state capital federal habeas corpus case to reach disposition. In 2004, the median time peaked to 25.3 months, but there were six times as many federal habeas corpus cases filed during this period. In summary, state capital federal habeas corpus generally cases take longer to reach disposition. Pre-AEDPA, state capital federal habeas corpus cases on average took three additional months to reach disposition when compared to state non-capital federal habeas corpus cases. Since the enactment of AEDPA, on average it has taken an additional nine months for state capital federal habeas corpus cases to reach disposition when compared to state non-capital federal habeas corpus cases. Moreover, during the last four years that were analyzed, it has taken longer to dispose of both types of cases. Federal Habeas Corpus Filings and Prison Population To what extent does the increased prison population have an effect on the number of habeas corpus petition filings? As shown in Figure 4 , in 1995 the total state prison population in the United States was 989,004. By 2000, the state prison population had increased by 19%, to 1,176,269. By 2004, the state prison population had increased by another 6% since 2000, to 1,244,311. Figures 1 and 2 show that the total number of habeas corpus petitions filed by state prisoners increased from 1990 to 2000. With more people in prison, it follows that more habeas corpus petitions would be filed, simply because there are more sentences to be challenged. However, while there has been a significant increase in the state prison population over the years, the rate of state non-capital habeas corpus filings has remained somewhat constant (see  Figure 5 ). The rate of state non-capital habeas corpus filings began to increase in 1996, the year AEDPA was enacted (see Figure 5 ). In 2000, however, there was a noticeable decline in the rate of state non-capital habeas corpus filing, which continues to the present day (see Figure 5 ). According to BJS, AEDPA had a delayed effect on the filing of habeas corpus petitions by state prisoners. BJS stated that AEDPA resulted in approximately one additional habeas corpus petition being filed each month for every 3,400 state prisoners. Legislation in the 109th Congress Two pieces of legislation were introduced in the 109 th Congress that would have reformed the current federal habeas corpus system for state inmates—the Streamlined Procedures Act of 2005 (SPA; S. 1088 and H.R. 3035 ). The Senate Judiciary Committee attempted to mark up S. 1088 on several occasions. In addition to the SPA, the House passed the Border Protection, Antiterrorism, and Illegal Immigration Control Act of 2005 ( H.R. 4437 ) on December 16, 2005. Section 302 of H.R. 4472 would have barred federal judicial review of a state prisoner's habeas corpus application in cases where the state court has found harmless errors in sentencing, see discussion below. Three additional bills ( H.R. 3132 / S. 956 and S. 1605 ) were also introduced in the 109 th Congress. The bills would have provided for an expeditious habeas review of convictions that involved a killing of a child (§303 of H.R. 3132 , §303 of H.R. 3860 , and §4 of S. 956 ) and a public safety officer or state judge (§6 of S. 1605 ). The House passed H.R. 3132 on September 14, 2005. The SPA would have amended AEDPA and further restricted state inmates' access to federal habeas corpus relief. Generally, SPA would have imposed additional requirements on habeas corpus applicants in state custody. SPA would have also imposed time limits on federal courts of appeal review of habeas corpus decisions. In addition, it would have barred federal courts from tolling the current one-year deadline for filing habeas corpus claims for reasons other than those authorized by the state, as well as clarify when a state appeal is pending for purposes of tolling the deadline. Following is a discussion of the SPA's major provisions. The Streamlined Procedures Act of 2005 (S. 1088/H.R. 3035) Mixed Petitions31 Both bills would have prohibited an applicant from filing a federal habeas corpus petition that included claims that were not properly exhausted in state court. For a claim to be considered by a federal court, the bills would have required the applicant to describe in his petition how he exhausted each claim. The bills would have only allowed unexhausted claims to be considered by the federal courts if the claims for relief rest on a new rule of law or on newly discovered evidence that demonstrates the claimant was factually innocent , and if the denial of relief would be contrary to, or would entail an unreasonable application of, clearly established federal law. The bills would have required all unexhausted claims that do not qualify for consideration be dismissed with prejudice. Unlike S. 1088 , H.R. 3035 would have made the provision retroactive. Amendments to Petitions33 Both bills would have permitted a petitioner to amend his petition only once before the one-year federal application deadline or before the state files an answer to the petition, whichever occurs first. The bills would not have allowed an application to be amended to modify existing claims or to present additional claims, unless such claims would qualify for consideration on the grounds described in current law. Unlike S. 1088 , H.R. 3035 would have made the provision retroactive. Procedurally Defaulted Claims35 Both bills would have barred federal judicial review of any claim found by a state court to be procedurally barred. The bills would have barred federal judicial review of any claim of ineffective assistance of counsel related to such claim unless (1) the claim would qualify for consideration if the claim for relief rests on a new rule of law or on newly discovered evidence that demonstrates the claimant was factually innocent ; or (2) the state's counsel expressly waives the prohibition on hearing the claim. Both bills would have also barred federal judicial review of any claim that a state court denies on the merits and on the ground that the claim was improperly raised under state procedural law unless the claim would qualify for consideration if it rests on a new rule of law or on newly discovered evidence that demonstrates the claimant was factually innocent. Additionally, both bills would have prohibited the writ of habeas corpus to be granted "unless the denial of such relief is contrary to, or would entail an unreasonable application of, clearly established federal law." Tolling of the Limitation Period38 Both bills would have clarified when a state appeal is pending for purposes of tolling the one-year deadline for filing habeas corpus claims. The bills would have established that an application is pending from the date on which the application is filed with a state court until the date on which the same state court rules on that application. Unlike S. 1088 , H.R. 3035 would have made the provision retroactive. Harmless Errors in Sentencing40 Unlike S. 1088 , H.R. 3035 would have barred federal judicial review of a habeas corpus application with respect to a sentencing error that a state court has found harmless or not prejudicial unless a determination is made that the error is contrary to clearly established federal law. Time Limitations for Appeals42 Both bills would have established appellate time limits as follows: A court of appeals would be required to decide a habeas corpus appeal within 300 days of the completion of briefing, or if no brief is filed, the date on which it is due. If a cross-appeal is filed, the court of appeals has 300 days after the date on which the appellant files a brief in response to the issues presented in the cross-appeal, or if no brief is filed, the date on which it is due. An appellate court would be required to rule on a petition for rehearing within 90 days. If a panel rehearing is granted, the panel has 120 days after the petition is granted to make a determination. If a rehearing en banc is granted, the court of appeals has 180 days after the petition is granted to make a final determination. If a court of appeals fails to comply with these deadlines, the bills would have allowed the state to petition the U.S. Supreme Court, or a Justice thereof, to force the court to comply with the deadline. Capital Cases44 Both bills would have changed the scope of federal review in capital cases. Under current law, a district court can only consider claims that have been raised and decided on the merits in state courts, unless the failure to raise the claim properly is (1) the result of state action in violation of the Constitution or U.S. laws; (2) the result of the Supreme Court's recognition of a new federal right made retroactively applicable; or (3) based on a factual predicate that could not have been discovered through the exercise of due diligence in time to present the claim for state or federal post conviction relief. Both bills would have barred judicial review of capital claims unless (1) the applicant shows that the claim relies on a new rule of constitutional law, made retroactive to cases on collateral review by the U.S. Supreme Court that was previously unavailable; or (2) the factual predicate for the claim could not have been discovered previously through the exercise of due diligence and the facts underlying the claim would be sufficient to establish by clear and convincing evidence that, but for constitutional error, no reasonable fact finder would have found the applicant guilty of the underlying offense. Both bills would have amended current law by extending the time limit during which the federal district court must render a final determination and enter a final judgment on any application for a writ of habeas corpus in a capital case. Currently, the federal district court must enter a final judgment not later than 180 days after the date on which the application is filed. The bills would have increased the time from 180 days to 15 months. Review of Chapter 154 Opt-in Requirements46 Under current law, Chapter 154 authorizes special expedited habeas corpus procedures for state capital cases. The procedures are currently available to states that establish a system for providing competent legal representation to capital defendants. Under current law, federal courts review whether the state has met the necessary requirements. Both bills would have placed the determination with the Attorney General (and not with the federal courts as in current law), with review of such decision in the D.C. Circuit Court of Appeals. The bills would have required the Attorney General's determination to be conclusive unless it is manifestly contrary to the law and is an abuse of discretion. Clemency and Pardon Decisions48 Both bills would have limited federal judicial review of state clemency and pardon decisions to Supreme Court reviews. The bills would have required such reviews to be conducted only of decisions made by the highest court of a state that involve a claim arising from the exercise of a state's executive clemency or pardon power, or the process or procedures used under such power. Ex Parte Funding Requests49 Both bills would have required an application for services for applicants in both federal and state custody to be decided by a judge other than the judge presiding over the post-conviction proceedings in capital cases seeking to vacate or set aside a death sentence. The bills would have required that any authorized amount for these services must be disclosed to the public immediately. Additionally, the bills would have prohibited courts from granting an application for an ex parte proceeding, communication, or request unless the application has been served upon the respondent. The bills would have required all such proceedings, communication, or requests to be transcribed and made a part of the record available for appellate review. Crime Victims' Rights53 Both bills would have extended crime victims' specified rights to federal habeas corpus proceedings arising out of a state conviction. These rights are enumerated in current law and include the right to be reasonably protected from the accused; to be given reasonable, accurate, and timely notice of any public court proceeding, or any parole proceeding involving the crime or of any release of escape or the accused; not to be excluded from any such proceeding; to be reasonably heard at any public proceeding in the district court involving release, plea, sentencing, or parole; to confer with the government's attorney in the case; to receive full and timely restitution as provided by law; to a proceeding free from unreasonable delay; and to be treated with fairness and with respect for the victim's dignity and privacy. DNA Testing55 Unlike H.R. 3035 , S. 1088 would have permitted DNA evidence to be introduced to establish facts related to a claim. The bill would have permitted the court to order DNA testing if (1) the evidence is in the possession of the state and has been subject to a chain of custody; (2) the proposed DNA testing is reasonable in scope, uses scientifically sound methods, and is consistent with accepted forensic practices; (3) the court, after reviewing the record of the applicant's trial and any other relevant proceedings, determines that there is a reasonable possibility that the DNA testing will produce exculpatory evidence; (4) the DNA testing will be conducted by a lab agreed upon by the state and the applicant, or if the state and the applicant cannot agree, one chosen by the court that is qualified to prepare DNA analysis for entry into the National DNA Index System; and (5) the results of the analysis are promptly disclosed to the court, the state and the applicant. Selected Issues As the debate over whether to reform federal habeas corpus law escalates, two major themes have emerged: trial finality and adequate representation . Both of these issues are relevant when discussing state capital and non-capital post-conviction proceedings. Following is a discussion of these two issues. Trial Finality Critics on both sides of the debate often point to the length of time it takes for a federal habeas corpus case to make its way through the system. On the one hand, those who are in favor of further reforming the body of law that governs federal habeas corpus appeals contend that prisoners abuse the current system as a means to keep their cases in litigation, which delays closure for many victims. They argue that the increased delays in resolving habeas corpus cases have decreased the public's confidence in the criminal justice system. Moreover, such delays associated with lengthy habeas corpus appeals cause many problems including victims paying a heavy emotional price; states having to pay the cost of the litigation; the dilution of the effectiveness of the criminal justice system; and some cases that have been overturned due to the tampering of witnesses, reluctance of victims to testify or evidence being lost. Proponents of further reforming the federal habeas corpus system also contend that the only way to reduce existing delays in the system is to streamline federal habeas corpus proceedings by limiting the ability of state prisoners to petition federal courts for habeas corpus relief and by limiting claims federal courts can consider in habeas corpus petitions. By streamlining the process, they argue, delays in processing these cases would be diminished. Opponents argue, however, that limiting the claims federal courts can consider in habeas corpus petitions would effectively prevent the federal courts from exercising judicial review. They note that under current law, prisoners are already required to exhaust state court remedies before advancing a claim in federal court. They contend that federal courts use the discretion to hear unexhausted claims sparingly. They also note that many petitioners do not have post-conviction representation, which makes it likely that many petitioners will have unexhausted claims dismissed because they did not have the help of an attorney to accurately present each claim in state court. Moreover, opponents contend that the "limiting federal habeas corpus appeals" argument is based on a faulty premise: that petitioners actually want to delay federal adjudication of their claims. According to one such opponent, "99% of state prisoners are serving prison sentences they hope to cut short by winning federal habeas corpus relief. For the 1% under a sentence of death," the U.S. Supreme Court has already addressed concerns about unwarranted delay. Post-Conviction Representation The Sixth Amendment of the Bill of Rights of the U.S. Constitution provides that any individual accused of a crime is entitled to counsel. The Constitution, however, does not require the appointment of counsel in post-conviction proceedings. Although most experts agree that counsel in post-conviction proceedings is important, especially in capital cases, many states lack an effective system of appointment of counsel for indigent prisoners. In 1988, Congress passed legislation that required the appointment of counsel in federal capital habeas corpus proceedings, that is, since 1988, prisoners serving a federal capital sentence are entitled to counsel during all post-conviction proceedings. Unlike the federal criminal justice system, most states do not afford its prisoners with the same right. Critics contend that by having a non-mandatory system of post-conviction representation, many states ignore the reality that indigent death row prisoners are simply not able to competently engage in post-conviction litigation. Access to Representation In 1996, Congress eliminated funding for Post-Conviction Defender Organizations (PCDO). PCDOs were created in the 1980s in response to the federal judiciary's concern about the growth of the death row population in some federal circuits and the lack of qualified counsel to handle post-conviction appeals. PCDOs were non-profit organizations that recruited and trained private attorneys to represent death row prisoners. Attorneys recruited by PCDOs were well versed in death penalty litigation. PCDOs served as consultants to the attorneys they recruited and provided expertise in the litigation of these cases. At its peak, PCDOs employed full-time, salaried attorneys in 20 of the 38 death penalty states. Before funding for PCDOs was eliminated, PCDOs received grants from the Judicial Conference that were contingent upon the PCDO receiving state funding to support the work it did in state courts. Since the elimination of PCDOs, many states lack a system for the appointment of counsel for indigent prisoners in post-conviction proceedings. In states that do provide an attorney for post-conviction appeals, the system to appoint such representation varies from state to state. Some states have a public defender's office that handles post-conviction representation, however, these offices are often understaffed and underfunded. In some states that do not have public defender's offices to handle appeals, counties in the state will handle the responsibility of providing post-conviction representation. Some counties do this by awarding a contract to a law firm to handle all post-conviction cases (usually to the lowest bidder), other counties use a list of attorneys that can be appointed to take the case. If an attorney is appointed to the case, a cap is usually placed on the amount of money the state will reimburse the attorney to cover the cost of investigation and legal fees. Also, standards used by the state to determine which attorneys are eligible to handle post-conviction representation vary from state to state. If the state chooses not to provide post-conviction representation, then the petitioner must file the petition himself or hope to find an attorney that will take the case pro bono. Effectiveness of Representation The effectiveness of defense counsel can have an effect on the length of post-conviction proceedings. Some have attributed the excessive length of post-conviction review to the lack of adequate representation for indigent defendants. In a report published in 1990, the American Bar Association (ABA) concluded that inadequate counsel greatly increases the risk of convictions that are flawed by fundamental, factual, legal or constitutional error. Hence, a great deal of time during state and federal post-conviction review, especially in a capital case, is used to determine whether or not a defendant received adequate representation. The importance of effective representation is further buttressed by research conducted by Liebman, Fagan, West and Lloyd. The authors conducted a study of death sentences over a 23-year period (from 1973 to 1995). According to the authors, there were approximately 5,760 death sentences handed down in the United States during the 23-year period that was studied. Of these sentences, 79% were reviewed on direct appeal and 41% were reversed due to "serious error." With respect to the death sentences that were not overturned after direct review, 40% were overturned on post-conviction review due to serious error. According to the authors, the overall error rate in capital cases for the period 1973-1995 was 68%. The study showed that among the most common errors that were cited during state post-conviction review, egregiously incompetent defense lawyers accounted for 37% of reversals. The research concluded that during the period examined, a majority of the death sentences with reversible error were overturned by state courts. In 40% of the cases where reversible error was found, it took an average of 7.6 years after the defendant was sentenced to death for the case to complete all stages of review. It took an average of nine years for cases in which no reversible error was found to complete all stages of review. However, the authors' results led them to conclude that, "indeed, it may be that capital sentences spend so much time under judicial review precisely because they are persistently and systematically fraught with alarming amounts of error, and that the expanding production of death sentences may compound the production of error." Not all states, however, have a public defense system with similar records. For example, Arizona appoints post-conviction representation to all indigent defendants and requires the appointed attorney to be different from the one that represented the defendant at trial. Arizona has also established mandatory competency standards for any attorney that wishes to be placed on the list of eligible attorneys for appointment in capital post-conviction cases. The standards evaluate the attorney's bar status, continuing legal education, and years of experience in the practice of criminal law or post-conviction proceedings. According to congressional testimony, since 2002, Arizona has spent more than $1million for post-conviction representation in 21 cases. Attorney General Determination of AEDPA "Opt-in" for States The issue of post-conviction representation is highlighted in the debate of further limiting state prisoners' access to appeal to the federal courts for habeas relief. Under current law, states have the opportunity to "opt-in" to an expedited review process for federal habeas corpus proceedings in capital cases if they meet certain conditions. The "opt-in" provision only applies to capital cases and for qualifying states. For states that successfully "opt-in," a six-month statute of limitation for filing habeas corpus petitions is imposed on state prisoners, and the district court is required to render a final determination and judgment on a petition brought forth under the new chapter no later than 180 days after the date on which the petition is filed. The Streamlined Procedures Act ( S. 1088 / H.R. 3035 ) would allow the Attorney General to decide if states have met the requirements set forth by AEDPA to "opt-in" for the special set of rules governing federal review of state court decisions. In deciding whether a state can "opt-in," the Attorney General must determine whether the state has developed a sufficient system for appointing and funding qualified counsels during the state post-conviction process. Under the current system, federal courts must rule on whether a state has met the requirements to "opt-in." If a state has successfully met such requirements, then the federal district court would be subjected to the limitations set forth by AEDPA, as discussed above. Proponents contend that such a system produces a reluctance on the court's part to determine whether states have met the criteria. This is evident in the fact that out of the 38 states that have the death penalty, only thirteen have petitioned the courts to "opt-in" to the expedited review process since its enactment—and only one of those states was successful (Arizona). Opponents contend, however, that it would eliminate the chance for federal courts to ensure reliable convictions in state capital cases (the only exception would be for claims of actual innocence). Moreover, opponents contend that by placing this authority with the Attorney General, who is a law enforcement official, it will disturb the existing allocation of the separation of powers. Conclusion The issue of what is the proper scope of federal habeas corpus relief resurfaced in the 109 th Congress. Although trial finality is often cited by proponents who favor further restricting federal habeas corpus relief to state prisoners as a desirable goal when discussing the scope of such relief, the question of a prisoner's constitutional rights is often cited by those holding an opposing viewpoint as equally paramount to the discussion of the proper scope of habeas corpus relief. The question of what is the purpose of constitutional rights in the criminal justice system, however, can be supported by both views. For example, do such rights exist primarily to protect the innocent and ensure that only those who actually committed a crime will be convicted or does the litigation of rights serve other purposes such as controlling police and prosecutorial behavior and protecting individual privacy and dignity? Regardless of the question, there appears to be a consensus among legislatures that adequate representation, arguably at all stages of the criminal justice system, is critical to ensure that an individual's constitutional rights are not violated. As early as 1989, the Powell Committee studied the federal habeas corpus system. Although the committee found that prisoners' abuses of the system were rampant, it also found that many states lacked representation for indigent prisoners in post-conviction proceedings. As a result of the committee's study, as well as several U.S. Supreme Court rulings that addressed some of the issues with the system, Congress passed AEDPA. Among other provisions, AEDPA created a two-tier system for states with respect to federal habeas corpus proceedings. Although there was already an existing system for the processing of federal habeas corpus cases, AEDPA created a second, expedited system for capital cases for states that met certain requirements. As was the case with the committee, Congress, in passing AEDPA, recognized the need to provide an incentive to states to have a system in place that would call for the appointment of adequate counsel as well as provide compensation for the litigation of post-conviction cases. The need for such a system was more apparent in capital cases where prisoners were facing a death sentence. Although Arizona is the only state that has successfully opted-in to the expedited system, 12 additional states have attempted to do the same to no avail. Once again Congress recognized the need for effective representation in post-conviction proceedings, especially in capital cases, when it passed the Justice for All Act ( P.L. 108-405 ). Title IV of the act ( the Innocence Protection Act of 2004 ) permits the Attorney General to make grants to states so they can improve the quality of legal representation provided to indigent defendants in state capital cases. The research of Liebman, Fagan, West and Lloyd discussed previously raised the question of whether the delays commonly associated with federal habeas corpus review are necessary to make sure that justice is administered fairly. Moreover, the research raised the possibility that the errors found in capital cases may be the result of poor representation. Until the issue of adequate representation is fully addressed in the nation's criminal justice system, reform efforts will continue to be debated.

Federal habeas corpus is the statutory procedure under which state and federal prisoners may petition the federal courts to review their convictions and sentences to determine whether they are being held contrary to the laws or the Constitution of the United States. In 1996, Congress passed legislation that restricted a prisoner's ability to seek relief through the writ of habeas corpus. The 109th Congress considered legislation that would have further restricted a state prisoner's access to federal habeas relief, and would have provided for expeditious habeas review of cases where a child, public safety officer, or state judge was killed. The 110th Congress may consider similar issues. At issue for Congress is whether it should further restrict state prisoners' access to federal habeas relief by limiting the federal role in policing constitutional violations in the states' criminal justice systems. Two issues have emerged as Congress considers such legislation—trial finality and adequate representation. Proponents contend that restricting state prisoners' access to federal habeas relief is necessary due to many prisoners filing excessive and frivolous claims that result in a backlog in the system and substantial delays in the processing of these cases. Critics contend, however, that many states' criminal justice systems are flawed, with many indigent defendants lacking proper representation throughout all stages of the criminal justice system. They argue that for many defendants, the writ of habeas corpus plays a key role in restoring justice when the system fails. The current debate over whether to reform the federal habeas corpus law is centered around state capital cases. These cases experience some of the lengthier delays that have been highlighted in congressional testimony. The issue of trial finality becomes apparent in these cases because the mandated outcome—execution—is suspended pending the outcome of the habeas proceeding. An analysis of the Administrative Office of the U.S. Courts' (AOUSC) data, however, does not fully support the claim that state capital habeas cases take excessively long to process. The data reveals that although the median time for state capital cases to make their way through a federal habeas proceeding is twice as long as state non-capital cases, the rate of filing for habeas relief for both types of cases has remained constant. Since 1988, prisoners serving a federal capital sentence are entitled to counsel during all post-conviction proceedings. Unlike the federal criminal justice system, most states do not afford prisoners the same right. Critics contend that by not having a mandatory system of post-conviction representation, many states ignore the reality that indigent death row prisoners are not able to competently engage in post-conviction litigation. A study that was conducted over a 23-year period raised the question of whether the delays commonly associated with federal habeas corpus review are necessary to make sure that justice is administered fairly. The research also raised the possibility that the errors found in capital cases may be the result of poor representation. Until the issue of adequate representation is fully addressed in the states' criminal justice systems, habeas corpus reform efforts will continue to be debated. This report will be updated as warranted.

The Context of the Durban Climate Change Negotiations Delegations from more than 190 countries and regions meet from November 28 to December 9, 2011, in Durban, South Africa, to continue discussions of how to address climate change under the United Nations Framework Convention on Climate Change (UNFCCC). The year 2012 will mark both the 20 th anniversary of the opening for signature of the UNFCCC (in Rio de Janeiro, 1992) and the end of the first "commitment period" (2008-2012) of the UNFCCC's subsidiary Kyoto Protocol. The preceding 20 years have witnessed expanding evidence of many aspects of human-related, greenhouse gas (GHG)-induced climate change. However, many questions regarding the magnitude, timing, and local characteristics of natural and human-induced climate change will likely persist for decades. A large majority of countries now consider climate change to be a primary impetus to restructuring their energy sectors—and economies more broadly—toward more efficient and less climate-vulnerable models. The 1992 UNFCCC treaty was formulated as a framework to facilitate mutual movement of all countries in this process, to increase effectiveness, and to ameliorate possible adverse effects on competitiveness. The UNFCCC was also created to help avoid a problem of "free riders" (in which some benefit by the efforts of others while not taking comparable actions themselves). In sharing responsibilities for actions, Parties, including the United States, committed to "common but differentiated" responsibilities under the UNFCCC. In the Kyoto Protocol in 1997, the highest-income countries (generally called Annex I Parties) adopted commitments to reduce their GHG emissions by, on average, 5% below their 1990 levels during the "first commitment period" of 2008-2012. The Kyoto Protocol was considered a first step, led by the wealthiest countries, in a process that would eventually include all countries. As such, the low-income, major emitting countries, including China and India, did not take on GHG obligations under the Kyoto Protocol. Partly because of this, the United States declined to ratify the Kyoto Protocol and is not a Party to it. From 1990 to 2009, the greenhouse gas emissions of the Annex I Parties declined by 11.5%, not counting the emissions or sequestration associated with land use and forestry changes (LULUCF); including LULUCF, the GHG decrease was 17.6% from 1990 to 2009. During this period, the GHG emissions of the United States grew by 7.2% excluding LULUCF, or by 5.6% including LULUCF. Globally, GHG emissions rose by an estimated 29% from 1990 to 2008, although greater uncertainties regarding non-CO2 emissions and LULUCF for the rest of the world make estimates less complete and precise. (See the Text Box below for information about actions a few countries are taking to reduce their GHG emissions.) Parties to the Kyoto Protocol were due to conclude negotiations for a second commitment period by 2007; unable to do so, Parties agreed to a two-track negotiating mandate: one to extend the Kyoto Protocol, and the other to include all Parties (including the United States), called the Bali Action Plan. Still, the Bali Action Plan entailed bifurcation in the anticipated commitments for "developed" versus "developing" countries—a persistent division that contributed to missing the deadline for negotiating a new agreement in Copenhagen in 2009 (the "Copenhagen Accord"). The terms of the Copenhagen Accord were reiterated and adopted in the Cancun Agreements in 2010. This disagreement continues to impede negotiations. Although some observers hope that the Durban negotiations will overcome this hurdle by producing a mandate for quantitative, legally binding GHG obligations for all countries, others wonder whether the UNFCCC process will be able to maintain momentum even on narrower objectives, such as rules for new processes and mechanisms for finance, technology deployment, and adaptation. Participants in the climate change negotiations hold a wide spectrum of expectations for the Durban conference. For many low-income nations and environmental groups, the key ambitions for the Durban meeting are to find agreement on 1. a second commitment period under the Kyoto Protocol with stronger GHG reduction commitments from the Annex I Parties; 2. the legal form of any new agreements, including proposals for legally binding commitments to GHG reductions to take effect by 2020; 3. design of the new Green Climate Fund, and materialization of funds during the "fast-start" period of 2010-2012, provisions for the unreferenced period of 2013-2020, and the pledged mobilization of $100 billion annually by 2020; 4. design of the new Technology Mechanism; and 5. evolution of the Adaptation Committee. At the other end of the spectrum of views, there are a few delegations (e.g., Saudi Arabia, Venezuela) that may seem content with no resolutions of issues, or even collapse of the process. Arguably, the U.S. delegation goes to the Durban negotiations with compromised credibility: the United States' lack of consensus on domestic policy has impaired its ability to negotiate for unambiguous commitments or to assure others that any negotiated texts will be accepted by the Senate. After signing the Kyoto Protocol, the United States never became a Party to it. The U.S. Congress has taken up, but never enacted, legislation specifically addressing mitigation of U.S. GHG emissions, and has not fully funded requests by Presidents Clinton, (George W.) Bush, or Obama to support their pledges of financial support for deployment of low-emitting technology and other assistance to low-income countries. Congress remains divided over the stance the United States should take in the international climate change negotiations. The breadth of views may be characterized by contrasting two recent remarks by Members: On the one hand, there is the call from Representative Bobby L. Rush: "Ambitious and urgent action to help poor countries and communities confront climate change and to reduce greenhouse gas emissions here in the [United States] is both a moral imperative and in our national interest." On the other hand, Senator James M. Inhofe recently wrote to Secretary of State Hilary Clinton that "there is no chance of any climate treaty being ratified by the United States Senate in the foreseeable future." Many international stakeholders doubt the policy stasis of the United States can be overcome in the next few years; instead of looking to U.S. leadership, some observers now counsel the U.S. delegation to "get out of the way." In this context of strongly held differences within the United States, and between the United States and most other countries, the Durban conference will tackle questions of the future of the Kyoto Protocol and the possibility of a mandate for future quantitative, binding GHG obligations for all Parties. Some observers have noted that, despite entrenched negotiating positions, the meetings throughout 2011 have had a positive atmosphere, which may portend well for decisions in Durban. As noted earlier, the Durban negotiations will continue on two tracks, one under the Kyoto Protocol and one under the broader UNFCCC. In each track, key topics for negotiation in Durban are summarized in the remainder of this report. Kyoto Protocol Track Extension of the Kyoto Protocol The first commitment period of the Kyoto Protocol, 2008-2012, expires at the end of 2012. Parties to the Protocol have been unable as yet to agree on the terms of any subsequent commitment period, and many are anxious to avoid a gap between periods or the setting aside of the protocol and of the rules and institutions established by it. To most experts, the Kyoto Protocol has been important not so much because of the GHG reductions it was intended to achieve, but more because it was the first step in launching a process and establishing formal mechanisms for setting targets, monitoring and verifying Parties' performance, minimizing costs through international emissions trading mechanisms, and other infrastructural achievements. Most countries are anxious to continue the Kyoto Protocol, in part to retain the emissions trading mechanisms that it established: "emissions trading" and "Joint Implementation" among Parties with binding GHG targets, and the Clean Development Mechanism (CDM) for generating "certified emission reductions" (CERs) with projects in Parties without targets that can be sold to Parties with targets to help minimize their GHG abatement costs. A minority of Parties are less interested in sustaining efforts under the Kyoto Protocol. Canada, Japan, and Russia have said they will not offer further GHG reduction commitments in an instrument that does not engage all major emitters, specifically the United States, China, India and Brazil. A common concern about the Kyoto Protocol is the exemption from quantitative GHG reduction commitments by middle-income Parties and, more broadly, the bipolar distinction between "developed" and "developing" country parties. The European Union has said it would agree to another commitment period under the Kyoto Protocol but would require a clear "road map" to agreements that would include GHG obligations for all major emitting Parties. Australia and Norway have launched a proposal to draw new Parties into commitments: binding emissions caps for the Annex I Parties and binding commitments to GHG abatement actions by the non-Annex I Parties by 2015. Other concerns about the Kyoto Protocol, and the focus of proposals to improve it, are that some of the rules and procedures established under the Kyoto Protocol have proven to be either overly constraining, in the views of some, or unacceptably inefficient. Also, some rules regarding what may count as emission reductions or offsets remain unresolved, such as whether and how to account for many emissions and carbon uptake associated with land use and forest management. Another issue is whether unused emission allowances from the first commitment period may be carried over into subsequent periods. Long-Term Cooperation Track Two Tracks or Convergence into One Agreement The Ad Hoc Working Group on Long-Term Cooperation (AWG-LCA) continues its work but remains divided over whether it should maintain the distinction among Parties in two groups: developed and developing country Parties, or whether "common but differentiated" commitments could be achieved within a single framework. Brazil, South Africa, India, and China (the so-called BASIC countries) seek to follow the terms of the 2007 "Bali Action Plan" that divides the world into developed and developing nations. Some delegations may not support any new negotiating mandate under the UNFCCC unless agreement is reached for a new commitment period under the Kyoto Protocol with binding GHG targets only for Annex I Parties. Proposals on the negotiating table would establish a mandate to negotiate by 2015 a new agreement for GHG reductions that would take effect by 2020. There exists a current stalemate, however, on whether to pursue a new agreement. On the one hand, the United States has been cool to such a mandate: it seeks assurance that all major emitters, including China and other non-Annex I Parties, would be bound by commitments in any future agreement. Further, the United States looks for clarity on the content of any agreement before considering the degree to which it would be "legally binding." China and some other large emitters, on the other hand, resist opening discussions that could demand from them anything more than voluntary commitments. This may be due in part to the uncertainty they would face in achieving a meaningful and precise target, and to concerns that emissions limits could obstruct their priorities to raise incomes to those of the wealthy economies and to alleviate poverty. China has argued forcefully that, because the current Annex I Parties are responsible for most of the accumulated GHG in the atmosphere, they must comply first with their past commitments before it will begin negotiating new ones. Many observers consider that a formal decision by the Parties on a negotiating mandate is unlikely from the Durban meeting, but that an informal agreement may emerge. Strengthening GHG Reductions The Copenhagen Accord and the Cancun Agreements acknowledged a common goal for policies to limit warming to 2 o C (3.6 o F) above the pre-industrial global average temperature. (A number of countries, including those perceived to be most vulnerable to further warming, urge lowering that goal to a limit of 1.5 o C above pre-industrial temperatures.) To achieve such a goal, some analysts have estimated that the Annex I Parties would have to reduce their GHG emissions to 50% below 1990 levels by 2020 and more than 85% by 2050, and that the emissions of all countries would have to peak no later than 2020 and be at least 80% below 1990 levels by 2050. Notwithstanding the 2 o C goal, current pledges to abate GHG emissions are projected to be insufficient to reach it, much less the 1.5 o C option. Though many delegations (especially those of the Climate Vulnerable Forum) and observers continue pressure on other Parties to make more ambitious GHG reduction commitments, quantitative strengthening of pledges is not expected to emerge in Durban. Reporting and Reviews The UNFCCC and the Kyoto Protocol contain obligations for Parties to create and report inventories of their GHG emissions and removals by sinks of GHG (i.e., forests and other growing vegetation). The Annex I Parties must also report their policies and measures to reduce GHG emissions and their projections of the effects of these measures on emissions and removals and, if a Party to the Kyoto Protocol, to demonstrate compliance with their commitments under the Protocol. The requirements for reports have been underpinned by common methodological guidelines adopted by the Parties. For the Annex I Parties, inventories are reported annually and broader national communications are submitted approximately every four years; all these are subject to expert desk reviews and in-country reviews by external experts. The Copenhagen Accord and Cancun Agreements (CA) call for international assessment and review (IAR) of the quantified economy-wide emission reduction targets (QEETS) and mitigation of the Annex I Parties, and for international consultation and analysis (ICA) of actions by the non-Annex I Parties that do not receive international support. Actions by non-Annex I Parties that receive international financing are subject to further monitoring, reporting, and verification (MRV). Added to the reporting requirements for the wealthiest countries is a new agreement to submit information about provision of finance internationally for mitigation and adaptation. The exact purposes, scopes, methods, and potential consequences of the CA reporting and reviews remain to be defined by the Parties. Though the language concerning Annex I and non-Annex I Parties varies, some countries and experts seek parallel provisions for all Parties; other countries cite among their concerns the possible infringement of national sovereignty and lack of expert capacity as reasons to set looser requirements for non-Annex I Parties. Although agreement on the specific requirements is not expected in Durban, decisions are eventually likely regarding guidelines for biennial reports from both Annex I and non-Annex I Parties; details regarding establishment of a "registry" of actions by non-Annex I Parties; guidelines for Common Accounting Rules for both international assessment and review (IAR) and international consultation and analysis (ICA); and monitoring, reporting, and verification (MRV) of financial support provided by Parties in a common reporting format (CRF). Reduced Emissions from Deforestation and Forest Degradation, Plus Forest Conservation (REDD+) Experts widely acknowledge the importance of growing vegetation to removing carbon from the atmosphere through photosynthesis, as well as the threat of continued deforestation and forest degradation to that continued "sink." Thus, there is broad agreement that the UNFCCC should establish incentives for "Reduced Emissions from Deforestation and Forest Degradation" and for forest conservation (REDD+) in the form of credits to tropical countries that can demonstrate successful REDD+ actions. Those credits could be sold to other countries to help them achieve their GHG targets. However, Parties have not reached agreement on what would constitute acceptable baselines for measuring forest protections, how to measure the enhanced carbon uptake, and the monitoring and international verification desired to ensure that the REDD+ credits are beyond what would have happened anyway. Three REDD+ issues that may be addressed in Durban include how REDD+ actions may be financed; guidance on reporting carbon reductions from REDD+ projects, and particularly how to establish reference levels from which emission reductions may be counted; and guidance for an information system to ensure that social, governance, and environmental safeguards are effective for REDD+ actions. Finance In Cancun, Parties agreed to establish a Green Climate Fund (GCF), through which a portion of financing will flow to support low-income countries' actions on mitigation and adaptation. A Transitional Committee was tasked with recommending the design of the Fund for approval by the Conference of the Parties (COP) in Durban. The COP will also need to decide on the role and composition of a new Standing Committee on financial matters, agreed in Cancun, that would assist the COP in coordinating and streamlining the various funds established under the UNFCCC and Kyoto Protocol, and in ensuring transparent reporting and verification of financing provided by Parties. United Nations Secretary General Ban Ki-Moon has urged that governments expedite mobilization of financial resources, saying, "An empty shell is not sufficient." Fast-start funds were pledged to be "new and additional" above funding available prior to 2009, though accounting and reporting are not transparent and many observers consider that a portion of the reported funding constitutes re-packaging of previously existing flows. Many in low-income countries have stated that all the $100 billion annually pledged to be mobilized by 2020 should flow through the Green Climate Fund (GCF). Others consider that most of the funds are likely to flow through private investment and financing arrangements, bilateral cooperation, multilateral financial institutions, and a portion through the GCF. While some Parties would like to set a quantitative target for the portion to go through the GCF, other Parties (including the United States) do not see the need. Countries disagree, likewise, on the sources of financing to be counted towards the $100 billion goal. The text of the Cancun Agreements states that the monies should come from "a wide variety of sources, public and private, bilateral and multilateral, including alternative sources of finance." The United States and many high-income countries say that the majority of funding must come from the private sector through appropriate incentives; many developing countries contend that most or all of the funding should come from public funding, which they may consider to be more reliable and transparent. These latter delegations may believe that governments are better able than private businesses to commit a firm amount of funding and deliver on that commitment. There are also proponents of new mechanisms to provide steady funding that would not rely on countries' appropriations processes; proposals have included reserve and sales of carbon emission allowances, fees on international financial transactions, fees on international aviation and marine fuels, and transfer of existing subsidies for fossil fuels to the GCF. In addition, the United States and some other delegations insist that the middle-income countries, including China and India, should also contribute to the Climate Green Fund. The United States (and others) wants the World Bank to manage the new fund, while most developing countries prefer it to be managed under the United Nations, where they may achieve "direct access" to the monies and feel they have a stronger role in managerial decision-making. The October 2011 meeting of the Transitional Committee did not unanimously adopt a design for the Green Climate Fund, but referred a draft for a decision by the Conference of the Parties in Durban. The United States did not agree to the proposal, concerned that the Board of the GCF would not be acceptably independent from the COP. Technology Mechanism The Cancun Agreements mandated establishment of a Technology Mechanism, including a Technology Executive Committee (TEC) for strategic planning purposes and a Clean Technology Centre for carrying out actions to stimulate technology deployment. The COP in Durban is expected to decide several rules necessary to allow the mechanism to begin to operate in 2012, for example, how to select the members of the TEC. The COP may decide also whether addressing intellectual property is within the scope of the Technology Mechanism. This topic was omitted from the language establishing the Technology Mechanism when countries could not agree. In general, the United States and other industrialized countries would exclude intellectual property from the scope, while many low-income countries would like to consider intellectual property protection as a barrier to technology deployment and, consequently, an issue to be addressed by the TEC. In addition, several options regarding the relationships of the two bodies to each other, to the Adaptation Committee (see below), and to the Conference of the Parties are on the table for resolution in Durban. Adaptation As global temperatures continue to increase, and as many Parties perceive that pledges to mitigate GHG emissions are likely insufficient to abridge climate change, more attention and urgency is being given to addressing adaptation under the UNFCCC. Parties have differing views on what would constitute acceptable "balance" between efforts to mitigate GHG-induced climate change and to adapt to its effects. Though the Cancun Agreements established a new Adaptation Committee, it remains unclear whether and how this new process and other multilateral efforts will stimulate effective adaptation—especially by the most vulnerable populations. Agreement is expected in Durban on decisions necessary to operationalize the Adaptation Committee. Provisions in the draft decision regard the composition of the Committee; its relationship to the Conference of the Parties (COP) and to other institutions (including the Standing Committee on finance and the Green Climate Fund); and the Committee's scope and authority. Another issue is how to allocate available funding and, more specifically, how to give priority to the "most vulnerable countries." Parties may agree in Durban to include in the activities of the Adaptation Committee a work program on "loss and damage" associated with climate change in developing countries. Some Parties also seek a mandate for a decision in 2012 (at COP 18) regarding reduction of disaster risks and improved risk management, a proposed international insurance mechanism, and a proposed rehabilitation mechanism. 2013-2015 Periodic Review The COP in Cancun mandated a review from 2013-2015 of the long-term goal of limiting global temperature increase to 2 o C above the pre-industrial level, and provides for consideration of whether that goal should be tightened to 1.5 o C, as urged by small island states and other populations that consider themselves acutely vulnerable to climate change. The Durban conference will address what the scope of that review should include, and the "modalities" of how it may proceed.

Delegations from more than 190 countries and regions meet from November 28 to December 9, 2011, in Durban, South Africa, to continue discussions of how to address climate change under the United Nations Framework Convention on Climate Change (UNFCCC). The year 2012 will mark both the 20th anniversary of the opening for signature of the UNFCCC in Rio de Janeiro in 1992 and the end of the first "commitment period" (2008-2012) of the UNFCCC's subsidiary Kyoto Protocol. In 2010, the Conference of the Parties (COP) to the UNFCCC adopted a set of decisions referred to as the "Cancun Agreements." These embody pledges to abate greenhouse gas (GHG) emissions made by all major emitting Parties; reporting and review systems to ensure "transparency" of implementation; a new Green Climate Fund and a Technology Mechanism; and restatement of pledges by the wealthiest countries to mobilize financing for adaptation, mitigation, technology, and capacity-building: pledges approaching $30 billion during 2010-2012, and a goal of approaching $100 billion annually by 2020. Parties agreed that funding would come from public and private, bilateral and multilateral, and alternative sources. The most vulnerable developing countries have priority for the 2010-2012 funds. Parties meeting in Durban, South Africa, will seek agreements that would clarify and carry out the Cancun Agreements. The dialogues particularly regard any second commitment period of the Kyoto Protocol, establishment of the Green Climate Fund and Technology Mechanism; and guidelines for the reporting and review mechanisms. This report provides context for the discussions that will ensue in the Durban conference, then outlines the main issues and expectations for decisions by the Parties. Many see agreement on a new commitment period for GHG abatement under the Kyoto Protocol as key to almost all other decisions. Notably, delegations from China, India, and some other middle-income countries say they will not discuss their own possible GHG abatement commitments until the highest-income "Annex I" Parties meet their existing commitments and sign up to further reductions under the Kyoto Protocol. On the other hand, Canada, Japan, and Russia have stated they will not offer GHG reductions except in an agreement that includes legally binding commitments from all major emitters (including China, the United States, and others). The United States, which declined to ratify the Kyoto Protocol, has no quantitative and binding GHG commitments. The absence of commitments from the top three global GHG emitters (China, the United States, and India) is a matter of consternation among many delegations. In Durban, the Parties may agree on rules to establish the Climate Green Fund, the Standing Committee on Finance, the Adaptation Committee, the Technology Committee, and Clean Technology Centre, and additional decisions to promote mitigation of greenhouse gases and adaptation to impacts of climate change. A proposal exists, but seems unlikely to be adopted, to set a mandate to negotiate by 2015 a new global agreement that would take effect by 2020.

Andean Counterdrug Initiative The Andean Counterdrug Initiative was designed to provide assistance to seven countries in the broadly defined Andean region: Bolivia, Brazil, Colombia, Ecuador, Panama, Peru, and Venezuela. The region is important to U.S. drug policy because it includes three major drug producing countries (Colombia, Bolivia, and Peru) where virtually all the world's cocaine and significant quantities of high quality heroin destined for the United States are produced. U.S. objectives for the ACI program are to eliminate the cultivation and production of cocaine and opium, build law enforcement infrastructure, arrest and prosecute traffickers, and seize their assets. The region also includes two major oil producing countries (Venezuela and Ecuador), members of the Organization of Petroleum Exporting Countries (OPEC), which supply significant quantities of oil to the United States. For the five traditional Andean countries (Colombia, Venezuela, Ecuador, Peru, and Bolivia), the Andes mountain range that runs through South America poses geographical obstacles to intra-state and inter-state integration, even though the countries are linked together in the Andean Community economic integration pact. U.S. support for Plan Colombia began in 2000, when Congress passed legislation providing $1.3 billion in interdiction and development assistance ( P.L. 106-246 ) for Colombia and six regional neighbors. Funding for ACI from FY2000 through FY2007 totals about $5.7 billion. ACI is managed by the State Department's Bureau of International Narcotics and Law Enforcement Affairs (INL). Some ACI funds are transferred to the U.S. Agency for International Development (USAID) for alternative development programs. ACI funds are divided between programs that support eradication or interdiction efforts and those focused on alternative crop development and democratic institution building. On the interdiction side, programs train and support national police and military forces, provide communications and intelligence systems, support the maintenance and operations of host country aerial eradication aircraft, and improve infrastructure related to counternarcotics activities. On the alternative development side, funds support development programs in coca growing areas, including infrastructure development, and marketing and technical support for alternative crops. They also support programs assisting internally displaced persons, promoting the rule of law, and expanding judicial capabilities. ACI also funds the Air Bridge Denial Program that is currently operational in Colombia, and temporarily suspended in Peru, after an accidental shooting down of a civilian aircraft carrying U.S. missionaries in 2001. After the incident, in which two Americans died, the program in both countries was suspended until enhanced safeguards were developed. The program in Colombia resumed in August 2003. The program supports an aircraft fleet, pilot training, and logistical and intelligence support. The program tracks aircraft suspected of being involved in drug trafficking, and forces them to land for inspection. If an aircraft is repeatedly unresponsive, it may be shot down, at the direction of the commander of the Colombian Air Force. The resumption of a program in Peru is still pending the development of safety enhancements. FY2007 Funding Request The Administration requested a total of $721.5 million for FY2007 for the Andean Counterdrug Initiative, a slight reduction from FY2006. Included as part of the request was $65.7 million for a Critical Flight Safety (CFS) Program, a multi-year effort to upgrade and refurbish State Department aircraft used for eradication and interdiction missions. FY2006 was the first year for which funds were requested for this function. Congress appropriated $30 million instead of the requested $40 million. In previous years, the Air Bridge Denial (ABD) Program was a separate line item in the request and appropriation. This year, funding for the program is included in the allocation for Colombia. In the two previous fiscal years, Congress cut funding for ABD from its request of $21 million, providing $11 million in FY2005 and $13.8 million in FY2006. From year to year, the ACI allocation for Colombia has remained relatively stable, and the FY2007 request was level with previous years. For FY2007, the Administration proposed to fund the Air Bridge Denial from the Colombia allocation, since the program is only operational there. The State Department maintained that this will not result in less funding for other Colombia programs, as previous costs related to critical flight safety were proposed to be funded in the CFS program. Related Funding Programs Additional funding for the Andean region is provided through the Foreign Military Financing (FMF) program and the International Military Education and Training (IMET) program, both managed by the State Department. Recipients are subject to an aid cutoff if they have not signed so-called Article 98 agreements with the United States. Such agreements, referring to Article 98 of the Rome Treaty on the International Criminal Court, prevent the International Criminal Court from proceeding with a request for the surrender of U.S. personnel present in the country. These agreements are required under the American Services Members Protection Act of 2002, that was incorporated as Title II of H.R. 4775 , the FY2002 Supplemental Appropriations Act ( P.L. 107-206 ). The President may waive the law if it is in the national interest. Colombia, the major recipient of military assistance in Latin America, has signed an agreement. Others, such as Bolivia, Brazil, Ecuador, Peru, and Venezuela, have not signed an agreement, or have not ratified such an agreement, and could see their assistance withheld. Counternarcotics funds are not affected. In addition to State Department programs, the Defense Department has a counternarcotics account for worldwide programs involving interdiction, training, equipment, and intelligence sharing. In the Western Hemisphere, these programs are managed by the U.S. Army Southern Command. Foreign Military Financing (FMF) Foreign Military Financing (FMF) provides funding grants to foreign nations to purchase U.S. defense equipment, services, and training. The program's objectives are to assist key allies to improve their defense capabilities, to strengthen military relationships between the United States and FMF recipients, and to promote the professionalism of military forces in friendly countries. FMF is provided to Colombia and the Andean region to support the efforts of those nations to establish and strengthen national authority in remote areas that have been used by leftist guerrilla organizations, rightist paramilitaries, and narcotics traffickers. A portion of FMF funding in Fiscal Years 2002 and 2003 went for infrastructure protection of oil pipelines in Colombia. The FY2006 estimate for the Andean region is $90.1 million, with $89.1 million for Colombia. The FY2007 request was $90.85 million for the region, with Colombia proposed to receive $90 million, mainly to support Colombia's efforts to establish and strengthen national authority over remote areas that are used by terrorists and that support narcotics trafficking. For FY2007, Congress provided $86.35 million, with funds for Colombia trimmed to $85.5 million. Funds are to be used to provide interdiction boats, additional combat aircraft, training and infrastructure improvements, and maintenance and operation of the Colombian military's helicopter program. Funds are also to be used to support Colombia's interdiction capabilities, intelligence sharing, and communications. International Military Education and Training (IMET) The IMET program provides training on a grant basis to students from allied and friendly nations. Its objectives are to improve defense capabilities, develop professional and personal relationships between U.S. and foreign militaries, and influence these forces in support of democratic governance. Training focuses on the manner in which military organizations function under civilian control, civil-military relations, military justice systems, military doctrine, strategic planning, and operational procedures. IMET funding for the Andean region was estimated at $3.4 million in FY2006 out of a total of $13.4 million for all of Latin America. The request for FY2007 for the Andean countries was $2.56 million out of a hemisphere-wide total $12.6 million. The request for Colombia was $1.68 million and would focus on civil-military issues for junior and mid-grade military officers, with an emphasis on human rights. Congress provided $2.46 million in IMET for the Andean nations, with Colombia to receive $1.61 million. Defense Department Counternarcotics Account The Department of Defense has authority for counternarcotics detection and monitoring under Sections 124, 1004, and 1033 of the National Defense Authorization Act. DOD requests a lump sum for counternarcotics programs worldwide and does not request amounts by country. The allocation for FY2005 DOD counternarcotics funding for Latin America was $366.9 million, of which up to $200 million was for Colombia. For FY2006, DOD requested a total of $896 million globally for counternarcotics programs, of which it estimated spending $368 million in Latin America. Of this amount, $122 million would be in direct support of Colombia. Activities include detection and monitoring operations to assist U.S. law enforcement agencies interdict drug trafficking. In the Andean region, support is provided in the form of training, equipment, and intelligence sharing activities. Requested levels for FY2007 were reportedly in the same range as FY2006. U.S. Counternarcotics Assistance by Country Colombia7 Colombia receives the single largest portion of ACI funds. For FY2007, the Administration requested $465 million, of which $313.9 million would be for interdiction and eradication efforts, $125 million for alternative development and institution building programs, and $26.2 million for rule of law programs. Interdiction funds would support the Colombian military's aviation program and drug units with training, logistics support, operating expenses, equipment, and to upgrade forward operating locations. Assistance would also be used to support Colombian National Police aviation, eradication and interdiction programs with equipment, logistical support, training, new base construction, communications and information links. Alternative development programs would support the introduction of new licit crops, the development of agribusiness and forestry activities, and the development of local and international markets for new products. Rule of law assistance would help promote democracy through judicial reform, support for vulnerable groups, and training and technical assistance for advisors in rule of law areas. For FY2007, Congress provided the Administration's request of $465 million. It is not clear at this time how the funds will be allocated among alternative development and interdiction activities. In the FY2006 Foreign Operations Appropriations Act, Congress provided a total of $469.5 million for Colombia, divided among $310.9 million for interdiction, $131.2 million for alternative development, and $27.4 million for rule of law programs. The amount for alternative development represents a $6.5 million increase from FY2005 levels. Colombia also receives small amounts of Non-proliferation, Anti-terrorism, Demining and Related Programs (NADR), that in FY2007, would be used to address arms trafficking across Colombian borders. Colombia's spacious and rugged territory, whose western half is transversed by three parallel mountain ranges, provides ample isolated terrain for drug cultivation and processing, and contributes to the government's difficulty in exerting control throughout the nation. The country is known for a long tradition of democracy, but also for continuing violence, including a guerrilla insurgency dating back to the 1960s, and persistent drug trafficking activity. Recent administrations have had to deal with a complicated mix of leftist guerrillas, rightist paramilitaries (or "self-defense" forces), and independent drug trafficking cartels. The two main leftist guerrilla groups are the Revolutionary Armed Forces of Colombia (FARC) and the National Liberation Army (ELN). The rightist paramilitaries are coordinated by the United Self-Defense Forces of Colombia (AUC). All three groups participate in drug production and trafficking, regularly kidnap individuals for ransom, and have been accused of gross human rights abuses. The three have been designated foreign terrorist organizations by the United States. The AUC and Colombian military have been accused of collaborating in fighting the FARC and ELN. Peru Peru is the second largest recipient of ACI funding with $98.5 million requested for FY2007. This represented a reduction from $106.9 million in FY2006. For FY2007, Congress provided $103.17 million for Peru. The request proposed splitting ACI funds, with $56 million for interdiction and $42.5 million for alternative development and institution building. Interdiction funds would focus on improving Peruvian airlift operations, determining the extent of coca cultivation in the country, and demand reduction and money laundering programs. Alternative development funds would address roads, bridges, schools and health care access, land reform, and agri-business. Peru shares its northern border with Colombia, and is the second largest cocaine producer in the world. It exports high purity cocaine and cocaine base to markets in South America, Mexico, Europe, and the United States. Nevertheless, Peru has been viewed as a success story in counternarcotics efforts because joint U.S.-Peru air and riverine interdiction operations, aggressive eradication efforts, and alternative development programs have significantly reduced coca production. Counternarcotics policy in Peru has faced growing resistance from indigenous communities that view coca leaf cultivation as a cultural right and source of income. A 2004 Peruvian study found that approximately two million people use coca leaf either habitually or occasionally, and another two million use it for tea, or for traditional or ceremonial purposes. Some regions have attempted to de-criminalize coca growing, a move that the government has resisted. Bolivia8 For FY2007, the Administration proposed spending, and Congress approved, $66 million in Bolivia, a reduction from $79.2 million in FY2006. The requested amount would be divided between $35.0 million for interdiction and $31.0 million for alternative development and institution building. Interdiction funds would be used to identify and eradicate illegal crops, and to disrupt trafficking operations. Alternative development would continue support for the production of licit crops, and establish integrated justice centers in conflictive regions. Landlocked Bolivia shares no border with Colombia, but Bolivia's significant gains in reducing illegal coca production could be threatened by any successes in controlling production in Colombia. For some 20 years, U.S. relations with Bolivia have centered largely on controlling the production of coca leaf and coca paste, which was usually shipped to Colombia to be processed into cocaine. The United States has provided significant interdiction and alternative development assistance. There has been growing public opposition in Bolivia to counternarcotics policy that has served to fuel to popular discontent and political instability. Some critics believe that U.S. policy supporting forced drug crop eradication contributed to electoral support for left-of-center opposition political figures, such as Evo Morales, who won the presidency in 2005. Ecuador9 Ecuador is the fourth largest recipient of ACI funds. For FY2007, the Administration requested, and Congress approved, $17.3 million, a reduction from nearly $20 million in FY2006. Funds would be divided between $8.9 million for interdiction and $8.4 million for alternative development and institution building. The objective of assistance to Ecuador is to stop or prevent any spillover of drug trafficking and guerrilla activities from Colombia, and to stop the transit of drugs destined for the United States. On Colombia's southern border, Ecuador is the most exposed of Colombia's neighbors to the influx of drugs and guerrillas, being situated adjacent to areas in southern Colombia that are guerrilla strongholds and heavy drug producing areas. As a major transit country for cocaine and heroin from Colombia and Peru, Ecuador cooperates extensively with the United States in counternarcotics efforts. Nonetheless, the State Department reports that weak public institutions, the uneven implementation of new criminal proceedings, and widespread corruption limit the country's ability to counter drug trafficking. In November 1999, the United States signed a 10-year agreement with Ecuador for a forward operating location (FOL) in Manta, on the Pacific Coast, for U.S. aerial counterdrug detection and monitoring operations. Brazil10 Congress approved the FY2007 ACI request for Brazil totaling $4 million mainly for interdiction and law enforcement activities. Brazil's isolated Amazon region, populated largely by indigenous groups, forms Colombia's southeastern border. Brazil is not a significant drug-producing country, but is a conduit for the transit of coca paste and cocaine from Colombia to Europe and the United States. It is also becoming a final destination, with marked increases in crack cocaine and heroin abuse. Brazilians have long been concerned about the sparsely populated territory in the huge Amazon region, and they have been fearful historically of foreign intervention. In an effort to exercise control over this vast territory, Brazil has constructed a $1.4 billion sensor and radar project called the Amazon Vigilance System (SIVAM from its acronym in Portuguese), offering to share data from this system with neighbors and the United States. It has established a military base at Tabatinga, with 25,000 soldiers and policemen, with air force and navy support. In 2000, it launched COBRA, an inter-agency border security program to deal with spillover drug crime from Colombia. In 2003, Brazil expanded COBRA-like programs to its northern borders with Peru, Venezuela, and Bolivia. The programs focus on controlling land and air entry into Brazil and are headquartered at Tabatinga. Venezuela11 The Administration proposed spending, and Congress approved, $1 million in FY2007 counternarcotics assistance to Venezuela largely for interdiction and law enforcement purposes, a reduction from $2.2 million in FY2006. Because of Venezuela's extensive 1,370-mile border with Colombia, it is a major transit route for cocaine and heroin destined for the United States. Despite political tensions in U.S.-Venezuelan relations, there has been continuing cooperation with the U.S. Drug Enforcement Agency (DEA). On September 15, 2005, President Bush designated Venezuela, pursuant to international drug control certification procedures set forth in the Foreign Relations Authorization Act, FY2003 ( P.L. 107-228 ), as one of two countries that had failed demonstrably to adhere to its obligations under international narcotics agreements. At the same time, the President waived economic sanctions that would have curtailed U.S. assistance for democracy programs in Venezuela, and ACI funding will not be affected. The justification noted that despite Venezuela's increase in drug seizures over the past four years, Venezuela has not addressed the increasing use of Venezuelan territory to transport drugs to the United States. The action was taken in the aftermath of Venezuela's August 2005 decision to suspend its cooperation with the DEA. Panama12 For FY2007, the Administration requested, and Congress approved, $4 million for counternarcotics programs to assist Panama. Because of its geographic location bordering Colombia at the crossroads of North and South America, its largely unguarded coastline, and its well-developed transportation, banking, trade and financial sectors, Panama is a major transit route for illicit drugs and an attractive site for money laundering. Drug traffickers use fishing vessels, cargo ships, small aircraft, and speed boats to move illicit drugs—primarily cocaine, but also heroin and Ecstasy—through Panama. According to the Department of State, security in Panama's Darien region bordering Colombia has improved in recent years, although the smuggling of weapons and drugs across the border continues. According to the Department of State's International Narcotics Control Strategy Report, Panama's cooperation with the United States on counternarcotics efforts is excellent, although the country's difficult fiscal situation has impeded Panama's law enforcement ability. For this reason, the Department of State maintains that U.S. assistance is critical in ensuring effective Panamanian law enforcement. Congressional Conditions on Assistance Since first approving expanded assistance to Colombia for counternarcotics programs in 2000, Congress has included a number of conditions on U.S. assistance in both authorization and appropriations legislation. The most recently enacted funding legislation is the FY2007 Foreign Operations Appropriations Act, as included in the Revised Continuing Appropriations Resolution ( H.J.Res. 20 , P.L. 110-5 ). The FY2007 National Defense Authorization Act ( H.R. 5122 , P.L. 109-364 ) also included provisions relating to Colombia. The FY2006 National Defense Authorization Act ( H.R. 1815 , P.L. 109-163 ) authorized funding for Department of Defense drug interdiction activities. Expanded Authority Both the FY2007 Foreign Operations Appropriations Act and the FY2007 National Defense Authorization, maintain language, first approved by Congress in 2002, authorizing support for a unified campaign against narcotics trafficking and activities by organizations designated as terrorist organizations. Appropriations report language notes that counternarcotics, alternative development, and judicial reform should remain the principal focus of U.S. policy in Colombia. This authority shall cease if the Secretary of State has credible evidence that the Colombian Armed Forces are not vigorously attempting to restore government authority and respect for human rights in areas under the effective control of paramilitary and guerrilla organizations. Personnel Caps The FY2005 National Defense Authorization Act changed existing law with regard to the cap on the number of U.S. military and civilian contractors that can be deployed in Colombia in support of Plan Colombia. The cap on military personnel was raised from 400 to 800, and for civilian contractors, from 400 to 600. The number of deployed personnel changes as programs begin, expand, or finish. The personnel caps do not apply to foreign national contract employees, or to personnel stationed at the U.S. embassy. Helicopters The FY2007 Foreign Operations Appropriations Act maintains current law requiring that if any helicopter procured with ACI funds is used to aid or abet the operations of any illegal self-defense group or illegal security cooperative, the helicopter shall be immediately returned to the United States. Reports The FY2007 Foreign Operations Appropriations Act requires a report from the Secretary of State prior to the obligation of funds on the proposed programs, projects, and activities funded by ACI on a country-by-country basis. Colombian Human Rights The FY2007 Foreign Operations Appropriations Act allows the obligation of 75% of assistance to the Colombian Armed Forces without a determination and certification from the Secretary of State regarding respect for human rights and severing ties with paramilitary groups. The remaining 25% can be released in two installments of 12.5% each. The first installment can be made provided that the Secretary of State certifies that the Commander General of the Colombian Armed Forces is suspending members who have been credibly alleged to have committed gross violations of human rights or to have aided or abetted paramilitary organizations; the Colombian government is vigorously investigating and prosecuting members of the military who have been credibly alleged to have committed gross violations of human rights or to have aided or abetted paramilitary organizations, and promptly punishing those found guilty; the Colombian Armed Forces have made substantial progress in cooperating with civilian prosecutors and judicial authorities in such cases; the Colombian Armed Forces have made substantial progress in severing links to paramilitary organizations; the Colombian government is dismantling paramilitary leadership and financial networks by arresting commanders and financial backers; and the Colombian government is taking effective steps to ensure that land and property rights of indigenous communities are not being violated by the Colombian Armed Forces. The last installment can be made after July 31, 2007, if the Secretary of State certifies that the Colombian Armed Forces are continuing to meet the above conditions and are conducting vigorous operations to restore government authority and respect for human rights in areas under the effective control of paramilitary and guerrilla organizations. The law also requires that not later than 60 days after enactment, and every 90 days thereafter, the Secretary of State shall consult with internationally recognized human rights organizations regarding progress in meeting these conditions. The law denies visas to anyone who the Secretary of State determines has willfully provided any support to leftist guerrilla organizations or rightist paramilitaries, or has participated in the commission of gross violations of human rights in Colombia. The provision may be waived if the Secretary of State determines and certifies, on a case-by-case basis, that the issuance of a visa is necessary to support the peace process in Colombia, or for urgent humanitarian purposes. In addition to these provisions that are specific to Colombia, the law includes a provision from previous legislation, often called the Leahy amendment, that denies funds to any unit of a security force for which the Secretary of State has credible evidence of gross human rights violations. The Secretary may continue funding if he determines and reports to Congress that the foreign government is taking effective measures to bring the responsible members of these security forces to justice. Aerial Fumigation The FY2006 Foreign Operations Appropriations Act required that not more than 20% of funds used for the procurement of chemicals for aerial coca and poppy fumigation be made available unless the Secretary of State certifies that 1) the herbicide mixture is in accordance with EPA label requirements for comparable use in the United States and any additional controls recommended by the EPA; and 2) the herbicide mixture does not pose unreasonable risks or adverse effects to humans or the environment, including endemic species. Further, the Secretary of State must certify that complaints of harm to health or licit crops caused by fumigation are evaluated and fair compensation is being paid for meritorious claims. These funds may not be made available unless programs are being implemented by USAID, the Colombian government, or other organizations to provide alternative sources of income in areas where security permits for small-acreage growers whose illicit crops are targeted for fumigation. Such programs are to include consultation with local communities. For FY2007, the Senate bill maintained the provision, whereas the House version was silent. Prohibition on Participation in Combat Operations The FY2007 Foreign Operations Appropriations Act continues the prohibition on U.S. military personnel or U.S. civilian contractors participating in any combat operations in Colombia. This provision has been included in appropriation legislation since the original Plan Colombia law approved by Congress in 2000. Bolivian Human Rights The FY2006 Foreign Operations Appropriations Act required the Secretary of State to certify that the Bolivian military was respecting human rights, and that civilian judicial authorities were investigating and prosecuting, with the military's cooperation, military personnel who have been implicated in gross violations of human rights. Such a certification was to be issued before any ACI funds were made available to the Bolivian military. House and Senate versions of the FY2007 bill contained differing report language relating to human rights (House) and seizure of natural gas fields (Senate). Demobilization of Illegally Armed Groups in Colombia The FY2007 Foreign Operations Appropriations Act makes funds available to assist in the demobilization and disarmament of former members of foreign terrorist organizations (FTOs), if the Secretary of State certifies that: assistance will be provided only for individuals who have verifiably renounced and terminated any affiliation or involvement with FTOs, and are meeting all the requirements of the Colombia Demobilization program; the Colombian government is fully cooperating with the United States in extraditing FTO leaders and members who have been indicted in the United States for murder, kidnaping, narcotics trafficking, and other violations of U.S. law; the Colombian government is implementing a concrete and workable framework for dismantling the organizational structures of FTOs; and funds will not be used to make cash payments to individuals, and funds will only be available for any of the following activities: verification, reintegration (including training and education), vetting, recovery of assets for reparations for victims, and investigations and prosecutions. Major Legislative Activity in the 109th Congress, Second Session, and 110th Congress, First Session FY2007 Foreign Operations Appropriations The Andean Counterdrug Initiative, as well as FMF and IMET, are funded in the annual Foreign Operations Appropriation bill. The 109 th Congress did not complete work on a number of appropriation bills, including Foreign Operations. Three continuing resolutions were passed to maintain funding into 2007 when the 110 th Congress finished all held-over spending bills. The final bill, the FY2007 Continuing Resolution ( H.J.Res. 20 / P.L. 109-289 , as amended by P.L. 110-5 ) was passed on February 15, 2007. Funding for ACI in FY2007 was set at $721.5 million, an amount equal to the President's request. Many of the changes proposed by Congress (see House and Senate action below) were not maintained in the final version of the continuing resolution because many programs, including conditions and limitations, were retained from the FY2006 spending bill. House Action On May 25, 2006, the House Appropriations Committee marked up the FY2007 spending bill. The bill made significant changes to the way foreign aid to Colombia is provided, but largely approved the Administration's request with regard to funding levels. The most significant change was to provide some funding for Colombia from traditional aid accounts rather than the Andean Counterdrug Initiative (ACI) and to create a new account—the Trade Capacity Enhancement Fund—to which some ACI funds would be transferred. The bill provided a total of $545.2 million for Colombia, an increase of $80.4 million over the FY2006 level. Instead of funding alternative development and institution building from the ACI account, the bill provided $135 million in Economic Support Funds (ESF) for alternative development, a $10 million increase from the request. In addition, the bill provided $26.2 million in International Narcotics Control and Law Enforcement (INCLE) funds for rule of law programs, equal to the request, that were previously provided from the ACI account. Funding for drug interdiction programs at $313.9 million, equal to the request, was maintained in the ACI account. The provision of some funds from non-ACI accounts was characterized as beginning the process of treating Colombia as a strategic partner. The Subcommittee also included $70.2 million for the Critical Flight Safety Program, earmarked for operations in Colombia. This was $4.5 million above the request. The bill increased funding for Peru by $10.5 million over the request, providing $46 million for alternative development and $63 million for interdiction programs. These funds remain in the ACI account. The bill cut ACI funding for Bolivia by $15 million from the request, all of it in interdiction programs. Funding for alternative development was set at $31 million, and $20 million for interdiction. The cut was made in response to reports that Bolivia's commitment to fighting drugs was lessening. ACI funding for Brazil ($4 million), Ecuador ($17.3 million), and Panama ($4 million) was equal to the request. The $1 million requested for Venezuela was not provided. The Subcommittee created a new account—the Trade Capacity Enhancement Fund—and a new position at USAID to oversee and coordinate trade assistance programs. While the total amount provided was $522 million, the bill transferred $62.5 million of ACI funds to the new account for use in ACI countries. The Subcommittee's report noted that this is the amount of ACI funds that would have been committed to trade promotion activities. Senate Action The Senate Appropriations Committee reported its version of the Foreign Operations bill on June 29, and did not make as many changes to the ACI program as the House. The Senate bill provided $699.4 million for ACI, a decrease of $22 million. A portion of the decrease ($9.8 million) was transferred to a Democracy Fund for similar types of programs as that provided by ACI. The remaining decrease was from interdiction activities and the Critical Flight Safety Program, which was cut by $12.3 million. Both the House and Senate bills maintained reporting requirements from previous appropriations bills. FY2006 Supplemental Appropriations13 The Administration did not request additional counternarcotics funds for the Andean region in the supplemental. However, an amendment on the House floor ( H.R. 4939 ) added $26.3 million for drug interdiction aircraft in Colombia. Sponsored by Representative Burton, the funds would be used to purchase three new DC-3 fixed-wing aircraft for the Colombian Navy. The bill passed the House on March 17 and the Senate on May 4. It was signed into law on June 15 ( P.L. 109-234 ). FY2007 John Warner National Defense Authorization Act Congress included a number of provisions in the FY2007 National Defense Authorization Act ( H.R. 5122 , P.L. 109-364 signed into law on October 17, 2006) relating to DOD's role in counter-narcotics and Colombia. The bill re-authorized previous law authorizing the Defense Department to provide support for counterdrug activities of other government agencies (Sec. 1004) and to support counterdrug activities of some foreign governments (Sec. 1033). The legislation also authorized a unified counterdrug and counterterrorism campaign in Colombia. Major Legislative Activity in the 109th Congress, First Session FY2006 Foreign Operations Appropriations On June 28, 2005, the House passed H.R. 3057 ( H.Rept. 109-152 ) fully funding the ACI at $734.5 million. The Senate passed H.R. 3057 on July 20, 2005 ( S.Rept. 109-96 ) also fully funding the ACI. Both House and Senate versions included conditions on assistance, similar to current law, regarding human rights, expanded authority for a unified campaign, a prohibition on combat, and the use of U.S.-provided helicopters. The House passed the conference report ( H.Rept. 109-265 ) on November 4, 2005, and the Senate followed suit on November 10. The President signed it into law on November 14, 2005 ( P.L. 109-102 ). The final agreement fully funded the ACI at $734.5 million, but provided a different mix on how that money should be spent than did either the House or Senate bills. The conference report made ACI funds available until September 30, 2008. It adopted language with regard to demobilization, and appropriated $20 million to assist Colombia with the demobilization of rightist paramilitary groups. The conference report removed a Senate provision requiring the Secretary of State to consult with the U.N. High Commissioner for Human Rights in Colombia before making a certification that Colombia is meeting human rights conditions. Instead, the conference report stated the expectation that the Secretary will consider the opinion of the High Commissioner and the Committees on Appropriations prior to making the certification. It also increased funding for alternative development and rule of law programs in Colombia from $149.76 million, as provided by the Senate, to $158.6 million. Foreign Relations Authorization Act, FY2006 and FY2007 The House International Relations Committee reported H.R. 2601 , the Foreign Relations Authorization Act, with a provision making U.S. assistance to Colombia contingent on a certification from the Secretary of State that Colombia has a workable framework in place for the demobilization and dismantling of former combatants, and that Colombia is cooperating with the United States on extradition requests. The bill also calls for a report from the Secretary of State that details tax code enforcement in Colombia. In floor action, the House approved a Burton amendment to authorize the transfer of two tactical, unpressurized marine patrol aircraft for use by the Colombian Navy for interdiction purposes. The bill passed the House on July 20, 2005. The Senate had under consideration its version of the foreign relations authorization bill, S. 600 . The bill authorizes funding for ACI and includes a number of conditions on assistance consistent with current law. The bill authorized a unified campaign against narcotics trafficking and terrorist activities; maintains the existing cap on military and civilian personnel allowed to be stationed in Colombia; prohibits U.S. military and civilian personnel from participating in combat operations; and maintains reporting requirements relating to human rights and the conduct of U.S. operations. National Defense Authorization Act, FY2006 Both the House and Senate approved the FY2006 National Defense Authorization Act ( H.R. 1815 ) on December 19, 2005, which was signed by the President on January 6, 2006 ( P.L. 109-163 ). The law authorized $901.7 million for DOD-wide global drug interdiction activities. Unlike the FY2005 authorization, it did not include provisions relating to Colombia or the Andean Counterdrug Initiative. Appendix. Map

In February 2007, the 110th Congress finished consideration of FY2007 foreign operations appropriations legislation, held over from 2006, that provided foreign assistance to the Andean region. In addition to the Andean Counterdrug Initiative (ACI), Andean countries benefit from Foreign Military Financing (FMF), International Military Education and Training (IMET) funds, and other types of economic aid. Congress continued to express concern with the volume of drugs readily available in the United States and elsewhere in the world. The three largest producers of cocaine are Colombia, Bolivia, and Peru. Ninety percent of the cocaine in the United States originates in, or passes through, Colombia. The United States has made a significant commitment of funds and material support to help Colombia and the Andean region fight drug trafficking since the development of Plan Colombia in 1999. From FY2000 through FY2007, the United States provided a total of about $5.7 billion for the region in ACI funds. The United States also provides funding for Development Assistance (DA), Child Survival and Health (CSH), and Economic Support Funds (ESF) to some countries in the region. The Defense Department maintains a central counternarcotics account that funds activities in Latin America. Since 2002, Congress has granted expanded authority to use counternarcotics funds for a unified campaign to fight both drug trafficking and terrorist organizations in Colombia. Three illegally armed groups in Colombia that participate in drug production and trafficking have been designated foreign terrorist organizations by the State Department. In 2004, Congress also increased the level of U.S. military and civilian contractor personnel allowed to be deployed in Colombia, in response to an Administration request. The FY2007 budget request, submitted to Congress on February 6, 2006, included a total of $721.5 million for ACI, an amount Congress approved in a continuing resolution. Congress did not complete work on the Foreign Operations bill in 2006, instead passing three continuing resolutions to maintain funding into 2007. The final bill, the FY2007 Continuing Resolution (H.J.Res. 20/P.L. 109-289, as amended by P.L. 110-5) was passed on February 15, 2007. For FY2006, Congress approved the Administration's request for $734.5 million in the Foreign Operations Appropriations Act (H.R. 3057/P.L. 109-102), although a 1% across-the-board rescission reduced it to $727.2 million.

Administration of Immigration Laws The INA primarily governs the administration of U.S. immigration laws. Originally enacted in 1952, the INA unified the country's immigration laws under one umbrella framework. A number of federal agencies possess distinct responsibilities relating to the administration of the country's immigration laws, including the Department of Justice, the State Department, and, following the enactment of the Homeland Security Act of 2002, the Department of Homeland Security (DHS). Before Congress enacted the Homeland Security Act most U.S. immigration laws—particularly as they related to enforcement activities and providing relief or services to aliens within the United States—were primarily administered by the Attorney General, who largely delegated his power to two agencies within the Department of Justice (DOJ): the Immigration and Naturalization Service (INS), which carried out enforcement and service activities, and the Executive Office for Immigration Review (EOIR), which carried out adjudication activities. The Homeland Security Act, as relevant here, dismantled the INS, created DHS, and transferred many of the Attorney General's immigration administration responsibilities to the DHS Secretary. Thus, the DHS Secretary is now "charged with the administration and enforcement of [the INA] and all other laws relating to the immigration and naturalization of aliens, except insofar as this chapter or such laws relate to the powers, functions, and duties conferred upon the President, Attorney General" and other executive officers. Three components of DHS—Customs and Border Protection (CBP), Immigration and Customs Enforcement (ICE), and U.S. Citizenship and Immigration Services (USCIS)—carry out the major functions of the former INS. In particular, ICE is the primary investigative arm of immigration enforcement within the United States. When ICE determines that an alien located within the U.S. interior has violated the immigration laws—for example, by committing certain crimes—DHS typically apprehends the alien and initiates removal proceedings against him before an immigration judge (IJ) within DOJ's EOIR. CBP, on the other hand, is authorized to enforce immigration laws at the border, which involves responsibilities including the inspection and admission of aliens seeking entry into the United States and the expedited removal of certain inadmissible aliens apprehended at or near the border while seeking entry to the United States. DHS, through USCIS, also plays a role in determining eligibility and approving applications for certain forms of relief and immigration benefits (e.g., granting asylum, adjusting status, or naturalizing). Despite the transfer of most enforcement functions to DHS, removal proceedings are primarily conducted by EOIR within DOJ. During those proceedings, an IJ typically assesses an alien's removability and eligibility for relief from removal. At the removal hearing—a civil proceeding —aliens generally have a right to legal counsel at their own expense. An IJ makes an initial removability determination, which may be appealed to the Board of Immigration Appeals (BIA), the highest administrative body charged with interpreting and applying federal immigration laws. (The Attorney General is vested with discretion to review those appeals as well.) Additionally, as was the case before enactment of the Homeland Security Act, Attorney General rulings "with respect to all questions of law shall be controlling." Federal circuit courts of appeals have exclusive jurisdiction to adjudicate petitions for review of final removal orders issued in proceedings before EOIR. However, the INA limits what issues the appellate courts may review. For instance, the INA limits federal courts' jurisdiction over cases involving an alien ordered removed based on certain criminal activity, unless the alien raises a constitutional claim or question of law (e.g., whether particular conduct an alien allegedly committed is of the type of conduct covered by a particular removal ground in the INA). Another executive branch agency, the State Department, takes the lead role in processing the visas that aliens must generally obtain (with notable exceptions) to travel to, and be admitted into, the United States. Immigrant visas are granted to aliens seeking lawful permanent residency in the United States, whereas nonimmigrant visas are issued to aliens seeking temporary admission into the United States. In both cases, the alien seeking a visa must submit supporting documentation to, and interview with, a consular official who generally must be located in the country where the alien resides. Eligibility for a particular visa depends on specified criteria set forth in the INA. And, as will be discussed in further detail below, certain criminal activity may render an alien ineligible to obtain a visa to enter the United States. Criminal Grounds for Inadmissibility and Deportation Aliens who commit certain crimes may be ineligible to enter or remain in the United States. The term "inadmissible" is used to describe aliens who are generally ineligible to receive visas or otherwise be lawfully admitted into the United States. "Deportable" refers to aliens who have been lawfully admitted to the United States, but have engaged in proscribed activities that render them removable from the country. Criminal Grounds of Inadmissibility Under INA § 212(a)(2) The criminal grounds for inadmissibility are primarily set forth in INA § 212(a)(2). The criminal grounds are a mix of specific crimes and categories of crimes with varying levels of proof required for the crime to render an alien inadmissible. Criminal Grounds of Deportability Under INA § 237(a)(2) Criminal grounds for deportation are primarily listed in INA § 237(a)(2). Like the inadmissibility grounds, criminal deportation grounds also consist of specific crimes and categories of crimes. One main difference between the criminal grounds for inadmissibility and deportability is that the deportability grounds largely require the alien to have been convicted of the listed offense, whereas the inadmissibility grounds for certain crimes may only require that the alien admitted committing the offense or that immigration authorities have "reason to believe" the alien committed the proscribed conduct. Crime Involving Moral Turpitude Both the criminal grounds of inadmissibility and deportability under the INA reference a "crime of moral turpitude" as one of the bases for denying admission or deporting an alien from the United States. The federal courts and legal community have long grappled over the meaning of the term "crime involving moral turpitude" (alternatively referred to as "crime of moral turpitude"). Neither the INA nor any earlier immigration law defines the term. Some federal appellate courts have opined that the term's legislative history, or lack thereof, "leaves no doubt ... that Congress left the term 'crime involving moral turpitude' to future administrative and judicial interpretation." According to the BIA, moral turpitude "refers generally to conduct that shocks the public conscience as being inherently base, vile, or depraved, and contrary to accepted rules of morality and the duties owed between persons and to society in general." In addition, moral turpitude, according to the BIA, involves "malicious intention" and actions "contrary to justice, honesty, principle, or good morals." The federal courts generally agree that a crime that is inherently fraudulent or involves an intent to defraud is a crime involving moral turpitude. It is less settled, however, when other, nonfraudulent crimes constitute crimes involving moral turpitude. Indeed, before Attorney General Michael Mukasey's 2008 opinion in Matter of Silva-Trevino ( Silva - Tr e vino I ), which set forth a standard for assessing whether a crime involved moral turpitude, there had been an "absence of an authoritative administrative methodology for resolving moral turpitude inquiries [which had] resulted in different approaches across the country." In Silva-Tr e vino I, the Attorney General ruled that a crime involving moral turpitude must involve both reprehensible conduct and a culpable mental state, such as specific intent, deliberateness, or recklessness. Since then, the BIA has adopted this formulation as the standard for determining whether an offense constitutes a crime involving moral turpitude. Aggravated Felony INA § 101(a)(43) provides a list of crimes deemed to be aggravated felonies for immigration purposes; a list which Congress has repeatedly expanded over the years to cover additional crimes. The list includes many specific offenses, as well as several broad categories of crimes. Moreover, the "aggravated felony" definition is not limited to offenses that are punishable as felonies (i.e., offenses punishable by at least a year and a day imprisonment); certain misdemeanors are also defined as aggravated felonies for INA purposes. INA § 101(a)(43) defines the term aggravated felony by designating certain crimes and categories of crimes as aggravated felonies. Specific crimes include the following: The offenses described above include violations of state or federal law, as well as violations of foreign law if the term of imprisonment was completed within the prior 15 years. Additionally, an attempt or conspiracy to commit any of the above offenses qualifies as an aggravated felony. An alien convicted of a crime that falls within the scope of the aggravated felony definition may be subject to serious immigration consequences. A conviction for an aggravated felony is a ground for deportation. Additionally, an alien who has committed an aggravated felony and is removed from the United States will become inadmissible indefinitely, and may be ineligible for various forms of relief from removal. Crimes Affecting "Good Moral Character" As discussed in detail below, aliens must demonstrate good moral character for a certain period to qualify for various forms of relief from removal and for naturalization. The INA specifies many criminal activities that would preclude an adjudicator from finding that an alien has good moral character. In most cases, the relevant criminal activity precludes a finding of good moral character only if it is committed within a particular statutory period; in some cases, however, criminal conduct may permanently bar a finding of good moral character. The table below lists major criminal bars to finding good moral character. The list above is not exhaustive, and so an adjudicator may find that an alien lacks good moral character for other criminal activities not listed in the statute. Relief from Removal and Obtaining Certain Immigration Benefits If an alien commits conduct that falls under a ground for inadmissibility or deportability, it does not necessarily follow that the alien cannot enter or remain in the United States. The INA provides several grounds for relief—mandatory and discretionary—from exclusion or removal. These forms of relief include adjustment of status, waivers of certain grounds of inadmissibility by immigration authorities, cancellation of removal, voluntary departure, withholding of removal, and asylum, among others. However, certain criminal activity may bar an alien from being eligible for some types of relief. The Attorney General, with authority typically delegated to EOIR, adjudicates applications for relief from removal. In addition, the DHS Secretary, with authority delegated to the agency's adjudicatory component, USCIS, has the authority to adjudicate applications for immigration benefits, including asylum, refugee admissions, and adjustment of status. Some of these forms of relief and adjustment are discussed below. Waiver for Criminal Inadmissibility Grounds The INA provides that immigration authorities have discretion to waive certain grounds of inadmissibility in qualifying circumstances. Concerning the criminal grounds for inadmissibility, the scope of this waiver authority differs depending on whether the alien is seeking admission as an LPR, or whether the alien is, instead, seeking admission into the country temporarily as a nonimmigrant. Aliens Seeking Admission as LPRs INA § 212(h) grants the Attorney General and the DHS Secretary discretion to waive the application of specified criminal grounds for inadmissibility for aliens seeking admission as an LPR if certain conditions are met. In particular, the Attorney General or DHS Secretary may waive the inadmissibility grounds relating to crimes involving moral turpitude; multiple criminal convictions; prostitution and other commercialized vices; involvement in serious criminal activity for which immunity from prosecution was granted; or drug crimes relating to a single offense of simple possession of 30 grams or less of marijuana. But for the Attorney General and the DHS Secretary to exercise their discretion, the alien must establish that (1) he is inadmissible solely on the basis of prostitution-related crimes, or the activities for which he is inadmissible took place more than 15 years before applying for admission; (2) his admission would not be contrary to the national welfare, safety, or security of the United States; and (3) he has been rehabilitated. For an alien who is the spouse, parent, son, or daughter of a U.S. citizen or LPR, the Attorney General and the DHS Secretary may also waive inadmissibility if the alien establishes that the denial of admission would result in "extreme hardship" to the qualifying family member. Additionally, under the Violence Against Women Act of 1994, as amended (VAWA), the Attorney General and DHS may waive the criminal inadmissibility grounds if the alien is a battered spouse or child of a U.S. citizen or LPR. Notwithstanding the Attorney General's and DHS Secretary's discretion noted above, INA § 212(h) bars waivers for aliens convicted of murder or criminal acts involving torture, or an attempt or conspiracy to commit those crimes. Additionally, a waiver may not be granted to an alien previously admitted as an LPR if, since the date of admission, the alien has been convicted of an aggravated felony, or has not lawfully resided continuously in the United States for at least seven years before removal proceedings have been initiated against the alien. Aliens Seeking Admission as Nonimmigrants For an alien seeking admission as a nonimmigrant (e.g., students, athletes, temporary workers), DHS may exercise its discretion to authorize the nonimmigrant visa if the Secretary of State or consular officer recommends that the alien be temporarily admitted despite a criminal ground for inadmissibility. This waiver, however, is not available if the alien is inadmissible because (1) he seeks to enter the United States to engage in espionage or sabotage; (2) he seeks to enter the United States to engage in any other unlawful activity; (3) he seeks to enter the United States to engage in activity with the purpose of opposing, controlling, or overthrowing the U.S. government through force or other unlawful means; (4) the Secretary of State has reasonable grounds to believe that the alien's entry "would have potentially serious adverse foreign policy consequences for the United States"; or (5) the alien has participated in Nazi persecution or genocide. Cancellation of Removal INA § 240A authorizes cancellation of removal, another form of discretionary relief available to certain LPRs and nonimmigrants in removal proceedings. For non-LPRs, this relief is available to up to 4,000 aliens each year. Cancellation of removal allows the Attorney General to cancel the removal of qualifying LPRs and nonpermanent residents (including both those lawfully admitted as nonimmigrants and aliens who do not possess a lawful immigration status) who are inadmissible or deportable. But some criminal activity may bar the Attorney General from exercising that discretion. Eligibility for cancellation of removal differs for LPRs and non-LPRs. For LPRs, the Attorney General may exercise discretion to cancel removal if the alien 1. has been an LPR for at least five years; 2. has resided in the United States continuously for seven years after having been admitted to the United States in any status; and 3. has not been convicted of an aggravated felony. For non-LPRs, the Attorney General may exercise discretion to cancel the removal of an alien who is inadmissible or deportable and adjust the alien's status to LPR if the alien 1. has been physically present in the United States for a continuous period of at least 10 years immediately preceding the application for relief; 2. has been a person of good moral character during that 10-year period; 3. has not been convicted of an offense described in INA § 212(a)(2) (criminal grounds of inadmissibility), § 237(a)(2) (criminal grounds of deportability), or § 237(a)(3) (failure to register and falsification of documents); and 4. establishes that his removal would result in "exceptional and extremely unusual hardship" to a spouse, parent, or child who is a U.S. citizen or LPR. Thus, LPRs who have been convicted of an aggravated felony cannot receive cancellation of removal. But this statutory bar does not preclude the Attorney General from canceling the removal of LPRs who have been convicted of other types of offenses. Conversely, non-LPRs may be rendered ineligible to obtain cancellation of removal by committing any offense described within the criminal grounds for inadmissibility or deportability. Additionally, an alien who is not an LPR cannot receive cancellation of removal if he has not been a person of good moral character for at least 10 years immediately preceding the date of the application. As listed above, the INA provides many additional criminal activities—aside from convictions for crimes listed in INA §§ 212(a)(2) and 237(a)(2)—that would preclude a finding of good moral character. Voluntary Departure INA § 240B authorizes relevant immigration authorities to allow an otherwise removable alien to voluntarily depart the United States at his own expense within 60 to 120 days of being granted that permission, instead of being formally removed by the government. Voluntary departure is sometimes viewed as a quid pro quo: The government benefits by avoiding the costs of formal removal and, in exchange, the alien may depart to any country of his choosing at any time within the statutory period, while also avoiding bars to reentry that attach to a formal order of removal. There are two forms of voluntary departure. First, an alien may be granted voluntary departure instead of being subject to formal removal proceedings or before those proceedings are completed. The INA bars voluntary departure for an alien deportable on account of being convicted of an aggravated felony or under the terror-related grounds of INA § 237(a)(4)(B). Alternatively, an alien may be granted voluntary departure at the conclusion of removal proceedings. To qualify for this form of voluntary departure, the alien must, among other things, (1) have been a person of good moral character for at least five years immediately preceding the application for voluntary departure and (2) not have committed any aggravated felony. Withholding of Removal INA § 241(b)(3) bars DHS from removing an alien to a country if the alien's life or freedom would be threatened because of the alien's race, religion, nationality, membership in a particular social group, or political opinion (i.e., a protected ground). Unlike the forms of relief discussed above, withholding of removal is mandatory if an immigration judge determines that the alien is eligible. To obtain this relief, the alien must establish a "clear probability that his life or freedom will be threatened upon return to his country" (i.e., that "it appears more likely than not that he will suffer persecution if removed"). Certain conduct renders an alien ineligible to obtain withholding of removal. Proscribed conduct includes not only the commission of certain crimes, but also activity that, while not clearly identified as a criminal offense (e.g., the commission of genocide), is typically subject to criminal sanction. An alien is ineligible for withholding of removal, however, if, among other things, the alien participated in Nazi persecution, genocide, or the commission of any act of torture or extrajudicial killing; ordered, incited, assisted, or otherwise participated in the persecution of an individual on account of a protected ground; is "a danger to the community of the United States" as a result of having been convicted of "a particularly serious crime"; committed a serious nonpolitical crime outside the United States before arriving in the United States; or is otherwise a danger to the security of the United States. An alien is considered to have committed a "particularly serious crime" if, among other things, the alien has been convicted of an aggravated felony (or felonies) for which the aggregate term of imprisonment is at least five years. However, the Attorney General is authorized to determine, on a case-by-case basis, that an alien has been convicted of a particularly serious crime regardless of the length of sentence imposed for an offense. Convention Against Torture An alien who fears torture in the country of his removal may apply for protection under the Convention Against Torture (CAT). There are two forms of CAT protection: withholding of removal and deferral of removal. To qualify for CAT-based relief, an alien must show that it is more likely than not that he would be tortured by the government or a person acting with the consent or acquiescence of that government in the country of removal. If the Attorney General determines that the alien has met that burden, the alien may not be removed to the country of removal, but DHS may still remove the alien to a different country where he would not more likely than not face torture. An alien who establishes eligibility for withholding of removal under CAT may not be afforded its protection if he falls within one of the criminal-related grounds that bar applications for withholding of removal under INA § 241(b)(3). Nevertheless, deferral of removal under CAT is available to all a liens who would likely face torture if removed to a particular country, regardless of whether they have been convicted of a crime. Unlike withholding of removal under CAT, deferral of removal is a more temporary form of protection that may be terminated if (1) DHS produces evidence that the alien might not be tortured, and, following a hearing, the alien fails to meet his burden of proving that he likely faces torture; or (2) U.S. authorities obtain adequate assurances from the government of the country of removal that the alien would not be tortured. Asylum INA § 208 allows aliens to apply for asylum within one year of entering the United States, regardless of the alien's immigration status. Once in the United States, an alien may affirmatively apply for asylum with USCIS, or, alternatively, the alien may defensively apply for asylum as a form of relief from removal after removal proceedings have been initiated. An alien may be eligible for asylum if he is unable or unwilling to return to his country because of past persecution or a well-founded fear of future persecution on account of race, religion, nationality, political opinion, or membership in a particular social group. In other words, the Attorney General or DHS has the discretion to grant an alien asylum if the alien can establish that he suffered past persecution in his home country or has a well-founded fear of future persecution in that country on account of belonging to a protected group. The well-founded fear standard for asylum is less demanding than the clear probability standard for withholding of removal. Certain criminal activity may preclude an alien from receiving a grant of asylum. As in withholding of removal, asylum may not be granted to an alien who 1. is a danger to the United States community because of a conviction for a particularly serious crime; 2. has committed a serious nonpolitical crime outside the United States before arriving in the country; 3. has participated in the persecution of a person in a protected group; 4. has engaged in or is associated with terrorist activities; 5. is otherwise a danger to the security of the United States. Unlike withholding of removal, a conviction for any aggravated felony is considered a particularly serious crime in asylum determinations, regardless of the term of criminal incarceration. Refugee Status Under INA § 207, an alien may apply for refugee status from outside the United States. As with asylum, a person seeking refugee status must show that he suffered past persecution or has a well-founded fear of future persecution on account of his race, religion, nationality, membership in a particular social group, or political opinion. DHS has the discretion to admit a refugee if he (1) has not been firmly resettled in another country, (2) is determined to be "of special humanitarian concern to the United States," and (3) is generally admissible as an immigrant. Certain inadmissibility grounds, however, do not apply to an alien seeking admission as a refugee, and DHS may waive most grounds of inadmissibility under INA § 212, including those related to criminal offenses (except for drug trafficking offenses) if the agency determines that a waiver is warranted "for humanitarian purposes, to assure family unity, or when it is otherwise in the public interest." An alien who has been admitted as a refugee may adjust to LPR status after being physically present in the United States for at least one year. In adjudicating the adjustment application of a refugee, the relevant immigration authorities must determine whether, among other things, the alien is admissible for permanent residence. At this stage, DHS has the authority to waive most criminal grounds of inadmissibility—other than drug trafficking—under the same standard that applies to the inadmissibility waivers for refugees seeking admission (humanitarian purposes, family unity, or public interest). Adjustment of Status Both the DHS Secretary and the Attorney General have the discretion to adjust the status of certain nonimmigrants and other categories of aliens if certain criteria are met. The primary statute governing adjustment of status is INA § 245. But nearly all inadmissibility grounds—including all of the criminal grounds listed in INA § 212(a)(2)—preclude an alien from adjusting status under that section. However, as discussed previously, INA § 212(h) grants the Attorney General and the DHS Secretary discretion to waive the application of specified criminal inadmissibility grounds in certain circumstances. Therefore, the presence of a criminal ground of inadmissibility does not always foreclose an alien from adjusting status. Temporary Protected Status Under INA § 244, the Attorney General or DHS may grant Temporary Protected Status (TPS) relief to certain aliens from designated countries that are (1) afflicted with ongoing armed conflict posing a serious threat to the nationals of those countries; (2) disrupted by natural disasters or an epidemic; or (3) otherwise experiencing "extraordinary and temporary conditions in the foreign state that prevent aliens who are nationals of the state from returning to the state in safety." However, certain criminal activity can make an alien ineligible to receive TPS relief. Although the relevant immigration authorities have the discretion to waive most inadmissibility grounds in granting TPS relief, they may not waive inadmissibility for aliens who have 1. committed a crime involving moral turpitude other than a purely political offense (including an attempt or conspiracy to commit such a crime); 2. violated any federal, state, or foreign drug law (including an attempt or conspiracy to commit such a violation); 3. engaged in drug trafficking (other than a single offense of simple possession of 30 grams or less of marijuana); or 4. been convicted of two or more offenses (other than purely political offenses) for which the aggregate sentences were five or more years of imprisonment. In addition to those nonwaivable criminal inadmissibility grounds, the relevant immigration authorities may not grant TPS relief to an alien who (1) has been convicted of any felony or two or more misdemeanors committed in the United States; or (2) falls within the categories of aliens who are statutorily ineligible for asylum, as described above. Naturalization: Impact of Criminal Activity In general, LPRs may naturalize as U.S. citizens after residing continuously in the United States for five years and satisfying other qualifications. But to be eligible to naturalize, an LPR (among other things) must have been a person of good moral character for at least five years preceding his application for naturalization. As discussed above, the INA provides a nonexhaustive list of criminal activity that—if committed during the relevant period—would preclude a finding of good moral character and thus bar an LPR from naturalizing. However, some types of criminal activity permanently bar an alien from showing good moral character if they were committed at any time, including a conviction for an aggravated felony. The Intersection of Criminal Law and Immigration: Select Legal Issues Although immigration proceedings are civil matters, criminal proceedings are often linked to immigration proceedings because of the many immigration consequences of criminal activity. This section examines select legal issues related to criminal proceedings as they relate to immigration law, including the constitutional obligations of criminal attorneys representing alien defendants, what constitutes a "conviction" under the INA, and how adjudicatory bodies determine when a criminal conviction will trigger immigration consequences. The Duty to Inform about Immigration Consequences from a Criminal Conviction Criminal proceedings involving aliens may carry additional consequences for an alien defendant beyond criminal sanction, including potentially rendering the alien subject to removal from the country. Immigration proceedings are civil, not criminal, and so aliens facing removal charges have no Sixth Amendment right to counsel. But aliens facing criminal charges in federal and state court do have a constitutional right to effective assistance of counsel. This right applies throughout all "critical" stages of criminal proceedings, including pretrial stages when the defendant must make crucial decisions, like whether to plead guilty. In Padilla v. Kentucky, the Supreme Court held that the Sixth Amendment guarantee to effective counsel requires a lawyer representing an alien in criminal proceedings to advise the alien client if the offense to which the alien is pleading guilty could result in removal from the United States. The Court noted that under current immigration law, removal is "nearly an automatic result for a broad class of noncitizen offenders." Thus, the Court reasoned, "[t]he importance of accurate legal advice for noncitizens accused of crimes has never been more important." Recognizing that "[i]mmigration law can be complex, and ... some members of the bar who represent clients facing criminal charges ... may not be well versed in it," the Court added that "[w]hen the law is not succinct and straightforward ... a criminal defense attorney need do no more than advise a noncitizen client that pending criminal charges may carry a risk of adverse immigration consequences." But when the INA is clear about the deportation consequences of a particular crime, the Court admonished, "the duty to give correct advice is equally clear." What Constitutes a Conviction? Numerous criminal grounds for inadmissibility and deportability require the rendering of a conviction for a particular crime to be applicable. INA § 101(a)(48)(A) provides two definitions for what constitutes a conviction for INA purposes. First, INA § 101(a)(48)(A) defines a conviction as a formal judgment of guilt entered by a court. Generally, in federal cases, the final judgment ordered by the district judge contains the formal judgment of guilt. A state court's written judgment and sentence would qualify as well. If a conviction is vacated or set aside because of substantive or procedural defects in the criminal proceedings, the conviction no longer qualifies as a "conviction" under INA § 101(a)(48)(A). However, a conviction that is vacated or set aside for rehabilitative purposes (e.g., under state laws that permit a judge to expunge convictions for simple drug possession) or solely for the purpose of avoiding immigration consequences, still qualifies as a conviction under the INA. The same is true for expunged convictions: INA § 101(a)(48)(A) has been interpreted to exclude expunged convictions, unless the expungement was allowed solely for rehabilitative purposes. A second definition of conviction exists for situations in which adjudication of guilt has been withheld: There is also a "conviction" if (1) a judge or jury has found the alien guilty, or the alien pleaded guilty or nolo contendere, or the alien has admitted sufficient facts to be found guilty, and (2) the judge has ordered some sort of punishment, penalty, or restraint on the alien's liberty. Qualifying nonconfinement judicial orders can include probation and restitution. Thus, even for crimes requiring a conviction for immigration consequences to attach, there need not be, necessarily, a formal judgment of guilt or a sentence of imprisonment imposed. Approaches to Determine Whether a Criminal Conviction Triggers Immigration Consequences Although the INA, on some occasions, expressly identifies conduct referenced in a criminal statute that would render an alien removable or ineligible for certain relief, in many instances the INA simply refers to a general category of criminal behavior that carries immigration consequences. Accordingly, reviewing courts and immigration authorities must sometimes determine whether the range of conduct covered by an alien's criminal conviction falls within the scope of criminal conduct proscribed by the INA. The Supreme Court has instructed that, to make such a determination, reviewing courts should apply a "categorical approach," in which they compare the elements of the offense of conviction to the generic federal definition of the predicate crime. Under this approach, reviewing courts may look only to the statutory elements of the crime of conviction, rather than the particular facts of the case, in analyzing whether the crime "categorically fits" within the corresponding federal generic offense. In doing so, the courts must presume that the conviction was based on the least culpable conduct under the criminal statute. If the crime of conviction "sweeps more broadly" than the generic offense identified by the INA as grounds for an alien's removal, the criminal conviction cannot serve as a basis for removal. In some cases, however, the courts may look beyond the statutory definition of a criminal offense when the statute lists multiple, alternative elements of a crime, and only some of those alternatives correspond to the generic offense identified by the INA as carrying immigration consequences. Under this "modified categorical approach," courts may examine the underlying conviction documents, such as the charging papers or plea agreement, to determine which statutory elements a defendant was convicted of, and compare those elements to the federal generic offense. The Supreme Court has held, though, that a court may not apply this approach merely when a statute contains a "single, indivisible set of elements" that cover "a broader swath of conduct than the relevant generic offense." Instead, "[a] court may use the modified approach only to determine which alternative element in a divisible statute formed the basis of the defendant's conviction." The strict limitations of the categorical and modified categorical approaches do not apply, however, when a comparison between the criminal statute and a generic offense requires an examination of the "particular circumstances in which an offender committed the crime on a particular occasion." Applying this "circumstance-specific" exception, a number of reviewing courts have held that an adjudicator may consider evidence outside the conviction record to determine whether a criminal conviction involved factors specified in a generic offense that are not tied to the elements of a criminal statute. For example, the courts have considered evidence as to whether a fraud offense met a $10,000 loss threshold (a monetary threshold that must be exceeded for the offense to constitute an aggravated felony under the INA), or whether a drug conviction involved the personal use of 30 grams or less of marijuana (in which case the drug conviction would not be a deportable offense). In practice, the BIA employs the categorical and modified categorical approaches to determine whether a criminal conviction meets the definition of a predicate offense for immigration purposes. Following the Supreme Court's guidance, the BIA generally limits its analysis of criminal convictions to the statutory elements of the crime, rather than the specific facts underlying the conviction. The BIA will turn to the record of conviction only in cases in which the statute has a divisible structure that lists alternative elements of an offense, only some of which categorically match the generic offense identified by the INA as carrying immigration consequences. Previously, however, in analyzing whether a criminal conviction is a crime involving moral turpitude, the BIA adopted a less restrictive form of the categorical approach that merely examines "whether there is a 'realistic probability,' as opposed to a 'theoretical possibility,' that the statute under which the alien was convicted would be applied to reach conduct that does not involve moral turpitude." Under that analysis, if the criminal statute realistically could reach conduct not involving moral turpitude, an adjudicator could look to the record of conviction as well as "any additional evidence the adjudicator determines is necessary or appropriate to resolve accurately the moral turpitude question." Ultimately, after several reviewing courts rejected this formulation, the BIA ruled that the categorical and modified categorical approaches—as outlined by the Supreme Court—are the proper methods for determining whether an alien was convicted of a crime involving moral turpitude. The BIA, however, stated that it would continue using the realistic probability test when applying the categorical approach analysis; but, noting the circuit disagreement as to its appropriateness, announced that it would apply the controlling law of circuits that have expressly disavowed that approach. The BIA also held that application of the modified categorical approach was limited to circumstances in which the statute is divisible and lists offense elements in the alternative. And using this approach, the BIA clarified, adjudicators may look to only the record of conviction to determine which element formed the basis for the alien's conviction. Interpreting the INA Predicate Offense In many instances Congress did not incorporate a statutory definition when defining a predicate offense that carries immigration consequences, leaving it up to the courts to carve out a generic definition. For example, the INA includes as an aggravated felony "a theft offense (including receipt of stolen property)" for which the term of imprisonment is at least one year, but does not define that phrase. To fill that gap, the appellate courts have generally eschewed the more restrictive, common law definitions of "theft" or "larceny" for a broader and more modern construction: The "taking of property or an exercise of control over property without consent with the criminal intent to deprive the owner of rights and benefits of ownership, even if such deprivation is less than total or permanent." In defining the scope of other undefined predicate offenses, the courts have been less consistent. For example, the INA also includes as an aggravated felony "murder, rape, or sexual abuse of a minor." Until the Supreme Court's decision in Esquivel-Quintana v. Sessions , there was some disagreement among reviewing courts and the BIA over the scope of offenses constituting "sexual abuse of a minor" under the INA, with the BIA broadly interpreting the phrase to cover any sexually explicit conduct with a person under 18. In Esquivel-Quintana , however, the Supreme Court construed the phrase as having a more limited scope and held that, for statutory rape offenses based solely on the age of the participants, the term "sexual abuse of a minor" requires the age of the victim to be less than 16. Even in cases that involve interpreting an INA provision in which Congress has expressly incorporated a federal statutory provision to define a predicate offense, the courts sometimes have struggled to interpret that definition consistently. As mentioned above, INA § 101(a)(43) includes as an aggravated felony a "crime of violence" as that term is defined in 18 U.S.C. § 16, and for which the term of imprisonment is at least one year. 18 U.S.C. § 16 defines a crime of violence as either (1) "an offense that has an element the use, attempted use, or threatened use of physical force against the person or property of another"; or (2) "any other offense that is a felony and that, by its nature, involves a substantial risk that physical force against the person or property of another may be used in the course of committing the offense." Initially, a question raised was whether a "crime of violence," as defined in 18 U.S.C. § 16, requires a particular mens rea , or mental state. Lower courts had reached varying conclusions over the state of mind that a person must possess in order to commit a crime of violence. Some courts, for example, had ruled that grossly negligent behavior was sufficient to meet the definition, whereas other courts required a showing of recklessness or specific intent. Eventually, in its 2004 ruling in Leocal v. Ashcroft , the Supreme Court held that a crime of violence requires an "active employment" of force with "a higher degree of intent than negligent or merely accidental conduct." More recently, in October 2017, the Supreme Court heard oral argument in Session s v. Dimaya to address the circuit split about whether the second clause in the definition of a crime of violence—"any other offense that is a felony and that, by its nature, involves a substantial risk that physical force against the person of property of another may be used in the course of committing the offense" —is unconstitutionally vague. Issues for Congress Congress has repeatedly amended the INA to expand, curtail, or otherwise modify the immigration consequences of criminal conduct, and legislative proposals to alter the current framework are regularly introduced. For instance, Congress may legislate to expand or constrict criminal grounds for inadmissibility and deportability. Congress also could add or subtract crimes from those listed as aggravated felonies and clarify what crimes involve moral turpitude. Additionally, Congress could modify the number of crimes that would render an alien statutorily ineligible for relief from removal or those that preclude a finding of good moral character. Further, Congress could clarify certain terminology in the INA that some courts have deemed ambiguous, like crime of moral turpitude and crime of violence. In short, given the immigration consequences that may follow from criminal activity, Congress may consider various legislative options that would modify the standards employed by the courts and relevant immigration authorities to determine whether an alien may be excluded or deported from the United States due to criminal conduct.

Congress's power to create rules governing the admission of non-U.S. nationals (aliens) has long been viewed as plenary. In the Immigration and Nationality Act (INA), as amended, Congress has specified grounds for the exclusion or removal of aliens, including on account of criminal activity. Some criminal offenses, when committed by an alien who is present in the United States, may render that alien subject to removal from the country. And certain criminal offenses may preclude an alien outside the United States from being either admitted into the country or permitted to reenter following an initial departure. Further, criminal conduct may disqualify an alien from certain forms of relief from removal or prevent the alien from becoming a U.S. citizen. In some cases, the INA directly identifies particular offenses that carry immigration consequences; in other cases, federal immigration law provides that a general category of crimes, such as "crimes involving moral turpitude" or an offense defined by the INA as an "aggravated felony," may render an alien ineligible for certain benefits and privileges under immigration law. The INA distinguishes between the treatment of aliens who have been lawfully admitted into the United States and those who are either seeking admission into the country or are physically present in the country without having been lawfully admitted. Aliens who have been lawfully admitted into the country may be removed if they engage in conduct that renders them deportable, whereas aliens who have not been legally admitted into the United States—including both aliens seeking initial entry into the United States as well as those who are physically present in the country but were never lawfully admitted—may be excluded or removed from the country if they have engaged in conduct rendering them inadmissible. Although the INA designates certain criminal activities and categories of criminal activities as grounds for inadmissibility or deportation, the respective grounds are not identical. Moreover, a conviction for a designated crime is not always required for an alien to be disqualified on criminal grounds from admission into the United States. But for nearly all criminal grounds for deportation, a "conviction" (as defined by the INA) for the underlying offense is necessary. Additionally, although certain criminal conduct may disqualify an alien from various immigration-related benefits or forms of relief, the scope of disqualifying conduct varies depending on the particular benefit or form of relief at issue. This report identifies the major criminal grounds that may bar an alien from being admitted into the United States or render an alien within the country removable. The report also discusses additional immigration consequences of criminal activity, including those that make an alien ineligible for certain relief from removal, including cancellation of removal, voluntary departure, withholding of removal, and asylum. The report also addresses the criminal grounds that render an alien ineligible to adjust to lawful permanent resident (LPR) status, as well as those grounds barring LPRs from naturalizing as U.S. citizens. The report also discusses the scope of several general criminal categories referenced by the INA, including "crimes involving moral turpitude," "aggravated felonies," and "crimes of violence."

Introduction Food and Drug Administration (FDA) review of medical products (human drugs and devices) is funded through a combination of annual discretionary appropriations from Congress (budget authority) and user fees collected from industry. The human medical product user fee programs require reauthorization every five years to continue uninterrupted. Prior to the passage of the Food and Drug Administration Reauthorization Act of 2017 (FDARA, P.L. 115-52 ), these programs were set to expire on September 30, 2017. The reauthorization legislation typically includes additional provisions related to FDA, since for many the bill is considered "must-pass" legislation in order for FDA product review activities to continue uninterrupted; as in prior reauthorizations, Congress made this user fee legislation a vehicle for addressing other FDA-related issues. FDARA continues the five-year reauthorization cycle of the human medical product user fee programs, which allows FDA to continue collecting fees and using the revenue to support, among other things, the review of marketing applications for brand-name and generic drugs, biological and biosimilar products, and medical devices. In addition to titles that reauthorize the drug, device, generic drug, and biosimilar biological product user fee programs through FY2022, FDARA includes titles that modify the drug and device regulatory processes to encourage the development of drugs and devices for pediatric use; amend the law regarding medical device, prescription drug, and generic drug regulation; and make changes in several cross-cutting areas, such as annual reporting on inspection and analysis of use of funds. The passage of the 21 st Century Cures Act ( P.L. 114-255 ) in December 2016 resulted in numerous changes to the FDA approval processes for drugs, devices, and biologics, as well as other reforms to FDA. Therefore, fewer non-user fee provisions were included in FDARA. FDARA has nine titles, as listed in Table 1 . Titles I through IV authorize FDA to collect fees and use the revenue to support specified activities for the review of prescription brand-name drugs and biological products, medical devices, generic drugs, and biosimilar biological products. Title V makes modifications to facilitate the development and approval of drugs and devices for pediatric populations. Title VI addresses various aspects of prescription drug regulation, including drug supply chain security and expanded access, among other topics. Title VII makes modifications to the device inspection and approval processes. Title VIII makes modifications to improve patient access to generic drugs. Finally, Title IX covers annual reporting on inspections, performance reporting requirements, and analysis of use of funds, among other topics. This report presents an overview of FDARA by title and section, providing a narrative context for each title, as well as a brief description of each section. There is generally one bullet for each section, and the FDARA section number is listed after the bullet in parentheses. For lengthy sections with multiple subsections, the FDARA section number and subsection are listed after the bullet in parentheses. Where relevant, the Federal Food, Drug, and Cosmetic Act (FFDCA) section being amended by the FDARA section is noted either in the introductory text or in the bulleted text. Title I: Fees Relating to Drugs FDARA reauthorizes the prescription drug user program for another five years, from FY2018 through FY2022. With the Prescription Drug User Fee Act (PDUFA) in 1992, Congress authorized FDA to collect user fees from the manufacturers of brand-name prescription drugs and biological products and to use the revenue for specified activities. For PDUFA to succeed, FDA, industry, and Congress had to agree on two concepts: (1) performance goals —FDA would commit to performance goals it would negotiate with industry that set target completion times for various review processes; and (2) use of fees —the revenue from prescription drug user fees would be used only for activities to support the review of human drug applications and would supplement, rather than replace, funding that Congress appropriated to FDA. The added resources from user fees allowed FDA to increase staff to review what was then a backlog of new drug applications and to reduce application review times. Over the years, Congress has added similar authority regarding the regulatory review of other medical products. User fees made up 41% of the FY2017 FDA budget. , Following the precedent set by PDUFA, the user fee programs addressed in this legislation include both (1) legislation and (2) performance goal agreements developed with representatives of the regulated industry in consultation with representatives of patients and advocates, academic and scientific experts, and congressional committees. FDA may use the revenue from PDUFA fees to support "the process for the review of human drug applications." Congress has used the reauthorization process to expand the range of activities included in that phrase. The prescription drug user fee program covers new drugs whose sponsors are the first to apply for marketing approval (excluding, therefore, generic drugs) and new biological products (excluding, therefore, the newer category of biosimilar biological products). Each five-year reauthorization sets a total amount of fee revenue for the first year and provides a formula for annual adjustments to that total based on inflation and workload changes. Until now (PDUFA I through V), PDUFA had required that three types of fees each contribute one-third of the fee revenue every year: application fees, establishment fees, and product fees. In general, FDARA Title I, the Prescription Drug User Fee Amendments of 2017 (commonly referred to as PDUFA VI), makes the following amendments to FFDCA Sections 736 and 736B: Establishes a new user fee structure to include a program fee , eliminating the establishment and product fees from earlier versions of PDUFA; continues the application fee , while eliminating the fee for a supplemental application (§102(a)). Provides that of the total prescription drug user fee revenue to be collected each year, 80% is to come from program fees and 20% is to come from application fee ; establishes the annual base revenue and specifies additional dollar amounts for each of FY2018 through FY2022 (§102(b)). Modifies the inflation adjustment calculation; replaces the workload adjustment with a capacity planning adjuster; eliminates the final year adjustment provisions; establishes an annual operating reserve adjustment; and establishes an additional direct cost adjustment (§102(c)). Continues the requirement that the Secretary of Health and Human Services (HHS) establish and publish fees before the start of each fiscal year (§102(c)). Continues to require the Secretary to waive or reduce a fee (1) to protect the public health, if the fee would present a significant barrier to innovation, or (2) for the first human drug application from a small business; eliminates the authority of the Secretary to waive or reduce a fee because the fee would exceed the anticipated present and future costs of the review (§102(d)). Continues to consider an application or supplemental application to be incomplete until all required fees (now the application and program fees) have been paid (§102(e)). To ensure that user fees supplement rather than replace congressional appropriations, continues the requirements, referred to as "triggers," that FDA may collect and use fees only if, for each year, (1) FDA spends at least as much from direct appropriations for the review of human drug applications as it had in FY1997 (adjusted for inflation), and (2) appropriations (excluding fees) for FDA salaries and expenses, overall, are equal to or greater than the appropriations (excluding fees and adjusted for inflation) for FY1997 (§102(f)). Continues to allow for the early payment of authorized fees (§102(g)). Continues the requirement for annual performance and fiscal reports (§103). Authorizes these prescription drug user fees from October 1, 2017, through September 30, 2022 (§§104 and 105). Includes a savings clause noting that fees for applications accepted by FDA for filing on or after October 1, 2012, but before October 1, 2017, will remain as under prior law (§106). Title II: Fees Relating to Devices Medical devices include a wide range of products used to diagnose, treat, monitor, or prevent a disease or condition in a patient. For many medical devices, FDA approval or clearance must be obtained prior to marketing them in the United States. Congress gave FDA the authority to collect fees from the medical device industry in 2002. User fees and direct appropriations from Congress fund FDA's review of medical devices. The user fees support FDA's medical device premarket review program to help reduce the time it takes the agency to review and decide on marketing applications. The medical device user fee program was modeled after the PDUFA program. It provides revenue for FDA; in conjunction, the agency negotiates with industry to set performance goals for the premarket review of medical devices. In general, Title II, the Medical Device User Fee Amendments of 2017 (MDUFA), makes the following amendments to FFDCA Sections 738 or 738A (titles that amend a different FFDCA section are noted): Adds a definition for the term "de novo classification request" (§202). Changes the fee for a premarket notification submission, also called a 510(k) submission, from 2.0% of the premarket application (PMA) fee to 3.4% of the PMA fee; adds a new fee for a de novo classification request equal to 30% of the PMA fee; adds that no fee would be required for a de novo classification request if the device is intended solely for a pediatric population (§203(a)). Sets for each fiscal year the PMA fee amounts, which start at $294,000 per application in FY2018 and increase to $329,000 in FY2022, and annual establishment fee amounts, which start at $4,375 per manufacturing establishment in FY2018 and increase to $4,978 in FY2022; sets the total fee revenue amounts for each fiscal year, which start at $183,280,756 in FY2018 and increase to $213,687,660 in FY2022 (§203(b)). Allows for adjustment of the total revenue amounts by a specified inflation adjustment, with PMA and establishment fees adjusted accordingly (§203(c)). Adds that a small business may pay 25% of the fee established for a de novo classification request (§203(d)). Changes the fee paid by small businesses for a premarket notification submission, also called a 510(k) submission, from 50% of the standard fee to 25% of the standard fee (§203(e)). Repeals FFDCA Section 738(f), which allowed for the waiver or reduction of a PMA fee or establishment fee if in the interest of public health (§203(f)). Adds that failure to pay the fee associated with a de novo classification request shall be considered incomplete and will result in no acceptance of any and all subsequent submissions until all fees owed have been paid (§203(g)). Changes the specified amount for the "trigger" from $280,587,000 to $320,825,000 (§203(h)). Strikes paragraph 4 of FFDCA redesignated Section 738(h), which had provided a fifth-year fee offset (§203(i)). Continues the requirement for annual performance and fiscal reports (§204). Adds to FFDCA Section 514 a new subsection (d), which requires the Secretary to issue guidance and establish a pilot program under which testing laboratories may be accredited to assess whether a device conforms to established performance standards that have been accepted by the Secretary to demonstrate such conformity; requires an annual report on the progress of the pilot program to be posted on the FDA website; authority for the program sunsets on October 1, 2022 (§205). Amends FFDCA Section 523 regarding the scope of the third-party review program to specify in more detail that certain devices—such as "breakthrough devices" or any device intended to be permanently implantable or life-sustaining or life-supporting—may not be reviewed by an accredited person under the third-party review program; directs the Secretary to issue guidance on devices eligible for review under the program and factors in determining eligibility, and to post a list of eligible and ineligible devices on the FDA website; strikes a requirement to include details about this program in an FDA annual report (§206). Amends FFDCA Section 745A, Electronic Format for Submissions, providing FDA with the authority to develop and implement device presubmissions and submissions solely in electronic format following the issuance of draft guidance (no later than October 1, 2019) and final guidance one year after the close of the public comment period on the draft guidance (§207). Includes a savings clause noting that fees for applications accepted by FDA for filing before October 1, 2017, will remain as under prior law (§208). Makes effective the amendments in Title II as of October 1, 2017, and authorizes the medical device user fees from October 1, 2017, through September 30, 2022 (§§209 and 210). Title III: Fees Relating to Generic Drugs The Drug Price Competition and Patent Term Restoration Act of 1984 ("Hatch-Waxman Act," P.L. 98-417 ) established an expedited pathway for generic drugs, allowing generic drug companies to submit an abbreviated new drug application (ANDA) to FDA for premarket review. Instead of replicating animal and clinical research, the ANDA sponsor establishes that the generic product is the same as the brand drug, thereby relying on the agency's determination that the brand drug is safe and effective. While the Hatch-Waxman Act has been considered successful in increasing generic drug competition, the law has increased the number of generic drug submissions and thus FDA's workload, resulting in delayed approval of generic drug applications. In March 2012, the median review time for generic drug applications was approximately 31 months, and FDA had a backlog of over 2,500 ANDAs. In addition, as the number of manufacturing facilities increased, particularly foreign facilities, FDA had to conduct more inspections. To expedite ANDA reviews and bring uniformity to inspection schedules, Congress passed the Generic Drug User Fee Amendments (GDUFA, now called GDUFA I), which authorized FDA to collect fees from industry for agency activities associated with generic drugs. A May 2017 Government Accountability Office (GAO) report found that under GDUFA I, "the average time for FDA to complete the first review cycle decreased from 26 months for ANDAs submitted in fiscal year 2013 to about 14 months for those submitted in fiscal year 2015.... As of December 31, 2016, FDA had also acted on 89 percent of all ANDAs submitted in fiscal year 2015 within 15 months of receipt, exceeding its GDUFA [I] goal of acting on 60 percent of ANDAs received in fiscal year 2015 within 15 months." The report also states that "as of December 31, 2016, FDA had acted on 92 percent of the 4,743 applications in the backlog pending review as of October 1, 2012, exceeding its GDUFA [I] goal of acting on 90 percent of such applications before the end of fiscal year 2017." In general, Title III, Fees Relating to Generic Drugs, makes the following amendments to FFDCA Sections 744A, 744B and 744C: Modifies the definition of abbreviated new drug application by excluding an application submitted by a state or federal governmental entity for a drug that is not distributed commercially (§302). Adds a definition for the term contract manufacturing organization facility (§302). Establishes a sunset date of October 1, 2022, for the one-time backlog fee paid by sponsors of currently pending applications (§303(a)). Creates a new generic drug applicant program fee (tiered based on the number of approved ANDAs an applicant owns), to be paid annually, and eliminates the prior approval supplement (PAS) fee. Continues the drug master file (DMF) fee but makes changes to the fee due date. Continues the application filing fee (for an ANDA) but makes changes to the refunding of ANDA fees in certain specified situations. Continues the facility fee (for generic drug facilities, active pharmaceutical ingredient [API] facilities, and contract manufacturing organization [CMO] facilities), but fees would not be required if the application is pending (§303(a)). Sets the total fee revenue for FY2018 at $493,600,000 and specifies the amount to be derived from each fee type: 35% from the new generic drug applicant program fees, 33% from ANDA fees, 5% from DMF fees, 20% from generic drug facilities, and 7% from API facilities. Specifies that fees for foreign generic drug and API facilities will be $15,000 higher than for domestic facilities and that the facility fee for a CMO is equal to one-third of the fee for a non-CMO facility (§303(b)). Makes minor changes to the annual inflation adjustment and the final year adjustment (§303(c)). Adds that information about whether a facility is a CMO must be included with the annual submission to the Secretary regarding identification of facilities (§303(e)). Adds that if a generic drug applicant program fee is not paid, then the applicant's name will be placed on a publicly available arrears list, any ANDA submitted by the applicant shall not be received by the Secretary, and all drugs marketed pursuant to any ANDA held by the applicant shall be deemed misbranded until the generic drug applicant program fee is paid (§303(f)). To ensure that user fees supplement rather than replace congressional appropriations, continues the requirement ("trigger") that fees be refunded if appropriations for FDA salaries and expenses for a fiscal year are not at least the amount appropriated for FY2009 excluding fees for that year (§303). Continues the requirement for annual performance and fiscal reports and adds reporting requirements (§304). Authorizes generic drug user fees from October 1, 2017, through September 30, 2022 (§§305 and 306). Includes a savings clause noting that fees for applications accepted by FDA for filing on or after October 1, 2012, but before October 1, 2017, will remain as under prior law (§307). Title IV: Fees Relating to Biosimilar Biological Products A biosimilar is a biological product that is highly similar to a brand-name (innovator) biological product made by a pharmaceutical or biotechnology company. A biological product, or biologic, is a preparation, such as a drug or a vaccine, made from living organisms. Unlike chemical drugs, which have a relatively simple structure and method of manufacture, biosimilars, with their more complex nature and method of manufacture, are not identical to a brand-name product, but instead may be shown to be highly similar. Biological products are, in general, regulated—licensed for marketing—under the Public Health Service Act (PHSA), and chemical drugs are regulated—approved for marketing—under the FFDCA. The Drug Price Competition and Patent Term Restoration Act of 1984 ( P.L. 98-417 ), often referred to as the Hatch-Waxman Act, provided a mechanism for the approval of generic chemical drugs under the FFDCA, but not for biosimilars under the PHSA. The Biologics Price Competition and Innovation Act of 2009 (BPCIA), enacted as Title VII of the Patient Protection and Affordable Care Act of 2010 (ACA, P.L. 111-148 ), established a new regulatory authority within the FDA by creating a licensure pathway for biosimilars under the PHSA analogous to the pathway for the approval of generic chemical drugs via the Hatch-Waxman Act under the FFDCA. Under the new pathway, a biosimilar may be approved by demonstrating that it is highly similar to a biological product already allowed on the market by FDA. The Biosimilar User Fee Act of 2012 amended the FFDCA to provide FDA with the authority to collect use fees associated with the review of biosimilars. In general, Title IV, the Biosimilar User Fee Amendments of 2017 (BsUFA), makes the following amendments to FFDCA Sections 744G, 744H, and 744I: Adds a definition for the term "adjustment factor" and amends the definition for the term ''biosimilar biological product'' (§402). Adds that under certain specified conditions, a written request from a product sponsor for a refund of an annual biosimilar biological product development fee may be submitted to the Secretary not later than 180 days after the marketing application for the product is accepted for filing; removes the supplement fee; changes the application fee by no longer reducing the application fee by the cumulative amount of previously paid fees for the product; and removes the establishment fee and replaces it with a new biosimilar biological product program fee stipulating that product sponsors shall not be assessed more than five biosimilar biological product program fees for a fiscal year per application (§403(a)). Sets the total fee revenue amount for FY2018 at $45,000,000; changes the allocation of the total revenue amount for a fiscal year among the various biosimilar fees; specifies that the initial biosimilar biological product development fee for a fiscal year shall be equal to the annual biosimilar biological product development fee for that fiscal year; specifies that the reactivation fee for a fiscal year shall be equal to twice the amount of the annual biosimilar biological product development fee for that fiscal year; and specifies that amounts of all biosimilar fees will be determined by the Secretary, except that after FY2018, any biosimilar fee will not be higher than 125% of the fee amount in FY2018 until the capacity planning adjustment is available (§403(b)). Establishes that the total revenue amounts for FY2019 through FY2022 will be based on a specified formula that takes into account the annual base revenue for the fiscal year, a new inflation adjustment, a new capacity planning adjustment, and the operating reserve for the fiscal year; the total amount for FY2018 may be adjusted to reflect updated workload estimates, but the adjustment may not exceed an increase of $9,000,000 (§403(c)). Allows the spending trigger requirements to be considered met in any fiscal year if the costs funded by budget authority are not more than 15% below the inflation adjusted amount for that year; the spending trigger will remain $20 million, adjusted for inflation (§403(f)). Continues requirements for performance reports and fiscal reports; drops the requirement for an independent accounting or consulting firm study of the workload volume and costs associated with the review of biosimilar biological product applications (§404). Authorizes these biosimilar biological product user fees from October 1, 2017, through September 30, 2022 (§§405 and 406). Includes a savings clause noting that fees for applications accepted by FDA for filing before October 1, 2017, will remain as under prior law (§407). Title V: Pediatric Drugs and Devices Medical product manufacturers may be reluctant to test drugs and medical devices in children because of economic, ethical, legal, and other obstacles. Congress has acted to incentivize such testing. Current programs stem from the Best Pharmaceuticals for Children Act (BPCA), the Pediatric Research Equity Act (PREA), and the Pediatric Medical Device Safety and Improvement Act (PMDSIA). BPCA provides an incentive in the form of a six-month extension of regulatory exclusivity for a drug whose manufacturer completes FDA-requested pediatric studies. PREA requires pediatric assessments to support pediatric use information in product labeling. PMDSIA requires certain reports for pediatric medical devices, provides incentives for manufacturers to create pediatric medical devices, and gives FDA the authority to require postmarket studies of approved pediatric devices to ensure their continued efficacy and safety. Prior to the enactment of the incentive provisions in 1997, more than 80% of approved drugs contained no pediatric-specific labeling information. Since then, there have been more than 600 approved labeling changes with pediatric-specific information, 149 of which were completed following FDASIA. BPCA and PREA studies have resulted in information on new dosing, new indications of use, new safety information, and new data on effectiveness that inform labeling changes for pediatric dosing, warnings, and instructions on how to prepare formulations for pediatric populations. However, gaps continue to exist, especially for pediatric cancer, with FDA noting that because children's cancers often occur in different organs than adult cancers, manufacturers are able to obtain a waiver from PREA requirements. PMDSIA added an annual reporting requirement to Congress on pediatric medical devices, including the number of pediatric device approvals per year and the review time for these devices. In August 2017, FDA published the seventh report pursuant to this requirement. In general, Title V, Pediatric Drugs and Devices, makes the following amendments: Amends PHSA Section 409I(a)(2)(A)(ii) to require the Secretary, in developing the list of priority issues in pediatric therapeutics that require study, to consider where identification of biomarkers for particular pediatric diseases, disorders, or conditions may be beneficial in pediatric populations (§501). Amends PHSA Section 409I(c)(6) to require that reports on pediatric studies completed in accordance with an award under this section be posted on the National Institutes of Health (NIH) website, as specified, and that any interested person be allowed to submit comments on these studies to the FDA Commissioner and eliminates the requirement that the Secretary publish in the Federal Register summaries of reports that request a labeling change (§501). Amends PHSA Section 409I(d) to reauthorize the appropriation of $25 million for each of FY2018 through FY2022 for the program for pediatric studies of drugs at NIH (§501). Amends FFDCA Section 515A(a)(3) to add additional elements to the required annual report on pediatric medical devices; amends Section 305(c) of FDAAA to require a nonprofit consortium that receives a demonstration grant to provide regulatory consultation to device sponsors in support of a pediatric device application, where appropriate, and continues previously required consortium activities; amends Section 305(e) of FDAAA to reauthorize the appropriation of $5.25 million for FY2018 through FY2022 for the demonstration grant program for improving pediatric medical devices; and requires the Secretary to convene a public meeting on the development, approval or clearance, and labeling of pediatric medical devices not later than one year after enactment and to include a summary of the meeting in the report required under FFDCA Section 515A(a)(3) (§502). Amends FFDCA Section 505B(e)(2)(C) regarding meetings the Secretary is required to hold with a sponsor: requires the Secretary to meet with the sponsor of an application for a drug to treat a serious or life-threatening disease to discuss preparation of the initial pediatric study plan no later than the end-of-Phase 1 meeting or within 30 calendar days of request receipt, whichever is later; for applications for other drugs, continues the requirement that the meeting be as soon as practicable, but within 90 days of the receipt of the pediatric study plan; and requires a meeting "to discuss the bases for deferrals or waivers" (§503). Amends FFDCA Section 505B to require the sponsor of an original application for a new active ingredient, including an orphan drug, that is intended to treat an adult cancer and is directed at a molecular target that the Secretary determines is "substantially relevant to the growth or progression of a pediatric cancer" to conduct specified pediatric studies and make specified reports on the required investigation (§504). Requires the Secretary to publish on the FDA website and update regularly a list of molecular targets the Secretary determines, in consultation with the National Cancer Institute and two specified FDA committees, to be "substantially relevant to the growth or progression of a pediatric cancer" and that may trigger the new study requirements, as well as a list of molecular targets for which the pediatric study requirements will be automatically waived (§504). Requires the Secretary to convene a public meeting with specified stakeholders to inform development of guidance on implementation of the requirements surrounding molecularly targeted cancer drugs; requires the Secretary to issue final guidance on this implementation; modifies the contents of the report on pediatric assessments that the Secretary is required to submit to Congress every five years; and requires GAO to study and report to the authorizing congressional committees on the effectiveness of the new pediatric assessment and investigation requirements on the development of drugs and biologics for pediatric cancer indications (§504). Amends FFDCA Section 505A to require the Secretary to review and act on a proposed pediatric study request or proposed amendment to a written request within 120 days of submission, and to provide to the internal review committee any response to a proposed pediatric study request. Directs the Secretary, acting through the internal review committee, to develop and implement a plan to achieve earlier submission of pediatric studies under the BPCA (§505). Amends the BPCA to permanently authorize the requirement that at least one individual in FDA's Office of Pediatric Therapeutics has expertise in neonatology and requires the Secretary to issue draft guidance on clinical pharmacology considerations for neonatal studies for drugs and biologics (§505). Amends FFDCA Section 505B(d) to require the Secretary to inform the Pediatric Advisory Committee of correspondence about noncompliance with required assessments; amends FFDCA Section 505C to require that the FDA internal committee for the review of pediatric plans and other materials include expertise in "pediatric rare diseases"; and requires the Secretary to submit to Congress and post on the FDA website a report on the lack of information in the labeling for pediatric use of drugs for indications with orphan designations (§505). Title VI: Reauthorizations and Improvements Related to Drugs In general, Title VI, Reauthorization and Improvements Related to Drugs, makes the following amendments: Amends FFDCA Section 505(u) to extend until October 1, 2022, the period during which a manufacturer may elect to consider, in an application for approval under FFDCA Section 505(b), a single enantiomer (each of a pair of molecules that are mirror images of one another) that is also in an approved racemic (having both the left- and right-handed molecular forms of an active ingredient) drug as a separate active ingredient (§601). Amends FFDCA Section 566(f) to reauthorize the Critical Path Public-Private Partnerships, through which FDA can enter into collaborative agreements with eligible educational or tax-exempt organizations to foster medical product innovation, development, and safety; and authorizes the appropriation of $6 million for each of FY2018 through FY2022 (§602). Amends Section 5(c) of the Orphan Drug Act to reauthorize the appropriation of $30 million for each of FY2018 through FY2022 for grants and contracts to defray the costs of qualified testing used for orphan drug development (§603). Amends FFDCA Section 801(d) to prohibit importation of a foreign-made drug, with certain exceptions, unless it is authorized to be marketed in the United States and labeled accordingly (§604). Amends FFDCA Section 303(b) to specify an increased penalty for making, selling, or dispensing a counterfeit drug (§604). Amends FFDCA Section 569C(c) to change the definition of "patient experience data" in the context of required strategies to solicit patients' views during the medical product development process to include data intended to provide information about patients' experiences with a disease or condition or a related therapy or clinical investigation (§605). Amends FFDCA Section 505-1(e) to allow the Secretary to require, as part of a Risk Evaluation and Mitigation Strategies (REMS) communication plan, the manufacturer to disseminate to health care providers information about drug formulations or properties, including the limitations of those properties and how they may be related to serious adverse effects (§606). Amends FFDCA Section 527 to require an applicant, in order to obtain the seven-year orphan drug exclusivity for a drug that is the same drug for the same disease or condition as a previously approved drug, to demonstrate that its product is clinically superior , meaning that "the drug provides a significant therapeutic advantage over and above an already approved or licensed drug in terms of greater efficacy, greater safety, or by providing a major contribution to patient care" (§607). Amends FFDCA Section 505A(o) to expand the circumstances under which certain patent- and exclusivity-protected pediatric information may be omitted from drug labeling to permit the approval of the drug for adult use to include 505(b)(2) new drug applications (NDAs); expands the applicable categories of such exclusivity to include orphan drug, pediatric, and qualified infectious disease product exclusivity; and expands the circumstances under which the Secretary is allowed to require the applicant to include a disclaimer with respect to the omitted information (§608). Includes a Sense of Congress that the Secretary should commit to engaging with Congress to take action and enact legislation to lower the cost of prescription drugs for consumers while balancing the need to encourage innovation and increase competition in the pharmaceutical market (§609). Requires the Secretary to (1) through the FDA Commissioner and in coordination with the NIH Director and consultation with specified stakeholders (e.g., patients, health care providers), convene a public meeting to discuss clinical trial inclusion and exclusion criteria; (2) issue guidance on clinical trial eligibility criteria; (3) issue a publicly available report on the topics discussed at the meeting, as specified; and (4) acting through the FDA Commissioner, issue or revise guidance or regulations to streamline Institutional Review Board (IRB) review for individual patient expanded access protocols, and update any relevant forms associated with individual patient expanded access (§610). Requires GAO to report to Congress on individual access to investigational drugs through FDA's expanded access program, as specified (§610). Amends FFDCA Section 561A(f) to change the date by which a company must post on its website its expanded access policies to the earlier of the first initiation of a Phase 2 or Phase 3 study with respect to the investigational drug, or 15 days after the drug is designated as a breakthrough therapy, fast-track product, or regenerative advanced therapy (§610). Amends FFDCA Section 524(a)(4) to require that a tropical disease product application contains (1) reports of one or more new clinical investigations that are conducted or sponsored by the applicant and that are essential to approval, and (2) an attestation from the sponsor that such reports were not submitted as part of an application for approval or licensure in other countries, as specified, prior to September 27, 2007 (§611). Title VII: Device Inspection and Regulatory Improvements Medical devices include a wide range of products used to diagnose, treat, monitor, or prevent a disease or condition in a patient. Medical devices are broadly integrated into health care and include simple devices, such as tongue depressors, as well as more complex devices, such as implantable hips. The extent of FDA authority to regulate whether a device may be marketed in the United States and how it is monitored afterward varies across types of devices. To determine the applicability of premarket requirements (i.e., clearance or approval before marketing) for a given device, FDA classifies the device based on the risk to the patient: (1) low-risk devices are class I; (2) moderate-risk devices are class II; and (3) high-risk devices are class III. Low-risk medical devices (class I) and a very small number of moderate-risk medical devices (class II) are exempt from premarket review. In general, for moderate-risk and high-risk medical devices, manufactures may use two pathways to bring such devices to market with FDA's permission: (1) premarket approval (PMA) and (2) premarket notification submission (also known as a 510(k) submission, after the section in the FFDCA that authorized this type of notification). The PMA process generally consists of conducting clinical studies and submitting a PMA application, which requires evidence providing reasonable assurance that a device is safe and effective. This is somewhat analogous to the new drug application process. A PMA is used for novel and high-risk devices, is often lengthy and expensive, and results in a type of FDA permission called approval. The other path involves submitting a 510(k) notification demonstrating that the device is substantially equivalent to a device already on the market (a predicate device) that does not require a PMA. The 510(k) process is unique to medical devices and results in FDA clearance. Substantial equivalence is determined by comparing the performance characteristics of a new device with those of a predicate device. Once a device is on the market, FDA has authority to carry out certain activities to monitor the device's safety and effectiveness. The extent of the agency's postmarket authority is tied to characteristics of the device. Manufacturer requirements include areas such as labeling, postmarket surveillance, device tracking, and adverse event reporting. In general, Title VII makes the following amendments to various FFDCA provisions to modify various aspects of device regulation: Amends FFDCA Section 510(h) to change the inspection schedule of establishments engaged in the manufacture or processing of a device from biennial to a risk-based approach (§701). Amends FFDCA Section 704 to require the Secretary to identify and adopt uniform standards and processes for the conduct of device establishment inspections, other than for-cause inspections; these must allow unspecified exceptions to the inspection processes and standards, require notification within a reasonable timeframe to the establishment of the type and nature of the inspection, and require to the extent feasible advance notice of the records that will be requested; and requires the issuance of draft and final guidance regarding these changes to inspections (§702). Amends FFDCA Section 501(j) to add that a device may be considered to be adulterated if the device establishment delays, denies, or limits an inspection, or refuses to permit entry or inspection (§702). Amends FFDCA Section 704 to reauthorize through FY2022 the third-party inspection program, allowing accredited third parties to inspect medical device establishments (§703). Amends FFDCA Section 801 to make changes regarding the certification of devices for export: if a request for certification is denied, the basis for the denial shall be provided in writing; the Secretary shall not deny a request for certification solely on the basis of an inspection report that documents violations, provided that the device establishment has agreed to a plan of correction in response to such a report; the owner of a device establishment may request a review at any time to present new information that addresses the reasons for denial of certification; and requires the issuance of guidance regarding these changes (§704). Amends FFDCA Section 794(g) to allow the Secretary to recognize auditing organizations recognized by governmental organizations to facilitate international device establishment inspections (§705). Adds a new subsection (p) to FFDCA Section 520 regarding the approval, clearance, or classification of diagnostic imaging devices that use contrast agents; provides definitions for "applicable medical imaging device" and "contrast agent;" and specifies that the agency center that reviews devices has primary jurisdiction over such review (§706). Adds a new subsection (y) to FFDCA Section 505; following the marketing authorization of an imaging device that uses a contrast agent, the sponsor of the contrast agent may submit a supplemental application for the new use of the contrast agent; specifies that the agency center charged with the premarket review of drugs has jurisdiction over review of the supplement; and provides definitions for "new use," "applicable medical imaging device," and "contrast agent" (§706). Amends FFDCA Section 513 to make changes to the classification of accessories that are used with medical devices; directs the Secretary to classify an accessory to a device based on the risks of the accessory when used as intended, rather than the risk of the device with which the accessory is intended to be used (§707). Amends FFDCA Section 519 to direct the Secretary to initiate one or more voluntary postmarket pilot projects to generate timely and reliable information on the safety and effectiveness of approved or cleared medical devices: the pilot projects will use electronic health data and will prioritize certain specified devices and device types; requires the Secretary to submit annual reports to Congress on the status of each pilot project and sunsets the project on October 1, 2022; requires the Secretary, acting through the FDA Commissioner, to conduct a review through an independent third-party contract to determine whether such pilot projects generate reliable and timely evidence about the safety and effectiveness of medical devices (§708). Adds a new subsection (q) to FFDCA Section 520 regarding the regulation of over-the-counter hearing aids providing a definition of over-the-counter hearing aids and directing the Secretary to promulgate proposed regulations regarding over-the-counter hearing aids and to finalize such regulations, as specified; requires a determination on whether 510(k) premarket notification is necessary to provide reasonable assurance of safety and effectiveness of over-the-counter hearing aids; stipulates that state and local governments shall not establish or continue in effect any law or regulation that would restrict or interfere with the sale or use of over-the-counter hearing aids; requires the issuance of updated draft and final guidance clarifying which products meet the definition of a device and which products meet the definition of a personal sound amplification product as specified in the guidance; and requires the Secretary to submit a report to Congress analyzing any adverse events related to over-the-counter hearing aids (§709). Requires the Secretary, acting through the Commissioner of FDA, to post on the FDA website a report on the quality, safety and effectiveness of servicing medical devices (servicing is defined as "refurbishing, reconditioning, rebuilding, remarketing, repairing, remanufacturing, or other servicing of the device"); and specifies the report contents, including how the regulation of device servicing could be improved and any actions that could be taken to track adverse events caused by servicing errors (§710). Title VIII: Improving Generic Drug Access The Hatch-Waxman Act established an expedited pathway for generic drugs, allowing a generic company to submit an ANDA to FDA for premarket review. In the ANDA, the applicant must demonstrate that the generic product is the same as the brand-name drug or reference listed drug (RLD). Generally, the brand-name drug is called the RLD because the generic product's ANDA refers to the clinical data in the brand-name drug's NDA. The Approved Drug Products with Therapeutic Equivalence Evaluations ("Orange Book") lists drugs approved by FDA on the basis of safety and effectiveness, as well as those drugs identified by FDA as eligible to be RLDs, among other things. Largely because a generic sponsor does not perform costly animal and clinical research—and usually does not pay for expensive advertising, marketing, and promotion—the generic drug company is able to sell its generic drug product at a lower price compared with the brand drug product. A 2016 report sponsored by the Generic Pharmaceutical Association (GPhA, renamed as the Association for Affordable Medicines [AAM]), states that generic drugs saved the U.S. health system $1.46 trillion from 2006 to 2015. "Generics are 89% of prescriptions dispensed but only 27% of total drug costs. Put another way, brand drugs are only 11% of prescriptions but are responsible for 73% of drug spending." Because generic competition is associated with lower drug prices, some have looked to FDA to increase pharmaceutical competition, for example, by prioritizing the review of certain ANDAs. On June 27, 2017, FDA announced that the agency is taking steps to increase generic competition and facilitate market entry of lower-cost drugs. Specifically, FDA posted on its website a list of drugs that have no listed patents or exclusivities and for which there is no approved ANDA. The agency states that it intends to expedite the review of ANDAs for drugs on this list and will continue to expedite the review of ANDAs until there are three approved generics for a given drug. In general, Title VIII, Improving Generic Drug Access, makes the following amendments to various FFDCA provisions to modify aspects of generic drug regulation: Amends FFDCA Section 505(j) to require the Secretary to prioritize the review and act, within eight months of the submission date, on ANDAs submitted for drugs (1) with not more than three approved products listed in the Orange Book and for which there are no blocking patents and exclusivities and (2) on the FDA's drug shortage list (§801). Allows the Secretary to expedite the inspection or reinspection of an establishment that proposes to manufacture such a drug (§801). Requires the applicant, in order to qualify for priority review, to provide complete, accurate information regarding the facilities involved in manufacturing processes and testing of the drug to enable the Secretary to determine whether an inspection of the facility is necessary (§801). Requires the Secretary to publish on the FDA website, and update every six months, a list of drugs for which all patents and periods of exclusivity have expired and for which no ANDA has been approved (§801). Amends FFDCA Section 505(j), requiring the Secretary, upon request of the applicant, to provide review status updates for pending ANDAs, as specified (§802). Creates a new FFDCA Section 506H, "Competitive Generic Therapies" which allows the Secretary, upon request of the applicant, to designate a drug as a competitive generic therapy if the Secretary determines that there is inadequate generic competition ; defines inadequate generic competition to mean there is not more than one approved drug listed in the active section of the Orange Book that is either (1) the RLD (i.e., the brand-name drug, and there is no approved generic) or (2) a generic drug with the same RLD as the drug seeking competitive generic therapy designation (i.e., one generic drug has been approved, but the RLD has been discontinued); and allows the Secretary to expedite the development and review of an ANDA of a competitive generic therapy (§803). Allows the Secretary, upon request of the applicant, to take certain actions to increase communication, such as holding meetings with the applicant and review team during drug development (§803). Requires the applicant to report to the Secretary on whether the drug designated as a competitive generic therapy has been marketed in interstate commerce (§803). Requires the Secretary to issue draft and final guidance specifying the process and criteria by which the Secretary designates a drug as a competitive generic therapy, among other things, and to issue or revise any regulations that may be necessary for carrying out this provision (§803). Creates a new FFDCA Section 506I, "Prompt Reports of Marketing Status" which requires the holder of an approved application to (1) notify the Secretary in writing before withdrawing an approved brand-name or generic drug from sale, either 180 days before doing so or as soon as practicable, (2) notify the Secretary within 180 days of approval if the drug will not be available for sale within 180 days of the date of approval and (3) review the information in the Orange Book and notify the Secretary in writing that either all of the application holder's drugs in the active section of the Orange Book are available for sale, or that one or more of the application holder's listed drugs have been withdrawn from sale or have never been available for sale; and requires each of these notifications to include specified information (e.g., drug identity, reason for withdrawal from sale) (§804). Allows the Secretary to move the application holder's drugs from the active section of the Orange Book to the discontinued section if the holder fails to submit the required information (§804). Requires the Secretary to report to Congress annually the number of pending suitability petitions and the number of such petitions pending a substantive response for more than 180 days from the date of receipt (§805). Requires the Secretary to develop a protocol to expedite review of timely responses to inspection observations, address expedited reinspection, and establish a six-month timeline for completion of review and response to such reports; this protocol would apply to drug applications for which (1) approval depends on resolving the facility issues identified in the inspection report, (2) the facility issues are the only barrier to approval, and (3) the drug appears on the FDA shortage list or there are not more than three other approved ANDAs that reference the same listed drug and less than six tentatively approved ANDAs (§806). Requires the Secretary, not later than 180 days after enactment, to post on the FDA website a quarterly report on the number of pending ANDAs and priority review applications, as specified (§807). Amends FFDCA Section 505(j) to provide eligibility for a 180-day exclusivity period for an approved ANDA that is designated as a competitive generic therapy and for which there are no blocking patents or exclusivities, subject to forfeiture if the applicant fails to market the drug within 75 days of approval and adds definitions for the terms competitive generic therapy and first approved applicant (§808). Requires GAO to conduct a study on issues related to first cycle approvals of generic drugs, as specified, and to submit a report to the House Energy and Commerce and Senate HELP Committees describing its findings and conclusions (§809). Title IX: Additional Provisions In general, these sections do the following: Make technical corrections to the 21 st Century Cures Act ( P.L. 114-225 ) and to Sections 506F, 506G, 510, 513, 515B, and 515C of the Federal Food, Drugs, and Cosmetics Act (§901). Require the Secretary to annually post on the FDA website specified information (including timing of actions) on facility inspections necessary for drug approval, device approval, and device clearance (§902). To streamline and improve consistency in performance reporting for the four human medical product user fee programs, amend FFDCA Sections 736B, 738A, 744C, and 744I to require specified quarterly posting on the FDA website and inclusion of additional material in the annual performance reports for each program; defines quarterly "real time reporting" to include specified information on draft and final guidance and public meetings; defines annual report information to include "data, analysis, and discussion" related to (1) changes in the hiring of full-time equivalents funded by user fee revenue and by budget authority, (2) "changes in the fee revenue amounts and costs for the process for the review of human drugs, including identifying drivers of such changes" and (3) other personnel data (§903). Amend FFDCA Section 736B to require the Secretary to quarterly post on the FDA website the number of NDAs and BLAs filed and the number approved (§903). Amend FFDCA Section 738A to require the Secretary to include in the annual MDUFA performance report the number of premarket applications filed, the number of 510(k) reports submitted, and the number of expedited development and priority review designations (§903). Amend FFDCA Section 744I to require the Secretary to include in the annual BsUFA performance report information on the progress of previous application cohorts, number of new applications filed and those approved, and number of resubmitted applications and those approved (§903). Amend FFDCA Sections 736B, 738A, 744C, and 744I to require, in the annual reports of each of the human medical product user fee programs, specified analyses of the use of funds to include information such as differences between aggregate numbers of applications and approvals, analysis of performance goals met and missed, and a determination of causes of ability to meet performance goals; and require the issuance of corrective action reports; and require enhanced communications with Congress and participation in congressional hearings (§904). Require GAO to (1) conduct a study, with specified content, on FDA expenses related to facility maintenance and renovation; and (2) report to the authorizing congressional committees on the study's results and recommendations (§905). Amend FFDCA Sections 736, 738, 744B, and 744H to limit the scope of allowed uses of user fee revenue for expenses related to things such as facilities, furniture, and supplies; beginning October 1, 2023, "leasing and necessary scientific equipment" will replace "leasing, maintenance, renovation, and repair of facilities and acquisition, maintenance, and repair of fixtures, furniture, scientific equipment, and other necessary materials and supplies" (§905).

Food and Drug Administration (FDA) review of medical products (human drugs and devices) is funded through a combination of annual discretionary appropriations from Congress (budget authority) and user fees collected from industry. The human medical product user fee programs require reauthorization every five years to continue uninterrupted. Prior to the passage of the Food and Drug Administration Reauthorization Act of 2017 (FDARA, P.L. 115-52), these programs were set to expire on September 30, 2017. The reauthorization legislation typically includes additional provisions related to FDA, since for many the bill is considered "must-pass" legislation in order to not interrupt FDA product review activities. FDARA continues the five-year reauthorization cycle of the human medical product user fee programs; this reauthorization allows FDA to keep collecting user fees and using the revenue to support, among other things, the review of marketing applications for brand-name and generic drugs, biological and biosimilar products, and medical devices. In addition to titles that reauthorize the four user fee programs (drugs, devices, generic drugs, and biosimilars) through FY2022, FDARA includes titles that modify the drug and device regulatory processes to encourage the development of drugs and devices for pediatric use; amend the law regarding medical device, prescription drug, and generic drug regulation; and make changes in several cross-cutting areas, such as annual reporting on inspection and analysis of use of funds. The passage of the 21st Century Cures Act (P.L. 114-255) in December 2016 made numerous changes to the FDA approval processes for drugs, devices, and biologics, as well as other reforms to FDA; therefore, fewer non-user fee provisions were included in FDARA. This report presents an overview of FDARA by title and section, providing a narrative context for each title, as well as a brief description of each section.

Background The questions and answers in this section provide background information on termination for convenience, including (1) the legal basis for the government's right to terminate contracts for convenience; and (2) the circumstances in which the government may so terminate. What Is the Basis for the Government's Right to Terminate for Convenience? The government's right to terminate contracts for convenience generally arises from the terms of its contracts. The Federal Acquisition Regulation (FAR)—which governs many (although not all) acquisitions by executive branch agencies —requires agencies to incorporate in their procurement contracts standard clauses granting the government the right to terminate the contract for its convenience. The exact language of this clause varies depending upon the type and value of the contract, among other things. However, such clauses typically provide that [t]he Government may terminate performance of work under [the] contract in whole or, from time to time, in part if the Contracting Officer determines that a termination is in the Government's interest. These clauses typically also specify the form and content of the government's notice to the contractor when it exercises its right to terminate; the contractor's obligations upon receipt of this notice; disposal of the "termination inventory"; procedures for arriving at a termination settlement; items to be included in a termination settlement if the contractor and the agency fail to agree upon the amount to be paid; and the contractor's retention of records pertaining to the terminated portion of a contract. However, even when the contract does not expressly provide for the government's right to terminate for convenience, the government is generally still able to exercise this right, although the rationale for construing the right to terminate for convenience as an implied term of government contracts has varied over time. The Supreme Court first articulated the theory that the government could terminate contracts for its convenience in upholding the Secretary of the Navy's determination to "suspend" certain contracts for equipment which was no longer needed because the Civil War had ended. The Navy proposed to pay the contractor a reduced amount as "compensation for partial performance." The contractor objected to both the suspension of its contract and the reduced payment, arguing that the government had breached the contract since the contract did not grant the government the right to take such action. However, the Court found that the government had not breached and, thus, was not liable for anticipatory profits or consequential damages because the right to terminate is a necessary adjunct of the government's authority to contract and an inherent right of the government. The Court based this conclusion, in part, on its view that it would be of serious detriment to the public service if the power of the head[s] of [federal agencies] did not extend to providing for all … possible contingencies by modification or suspension of the contracts and settlement with the contractors. Subsequent cases similarly emphasized the "public interest" when affirming the government's right to terminate for convenience contracts that do not expressly provide for this right, but upheld this right for differing reasons. For example, immediately after World War I, when a statute authorized the President to "cancel" contracts, the Supreme Court found that the government's right to terminate was, "by implication, one of the terms" of any government contract, since the statute was "binding," and the contractor "impliedly agree[d]" to the government's right to terminate by contracting with the government. Subsequently, when federal regulations called for termination clauses to be incorporated into federal procurement contracts, the U.S. Court of Claims (acting as the predecessor of today's Court of Appeals for the Federal Circuit) found that such clauses were "incorporated, as a matter of law ... [since] the Regulations can fairly be read as permitting that interpretation." Key to the court's decision was that it viewed termination for convenience as a "deeply ingrained strand of public procurement policy." The court also noted that the contractor is entitled to some recovery when the government terminates contracts for convenience, although "[t]he termination clause limits profit to work actually done, and prohibits the recovery of anticipated but unearned profits [on work not yet performed]." When Can the Government Terminate a Contract for Convenience? The standard Termination for Convenience clauses prescribed by the Federal Acquisition Regulation (FAR) all provide that a termination for convenience is based on the "Government's interest," as opposed to the contractor's actual or anticipated failure to perform. The FAR does not define what constitutes the "Government's interest." However, the term has been broadly construed to encompass many—although not all—interests that the government might assert. For example, federal courts and agency boards of contract appeals have recognized the government's interest in terminating a contract when the government no longer needs the supplies or services covered by the contract; the contractor refuses to accept a modification of the contract; questions have arisen regarding the propriety of the award, or about continued performance of the contract; the contractor ceases to be eligible for the contract awarded; the business relationship between the agency and the contractor has deteriorated; the agency has decided to restructure its contractual arrangements or perform work in-house; the agency seeks to avoid a conflict with the Comptroller General, or a dispute with Congress; or the work contemplated by the contract is proving impossible or too costly. Terminations in almost any other circumstances could also be found to be in the government's interest. It is only in unusual circumstances—such as when the government entered the contract with no intention of fulfilling its promises, or purports to terminate the contract for convenience after the contract has expired —that a termination for convenience could be found to be improper. In such situations, the government could be liable for breach, as discussed below (" Could the Government Ever Face Liability for Breach by Terminating for Convenience? "). On the other hand, because the government has a duty to consider only its own best interests in terminating contracts for convenience, it generally would not be found to have behaved improperly if it declined to terminate a contract for convenience in order to assist the contractor. Types of Terminations and Other Reductions The questions and answers in this section discuss the differences between the various types of terminations, and between termination for convenience and other actions that the government could take. It covers total and partial terminations for convenience, constructive terminations, terminations for default, cancellation, and other reductions that agencies could make in the work performed under a contract, such as "de-scoping." How Is a Total Termination Different From a Partial One? A "total termination" encompasses all the work remaining to be performed under a contract, while a "partial termination" encompasses only some of the work remaining to be performed (e.g., deleting 50% of the work from a contract for cleaning, inspecting, and coating the roofs of family housing units). When the termination is total, the contractor could be entitled to a "termination settlement" covering the costs of work already performed, but not yet paid for; certain costs incurred in anticipation of performance; and the costs of settling the terminated work, among other things. (See " What Could a Termination Settlement Include? ") When the termination is partial, the contractor could be entitled to a similar settlement as to the terminated work, plus an "equitable adjustment" granting it more money and/or time to perform the work remaining to be performed on those portions of the contract that were not terminated. An equitable adjustment granting the contractor more money in the event of a partial termination may seem somewhat counter-intuitive, since terminations often reduce the overall price of the contract by deleting work. However, situations could potentially arise where the contractor's costs in performing the remaining portions of the contract are increased by the deletion of work, and the contractor could be entitled to an equitable adjustment to cover those increases. A partial termination is not the only means by which the government could delete some—but not all—of the work remaining to be performed under a contract. So long as the reduction is within the scope of the contract, agencies could potentially also rely upon any Changes clause incorporated into the contract to delete work covered by that clause. (See below " What Is the Difference Between Termination for Convenience and De-Scoping and Other Reductions? ") What Is a Constructive Termination? The FAR and some of the standard Termination for Convenience clauses used in government contracts require the government to give the contractor written notice of its intent to terminate. This notice is to include, among other things, the effective date of the termination; the extent of the termination; and any steps that the contractor should take to minimize the impact of the termination on personnel, if the termination will result in a "significant reduction" in the contractor's workforce. The notice also directs the contractor to cease work; furnish notice of the termination to each immediate subcontractor and supplier affected by the termination; and take certain other actions as to the termination inventory and the settlement of subcontracts. In practice, however, not all terminations for convenience result from such a written notice. In some cases, a court or board of contract appeals finds that the agency has constructively terminated a contract by its conduct even though no termination notice has been issued. The concept of "constructive termination" is a "judge-made doctrine that allows an actual breach by the government to be retroactively justified." Courts and boards of contract appeals may invoke this doctrine in order to avoid finding breach in "situations where the government stops or curtails a contractor's performance for reasons that are later found to be questionable or invalid." Constructive termination for convenience is perhaps most commonly found when an improper termination for default is "converted" into a constructive termination for convenience. (See " How Does a Termination for Default Differ from a Termination for Convenience? ") However, courts and boards of contract appeals have also found constructive termination for convenience in other circumstances, including when (1) the parties fail to agree upon the terms of a definitive contract after the work under a "letter contract" has been completed; (2) the contracting officer improperly repudiates the contract; (3) the government improperly uses a "change order" to delete work beyond the scope of the contract; and (4) the government fails to make any requisite progress payments. How Does a Termination for Default Differ from a Termination for Convenience? Unlike a termination for convenience, which is based on the government's interests, a "termination for default" is based on the contractor's anticipated or actual failure to perform substantially as required by the contract. The standard terms of federal procurement contracts grant the government the right to terminate contracts for default, as well as for convenience, by providing that the government may, subject to certain conditions, terminate this contract in whole or in part if the Contractor fails to (i) [d]eliver the supplies or to perform the services within the time specified in this contract or any extension; (ii) [m]ake progress, so as to endanger performance of this contract ...; or (iii) [p]erform any of the other provisions of this contract .... The standard terms further provide that "[i]f, after termination, it is determined that the Contractor was not in default, or that the default was excusable, the rights and obligations of the parties shall be the same as if the termination had been issued for the convenience of the Government." In other words, if the government exercises its right to terminate for default, and is later found to have exercised this right improperly, the default termination will be treated as a constructive termination for convenience, as previously discussed (see " What Is a Constructive Termination? "). Thus, the government would generally be liable to the contractor for only a termination settlement, not damages for breach. When a contract is terminated for default, the contractor may be entitled to payment for any work it has already performed for which it has not been paid. However, it is generally not entitled to profit on costs incurred in anticipation of performance, and it could potentially be liable to the government for liquidated damages, any excess costs of re-procurement, or certain other costs. How Does Cancellation Differ from Termination for Convenience? Commentators sometimes use the terms "termination" and "cancellation" as if they were synonymous. The Federal Acquisition Regulation (FAR), however, distinguishes between termination and cancellation. The FAR defines "cancellation" as the bringing to an end of the "total requirements of all remaining program years," and contrasts cancellation with termination on the grounds that termination can be effected at any time during the life of the contract (cancellation is effected between fiscal years) and can be for the total quantity or partial quantity (where as cancellation must be for all subsequent fiscal years' quantities). In other words, for purposes of the FAR, cancellation affects only multiyear contracts, and occurs between fiscal years. Termination, in contrast, can affect multiyear contracts (at times other than between years) or other contracts (at any time). A "multiyear contract" is one that extends over more than one year without the government having to establish and exercise options for each program year after the first. When a multiyear contract is canceled, the contractor is generally paid a "cancellation charge." This charge is like a termination settlement in that it covers (1) costs (i) incurred by the Contractor and/or subcontractor, (ii) reasonably necessary for performance of the contract, and (iii) that would have been equitably amortized over the entire multiyear contract period but, because of the cancellation, are not so amortized, and (2) a reasonable profit or fee on the costs. However, cancellation charges generally cannot exceed the "cancellation ceiling" specified in the contract. This ceiling represents the maximum amount that the contractor may recover (although the contractor will not necessarily recover this amount). The ceiling is lowered each year to exclude amounts allocable to items included in the prior year's program requirements. What Is the Difference Between Termination for Convenience and De-Scoping and Other Reductions? Termination for convenience is sometimes confused with "de-scoping" or other actions that the government could take pursuant to a contract that would reduce or limit the work that might have been originally contemplated by the parties to the contract. Partial terminations for convenience, in particular, can resemble "de-scoping" pursuant to any Changes clause incorporated in the contract. Many (although not all) federal procurement contracts include a Changes clause that permits the government "at any time ... [to] make changes within the general scope of th[e] contract" to certain terms of the contract, such as (1) the contract specifications; (2) the method or manner of performing the work; (3) any government-furnished property or services to be used in performing the contract; (4) the method of shipping or packing; (5) the place of delivery (for supplies); and (6) the time and place of performance (for services). When the proposed reductions are among those contemplated by any Changes clause and are "within the scope of the contract," the contracting officer generally may either "de-scope" the work pursuant to the Changes clause or partially terminate it for convenience. Terminations should also be distinguished from determinations not to exercise options, or not to order more than the minimum quantity under an indefinite-quantity/indefinite-delivery (ID/IQ) contract. In both of the latter situations, the contractor ends up not obtaining work that the contractor may have been counting on, or that the parties may have contemplated being performed. However, in these situations, the contractor has no legal entitlement to the work that the government determines not to have performed, which is not the case with terminations. An option is a "a unilateral right in a contract by which, for a specified time, the Government may elect to purchase additional supplies or services called for by the contract, or may elect to extend the term of the contract." If the government decides not to exercise the option, the contractor is entitled to no recovery. Similarly, a contractor under an ID/IQ contract is entitled to only the minimum purchase guaranteed in the contract, and cannot recover if the government fails to make purchases in excess of the minimum. In contrast, when the government wholly or partially terminates a contract for convenience, the government is taking away work that the contractor is legally entitled to perform, and the contractor is potentially entitled to a termination settlement or other remedy. Government Liability in the Event of Termination for Convenience The questions and answers in this section focus upon the government's potential liability in the event of a termination for convenience. It begins by addressing how termination settlements are typically arrived at and what they may include before discussing the circumstances in which the government could potentially face liability for breach as a result of the exercise of its contractual and/or inherent right to terminate for convenience. How Is a Termination Settlement Arrived At? When the government exercises its right to terminate, it is typically obligated, pursuant to the terms of the contract, to pay the contractor for certain costs, discussed below (see " What Could a Termination Settlement Include? "). This payment is commonly referred to as a "termination settlement," and the contract generally also prescribes the procedures for arriving at the termination settlement. The standard termination clauses prescribed by the Federal Acquisition Regulation (FAR) generally require the contractor to submit a "final termination settlement proposal" to the contracting officer within one year from the effective date of the termination (or any longer period granted by the contracting officer). This proposal can form the basis for an agreement between the contractor and the contracting officer regarding all or part of the amount to be paid because of the termination. However, if the contractor fails to submit a proposal within the requisite time period, the contracting officer may determine the amount, if any, due to the contractor and pay it. Similarly, if the contractor and the contracting officer fail to agree on the "whole amount" to be paid, the contracting officer may determine the amount based upon certain factors specified in the contract (e.g., the price for any completed work that has not already been paid for, costs incurred in performing the terminated work). Such determinations constitute "final decisions" of the contracting officer, and may be appealed pursuant to the contract's Disputes clause, so long as the contractor submitted a final termination settlement proposal within the requisite time period. Any settlement agreement reached by the parties modifies the contract, and is generally binding upon them. What Could a Termination Settlement Include? The standard Termination for Convenience clauses in federal procurement contracts also generally address the specific components of any settlement between the government and the contractor for claims arising from a total or partial termination. These components can vary depending upon the terms of the contract, but generally include (1) payment for work already performed, but not yet paid for; (2) costs incurred in anticipation of performance; (3) costs arising from the termination and settling the termination; and (4) some recovery for profit, in the case of fixed-price contracts, or recovery of award or incentive fees, in the case of cost-reimbursement contracts. A "fixed-price contract" is a contract whereby the contractor agrees to supply certain supplies or services to the government at a predetermined price, while a "cost-reimbursement contract" is one that provides for the government to pay the contractor allowable costs incurred in performing the contract up to a total cost specified in the contract. Because of this focus upon costs, termination has frequently been described as effectively converting fixed-price contracts into cost-reimbursement contracts, and the cost principles and procedures from Part 31 of the FAR—which typically apply only to cost-reimbursement contracts—generally govern "all costs claimed, agreed to, or determined" under the standard Termination for Convenience clauses. The application of Part 31 is, however, subject to the general principle that the purpose of a termination settlement is to "fairly" compensate the contractor (i.e., the cost principles will not necessarily be strictly applied). Part 31 specifically contemplates the following costs as potentially allowable (i.e., included in settlements under the government contract to which it is allocable) when a contract is wholly or partially terminated: common items : the costs of items "reasonably usable on the contractor's other work" if these items could not be retained at cost without the contractor sustaining a loss; costs continuing after termination : costs which cannot be discontinued immediately after the termination "[d]espite all reasonable efforts by the contractor"; initial costs : nonrecurring labor, material, and related overhead costs incurred in the early part of production as a result of factors such as training, lack of familiarity with the product, or excess spoilage due to inexperienced labor; and preparatory costs incurred in preparing to perform the terminated work, such as initial plant rearrangement and alterations and production planning; loss of useful value of special tooling, machinery, and equipment, provided that the items are not "reasonably capable of use" in the contractor's other work, and the government's interest is protected; rental under unexpired leases , minus the residual value of such leases, provided that the amount of rent claimed does not exceed the reasonable use value of the property, and the contractor makes "all reasonable efforts" to terminate or otherwise reduce the cost of the lease; alterations of leased property : alterations and reasonable restorations required by the lease, when the alterations were necessary for performing the contract; settlement expenses : accounting, legal, clerical, and similar costs reasonably necessary for preparing settlement claims and for termination and settlement of subcontracts; reasonable costs for the storage, transportation, protection, and disposition of property acquired or produced for the contract; and indirect costs related to salary and wages incurred as settlement expenses in relation to the foregoing; and subcontractor claims , including the allocable portion of the claims common to the contract and the contractor's other work, as well as an "appropriate share" of the contractor's indirect expenses, provided that the amount allocated is "reasonably proportionate" to the relative benefits received and is otherwise consistent with Part 31 of the FAR. Other costs could potentially also be allowable, depending upon the circumstances, because "[t]he purpose of a termination settlement is to compensate a contractor fairly, ... and to make [the contractor] whole for costs incurred in performing the terminated work." How Much Can a Termination Settlement Cost? The amount of any termination settlement can vary considerably, depending upon when in the course of the contract's performance the termination occurs and the costs that the contractor incurs as a result of the termination, among other factors. In some cases, contractors may be entitled to—or agree to—a "no cost" settlement. In other cases, the amount of the settlement can be in the billions of dollars . The settlement costs cannot, however, generally exceed the "contract price less payments otherwise made or to be made under the contract," and the Government Accountability Office (GAO) has found that potential termination costs are generally not, in themselves, so large as to justify continued performance of contracts which agencies might otherwise consider terminating. Because the costs of any termination settlement could potentially be high, and agencies are generally required to obligate or otherwise "reserve" funds to cover potential termination liability, the possibility of termination for convenience can significant affect agencies' financial management practices and other operations, even though the likelihood of terminating any particular contract is low. (See " Why Must Agencies Generally Obligate or Reserve Funds for Termination Liability? ") However, in addition to potentially being "capped" by the contract price, the amount of any termination settlement could also be limited by the operation of certain contract clauses, such as the Special Termination Cost clause included in certain Department of Defense Contracts. Could the Government Ever Face Liability for Breach by Terminating for Convenience? As a general rule, the government does not face liability for breach of contract when it terminates a contract for convenience because the government's right to terminate for convenience is an express or implied term of the contract. (See " What Is the Basis for the Government's Right to Terminate for Convenience? ") However, in certain narrow circumstances, the government could potentially face liability for breach because the termination for convenience is found to have been motivated by bad faith or to constitute an abuse of discretion. The number of such cases is arguably limited by the difficulty of proving bad faith or an abuse of discretion on the government's part. Bad faith, in particular, "is an onerous charge that requires 'well-nigh irrefragable proof,'" and public officials are presumed to perform their duties correctly, fairly, in good faith, and in accordance with the laws and regulations. In certain cases, though, courts and boards of contract appeals have found breach when the government exercises its right to terminate for convenience. Such cases generally involve situations where (1) the government entered the contract with the intent to terminate it, or (2) the government purported to terminate the contract for convenience after the contract expired in order to avoid liability under the contract. These findings impliedly or expressly reflect fundamental principles of the common law of contracts. For example, in finding breach when the government entered the contract with the intent to terminate it, courts and boards have described the government's undisclosed intent to terminate as making a "mockery" of its purported assent to the contract. Mutual agreement by the parties is fundamental to any contract. Similarly, in finding that "retroactive terminations" constitute breach, courts and boards have emphasized that the government "may not use the standard termination for convenience clause to dishonor, with impunity, its contractual obligations." In other words, the government's express or implied contractual right to terminate contracts for convenience expires with the contract, and cannot thereafter be asserted to avoid liability for the government's failure to perform as required during the term of the contract. Why Must Agencies Generally Obligate or Reserve Funds for Termination Liability? The Anti-Deficiency Act is a federal statute which generally prohibits the obligation of federal funds in excess of amounts actually appropriated under law. As a result, when a federal agency enters into a contract, the agency must generally have sufficient funds to cover the cost of the contract, plus any liability that may arise if the agency chooses to terminate the contract before it expires. In the case of a typical single-year fixed-price contract, the total recovery by the contractor generally may not exceed the contract price. Therefore, it is generally not necessary for an agency to set aside funds for termination liability for such contracts, as the government's liability would be within the amount required to pay for full performance under the contract. However, where the contract gives the agency an option to renew, the contractor may have initial outlays that would not be recouped if the government chooses not to renew beyond the base period of the contract. In order to provide some security for the contractor in these situations, renewable (i.e., multiple year) contracts may contain provisions requiring the government to pay some form of "termination charge" in the event that a renewal option is not exercised. Notably, in contrast with a typical single-year contract, here the government may be liable for more than the cost of performance under the contract from its inception up until the refusal to renew. Therefore, the Anti-Deficiency Act generally requires that an agency have sufficient funds to cover any termination charges before entering into such a contract. The required obligation of termination costs also arises in the context of multiyear contracts authorized under the Federal Acquisition Streamlining Act of 1994 (FASA), as amended, or other authority. Multiyear contracts are defined under FASA as contracts of up to five years in length. Multiyear contracts are an exception to the Anti-Deficiency Act, but FASA imposes its own requirement to set aside termination costs. Specifically, FASA provides that civilian agencies may only enter into multiyear contracts if they either obligate the full cost of the contract over the entire term, or obligate the cost of the first year of the contract plus the estimated costs associated with any termination of the contract. Termination costs are often obligated from the same fund under which the underlying contract would be funded. Consequently, if an agency were not required to obligate potential termination liability when entering into a contract, the purchasing power of a particular appropriation would be increased. To this end, exceptions to the general requirement to set aside funds for termination liability have been enacted by Congress. For example, Congress has previously specified that a particular federal agency "shall not be required to obligate funds for potential termination liability in connection with" specific programs. Congress has also specifically appropriated or designated additional funds to cover potential termination liability. In other cases, Congress has placed ceilings on the amount of termination liability that an agency may negotiate with a contractor.

"Termination for convenience" refers to the exercise of the government's right to bring to an end the performance of all or part of the work provided for under a contract prior to the expiration of the contract "when it is in the Government's interest" to do so. Federal agencies typically incorporate clauses in their procurement contracts granting them the right to terminate for convenience. However, the right to terminate procurement and other contracts for convenience has also been "read into" contracts which do not expressly provide for it on the grounds that the government has an inherent right to terminate for convenience, or on other related grounds. Where termination for convenience is concerned, the "Government's interest" is broadly construed. Federal courts and agency boards of contract appeals have recognized the government's interest in terminating a contract when (1) the government no longer needs the supplies or services covered by the contract; (2) the contractor refuses to accept a modification of the contract; (3) questions have arisen regarding the propriety of the award or continued performance of the contract; (4) the contractor ceases to be eligible for the contract awarded; (5) the business relationship between the agency and the contractor has deteriorated; or (6) the agency has decided to restructure its contractual arrangements or perform work in-house. Terminations in other circumstances could also be found to be in the "Government's interest." In contrast, terminations based on the contractor's actual or anticipated failure to perform substantially as required in the contract are known as "terminations for default." Such terminations are distinct from terminations for convenience in both their contractual basis and the amount of any recovery by the contractor in the event of termination. However, an improper termination for default will typically be treated as a constructive termination for convenience. Terminations for convenience are similarly distinguishable from "de-scoping" pursuant to any Changes clause incorporated in the contract. The Federal Acquisition Regulation (FAR) also distinguishes between termination for convenience and cancellation of multiyear contracts. As a rule, the government cannot be held liable for breach when it exercises its right to terminate contracts for convenience because it has the contractual and/or inherent right to do so. This means that contractors generally cannot recover anticipatory profits or consequential damages when the government terminates a contract for convenience. The contractor is, however, entitled to a termination settlement, which, in part, represents the government's consideration for its right to terminate. The composition of any termination settlement can vary depending upon which of the "standard" Termination for Convenience clauses is incorporated into the contract, among other factors. Such settlements typically include any costs incurred in anticipation of performing the terminated work and profit thereon. Some settlements are "no cost"; others are sizable. In certain cases, however, exercise of the right to terminate for convenience could result in breach of contract (e.g., the agency entered the contract with the intent to terminate). Congress is perennially interested in termination for convenience because it is part of the overall framework of federal procurement. However, congressional interest has been particularly high in recent Congresses due to sequestration and other efforts to constrain federal spending. Some contracts were reportedly terminated, or considered for termination, for convenience in FY2013 as a result of sequestration. There has also been interest in ways to reduce the amount of funds that must be obligated or otherwise "reserved" to cover potential termination liability.

Introduction On June 18, 2014, the Environmental Protection Agency (EPA) published in the Federal Register a proposed rulemaking under Section 111(d) of the Clean Air Act. The proposal would establish carbon dioxide (CO 2 ) emission guidelines for states to use when developing plans that address CO 2 emissions from existing fossil fuel-fired electric generating units. For more background on the statutory authority, history, and legal and administrative processes involving this rulemaking, see CRS Report R43572, EPA's Proposed Greenhouse Gas Regulations for Existing Power Plants: Frequently Asked Questions , by [author name scrubbed] et al. The proposed rule establishes state-specific CO 2 emission rate goals, measured in pounds of CO 2 emissions per megawatt-hour (MWh) of electricity generation. This metric is generally described as carbon intensity, which is a ratio of CO 2 emissions per a unit of output, which is electric power (MWh) in this context. EPA based its intensity goals on each state's current portfolio of electricity generation and various assumptions involving opportunities for states to decrease their carbon intensity, including: coal-fired power plant efficiency improvements; natural gas combined cycle displacement of more carbon-intensive sources, particularly coal; increased use of low-carbon sources, namely renewable energies like wind and solar, and continued use of existing nuclear power generation; and energy efficiency improvements. The proposal sets a final goal for each state for 2030 and an interim goal to be achieved "on average" between 2020 and 2029. EPA estimates that if the states achieve their individual emission rate goals in 2030, the CO 2 emissions from the electric power sector in the United States would be reduced by 30% compared to 2005 levels. However, the state emission rate goals are based on a baseline year of 2012, not 2005. This report discusses the methodology EPA used to establish the state-specific CO 2 emission rate goals. The first section explains the process by which EPA created state-specific 2012 emission rate baselines. The emission rate equation EPA used to calculate the state baselines is provided at the end of this section. The second section discusses the four categories of emission reduction opportunities, described as "building blocks" by EPA, that the agency used to determine the interim and 2030 emission rate goals for each state. The emission rate equation that incorporates each building block is provided at the end of this section. In addition, Table 6 at the end of this section lists the state-specific 2012 emission rate baselines, the final emission rate goals, and the incremental effects of applying each of EPA's building blocks to the 2012 baselines. 2012 Emission Rate Baseline EPA's first step in establishing the state-specific CO 2 emission rate goals involved setting state-specific baselines. The baseline is the starting point, from which future goals are measured. The baseline year selection is an important issue for some states, because some states already have regulations or policies that would directly (e.g., emissions cap) or indirectly (e.g., renewable portfolio standards) reduce CO 2 emissions. Some of these state requirements were in place well before 2012. EPA chose to use state-specific data from 2012 to establish the rate-based baselines, stating: EPA chose the historic data approach as it reflected actual historic performance at the state level. EPA chose the year 2012 as it represented the most recent year for which complete data were available at the time of the analysis .... EPA also considered the possibility of using average fossil generation and emission rate values over a baseline period (e.g., 2009 – 2012), but determined that there would be little variation in results compared to a 2012 base year data set due to the rate-based nature of the goal. EPA Data Sources6 EPA used its Emissions & Generation Integrated Resource Database (eGRID) to provide the underlying data for the vast majority of the inputs the agency used to generate state emission rates. According to EPA, "eGRID integrates many different data sources on power plants and power companies, including, but not limited to: the EPA, the Energy Information Administration (EIA), the North American Electric Reliability Corporation (NERC), and the Federal Energy Regulatory Commission (FERC)." In addition, EPA used its National Electric Energy Data System (NEEDS) to identify nuclear and NGCC plants that were not operating in 2012 but are under construction. Affected EGUs The 2012 state baselines are based on CO 2 emissions from electric generating units (EGUs) that are addressed in the proposal. These units are called "affected EGUs." The terminology in this proposal differs from other air pollutant regulations that apply directly to "covered sources" or "regulated entities." The emission rate goals described below do not apply directly to individual power plants, but to the state's overall electricity generation portfolio. In general, an affected EGU is a fossil fuel-fired unit that was in operation or had commenced construction as of January 8, 2014, has a generating capacity above a certain threshold, and sells a certain amount of its electricity generation to the grid. The specific criteria include the following: 1. has a base load rating greater than 73 MW; 2. combusts fossil fuel for more than 10% of its total annual heat input; and 3. sells the greater of 219,000 MWh per year or one-third of its potential electrical output to a utility distribution system. Based on 2012 data provided by EPA, the "affected EGU" definition applies to over 3,100 EGUs at 1,508 facilities throughout the United States. The number of "affected" power plant facilities range by state, from 2 EGUs in Idaho to 115 EGUs in Texas, with a median number of 19. 2012 Emission Rate Equation EPA constructed the 2012 state baselines using CO 2 emissions and electricity generation data from the affected EGUs and several additional electricity generation categories described below. First, EPA grouped the affected EGUs into different categories: coal-fired steam generation; oil and gas (OG) steam generation; natural gas combined cycle (NGCC) generation; and "other" affected EGUs. This last grouping includes fossil sources, such as integrated gasification combined cycle (IGCC) units, high utilization combustion turbine units, and applicable thermal output at cogeneration units. EPA separated the data from these units because they are not part of the building block applications described below. On a national basis, the "other" category accounts for approximately 1% of total U.S. electricity generation and CO 2 emissions. And for the vast majority of states, these sources have minimal impacts on emission rates. To establish each state's 2012 baseline, EPA calculated the pounds of CO 2 generated from affected EGUs in each state (the numerator in the Table 1 equation) and then divided that sum by the electricity generated (the denominator in the Table 1 equation) from affected EGUs in each state. This yields an emission rate measured in pounds (lbs.) of CO 2 per megawatt-hour (MWh) of electricity generation. EPA described this result as the "unadjusted" emission rate. To establish the final, "adjusted" 2012 baseline for each state, EPA added two elements to the denominator of the emission rate equation (in Table 1 ): "at-risk" nuclear power (discussed below) and renewable energy generation. The addition of these elements produced the "adjusted" emission rate equation, which is used to generate the 2012 baseline emission rate for each state. The adjusted emission rate equation is provided below: For the "at-risk" nuclear power element, EPA assumes that under a business-as-usual scenario some amount of existing nuclear power will be unavailable for use in the near future. Using projections from EIA, EPA determined that 5.8% of total U.S. nuclear power capacity was at risk of being retired in the near future. EPA used this percentage value to estimate at-risk nuclear power (in MWh) for each state with operating nuclear units in 2012. According to EPA, this projected outcome is due to a "host of factors –increasing fixed operation and maintenance costs, relatively low wholesale electricity prices, and additional capital investment associated with ensuring plant security and emergency preparedness." In addition, EPA added each state's renewable energy electricity generation (in MWh) from 2012 into the state baseline calculation. As discussed below, renewable energy potential plays an important role in determining EPA's emission rate interim and final goals. Including renewable energy in the state baseline rates allows for a more appropriate comparison between the 2012 baseline and interim and final rate goals. Applying the above equation to each state's specific circumstances yields a range of emission rate baselines, as illustrated in Figure 1 . CO2 Emission Rate Goals In its proposed rule, EPA identified four categories of CO 2 emission reduction strategies that states could employ to reduce the states' overall CO 2 emission rates. EPA proposed that the combination of these four strategies—described as "building blocks"—represents the "best system of emission reduction ... adequately demonstrated," a key determination pursuant to CAA Section 111(d). Using the state-specific 2012 baseline data as its starting point, EPA applied the four building blocks to establish CO 2 emission rate goals for each state. Building blocks 1 and 2 directly affect the CO 2 emission rate at affected EGUs by factoring in efficiency improvements at EGUs and opportunities to switch from high- to low-carbon power generation. In contrast, blocks 3 and 4 involve so-called "outside the fence" opportunities that do not directly apply to electricity generation at affected EGUs. These blocks decrease the states' overall CO 2 emission rates by (1) increasing the use of low- or zero-carbon electricity generation and (2) reducing consumer demand for electricity through energy efficiency improvements. The equation for the 2030 emission rate goals, which includes the application of all four building blocks, is provided at the end of this section. Compared to the 2012 baseline emission rate equation, building blocks 3 and 4 add more elements to the equation's denominator. In its proposal, EPA explained: A goal expressed as an unadjusted output-weighted-average emission rate would fail to account for mass emission reductions from reductions in the total quantity of fossil fuel-fired generation associated with state plan measures that increase low- or zero-carbon generating capacity [e.g., renewable portfolio standards] or demand-side energy efficiency. Accordingly, under the proposed goals, the emission rate computation includes an adjustment designed to reflect those mass emission reductions.... Mathematically, this adjustment has the effect of spreading the measured CO 2 emissions from the state's affected EGUs over a larger quantity of energy output, thus resulting in an adjusted mission rate lower than the unadjusted emission rate. The following discussion describes each of these building blocks and their relative contributions to the state-specific emission rate goals. Building Block 1—Coal-Fired Generation Efficiency Improvements Building block 1 applies heat rate (i.e., efficiency) improvements to coal-fired, steam EGUs. EPA maintains that these EGUs are "less efficient at converting fuel into electricity than is technically and economically possible." Almost all of the existing coal-fired EGUs are considered steam EGUs. A small percentage of coal-fired EGUs are integrated gasification combined cycle (IGCC) units, but the proposed heat rate improvements in building block 1 do not apply to these units. EPA is seeking comment on whether the agency should include heat rate improvements at other fossil-fuel EGUs as part of its emission rate calculations. Potential heat rate improvements include the adoption of operation and maintenance best practices and equipment upgrades. EPA determined that a combination of these potential options could improve coal-fired EGU heat rates by 6%. A reduction in the heat rate leads to a proportional reduction in CO 2 emissions, because CO 2 emissions are directly related to the amount of fuel consumed. Therefore, building block 1 reduces each state's CO 2 emissions rate (pounds of CO 2 per MWh) for coal-fired affected EGUs by as much as 6%. For example, if a state's coal-fired affected EGUs averaged 2,000 pounds of CO 2 emissions per MWh in 2012, building block 1 could decrease this rate to 1,880 pounds CO 2 per MWh. This lowers one of the elements ("coal emission rate") in the numerator of the emission rate equation ( Table 5 ), but has no effect on the denominator. As indicated in Table 6 , building block 1 decreases state emission rate goals (compared to 2012 baselines) by a range of 0% to 6%. The greater rate impacts are seen in states that have a relatively high percentage of coal-fired electricity in their electricity generation portfolio. Building Block 2—Increased Utilization of Natural Gas Combined Cycle Units Building block 2 lowers a state's CO 2 emission rate (pounds of CO 2 per MWh) from the baseline by shifting a state's electricity generation from higher-carbon units, such as coal-fired EGUs, to lower-carbon NGCC units. The carbon intensity of different types of EGUs can vary considerably. According to EPA, the 2012 average CO 2 emission rates by unit type category were the following: Coal steam units = 2,220 lbs. CO 2 /MWh Oil and natural gas steam units = 1,463 lbs. CO 2 /MWh NGCC units = 907 lbs. CO 2 /MWh As electricity demand increases during the day, system operators or regional transmission organizations call into service ("dispatch") additional power plants to meet the electricity needs. When electricity demand decreases, these additional units are taken off-line. In general, coal-fired EGUs are dispatched before NGCC units, because coal-fired plants take hours or days to ramp up to their design capacity and they have traditionally been cheaper to operate than most other sources. EPA concluded that there is "significant potential for re-dispatch" from steam EGUs to NGCC units. The agency estimated that, in aggregate, NGCC units provided about 46% of their total generating capacity in 2012. This measure is called the capacity factor. Based on its analysis, EPA determined that a state's capacity factor for its NGCC units could be increased to 70%. Building block 2 uses the 70% capacity factor to increase the utilization of NGCC units and correspondingly decrease generation from more carbon intensive EGUs. As an example, Table 2 illustrates the application of building block 2 for Arizona. In 2012, NGCC units in Arizona generated 26.8 million MWh of electricity, which represented approximately 27% of the total NGCC nameplate capacity (11,202 MW) in the state. Under building block 2 methodology, the increase in NGCC generation is capped at the lower of two ceilings: 70% of the nameplate capacity or the total generation from coal and OG steam EGUs and NGCC units in 2012. Applying the 70% NGCC capacity factor would increase NGCC generation from 26.8 million MWh to 68.9 million MWh, well above the total generation from all units in 2012 of 52.1 million MWh. Therefore, NGCC generation increases to 52.1 million MWh, the total generation from fossil fuel units in 2012. Applying block 2 methodology, the increased NGCC generation replaces generation from coal and OG steam EGUs, decreasing their generation to zero. As Table 2 indicates, building block 2 has a substantial effect on Arizona's emission rate, reducing it by 42%. Note that the results of applying building block 2 do not require or predict a particular outcome in a state's electricity generation profile. The results are a function of the emission rate methodology. States may choose to meet their emission rate goals through alternative approaches. Table 6 shows the effect that building blocks 1-2 have on all of the 2012 state emission rate baselines. Building Block 3—Renewable Energy and Nuclear Power Building block 3 factors in additional electricity generation from low- or zero-carbon emitting sources, including renewable energy and nuclear power. Both types of generation are added to the denominator for the emission rate equation (see Table 5 at the end of this section), but the numerator is unchanged. The methodologies for incorporating these categories of electricity generation are very different, thus they are discussed separately below. Renewable Energy Building block 3 projects annual renewable energy (RE) increases for each state. Current RE use varies by states and the potential to utilize different types of renewable energy sources—wind, solar, geothermal—varies by geographic location. To "account for similar power system characteristics as well as geographic similarities in [renewable energy] potential." As illustrated in Figure 2 , EPA placed each state into one of six regions (Alaska and Hawaii have individual targets). EPA determined a RE 2030 target for each region based on an average of existing RE targets that are required by states in the relevant region. Then, EPA calculated an annual growth rate for each region that would allow each region to reach its specific target by 2030. Table 3 lists the six regions and their states, the regional targets, and the average annual growth rates for each region. The regional targets range from 10% to 25%, and the growth rates range from 6% to 17%. As the table indicates, a region can have a relatively high regional target (e.g., the West region's target of 21%) but have a relatively low growth rate (6% in the West region). Conversely, a state can have a relatively low target (10% in the Southeast region) and a relatively high growth rate (13% in the Southeast region). These outcomes are a function of EPA's methodology. For instance, the West region's growth rate is relatively low, because some of the states—namely California, which accounts for 28% of the region's total electricity generation—are more than halfway toward the regional goal. In contrast, the states in the Southeast are starting with relatively low percentages (0% to 3%) of RE generation in 2012, which accounts for the relatively high growth rate needed to achieve their regional target. EPA applies the region-specific, annual growth rate to each state's RE generation in 2012 to estimate annual RE generation for each state from 2017 through 2030. If a state's RE use equals or exceeds its 2030 regional target, the state's RE use is held constant at the level that matches its regional target. The 2012 RE baseline does not include hydroelectric generation. According to EPA: Inclusion of this generation in current and projected levels of performance would distort the proposed approach by presuming future development potential of large hydroelectric capacity in other states. Because RPS [renewable portfolio standard] policies were implemented to stimulate the development of new RE generation, existing hydroelectric facilities are often excluded from RPS accounting. No states are expected to develop any new large facilities. Although EPA's determination of regional RE targets does not explicitly account for opportunities to build new hydroelectric facilities, states could use increased hydroelectric power generation in the future to lower their emission rate. T able 4 applies EPA's methodology and depicts the states' RE levels in 2012, total electricity generation in 2012, and the percentage of electricity generation from renewable sources in 2012 and 2030. The last column measures the projected RE generation in 2030 against the total electricity generation in 2012. EPA's RE building block 3 methodology yields the following results: About half of the states would not reach their region-specific goals by 2030; the other half would reach the region-specific goals. Some of these states reached their goals in the early years. In general, the percentage of electricity generated from renewable sources in these states was relatively high in the baseline year (2012); Five states—Iowa, Maine, Minnesota, North Dakota, and South Dakota—matched or exceeded their regional RE targets in 2012, so the estimated future RE generation (for the purposes of the emission rate calculations) in these states actually decreases to match their regional targets. Arguably, this outcome artificially lowers the emission rate targets for these states and EPA specifically asks for comment on whether the calculations should include a RE floor based on 2012 generation; and The impact of building block 3 varies considerably by states. Not counting the states that meet or exceed their targets in 2012, some states increase their percentages of RE generation by 2%; others increase their percentages by over 18%. These different impacts are reflected in Table 6 , which shows the emission rate change after applying blocks 1-3. Nuclear Energy The second part of building block 3 involves nuclear power generation. EPA includes both "at-risk" and "under construction" nuclear power in the denominator of the emission rate equation (see Table 5 at the end of this section). As discussed above, the "at-risk" nuclear power, which exists in 30 states, was factored into the state 2012 baseline emission rates. Thus, its inclusion in the emission rate goal equation has no effect on the emission rate compared to the 2012 baseline. However, its inclusion in the 2012 baseline equation was unique: it was the only part of the baseline equation that projected future activity (i.e., loss of nuclear power capacity). Thus, if states do not maintain their existing nuclear generation, their emission rates will increase (all else being equal). Including at-risk nuclear generation in the baseline equation denominator was one of EPA's "adjustments." The at-risk nuclear generations lowered the (unadjusted) baselines in some states by as much as 7%, thus having a stronger impact than building block 1. In addition to the "at-risk" nuclear power, EPA added projected electricity generation from nuclear power units that are currently under construction. EPA identified five under-construction nuclear units at three facilities in Georgia, South Carolina, and Tennessee. The estimated electric generation from these units and their percentage contribution to the state's total electricity generation in 2012 are listed below: Georgia: approximately 17 million MWh (14% of total electric generation in 2012); South Carolina: approximately 17 million MWh (18% of total electric generation in 2012); and Tennessee: approximately 9 million MWh (11% of total electric generation in 2012). Including the estimated generation from these anticipated units in the emission rate equation substantially lowers the emission rates of these three states ( Table 6 ). If these anticipated units do not complete construction and enter service, these states would likely have more difficulty achieving their emission rate goals. Building Block 4—Energy Efficiency Improvements The fourth building block reduces state emission rates by including avoided electricity generation that results from projected energy efficiency (EE) improvements. These EE improvements are described as "demand-side," because they would seek to reduce the demand for electricity from end-users, such as factories, office buildings, and homes. EPA estimated the amount of decreased electricity generation in each state that would result from EE activities and added the avoided MWh to the denominator of the emission rate equation ( Table 5 ). Demand-side EE activities can involve a range of practices in the residential, commercial, and industrial sectors. According to EPA, "every state has established demand-side energy efficiency policies." However, these policies cover a wide range of activities, and, as discussed below, their effectiveness varies. EPA states that the "most prominent and impactful" EE policies in most states are those that drive the development and funding of EE programs and building codes. To estimate the avoided electricity generation, EPA first determined the "best practices" performance target for all states. Using data from EIA, EPA calculated each state's incremental EE savings as a percentage of retail electricity sales. According to EPA, "incremental savings (also known as first-year savings) represent the reduction in electricity use in a given year associated with new EE activities in that same year." As Figure 3 illustrates, the states' 2012 incremental EE savings ranged from 0% to 2.19%. In addition to the three states—Vermont, Maine, and Arizona—that achieved EE savings greater than 1.5% ( Figure 3 ), EPA concluded that nine other states are expected to reach this annual level of performance by 2020. Based on these observed and expected achievements, EPA determined that the "best practices" performance target for all states should be 1.5%. Figure 3 depicts this performance target as a red line. EPA explained: [The best practices scenario] does not represent an EPA forecast of business-as-usual impacts of state energy efficiency policies or an EPA estimate of the full potential of end-use energy efficiency available to the power system, but rather represents a feasible policy scenario showing the reductions in fossil fuel-fired electricity generation resulting from accelerated use of energy efficiency policies in all states consistent with a level of performance that has already been achieved or required by policies (e.g., energy efficiency resource standards) of the leading states. Similar to the RE methodology described above, EPA's calculations assume that the EE component of the rate equation begins in 2017, and states would start that year at the EE incremental saving levels achieved in 2012 ( Figure 3 ). EPA points out that EE improvements made between 2012 and 2017 would count toward achieving a state's emission rate target. However, if a state were to decrease its actual EE performance prior to 2017, the state would face a more difficult effort (all else being equal) in achieving its emission rate goal, as its 2017 EE starting point would be based on its (higher) 2012 EE performance level. The next determination made by EPA was the pace at which states, starting in 2017, would annually increase their EE incremental performance. Based on its analysis of historical EE performance increases and future requirements for some states, EPA chose an annual increase of 0.2%, which it deemed as a "conservative" value. EPA assumed that each state would increase its incremental EE performance by 0.2% each year, starting in 2018, until it reached the best practices, incremental target of 1.5%. EPA projects that a small number of states would achieve this level in 2017, with the rest of the states reaching this level by 2025. Once this level is achieved, EPA assumed the states could sustain that incremental performance level through 2030. Next, EPA estimated the cumulative savings that each state would achieve through its annual, incremental EE efforts. In contrast to incremental savings, which measure EE improvements made in one specific year, cumulative savings include the aggregate impacts of EE improvements made in prior years. This raises the question: how many years are counted in the cumulative savings tally? For instance, the installation of a high-efficiency appliance may yield EE savings for the life of the appliance (e.g., 10-15 years), referred to as its "measure life." Other improvements (e.g., home insulation, building codes) may provide savings for 20 years or more. Based on its analysis of various studies, EPA determined the average measure life for an EE portfolio would be 10 years. However, in its EE methodology, EPA distributed the decline in EE savings over 20 years, instead of having 10 years of savings and then dropping to zero at year 11. Both approaches lead to the same overall EE savings, but EPA's approach spreads the savings over a longer period of time. EPA used the above inputs to estimate cumulative EE savings, as a percentage of retail sales, for each state for each year between 2020 and 2030. This calculation combined the above state-specific inputs with business-as-usual regional estimates of electricity retail sales. Based on EPA's estimates, the EE improvements would yield cumulative reductions in electricity generation in the range of 9% to 12% by 2030, depending on the state's EE starting point. EPA applied each state's annual (2020-2029) cumulative reductions (as a percentage of sales) to the amount of total electricity (including hydropower) sold to in-state consumers in 2012. EPA adjusted this value to account for states that are net importers or exporters of electricity. Some states (e.g., Idaho and Delaware) import close to 50% of the electricity sold in their state. Other states (e.g., North Dakota, Wyoming, and West Virginia) generate more than twice the amount of electricity they use in-state, exporting the additional electricity to neighboring states. For net importers, EPA adjusted the cumulative reductions by applying the cumulative reduction percentage to in-state sales, multiplied by the in-state generation as a percentage of sales. For example, Delaware's in-state generation as a percentage of sales equaled 45%, meaning it imported 55% of its total electricity in 2012. To calculate Delaware's cumulative EE reductions, EPA multiplied Delaware's electricity sales (12 million MWh) by its generation as a percentage of sales (0.45) by its cumulative EE reduction percentage (9.5% in 2029). For net exporters, the EE cumulative reduction percentages only apply to in-state electricity sales, not the total amount of electricity generated. The resulting avoided electricity generation values for each state are added to the denominator in the emission rate equation ( Table 5 ). The impacts of applying building block 4 to the emission rate equation vary by state. In general, the effects appear to be more pronounced in states that generate a large percentage of their electricity from sources that are not already included in the emission rate equation. This primarily involves hydroelectric power, and to some extent, nuclear power generation. For example, building block 4 appears to have a greater effect in Washington (77% of total power generation from hydropower), Idaho (71% from hydropower), and Oregon (65% from hydropower). Building block 4 includes hydroelectric power generation as part of the total generation subject to EE reductions, but this is the only instance in which MWh from hydroelectric power generation are part of the emission rate equation. In addition, the EE methodology appears to have a greater effect in states with relatively high percentages of nuclear power generation, such as South Carolina (53% nuclear power) and New Jersey (51% nuclear power). Although existing nuclear power is captured in the emission rate equation, it only accounts for the at-risk (5.8%) component. By comparison, the effects of building block 4 are less pronounced in states that export a substantial amount of the electricity they generate, such as Wyoming, North Dakota, and West Virginia. These states generate more than twice as much electricity as they consume. The total generation from affected EGUs is captured in the equation's numerator, but only the avoided generation from in-state sales is captured in the denominator, resulting in a lesser impact from building block 4. What do the different effects of the EE building block mean for states? The states that generate a considerable percentage of electricity from either hydroelectric power or nuclear power may have more limited options to find emission rate reductions than other states. The inclusion of avoided generation from all electricity generating sources may compel these states to focus on EE improvements to reach their emission rate targets. This potential outcome assumes these states cannot find rate reductions from their existing hydroelectric or nuclear power sources. Concluding Observations As Table 6 indicates, the building blocks affect each state's emission rate baseline in different ways, depending on each state's specific electricity generation circumstances. Table 6 presents an incremental analysis of the impacts of applying the building blocks in a stepwise fashion (or all at once), ultimately reaching the 2030 emission rate goal. As another measure of a state-by-state comparison, CRS used EPA's emission rate methodology to calculate the impacts of each building block in isolation . The results are listed in Table 7 . These calculations illustrate the relative impacts of the four building blocks for each state. For example in Idaho, building blocks 1, 2, and 3 (nuclear) have no impact on the 2012 emission rate, because Idaho has no coal-fired EGUs, no room to improve its NGCC utilization, and no nuclear generation. Therefore, the only impacts to its 2012 baseline rate are due to the renewable component of building block 3 and EE improvements from building block 4. As Table 7 indicates, on average, building block 1 has the smallest impact (4%), decreasing state emission rate goals (compared to 2012 baselines) by a range of 0% to 6%. The emission rates in states (e.g., Rhode Island, Maine, and Idaho) without coal-fired, steam EGUs are unaffected by this block; states that employ coal-fired units to generate a significant percentage of their electricity (e.g., Kentucky, West Virginia, and Wyoming) see a greater impact to their emission rates. Building block 2, on average, generates the largest (tied with block 4 below) incremental impact (13%), ranging from a 0% to 38% change (compared to baseline). The largest changes are seen in states that have both coal-fired EGUs and under-utilized NGCC plants. The smallest impacts are in states without any NGCC and states that already have relatively high NGCC utilization rates. Although the nuclear component of building block 3 only affects three states, its impacts are considerable in those states. The RE component of building block 3, on average, reduces emission rate baselines by 9% (10% if the negative values are omitted). The impacts from the RE block application range from 2% to 33%. Multiple factors explain this range of impacts. For example, this block has a considerable effect in Washington (33%), because it increases the state's RE generation by 116% and RE accounts for a substantial percentage of the state's total generation (not counting hydroelectric power): 30% in 2012 and 65% in 2030. Although Kentucky's RE generation increases by 415% between 2012 and 2030 (from 0.4% to 2%), the RE block has a relatively small impact, because RE continues to account for a small percentage of the state's total generation. Building block 4 has the largest impact (tied with block 2) on emission rate baselines, reducing them, on average, by 13%, but the range of impacts is between 4% and 37%. This range is a result of several factors, including (1) the contribution of in-state electricity generation that comes from hydroelectric power or nuclear power; and (2) whether the state is a net importer or net exporter of electricity. Although the isolated building block application (in Table 7 ) provides a comparison of the relative magnitude of potential effects in each state, states have the flexibility to combine the building blocks (and/or other potential activities) to meet their emission rate targets. EPA's building blocks were meant to establish the emission rate goals, not predict a particular outcome in a state's electricity generation profile.

On June 18, 2014, the Environmental Protection Agency (EPA) published a proposed rulemaking that would establish guidelines for states to use when developing plans that address carbon dioxide (CO2) emissions from existing fossil fuel-fired electric generating units. The proposal creates CO2 emission rate goals—measured in pounds of CO2 emissions per megawatt-hour (MWh) of electricity generation—for each state to achieve by 2030 and an interim goal to be achieved "on average" between 2020 and 2029. EPA estimates that if the states achieve their individual emission rate goals in 2030, the CO2 emissions from the electric power sector in the United States would be reduced by 30% compared to 2005 levels. This report discusses the methodology EPA used to establish state-specific CO2 emission rate goals that apply to states' overall electricity generation portfolio. The emission rate goals do not apply directly to individual emission sources. EPA established the emission rate goals by first determining each state's 2012 emission rate baseline, which is generally a function of each state's portfolio of electricity generation in 2012. The resulting baselines in each state vary considerably, reflecting, among other things, the different energy sources used to generate electricity in each state. To establish the emission rate goals, EPA applied four "building blocks" to the state baselines. The four building blocks involve estimates of various opportunities for states to decrease their emission rates: Building block 1: coal-fired power plant efficiency improvements; Building block 2: natural gas combined cycle displacement (NGCC) of more carbon-intensive sources, particularly coal; Building block 3: increased use of renewable energy and preservation of existing and under construction nuclear power; and Building block 4: energy efficiency improvements. Building blocks 1 and 2 directly affect the CO2 emission rate at affected EGUs by factoring in EGU efficiency improvements and opportunities to switch from high- to low-carbon power generation. In contrast, building blocks 3 and 4 involve so-called "outside the fence" opportunities that do not directly apply to electricity generation at affected EGUs. The building blocks affect each state's emission rate in different ways, depending on each state's specific circumstances. On average, block 1 has the smallest average impact, decreasing state emission rate goals (compared to 2012 baselines) by a range of 0% to 6%. Building block 2, on average, lowers rates by 13%, with a range of impacts from 0% to 38% (compared to baseline). The largest rate changes are seen in states that have both coal-fired EGUs and under-utilized NGCC plants. The smallest rate impacts are in states without any NGCC units and states that already have relatively high NGCC utilization rates. The under construction nuclear component of building block 3 only affects rates in three states, but its rate impacts are considerable. An amount of at-risk nuclear generation was included in the 2012 baseline rates, lowering some state baselines by as much as 7%. The renewable energy component of block 3, on average, reduces emission rate baselines by 9%, with a range from 2% to 33%. This block has a greater impact in states that use renewable energy (not counting hydroelectric power) to generate a substantial percentage of their total electricity. Building block 4 reduces rates, on average, by 13%, with a range of impacts between 4% and 37%. This range is a result of several factors, including (1) the contribution of in-state electricity generation that comes from hydroelectric power or nuclear power; and (2) whether the state is a net importer or net exporter of electricity. The results of applying the four building blocks do not require or predict a particular outcome in a state's electricity generation profile. The emission rates are a function of EPA's specific emission rate methodology. States may choose to meet emission rate goals by focusing on one or more of the building block strategies or through alternative approaches.

Background The World Trade Organization (WTO) is the principal international organization governing world trade. With the 2012 accessions of the Russian Federation and Vanuatu, it has 157 member countries, representing over 95% of world trade flows. It was established in 1995 as a successor institution to the General Agreement on Tariffs and Trade (GATT). The GATT was a post-World War II institution intended to promote nondiscrimination in trade among countries, with the view that open trade was crucial for economic stability and peace. Decisions within the WTO are made by member countries, not WTO staff, and they are made by consensus, not formal vote. High-level policy decisions are made by the Ministerial Conference, which is the body of political representatives (trade ministers) from each member country. The Ministerial Conference must meet at least every two years. Operational decisions are made by the General Council, which consists of a representative from each member country. The General Council meets monthly, and the chair rotates annually among national representatives. The United States was an original signatory to the GATT and a leading proponent of the GATT's trade-liberalizing principles. It continues to be among the countries urging further discussions on opening markets to trade. Although decisions in the WTO are made by consensus, the United States has a highly influential role shaping decisions in the institution befitting its status as the largest trading nation in the world. Periodically, member countries agree to hold negotiations to revise existing rules or establish new ones. These periodic negotiations are commonly called "rounds." The broader the negotiations, the greater the possible trade-offs, and thus theoretically the greater the potential economic benefits to countries. The multilateral negotiations are especially important to developing countries, which might otherwise be left out of more selective agreements. It must be remembered, however, that trade liberalization also results in job losses and other economic dislocations as well. What Began at Doha? From November 9 to November 14, 2001, trade ministers from member countries met in Doha, Qatar, for the fourth WTO Ministerial Conference. At that meeting, they agreed to undertake a new round of multilateral trade negotiations. Before the Doha Ministerial, negotiations had already been underway on trade in agriculture and trade in services. These ongoing negotiations had been required under the last round of multilateral trade negotiations (the Uruguay Round, 1986-1994). However, some countries, including the United States, wanted to expand the agriculture and services talks to allow trade-offs and thus achieve greater trade liberalization. There were additional reasons for the negotiations. Just months before the Doha Ministerial, the United States had been attacked by terrorists on September 11, 2001. Some government officials called for greater political cohesion and saw the trade negotiations as a means toward that end. Some officials thought that a new round of multilateral trade negotiations could help a world economy weakened by recession and terrorism-related uncertainty. According to the WTO, the year 2001 showed "the lowest growth in output in more than two decades," and world trade actually contracted that year. In addition, countries increasingly have been seeking bilateral or regional trade agreements. As of January 15, 2012, 515 regional trade agreements have been notified to the WTO, 319 of which are currently in force. There is disagreement on whether these more limited trade agreements help or hurt the multilateral system. Some experts say that regional agreements are easier to negotiate, allow a greater degree of liberalization, and thus are effective in opening markets. Others, however, argue that the regional agreements violate the general nondiscrimination principle of the WTO (which allows some exceptions), deny benefits to many poor countries that are often not party to the arrangements, and distract resources away from the WTO negotiations. With the backdrop of a sagging world economy, terrorist action, and a growing number of regional trade arrangements, trade ministers met in Doha. At that meeting, they adopted three documents that provided guidance for future actions. The Ministerial Declaration includes a preamble and a work program for the new round and for other future action. This Declaration folded the ongoing negotiations in agriculture and services into a broader agenda. That agenda includes industrial tariffs, topics of interest to developing countries, changes to WTO rules, and other provisions. The Declaration on the TRIPS Agreement and Public Health presents a political interpretation of the WTO Agreement on Trade-Related Intellectual Property Rights (TRIPS). A document on Implementation-Related Issues and Concerns includes numerous decisions of interest to developing countries. Especially worth noting is how the role of developing countries changed at the Doha Ministerial. Since the beginning of the GATT, the major decision-makers were almost exclusively developed countries. At the preceding Ministerial Conference (Seattle, 1999), developing countries became more forceful in demanding that their interests be addressed. Some developing countries insisted that they would not support another round of multilateral negotiations unless they realized some concessions up-front and the agenda included their interests. Because of the greater influence of developing countries in setting the plan of action at Doha, the new round became known as the Doha Development Agenda. At the Doha meeting, trade ministers agreed that the 5 th Ministerial, to be held in 2003, would "take stock of progress, provide any necessary political guidance, and take decisions as necessary," and that negotiations would be concluded not later than January 1, 2005. With the exception of actions on the Dispute Settlement Understanding, trade ministers agreed that the outcome of the negotiations would be a single undertaking, which means that nothing is finally agreed until everything is agreed. Thus, countries agreed they would reach a single, comprehensive agreement containing a balance of concessions at the end of the negotiations. Progress of the Negotiations: The Search for Modalities Negotiations have proceeded at a slow pace and have been characterized by lack of progress on significant issues and persistent disagreement on nearly every aspect of the agenda. A few issues have been resolved, notably in agriculture. However, the first order of business for the round, the negotiation of modalities, or the methods and formulas by which negotiations are conducted, still remains elusive 10 years after the beginning of the round. The Cancun Ministerial An important milepost in the Doha Development Agenda round was the 5 th Ministerial Conference, which was held in Cancún, Mexico, on September 10-14, 2003. The Cancún Ministerial ended without agreement on a framework to guide future negotiations, and this failure to advance the round resulted in a serious loss of momentum and brought into question whether the January 1, 2005, deadline would be met. The Cancun Ministerial collapsed for several reasons. First, differences over the Singapore issues seemed irresolvable. The EU had retreated on some of its demands, but several developing countries refused any consideration of these issues at all. Second, it was questioned whether some countries had come to Cancun with a serious intention to negotiate. In the view of some observers, a few countries showed no flexibility in their positions and only repeated their demands rather than talk about trade-offs. Third, the wide difference between developing and developed countries across virtually all topics was a major obstacle. The U.S.-EU agricultural proposal and that of the Group of 20, for example, show strikingly different approaches to special and differential treatment. Fourth, there was some criticism of procedure. Some claimed the agenda was too complicated. Also, the Cancun Ministerial chairman, Mexico's Foreign Minister Luis Ernesto Derbez, was faulted for ending the meeting when he did, instead of trying to move the talks into areas where some progress could have been made. At the end of their meeting in Cancun, trade ministers issued a declaration instructing their officials to continue working on outstanding issues. They asked the General Council chair, working with the Director-General, to convene a meeting of the General Council at senior official level no later than December 15, 2003, "to take the action necessary at that stage to enable us to move towards a successful and timely conclusion of the negotiations." The Cancun Ministerial did result in the creation of the so-called Derbez text. Ministerial chairman Derbez invited trade ministers to act as facilitators in Cancun and help with negotiations in five groups: agriculture, non-agricultural market access, development issues, Singapore issues, and other issues. The WTO Director-General served as a facilitator for a sixth group on cotton. The facilitators consulted with trade ministers and produced draft texts from their group consultations. The Ministerial chairman compiled the texts into a draft Ministerial Declaration and circulated the revised draft among participants for comment. The Derbez text was widely criticized at Cancun and it was not adopted, but in the months following that meeting, members looked increasingly at this text as a possible negotiating framework. On agriculture, the Derbez text drew largely on both the U.S.-EU and Group of 20 proposals. It included a larger cut from domestic support programs than the U.S.-EU proposal made, contained the blended tariff approach of the U.S.-EU proposal but offered better terms for developing countries, and provided for the elimination of export subsidies for products of particular interest to developing countries. On the Singapore issues, it included a decision to start new negotiations on government procurement and trade facilitation, but not investment or competition. The WTO Framework Agreement The aftermath of Cancun was one of standstill and stocktaking. Negotiations were suspended for the remainder of 2003. However, in early 2004, then-U.S. Trade Representative (USTR) Robert Zoellick offered proposals on how to move the round forward. The USTR called for a focus on market access, including an elimination of agricultural export subsidies. He also said that the Singapore issues could progress by negotiating on trade facilitation, considering further action on government procurement, and possibly dropping investment and competition. This intervention was credited at the time with reviving interest in the negotiations, and negotiations resumed in March 2004. On July 31, 2004, WTO members approved a Framework Agreement that includes major developments in the most contentious and crucial issue—agriculture. Because of the importance of agriculture to the Round, the Framework, which provides guidelines but not specific concessions, was regarded as a major achievement. With a broad agreement on agriculture and on other issues, negotiators were given a clearer direction for future discussions. However, the talks settled back into a driftless stalemate, where few but the most technical issues were resolved. The Hong Kong Ministerial The stalemate in 2005 increased the perceived importance of the 6 th Ministerial in Hong Kong as potentially the last opportunity to settle key negotiating issues that could produce an agreement by 2007, the then- de facto deadline resulting from the looming expiration of U.S. trade promotion authority. Although a flurry of negotiations took place in the fall of 2005, WTO Director-General Pascal Lamy announced in November 2005 that a comprehensive agreement on modalities would not be forthcoming in Hong Kong, and that the talks would "take stock" of the negotiations and would try to reach agreements in negotiating sectors where convergence was reported. The final Ministerial Declaration of December 18, 2005, reflected areas of agreement in agriculture, industrial tariffs, and duty-free and tariff-free access for least developed countries (see sectoral negotiations section below for details). Generally, these convergences reflected a step beyond the July Framework Agreement, but fell short of full negotiating modalities. New deadlines were established at Hong Kong for concluding negotiations by the end of 2006. These deadlines included an April 30, 2006, date to establish modalities for the agriculture and NAMA negotiations. Further deadlines set for July 31, 2006, included the submission of tariff schedules for agriculture and NAMA, the submission of revised services offers, the submission of a consolidated texts on rules and trade facilitation, and for recommendations to implement the "aid for trade" language in the Hong Kong declaration. On April 21, 2006, WTO Director-General Pascal Lamy announced there was no consensus for agreement on modalities by the April 30 deadline. Trade negotiators likewise failed to reach agreement at a high-level meeting in Geneva on June 30-July 1, 2006. It was agreed at those meetings, however, that Director-General Pascal Lamy would undertake a more proactive role as a catalyst "to conduct intensive and wide-ranging consultations" to achieve agricultural and industrial modalities. Prior to the summit, Lamy for the first time in his tenure suggested the outline of a possible compromise. Known as the "20-20-20 proposal," the offer (1) called on the United States to accept a ceiling on domestic farm subsidies under $20 billion, (2) proposed the negotiations use the Group of 20 proposal of 54% as the minimum average cut to developed country agricultural tariffs, and (3) set a tariff ceiling of 20% for developing country industrial tariffs. This suggestion was roundly criticized by all sides and was not adopted at the Geneva meetings. At the G-8 summit of leading industrialized nations in St. Petersburg, the leaders pledged a "concerted effort" to reach an agreement on negotiating modalities for agriculture and industrial market access with a month of the July 16 summit. Suspension Despite the hortatory language of the G-8 Ministerial Declaration, the talks were indefinitely suspended less than a week later by Director-General Lamy on July 24, 2006. The impasse was reached after a negotiating session of the G-6 group of countries (United States, EU, Japan, Australia, Brazil, and India) on July 23 failed to break a deadlock on agricultural tariffs and subsidies. The EU blamed the United States for not improving on its offer of domestic support, while the United States responded that no new offers on market access were put forward by the EU or the Group of 20 to make an improved offer possible. Members of Congress praised the hard-line position taken by U.S. negotiators that additional domestic subsidy concessions must be met with increased offers of market access. Following the July 2006 suspension, several WTO country groups such as the Group of 20 and the Cairns Group of agricultural exporters met to lay the groundwork to restart the negotiations. While these meeting did not yield any breakthrough, Lamy announced the talks were back in "full negotiating mode" on January 31, 2007. Key players in the talks, such as the G-4 (United States, European Union, Brazil, India), conducted bilateral or group meetings to break the impasse in the first months of the year. In April 2007, G-6 negotiators (G-4 plus Australia and Japan) agreed to work towards concluding the round by the end of 2007. Yet, a G-4 summit in Potsdam, Germany, collapsed in acrimony on June 21, 2007, over competing demands for higher cuts in developed country agricultural subsidies made by developing countries and developed country demands for greater cuts in industrial tariffs in developing countries. Despite the Potsdam setback, the chairs of the agriculture and industrial market access (NAMA) negotiating groups put forth draft modalities texts on July 17, 2007. The texts represented what the chair of each committee, as facilitators of the talks, believed was the basis for a balanced level of concessions based on the Doha Declaration and subsequent agreements. Revisions to these texts were circulated on February, May, and July 2008 based on committee level negotiations held in Geneva. Despite the criticism these texts received from nearly all quarters, they have served to continue the engagement of the various parties in Geneva at a time when many have predicted the demise of the round. Negotiators met in Geneva between July 21-29, 2008 in what was described as a 'make-or-break' summit to reach agreement based on the texts prepared during the spring. Once again, however, trade ministers failed to reach agreement with the talks foundering on a "special safeguard mechanism" (SSM) for agriculture products (see section on agriculture below). In the aftermath of the talks, there was a palpable sense of disappointment as many sticking points reportedly had been resolved. Director-General Lamy claimed after the talks broke up that convergence had been reached on 18 of 20 issues. Summing up this effort, Brazilian President Lula da Silva reportedly said, "We swam an entire ocean only to drown as we were reaching the beach." However, other obstacles in the agriculture, NAMA, and intellectual property rights talks may have been raised had the negotiations continued. In response to the global financial crisis, a summit of G-20 heads of state of leading economic powers meeting on November 14-15, 2008, in Washington, DC, agreed to work to reach an agreement by year's end on modalities leading to an "ambitious outcome" to the Doha Round and to refrain from raising new barriers to trade and investment. New draft negotiating texts were issued in December 2008 in anticipation of a proposed ministerial to finalize modalities, yet that summit never materialized as differences between the parties remained intractable. Some states called for negotiations based on the December 2008 draft texts, however, the United States has maintained that these texts were not agreed to by the United States and do not reflect consensus on the way forward. Instead, the United States has pursued a series of bilateral talks with advanced developing countries aimed at determining what specific market access commitments those countries could deliver under the draft texts. Despite continued exhortations by G-20 leaders to reach agreement on the Round, no breakthrough was achieved in 2009. The Seventh Ministerial Conference of the WTO was held between November 30 and December 2, 2009. The Marrakesh Agreements establishing the WTO called for a Ministerial Conference to be held every two years, although it had been nearly four years since the last Ministerial at Hong Kong in December 2005. While previous Ministerials had negotiations on the Round as their centerpiece, this Ministerial sought to avoid detailed negotiations and was designed to address other concerns facing the WTO system. Yet, ministers "reaffirmed the need to conclude the Round in 2010 and for a stock-taking exercise to take place in the first quarter of [2010]." Yet negotiators achieved no breakthrough in 2010, with only technical issues being addressed by the negotiating groups throughout much of the year. G-20 leaders and APEC leaders again called for a successful conclusion of the Doha Round at their respective summits in Korea and Japan in November 2010. The G-20 communiqué found a "critical window of opportunity" in 2011 for a "successful, ambitious, comprehensive and balanced conclusion" of the round. Director-General Pascal Lamy has called for the submission of revised negotiating texts by the end of March and "at the right moment … develop more of a global sense of what the final package will contain" as a result of horizontal negotiations among different negotiating groups. However, the production of revised texts did not result in any breakthroughs. Director-General Lamy himself described the NAMA differences as "unbridgeable today," noting a "fundamental gap in expectations in sectorals." The U.S. Ambassador to the WTO also noted that serious market access differences continued in agriculture and services as well. Indeed, there may be a sense that time is running out. In a December 2010 interview, EU Trade Commissioner Karel De Gucht—while welcoming what he described as renewed U.S. engagement on trade—warned that "if we don't have anything by the summer … Doha could be over." Moreover, former USTR Susan Schwab wrote that it was "time to give up trying to save Doha," and that prolonging the round will jeopardize the multilateral trading system. She advocated the "salvage" of several smaller agreements from the negotiation, including trade facilitation, the agricultural export pillar, reducing fishing subsidies and ending tariff and non-tariff barriers to green technologies. The Financial Times urged the institution to focus on narrower projects, such expanding the government procurement agreement and disciplining bilateral and regional FTAs, rather than "persisting with negotiations whose failure is leaching credibility from the very principle of multilateralism." In fact, Geneva negotiators had already begun thinking of a "plan B," focusing on a set of deliverables that could be agreed to by the WTO's eighth Ministerial, scheduled for December 2011. An LDC "early harvest" proposal for least developed countries (LDCs) which would have included such items as a deal on trade facilitation, duty-free-quota-free market access for LDCs, rules-of-origin proposals, movement on the cotton issue and a waiver to favor services for LDCs. However, this plan reached stalemate and was abandoned at a July 2011 General Council meeting, over the desire by some, including the United States, to some LDC+ provisions including fisheries subsidies and a tariff-free goods and services provision. The December 2011 WTO Ministerial did not meaningfully advance the Doha Round, nor was it anticipated. A "political guidance" document issued by the General Council prior to the Ministerial noted that "significantly different perspectives" remain over certain aspects of the single undertaking, making it "unlikely that all the elements of the Doha Development Round could be concluded simultaneously in the near future." Yet, some activity related to LDCs was included in the final Ministerial declaration, including a "services waiver," for preferential treatment for services suppliers from LDCs, extension of the period of time past 2013 that the LDCs will have to formally implement their TRIPS obligations, and new steps to make it easier to accede to WTO membership. Consequences If negotiators are not able to achieve a breakthrough, there may be several consequences for multilateral trade liberalization. First, the negotiation of bilateral and regional free trade agreements may accelerate. Some trade analysts view the increasing web of these agreements with suspicion. They assert that the emphasis on regional and bilateral negotiations undermines the WTO and increases the risk of trade diversion. Trade diversion occurs when the existence of lower tariffs under a trade agreement cause trade to be diverted away from a more efficient producer outside the trading bloc to a producer inside the bloc. What also results from the plethora of negotiated FTAs, according to one economist, "a 'spaghetti bowl' of multiple tariffs depending on the source of a product and, in turn, a flood of rules of origin to determine which source is to be assigned to that product." A second consequence may be the increased use of the WTO's dispute settlement function. If a political solution to disagreements among members cannot be agreed through negotiations, some practices like agricultural subsidies may be challenged in dispute settlement. An increased reliance on dispute settlement may, in turn, put stress on the WTO as an institution if the decisions rendered are not implemented or are not perceived as being fairly decided. A third consequence of a prolonged impasse may be the withdrawal of offers already on the table or of agreements already made at the negotiations. Such development-oriented proposals such as aid-for-trade, duty-free and quota-free access for least developed countries, or trade facilitation may languish due to the stalemate in the negotiations. The EU commitment to phase out export subsidies by 2013 is contingent on a broader agreement and may not be implemented without one. Further, the global economic crisis may encourage governments to implement protectionist measures that may be entirely WTO-consistent—such as a country raising its applied rate tariffs to the bound rate—yet undermines the purpose of the negotiations to liberalize trade. In addition, some have questioned the continued relevancy of the Doha negotiations in light of other pressing issues implicating the trade regime such as the global financial crisis, trade implications of greenhouse gas mitigation strategies, perceived exchange-rate manipulation, and widely volatile commodity prices: none of which are being addressed in the current negotiations. As two noted economists wrote, "the Doha process has been Nero-like in dwelling on issues of relatively minor consequence while the burning issues of the day are not even on the agenda." Another noted economist maintained that the round has "suffered incalculable collateral damage by seven years of fruitless, arcane negotiations and ... by the petty bickering and blame-games of national trade ministers," and has advocated for the suspension of the round for a year to allow time "to plot a course for the long-term revival of the negotiations and of the WTO as an institution." U.S. trade promotion authority (TPA) expired on July 1, 2007. Possible consideration of TPA legislation by the 113 th Congress may provide a venue for a debate on the status of the Round and the prospects for reaching an agreement consistent with principles set forth by Congress in granting TPA. Significance of the Negotiations Trade economists argue that the reduction of trade barriers allows a more efficient exchange of products among countries and encourages economic growth. Multilateral negotiations offer the greatest potential benefits by obliging countries throughout the world to reduce barriers to trade. The gains to the United States and to the world from multilateral trade agreements have been calculated in the billions of dollars. For example, a recent study by the International Trade Commission found that if the tariff cuts from the Uruguay Round were removed, the welfare loss to the United States would be about $20 billion. A study by the University of Michigan found that if all trade barriers in agriculture, services, and manufactures were reduced by 33% as a result of the Doha Development Agenda, there would be an increase in global welfare of $574 billion. Other studies present a more modest outcome predicting world net welfare gains ranging from $84 billion to $287 billion by the year 2015. Multilateral negotiations are especially important to developing countries that might otherwise be left out of a regional or bilateral trade agreement. Developing country blocs can improve trade and economic growth among its members, but the larger share of benefits is from the trade agreements that open the markets of the world. Multilateral trade negotiations are also an exercise in international cooperation and encourage economic interdependence, which offers political benefits as well. When a country opens its markets, however, increased imports might cause economic dislocations at the local or regional level. Communities might lose factories. Workers might lose their jobs. For those who experience such losses, multilateral trade agreements do not improve their economic well-being. Also, if a country takes an action that is not in compliance with an agreement to which it is a party, it might face some form of WTO-sanctioned retaliation. Further, some oppose WTO rules that restrict how a country is permitted to respond to imports of an overseas product that employs an undesirable production method, for example a process that might use limited resources or impose unfair working conditions. Thus, while multilateral trade agreements have been found to offer broad economic benefits, they are opposed for a variety of reasons as well. The Doha Agenda Doha Round talks are overseen by the Trade Negotiations Committee (TNC), whose chair is Director-General Pascal Lamy. The negotiations are being held in five working groups and in other, existing bodies in the WTO. Selected topics under negotiation are discussed below in five groups: market access, development issues, WTO rules, trade facilitation, and other issues. Market Access Agriculture The Uruguay Round Agreement on Agriculture called for continued negotiations toward "the long-term objective of substantial progressive reductions in support and protection." By early 2001, WTO members had achieved some preliminary work in those sectoral negotiations, and later that year, agriculture was wrapped into the broader Doha agenda. Agriculture has become the linchpin in the Doha Development Agenda. U.S. goals in the new round were elimination of agricultural export subsidies, easing of tariffs and quotas, and reductions in trade-distorting domestic support. The Doha Ministerial Declaration included language on all of these three pillars of agricultural support. It stated that the members committed to "comprehensive negotiations aimed at substantial improvements in market access; reductions of, with a view to phasing out, all forms of export subsidies; and substantial reductions in trade distorting support." The course of the negotiations in the lead up to Cancun was influenced by the reform of the EU's Common Agricultural Policy (CAP). A major issue for the EU was whether or not to approve separation ("decoupling") of payments to farmers based on production. Those types of payments are among the most trade-distorting ("amber box"). On June 26, 2003, EU agriculture ministers approved a reform package that included partial decoupling for certain products. The action was seen by many as a positive step for advancing the trade negotiations. The EU reform largely addressed one of the three pillars of agricultural reform—domestic support—but did little in a second pillar—market access. In the WTO negotiations on market access, the United States and the Cairns Group have supported a leveling, or harmonizing, of tariff peaks, or high rates. In comparison, the EU and Japan want flexibility to cut some items less than others to arrive at an average total rate cut. Another difficulty is "geographical indications," or the protection of product names that reflect the original location of the product. An example is the use of "Bordeaux wine" for wines from the Bordeaux region only. Europeans, joined by India and some other countries, want a mandatory registry of geographical indications that would prevent other countries from using the names. The United States and other countries refuse to negotiate a mandatory list, but will accept a voluntary list with no enforcement power. While the EU has said that it will not accept an agriculture agreement without a geographical registry, it reportedly has lowered expectations to achieving a registry for wines and spirits. Developing countries view reform in agricultural trade as one of their most important goals. They argue that their own producers cannot compete against the surplus agricultural goods that the developed countries, principally the EU and the United States, are selling on the world market at low, subsidized prices. Some African countries also are calling for an end to cotton subsidies, claiming that such subsidies are destroying markets for the smaller African producers. The July 2004 Framework Agreement provided a basis for which to continue the agriculture talks. On domestic support, subsidies are to be reduced by means of a "tiered" or "banded" approach applied to achieve "harmonization" in the levels of support. Subsidizing countries will make a down-payment of a 20% reduction in levels of support in the first year of the agreement. Tariff reduction will utilize a tiered formula with a harmonization component, but with some exceptions for "import sensitive products." The European Union finally agreed to the elimination of export subsidies, considered a major negotiating goal of the United States. While there was no breakthrough at the December 2005 Hong Kong Ministerial, members agreed to eliminate export subsidies, and "export measures with equivalent effect" by 2013, a date favored by the European Union (EU). Members agreed to cut domestic support programs with a three band methodology. As the largest user of domestic agricultural subsidies, the EU was placed in the highest band. The United States and Japan were placed in the second band and lesser subsidizing countries were placed in the third band. However, the actual percentage cuts that these bands represent remained subject to negotiation. Members also renewed a commitment to achieve a tariff cutting formula by April 30, 2006. This deadline was not met. In the parallel negotiations on cotton, members agreed to eliminate export subsidies for cotton and to provide duty-free and quota-free access for LDC cotton producers by year-end 2006. Members also agreed to reduce domestic support for cotton in a more ambitious manner than for other agricultural commodities as an "objective" in the ongoing agricultural negotiations. Talks to reach modalities proved unsuccessful at the July 23, 2006, meeting of the G-6 countries in Geneva and the negotiations were suspended thereafter. Sources of the stalemate in the Geneva talks included U.S. concerns about the magnitude of deviations from market access commitments stemming from the so-called "3-S flexibilities": sensitive products, special products, and the special safeguard mechanism. While each of these flexibilities was incorporated into the 2004 July Framework Agreement as negotiating modalities that would allow countries to exempt certain products from the banded tariff formula, the United States contends that the scope envisioned by some countries for these modalities would unacceptably diminish the overall market access gains from the agreement. Conversely, the United States was under pressure at the meeting from the EU and the G-20 group represented by Brazil and India to improve its subsidy reduction offer, but the United States put no new offer on the table. The United States insisted that it will not improve its offer on domestic subsidy reduction unless the EU improves considerably its market access offer and the G-20 countries show a willingness to open their markets not only to agricultural products but to industrial products and services as well. These dynamics continued in 2007 discussions. In July 2007, WTO Agriculture committee chairman Crawford Falconer submitted a draft modality paper to address the divergent negotiating positions of the parties. As a result of committee-based negotiations in Geneva, revisions to this draft were made in February, May and July 2008, the latter of which became the basis for negotiations at the WTO summit in July 21-29, 2008. Subsequent technical level negotiations and refinements resulted in a December 2008 draft from which the following headline figures are derived. These include a reduction of U.S overall trade-distorting domestic support (OTDS) of 70% for a total of $14.4 billion and a reduction in European domestic support of 80% to $22.1 billion. In this draft, Japan would cut 75% due to its high level of base OTDS (greater than 40%) in terms of the value of its total agricultural output. Other developed countries that spend less than $10 billion in OTDS would have to cut their support by 55%. The United States publicly offered to cap OTDS at $14.5 billion on July 25, 2008, during the negotiating summit, conditional on accepting the Lamy compromise package then on the table. In past negotiations, the EU has set a 70% reduction as its upper bound. The G-20 group of developing countries, though, has demanded a reduction yielding an $11 billion cap in U.S. OTDS. Developed country tariffs would be cut in a tiered formula in equal increments over five years: a 70% reduction for tariffs currently above 75%, a 64% cut for tariffs currently between 50% and 75%, a 57% cut for tariffs currently between 20% and 50% and a 50% cut for tariffs between 0 and 20%. In addition, the draft stipulates a minimum tariff cut of 54% for developed countries, after application of the formula and other exceptions. Developing countries would be able to cut two-thirds of the amount of cuts agreed by developed countries from bands with higher thresholds in equal installments over 10 years. While developed countries would have to cut 70% from tariffs currently above 75% (their highest tariff band), developing countries would have to cut 46.7% on all tariffs above 130%, 42.7% on tariffs between 80% and 130%, 38% for tariffs between 30% and 80%; and 33.3% on tariffs between 0% and 30%. Developing countries would only be required to make a maximum average tariff cut of 36%. If the average falls above that percentage, then the cut made by the formula can be reduced. The modalities draft also proposes that countries may designate 4% of their agricultural tariff lines as sensitive, and thus subject to lower cuts. Developing countries would be allowed to claim 5.3% more tariffs lines as sensitive. The draft reaffirmed the Hong Kong Ministerial commitment to eliminate export subsidies by 2013 with half the reductions implemented by 2010. The document also seeks disciplines on export credits, guarantees, insurance programs, and state trading enterprises. The special safeguard mechanism (SSM) has been revised in the December 2008 draft. Disagreements over the particulars of the SSM, a proposal to allow developing countries to raise duties beyond bound levels in instances of import surges or price depressions, contributed to the failure of the July 2008 summit. The concept of an SSM for developing countries had been a part of the Doha Round modalities since the July Framework Agreement of 2004. The controversy revolved around the trigger level and the resulting level of tariff increase. The new proposal posits a two tiered SSM that could be triggered at a 20% or 40% surge above the level of base imports. A 20% surge on imports could trigger a safeguard of the higher of one-third of the current bound tariff or 8 percentage points; a 40% surge could result in the imposition of a safeguard of the higher of one-half of the bound tariff or 12 percentage points. This iteration represents a compromise between the higher surge trigger sought by the United States and a greater increase in the amount of the safeguard sought by India and China. The United States has also sought to cap the safeguard duties so that their imposition would not breach the existing (pre-Doha) bound rates, however the latest draft provides that the bound rate could be breached for up to 2.5% of bound tariff lines in a 12 month period. Services Along with agriculture, services were a part of the "built-in agenda" of the Uruguay Round. The General Agreement on Trade In Services (GATS), which was concluded in that Round, directs Members to "enter into successive rounds of negotiations, beginning not later than five years from the date of entry into force of the WTO Agreement [January 1, 1995] ... [to achieve] a progressively higher level of liberalization." Those negotiations began in early 2000. Negotiating guidelines and procedures were established by March 2001. Under the request-offer approach being used, countries first request changes in other countries' practices, other countries then respond by making offers of changes, and finally the countries negotiate bilaterally on a final agreement. The Doha Ministerial Declaration recognized the work already undertaken and reaffirmed the March 2001 guidelines as the basis for continuing the negotiations. It directed participants to submit initial requests for specific commitments by June 30, 2002, and initial offers by March 31, 2003. The services talks are going slowly. By July 2005 the WTO had received 68 initial commitment offers representing 92 countries (the EU represents 25 members) and 24 offers remained outstanding from non-LDC members (55 if LDCs are included). Only 28 revised offers were tendered by November 2005, although the July Framework stipulated a March 31, 2005, deadline. All members were to have submitted their initial offers by March 31, 2003. Many have decried the poor quality of offers, many of which only bind existing practices, rather than offer new concessions and excluded some sectors entirely. At Hong Kong, members committed to submit a second round of revised offers by July 31, 2006, and to submit a final schedule of commitments by October 31, 2006. In order to expedite the negotiating process, members also agreed to employ plurilateral requests to other members covering specific sectors and modes of supply to be completed by February 28, 2006. In response to this deadline, 21 plurilateral requests concerning 17 sectors and 4 modes of supply were submitted, and 4 rounds of discussions have been held concerning them. In addition, 6 rounds of bilateral request-offer meetings have been held among the participants since the end of 2005. To some members, including the United States, the talks have not yielded adequate offers of improved market access. Consequently, various methods have been advocated to break the stalemate in negotiations, from calls to prepare a services modalities text to the convening of a signaling conference. A draft services negotiating text, released prior to the July 2008 mini-ministerial, called for countries "to the maximum extent possible" respond to requests with "deeper and/or wider commitments ... commensurate with levels of development, regulatory capacity, and national policy objectives." While much of the activity during the July 21-29, 2008, Geneva talks continued to concern agriculture and industrial market access, participants did hold a signaling conference on July 26 on the types of additional offers of services liberalization countries would be willing to make provided an agreement was reached in the agriculture and NAMA talks. Yet little emerged from this conference. In March 2010, the chair of the negotiating committee summarized the state of the negotiations, it is clear that there has been little or no significant progress in the market access negotiations since July 2008. Gaps in sectoral coverage and levels of commitment need to be filled in order for Members to be satisfied with the outcome of the services negotiations. In filling these gaps, rule-making in the services negotiations will need to move in tandem with market access. Members can make progress in market access in services once the political will has been summoned to resolve problems in other areas of the Round. One area of controversy is so-called "Mode IV" services. Mode IV relates to the temporary movement of business persons to another country in order to perform a service on-site. Developing countries want easier movement of their nationals under Mode IV. They claim that the services negotiations have centered on the establishment of businesses in other countries, which has been a focus of developed countries, while there has been no negotiation on Mode IV, which would help them. Developed countries, especially the United States, have opposed discussions on Mode IV services trade. Congress might oppose easier entry for business persons, based on Senate approval of a resolution ( S.Res. 211 ) in the 108 th Congress expressing the sense of the Senate that future U.S. trade agreements and implementing legislation should not contain immigration-related provisions. Mode IV services will be a difficult issue to resolve. Fifteen countries have joined a plurilateral request for Mode IV services liberalization to the United States and other developed countries. At the abovementioned signaling conference, the United States and the EU reportedly signaled increased flexibility on allowing more services professionals access to their markets. The International Services Agreement (ISA) Exploratory talks for new global services negotiations, provisionally entitled the ISA, were launched by 47 WTO Members on January 17, 2012. While these negotiations are not being conducted under the Doha mandate, they are being conducted among WTO members and likely could be incorporated into the WTO system. Doing so would facilitate the expansion of the agreement to other WTO members as well as utilize the existing WTO dispute settlement mechanism. The new talks are seen as resulting from frustration among certain WTO members by the lack of progress in the Services talks taking place within the negotiating structure of the Doha Round. To date, advanced developing countries such as Brazil, China, and India have not taken part in the negotiations. Currently, negotiators are seeking a framework for the manner in which the negotiations are to be conducted. Negotiators have discussed a so-called "hybrid approach," which would combine a "negative list" approach for national treatment of services providers with the "positive list" approach of the current GATS with regard to market access commitments, as well as disciplines on domestic services regulations in the participating countries. Negotiators have also discussed the principle of no a priori exclusions and an accession mechanism for new members. Negotiators seek to have a framework agreement in place by the end of 2012 in order to start negotiations of schedules of commitments in 2013. One potential unresolved issue is whether to extend the benefits of the potential ISA on a most-favored-nation basis to all WTO members as the European Union seems to support, or to extend the benefits only to participants as the United States reportedly favors. Non-Agricultural Market Access (NAMA) In the Doha Declaration, trade ministers agreed to negotiations to reduce or eliminate tariffs on industrial or primary products, with a focus on "tariff peaks, high tariffs, and tariff escalation." Tariff peaks are considered to be tariff rates of above 15% and often protect sensitive products from competition. Tariff escalation is the practice of increasing tariffs as value is added to a commodity. The talks are also seeking to reduce the incidence of non-tariff barriers, which include import licensing, quotas and other quantitative import restrictions, conformity assessment procedures, and technical barriers to trade. The sectoral elimination of tariffs for specific groups has also been forwarded as an area of negotiation. Negotiators accepted the concept of less than full reciprocity in reductions for developing and least-developed countries. Doha negotiators agreed to reach modalities for the reduction or elimination of tariffs and non-tariff barriers by the end of May 2003. This deadline was, as were subsequent ones, not met. NAMA issues were not discussed at Cancun, and there was no agreement on the draft texts proposed for consideration at that Ministerial. The July 2004 Framework Agreement adopted the use of a non-linear tariff reduction formula applied on a line-by-line basis, (i.e., one that it can work towards evening out or harmonizing tariff levels), and the Hong Kong Ministerial did agreed to use a Swiss formula. The Ministerial did not agree on coefficients, however, and these have become the subject of continuing negotiations. The July 2004 Framework Agreement also agreed that tariff reductions would be calculated from bound, rather than the applied, tariff rates. Negotiators are also grappling with the concept of "flexibility," or the nature and extent of developing country-special and differential treatment, as it relates to formula cuts. In addition to longer implementation times, the July Framework Agreement allowed for less than formula cuts for a certain (undetermined) amount tariff lines, keeping a percentage of tariff lines unbound, or not applying formula cuts for an (undetermined) percentage of tariff lines (the so-called Paragraph 8 flexibilities). At Hong Kong, negotiators did agree to provide tariff-free and quota-free access for LCDs by 2008. However, this agreement provides the caveat that 3% of tariff lines can be exempted as sensitive products such as textiles, apparel, and footwear. The April 30, 2006, deadline, like so many before, was breached without agreement on the NAMA formula or on other issues. The end of June Geneva summit also failed to reach agreement on NAMA modalities. The United States, Canada, and Switzerland proposed a 5 percentage point differential between the Swiss formula coefficients of developed and developing countries, which is consistent with the EU proposal of a 10 coefficient for developed countries and a 15 coefficient for developing countries. A group of developing countries known as the NAMA-11 proposed that the differential should be at least 25 percentage points. The NAMA talks have been increasingly linked to the agricultural talks, with some movement on one becoming increasingly linked to progress in the other. Developing countries have been unwilling to commit on NAMA without agreement on agriculture, but now some developed countries are tying further agriculture progress to NAMA. This linkage has come be known as the "exchange rate" between the two negotiations. A June 2007 G-4 meeting in Potsdam, Germany, faltered in part over the rejection by Brazil of a U.S. proposal of a 10-25 percentage point spread for developed and developing country coefficients, a proposal that was a clear break from either country's stated positions. Following on the Potsdam summit, a draft modality paper was released on July 17, 2007, authored by the NAMA negotiating chairman. This document, and subsequent revisions released in February, May, July, August, and December 2008, has formed the basis of the Geneva level negotiations. This paper sought to reconcile the positions of the parties to move the negotiations forward; as such, it faced mostly criticism from the diverse negotiating groups. These various texts have reflected some narrowing of positions over time, but they should not be considered to reflect the present state of agreement in the negotiations. Following the July 2008 Ministerial, the chairman revised his text again to reflect areas of "convergence" in the negotiations, while admitting that not all members accepted this convergence. The United States, for example, did not accept the August 2008 language on sectoral tariff participation, which was widely criticized by U.S. industry. The following figures reflect the latest text released in December 2008. Concerning the Swiss tariff reduction formula, the December 2008 draft called for a coefficient of 8 for developed countries and a range of coefficients of either [x=20][y=22][z=25] for developing countries depending on which so-called "Paragraph 7" flexibility each country avails themselves. This scenario would allow developing countries to choose one of the following flexibilities based on the coefficient x or y they chose for the tariff reduction formula: (1) apply less than formula cuts for up to [14% for x][10% for y]of tariff lines provided that the cuts applied are no less than half the formula cuts, and that the tariff lines do not exceed [16% for x][10% for y] of the value of a member's non-agricultural imports, or (2) keep tariff lines unbound or not applying formula cuts for [6.5% for x] [5% for y ]of tariff lines provided they do not exceed [7.5% for x][5% for y]of the value of a member's non-agricultural imports. Countries choosing coefficient z, which would lead to the lowest tariff cuts under the formula, would not avail themselves of these flexibilities. The use of these flexibilities has been further complicated by the so-called "anti-concentration clause," which provides that the flexibilities available to developing countries shall not be used to exclude full chapters of the harmonized tariff schedule (HS) from full formula reductions. Both the United States and the EU have been adamant that the flexibilities should not be used in a way to exclude whole industrial sectors from formula cuts, as reflected in the 2 digit HS chapter. Meanwhile, developing countries have opposed expanding the anti-concentration clause beyond the level of full chapters, as agreed by all members at the Hong Kong Ministerial. The December 2008 convergence text set full formula tariff reductions as a minimum of 20% of national tariff lines in each HS chapter or 9% of the value of imports of the Member in each HS chapter. Both the United States and the EU have favored using sectoral tariff elimination as a supplemental modality for the NAMA negotiations. Negotiations have been heated on which products to cover and the extent of participation (i.e., whether developing countries or LDCs would be able exempt themselves from commitments). Proposals have been made for sectoral negotiations in the automotive and related parts; bicycles and related parts; chemicals; electronics/electrical products; fish and fish products; forest products; gems and jewelry; hand tools; industrial machinery; open access to enhanced health care; raw materials; sports equipment; toys; and textiles, clothing and footwear. The United States has insisted that major developing countries participate in the sectorals, while developing countries have countered that the original negotiating mandate makes such negotiations voluntary. The December draft posits the still unresolved question of, "how and when to define the commitment of Members to participate in sectorals without altering the non- mandatory character of these negotiations." As noted above, the industrial market access talks also encompass negotiations on the reduction of non-tariff barriers (NTBs). The draft text includes several sectoral proposals concerning NTBs for chemical products; electronics; electrical safety and electromagnetic compatibility; labeling of textiles, clothing, footware, and travel goods; and automotive products. The text also includes a proposal for a mechanism to resolve disputes over specific NTBs as they arise. The Information Technology Agreement (ITA) The ITA is a plurilateral agreement providing for the elimination of tariffs on information and communications technologies (ICT) covered by the agreement. Originally concluded by 29 WTO Members in 1996, it is now in effect in 73 member countries, covering approximately 97% of trade in ICT products. ITA Members agree to eliminate tariffs and other duties and charges on products covered by the agreement, however, the agreement does not include disciplines on non-tariff measures affecting ICT products. While the ITA has been considered a success in liberalizing trade in covered ICT products, members have not been able to agree to expand its product list over the years. For this reason, as well as its lack of coverage of digital products and lack of disciplines on non-tariff measures, it is widely considered to be outdated by some members, including the United States. Informal talks began in May 2012 to expand and update the agreement. Thus far, talks have centered on which additional products to cover and how or whether to include disciplines on reducing non-tariff barriers on ICT. On November 5, 2012, the U.S. International Trade Commission released a report compiling a draft list of ICT products considered for duty-free treatment in the negotiations. Development Issues Three development issues are most noteworthy. One pertains to compulsory licensing of medicines and patent protection. A second deals with a review of provisions giving special and differential treatment to developing countries. A third addresses problems that developing countries were having in implementing current trade obligations. Access to Patented Medicines A major topic at the Doha Ministerial regarded the WTO Agreement on Trade-Related Aspects of Intellectual Property Rights (TRIPS). The issue involves the balance of interests between the pharmaceutical companies in developed countries that held patents on medicines and the public health needs in developing countries. Before the Doha meeting, the United States claimed that the current language in TRIPS was flexible enough to address health emergencies, but other countries insisted on new language. Section 6 of the Doha document Declaration on the TRIPS Agreement and Public Health (TRIPS Declaration), recognized that "WTO Members with insufficient or no manufacturing capabilities in the pharmaceutical sector could face difficulties in making effective use of compulsory licensing under the TRIPS Agreement." In Section 6, the trade ministers instructed the WTO TRIPS Council "to find an expeditious solution to this problem and to report to the [WTO] General Council before the end of 2002." On December 16, 2002, then-TRIPS Council chairman Eduardo Perez Motta produced a draft that would allow countries that lack the manufacturing capacity to produce medicines to issue compulsory licenses for imports of the medicines. All WTO members approved of the chairman's draft except the United States. The U.S. position, representing the interests of the pharmaceutical industry, was that the chairman's draft did not include enough protections against possible misuse of compulsory licenses. The United States sought a limit on the diseases that would be covered by the chairman's text, but other countries refused this initiative. The United States decided to oppose the chairman's draft and unilaterally promised not to bring a dispute against any least-developed country that issued compulsory licenses for certain medicines. One concern of the pharmaceutical industry was that the medicines sent to the developing country might be diverted instead to another country. To address this problem, it was suggested that the medicines be marked so that they can be tracked. Another concern was that more advanced developing countries might use the generic medicines to develop their own industries. For this problem, it was proposed that countries voluntarily "opt-out," or promise not to use compulsory licensing. On August 30, 2003, WTO members reached agreement on the TRIPS and medicines issue. Voting in the General Council, member governments approved a decision that offered an interim waiver under the TRIPS Agreement allowing a member country to export pharmaceutical products made under compulsory licences to least-developed and certain other members. An accompanying statement represented several "key shared understandings" of Members regarding the Decision, including the recognition that the decision should be used to protect public health and not be an instrument to pursue industrial or commercial policy objectives, and the recognition that products should not be diverted from the intended markets. The statement listed a number of countries that either agreed to opt out of using the system as importers or agreed that they would only use the system in national emergencies or extreme urgency. At the 2005 Hong Kong Ministerial, members agreed to a permanent amendment to incorporate the 2003 Decision, which will become effective when it is ratified by two-thirds of the member states. To date, 46 countries (including the 27 members of the EU) have ratified the agreement. Special and Differential (S&D) Treatment In the Doha Ministerial Declaration, the trade ministers reaffirmed special and differential (S&D) treatment for developing countries and agreed that all S&D treatment provisions "be reviewed with a view to strengthening them and making them more precise, effective and operational." In the Declaration, the trade ministers endorsed the work program on S&D treatment presented in another Doha document, Decision on Implementation-Related Issues and Concerns (Implementation Decision). That document called on the WTO Committee on Trade and Development to identify the S&D treatment provisions that are already mandatory and those that are non-binding, and to consider the implications of "converting [S&D] treatment measures into mandatory provisions, to identify those that Members consider should be made mandatory, and to report to the General Council with clear recommendations for a decision by July 2002." It also called for the Committee on Trade and Development "to examine additional ways in which S&D treatment provisions can be made more effective, to consider ways ... in which developing countries ... may be assisted to make best use of [S&D] treatment provisions." The negotiations have been split along a developing-country/developed-country divide. Developing countries wanted to negotiate on changes to S&D provisions, keep proposals together in the Committee on Trade and Development, and set shorter deadlines. Developed countries wanted to study S&D provisions, send some proposals to negotiating groups, and leave deadlines open. Developing countries claimed that the developed countries were not negotiating in good faith, while developed countries argued that the developing countries were unreasonable in their proposals. At the December 2005 Hong Kong Ministerial, members agreed to five S&D provisions for LDCs, including the tariff-free and quota-free access for LDC goods described in the NAMA section. Implementation Issues Developing countries claim that they have had problems with the implementation of the agreements reached in the earlier Uruguay Round because of limited capacity or lack of technical assistance. They also claim that they have not realized certain benefits that they expected from the Round, such as increased access for their textiles and apparel in developed-country markets. They seek a clarification of language relating to their interests in existing agreements. Before the Doha Ministerial, WTO Members resolved a small number of these implementation issues. At the Doha meeting, the Ministerial Declaration directed a two-path approach for the large number of remaining issues: (1) where a specific negotiating mandate is provided, the relevant implementation issues will be addressed under that mandate; and (2) the other outstanding implementation issues will be addressed as a matter of priority by the relevant WTO bodies. Outstanding implementation issues are found in the area of market access, investment measures, safeguards, rules of origin, and subsidies and countervailing measures, among others. Trade Facilitation The first WTO Ministerial Conference, which was held in Singapore in 1996, established permanent working groups on four issues: transparency in government procurement, trade facilitation, trade and investment, and trade and competition. These became known as the Singapore issues. These issues were pushed at successive Ministerials by the European Union, Japan and Korea, and opposed by most developing countries. The United States was lukewarm about the inclusion of these issues, indicating that it could accept some or all of them at various times, but preferring to focus on market access. In 2001, the Doha Ministerial Declaration called for further clarification on the four Singapore issues to be undertaken before the 5 th Ministerial in 2003 (at Cancún), and for negotiations to be launched on the basis of a decision taken by explicit consensus at the 5 th Ministerial. At Cancún, deadlock over the Singapore issues was a contributing factor in the breakup of that summit. After further negotiations during 2004, a compromise was reached in the July 2004 Framework Agreement: three of the Singapore issues (government procurement, investment, and competition) were dropped and negotiations would begin on three specific areas of trade facilitation: to clarify and improve GATT Article V (Freedom of Transit), Article VIII (Fees and Formalities connected with Importation and Exportation), and Article X (Publication and Administration of Trade Regulations). Trade facilitation aims to improve the efficiency of international trade by harmonizing and streamlining customs procedures such as duplicative documentation requirements, customs processing delays, and nontransparent or unequally enforced importation rules and requirements. The talks have thus far revolved around the scope and obligations of the new disciplines. The first negotiating text was released in December 2009 and has undergone 13 revisions, the latest being released on November 10, 2012 (TN/TF/W/165/Rev.13). Trade facilitation is often mentioned as a deliverable in a "scaled-back" Doha agreement, or as a stand-alone agreement acceptable to all parties. Discussions have also occurred concerning the technical assistance and trade capacity building needed by developing countries to implement any subsequent agreement. Developing countries are in the process of assessing their own trade facilitation status, and what it will take to bring them up to international standards with the help of customs experts from organizations such as the World Bank and the World Customs Organization. Developed countries, including the United States and the European Union, favor the negotiation of a concrete rules-based system with appropriate accountability, while some developing countries prefer optional guidelines with "policy flexibility." WTO Rules Rules Negotiations The Doha Round negotiations included an objective of "clarifying and improving disciplines" under the WTO Agreements on Antidumping (AD) and on Subsidies and Countervailing Measures (ASCM). The United States sought to keep negotiations on trade remedies outside of the Doha Round, but found many WTO partners insistent on including them for discussion. U.S. negotiators did manage to insert language asserting that "basic concepts, principles and effectiveness of these Agreements and their instruments and objectives" would be preserved. However, congressional leaders were highly critical of this concession by U.S. trade negotiators. The Doha Ministerial Declaration also called for clarifying and improving disciplines on fisheries subsidies, and both the Ministerial Declaration and the Implementation Decision have special provisions on trade remedies and developing countries. In addition to trade remedies, the Declaration calls for clarifying and improving WTO disciplines and procedures on regional trade agreements. The Declaration identified two phases for the work on trade remedies: "In the initial phase of the negotiations, participants will indicate the provisions, including disciplines on trade distorting practices that they seek to clarify and improve in the subsequent phase." No deadlines were set for these phases. The United States has primarily been on the defensive in the rules talks. Many countries have attacked the use of antidumping actions by the United States and other developed nations as disguised protectionism. However, many developing countries are now using antidumping actions themselves, which may goad some countries to reexamine the necessity for discipline. Most of the proposals on trade remedies focus on providing more specificity or restrictions to the AD/ASCM Agreements in terms of definitions and procedures. Yet, no agreements have been reached, even on what is to be negotiated. The leading proponents of such changes have been a group of 15 developed and developing countries known as the "Friends of Antidumping" (Brazil, Chile, Colombia, Costa Rica, Hong Kong, Israel, Japan, Mexico, Norway, Singapore, South Korea, Switzerland, Taiwan, Thailand, and Turkey; though not all countries sign onto every proposal). They have made numerous proposals, and in essence their proposals would reduce the incidence and amount of duties. Many of their proposals would require a change in U.S. laws. Although the EU is a major user of trade remedies and not a member of the "Friends" group, it has agreed with some of the group's proposals. The United States itself has sought some changes in the WTO rules, submitting papers on antidumping proposals on issues such as transparency, foreign practices to circumvent duty orders, and the WTO standard used by dispute panels in reviewing national applications of trade remedy laws. The United States also has submitted proposals on subsidies, such as expanding a list of prohibited subsidies and imposing disciplines on support to sales of natural resources. A draft modalities paper was released on November 30, 2007. A key feature of this draft was language allowing the use of zeroing in certain antidumping (AD) calculations. The draft was widely seen as a concession to the United States, the only country that continues to employ the zeroing methodology, despite several adverse Appellate Body decisions over the practice. While the United States expressed disappointment that the text did not go far enough in legitimizing the practice, several countries including the "Friends of Antidumping" group and others were harshly critical of the draft text as rolling back Appellate Body decisions on zeroing. Perhaps bowing to this group, a subsequent draft contained no draft language on zeroing, saying only that "delegations remain profoundly divided on this issue." Positions range from insistence on a total prohibition of zeroing irrespective of the comparison methodology used to a demand specifically authorizing zeroing in all contexts." Removing the zeroing language was duly criticized by the USTR, maintaining that "the United States cannot envision an outcome to the Rules negotiations that fails to adequately address this critical issue." The November 2007 draft modalities paper also put forth a proposed modality on fisheries subsidies. The proposal would ban some subsidies outright such as those boost fishing capacity or encourage over-fishing. Exceptions would be allowed for subsidies associated with operations of fisheries management programs and for certain special and differential treatment for developing countries, provided that they adopt fisheries management programs. The extent of this special treatment and the treatment of subsidies for small-scale fishing in both developed and developing countries remained unresolved. The latest draft removed all the language disciplining fish subsidies, citing "differences among delegations [that] go to the very concepts and structure of the rules," and instead calls for further discussion over what a new agreement should include. Dispute Settlement At the end of the Uruguay Round, trade ministers called for a full review of WTO dispute settlement rules and procedures within four years after entry into force of the agreement establishing the WTO. That deadline, January 1, 1999, passed without a review being completed. At Doha, trade ministers continued to call for a review of dispute rules. The Ministerial Declaration directed that negotiations be held on improvements and clarifications of the Dispute Settlement Understanding (DSU). They stated that the negotiations should be based on work done so far and on any additional proposals. They set a deadline of May 2003. They directed that these DSU negotiations would be separate from the rest of the negotiations and would not be a part of the single undertaking. Members are examining nearly all of the 27 Articles in the DSU. In early April 2003, the chair of the working group circulated a framework document that included over 50 proposals. There was some dissatisfaction that the document needed more focus. On May 16, 2003, the chair issued another text that was accepted by most countries. The United States and the EU favored additional reforms that were not a part of the text. For example, the United States has called for open public access to proceedings, and the EU had sought a roster of permanent dispute panelists. Environment The Ministerial Declaration included several provisions on trade and environment. Among the provisions, the trade ministers agreed to the following: (1) negotiations on the relationship between existing WTO rules and trade obligations in multilateral environmental agreements (MEAs); (2) procedures for the exchange of information between MEA Secretariats and WTO committees, and the criteria for granting observer status; and (3) the reduction or elimination of trade barriers to environmental goods and services. Concerning the third negotiating objective, the United States and the European Union unveiled a two-tiered tariff elimination proposal on November 30, 2007. The first tier would be the elimination on tariffs on 43 goods and services directly related to climate change mitigation such as wind-turbine parts, solar collectors, and hydrogen fuel cells. All countries would be obliged to take on this mandate, although certain phase-in periods are contemplated for developing and least-developed countries. The second phase would be the creation of a plurilateral Environmental Goods and Services Agreement (EGSA) that would liberalize 153 additional environmental-related goods and services among developed and advanced developing countries. However, this proposal has been criticized by several developing countries. Brazil has decried the omission of biofuels from the list, as well as biofuel production equipment. India has questioned the inclusion of certain 'dual-use' goods, those that also have non-environmental uses. Congressional Role Although the executive branch conducts trade negotiations in the WTO, the Congress has constitutional responsibility for regulation of U.S. foreign commerce. As part of this constitutional role, Congress conducts oversight of the negotiations. Oversight might be in the forms of hearings or meetings with executive branch officials. Members often communicate their positions through public statements and letters. In December 2008, for example, the chairmen and ranking Members of the Senate Finance and House Ways and Means Committee wrote to then-President Bush to urge him to resist a possible year-end WTO Ministerial, maintaining that "developed and advanced developing countries must commit to provide meaningful new market access opportunities if Congress is to support a deal." Trade Promotion Authority (TPA) expired on July 1, 2007. In the Trade Act of 2002 ( P.L. 107 - 210 ), Congress prescribed trade objectives for U.S. negotiators in the Doha Development Agenda and in other trade negotiations. These objectives gave direction to negotiators on U.S. priorities. Congress also outlined requirements that the executive branch must meet, as a condition for expedited procedures for legislation to implement trade agreements, including those reached in the Doha Development Agenda. Among the conditions for expedited legislative procedures, the executive branch must consult with Congress at various stages of the negotiations, notify Congress before taking specified actions, and submit reports as outlined. It is unclear whether the Administration will ask for TPA in its second term, or whether the 113 th Congress would be inclined to grant it.

The WTO Doha Round of multilateral trade negotiations, begun in November 2001, has entered its 12th year. The negotiations have been characterized by persistent differences among the United States, the European Union, and developing countries on major issues, such as agriculture, industrial tariffs and non-tariff barriers, services, and trade remedies. Partly as a result of being labeled a development round to entice developing countries to participate in the first place, developing countries (including emerging economic powerhouses such as China, Brazil, and India) have sought the reduction of agriculture tariffs and subsidies among developed countries, non-reciprocal market access for manufacturing sectors, and protection for their services industries. The United States, the European Union, and other developed countries have sought increased access to developing countries' industrial and services sectors while attempting to retain some measure of protection for their agricultural sectors. Given the differences, there is frustration over the ability of WTO member states to reach a comprehensive agreement. In response to the global economic crisis, the G-20 leading economies have repeatedly called for conclusion of the Doha Round as a way to bolster economic confidence and recovery. However, these hortatory statements have not led to renewed progress on the core negotiations. The subjects of the current negotiations are draft texts developed and refined by the chairs of the agriculture, industrial, and rules negotiating groups. These texts have been the subject of much disagreement since their initial release in 2007, not least of which by the United States, which views them as not reflecting the state of play in the negotiations. Yet, work has started on expanding the reach of the current WTO agreements outside the scope of the Doha Round. A group of 47 developed and advanced developing countries began negotiating a plurilateral services agreement in January 2012 that would expand disciplines in services beyond the General Agreement on Trade and Services (GATS). Negotiations to expand the scope of the current plurilateral Information Technology Agreement (ITA) have also been proposed. Agriculture has become the linchpin of the Doha Development Agenda. U.S. goals are reductions in trade-distorting domestic support; elimination of export subsidies, and improved market access in both developed and developing countries. The United States has also sought improved market access for its industrial goods, especially in developing countries. Developed countries generally are seeking improved market access for their services industries in developing countries. In addition, Members of Congress likely will carefully scrutinize any agreement that may require changes to U.S. trade remedy laws. Several issues are among the most important to developing countries, in addition to concessions on agriculture. One issue, now resolved, pertained to compulsory licensing of medicines and patent protection. Trade facilitation, which aims to improve the efficiency of international trade by harmonizing and streamlining customs procedures, has received strong support from developed and developing countries. A third issue deals with a review of provisions giving special and differential treatment to developing countries along with problems that developing countries are having in implementing current trade obligations.

Introduction Prior to the 1960s, little formal consideration was given to the potential impact of human activity on the environment. Beginning in the late 1950s and into the 1960s, the public became increasingly aware of and concerned about those impacts. During that time, members of Congress debated the need for a national policy on the environment and for an Executive-level council or committee that could provide advice to the President on environmental policy issues. The statute that ultimately addressed these needs was the National Environmental Policy Act of 1969 (NEPA, 42 U.S.C. §§ 4321-4347). Signed into law by President Nixon on January 1, 1970, NEPA was the first of several major environmental laws passed in the 1970s. It declared a national policy to protect the environment. To implement its policy, NEPA requires federal agencies to provide a detailed statement of environmental impacts, subsequently referred to as an environmental impact statement (EIS), for every recommendation or report on proposals for legislation and other major federal action significantly affecting the quality of the human environment. The act also created the Council on Environmental Quality (CEQ) in the Executive Office of the President. Among other duties, CEQ provides oversight of NEPA's implementation. In 1978, CEQ was authorized by executive order to issue regulations applicable to all federal agencies regarding the preparation of EISs. However, CEQ was not authorized to enforce those regulations. As it was subsequently interpreted, NEPA is a procedural statute with two primary aims. First, it obligates federal agencies to consider every significant aspect of the environmental impact of an action before proceeding with it. Second, it ensures that the agency responsible for the action will inform the public what the action is and that it has considered environmental concerns in its decision-making process. In this capacity, NEPA has become one of the primary mechanisms through which the public is able to participate in the federal decision-making process. As a procedural statute, NEPA does not require agencies to elevate environmental concerns above others. Instead, NEPA requires only that the agency assess the environmental consequences of an action and its alternatives before proceeding. If the adverse environmental effects of the proposed action are adequately identified and evaluated, the agency is not constrained by NEPA from deciding that other benefits outweigh the environmental costs and moving forward with the action. Most agencies use NEPA as an umbrella statute—that is, a framework to coordinate or demonstrate compliance with any studies, reviews, or consultations required by any other environmental laws. The use of NEPA in this capacity can lead to confusion. The need to comply with another environmental law, such as the Clean Water Act or Endangered Species Act, may be identified within the framework of the NEPA process, but NEPA itself is not the source of the obligation. Theoretically, if the requirement to comply with NEPA were removed, compliance with each applicable law would still be required. Unlike other environment-related statutes, no individual agency has enforcement authority with regard to NEPA's environmental review requirements. This absence of enforcement authority is sometimes cited as the reason that litigation has been chosen as an avenue by individuals and groups that disagree with how an agency meets NEPA's mandate or EIS requirements for a given project. (For example, a group may charge that an EIS is inadequate or that the environmental impacts of an action will in fact be significant when an agency claims they are not). Critics of NEPA charge that those who disapprove of a federal project will use NEPA as the basis for litigation to delay or halt that project. Others argue that litigation only results when agencies do not comply with NEPA's procedural requirements. Environmental groups often refer to NEPA as the "Magna Carta" of environmental law. They view it as an essential tool to help agencies plan and manage federal actions in a responsible way by requiring policymakers and project sponsors to consider the environmental implications of their actions before decisions are made. Environmental groups also view the NEPA process as an important mechanism in providing the public with an opportunity to be involved in agency planning efforts. Critics charge that the law creates a complicated array of regulations and logistical delays that stall agency action. This report provides information about NEPA's background and legislative history, provisions of the law, the role of the courts and CEQ in its implementation, how agencies implement NEPA's requirements, how the public is involved in the NEPA process, the means by which NEPA is used as an umbrella statute to coordinate or demonstrate compliance with other environmental requirements, and claims by some stakeholders that NEPA causes delays in some federal actions. (For a legally oriented overview of NEPA requirements, see CRS Report RS20621, Overview of National Environmental Policy Act (NEPA) Requirements , by [author name scrubbed].) NEPA and Its History In the 1950s and 1960s, Congress began to react to increasing public concern about the environment. In the congressional debates that ensued, a key legislative option considered was the declaration of a national environmental policy. Such a policy would require all federal agencies, whose actions were often seen as significant sources of pollution, to adhere to certain environmental values and goals. Advocates of a national policy argued that without a specific environmental policy, federal agencies were neither able nor inclined to consider the environmental impacts of their actions in fulfilling the agency's mission. Debate also existed regarding the creation of an Executive-level board or council that would gather information regarding the state of the environment and provide environmental policy advice to the President. Background and Legislative History For at least 10 years before NEPA was enacted, Congress debated issues that the act would ultimately address. The act was modeled on the Resources and Conservation Act of 1959, introduced by Senator James E. Murray in the 86 th Congress. That bill would have established an environmental advisory counsel in the office of the President, declared a national environmental policy, and required the preparation of an annual environmental report. In the years following the introduction of Senator Murray's bill, similar bills were introduced and hearings were held to discuss the state of the environment and Congress's potential responses to perceived problems. In 1968, a joint House-Senate colloquium was convened by the chairmen of the Senate Committee on Interior and Insular Affairs (Senator Henry Jackson) and the House Committee on Science and Astronautics (Representative George Miller) to discuss the need for and potential means of implementing a national environmental policy. In the colloquium, some members of Congress expressed a continuing concern over federal agency actions affecting the environment. Governor Laurence Rockefeller, a participant in the colloquium, stated before the joint committee: [W]e do not have a clearly stated national attitude toward the environment. In the areas of civil rights, education, full employment, and a number of others, the Congress of the United States has set forth a clearly understood national policy. This lack of overall national policy has been reflected in recent action of the courts in reversing decisions of administrative agencies on the grounds that they did not give sufficient consideration to environmental factors. Clearly, these agencies need better guidelines. Many of the concepts and ideas drawn from this colloquium would ultimately form the basis for the bills that would become NEPA. For example, in discussing new approaches to government, Senator Jackson argued that new approaches to environmental management were required, and he urged the colloquium to provide thoughts on possible "action-forcing" processes that could be put into operation. The discussion of action-forcing processes to implement a national policy provided the seeds of the idea that would eventually become the requirement to prepare an environmental impact statement. The bills that would become NEPA were introduced in the Senate and House in 1969 by Senator Jackson and Representative John Dingell. In introducing the Senate bill, Senator Jackson stated that its purpose was to "lay the framework for a continuing program of research and study which will insure that present and future generations of Americans will be able to live in and enjoy an environment free of hazards to mental and physical well-being." To accomplish this end, the Senate bill authorized federal agencies to conduct investigations and gather data on environmental issues. The bill also established a Council on Environmental Quality to analyze and study the information gathered and to advise and assist the President in the formulation of national policies. The Senate Committee on Interior and Insular Affairs held a hearing on the proposed bills in April 1969. During the hearing, the concept of creating some action-forcing mechanism, as a means of implementing a national environmental policy, was again discussed. One of the witnesses to provide testimony at the hearing was Dr. Lynton Caldwell. An interchange during the hearing between Dr. Caldwell and Senator Jackson is considered by some as the point at which the provision behind the environmental impact statement requirement was introduced. Following are relevant excerpts from that testimony: Dr. Caldwell: I would urge that in shaping [an environmental] policy, it have an action-forcing, operational aspect ... For example, it seems that a statement of policy by the Congress should at least consider measures to require Federal agencies, in submitting proposals, to contain within the proposals an evaluation of the effect of those proposals upon the state of the environment... Senator Jackson: I have been concerned with the inadequacy of the policy declaration in the bill I have introduced. Obviously this is not enough. It does, however, provide a predicate from which to launch at a discussion as to what is required and how we should proceed ... [W]hat is needed in restructuring the governmental side of this problem is to legislatively create those situations that will bring about an action-forcing procedure the departments must comply with. Otherwise, these lofty declarations are nothing more than that. Senator Jackson further discussed the potential of broadening the policy provision in the bill to stipulate a general requirement applicable to all agencies that have responsibilities that affect the environment. In doing so, the Senator stated that he was "trying to avoid recodification of all the statutes." After the Senate hearing, Senator Jackson introduced amendments to the Senate bill. Included in the amendments was a declaration of national environmental policy. Another amendment included a requirement that "all agencies of the Federal Government ... include in every recommendation or report on proposals for legislation and other major Federal actions significantly affecting the quality of the human environment, a finding by the responsible official that ... the environmental impact of the proposed action has been studied and considered." [Emphasis added.] In July 1969, the Senate passed its version of NEPA (S. 1075) without debate and no amendments offered. In September 1969, the House passed its version (H.R. 12549) by 372 to 15. The following December, the conference committee subsequently reported out a version containing various additions and compromises. In particular, in conference, the requirement for all major federal actions to be preceded by a "finding" on environmental impacts was changed to the requirement that a "detailed statement" on environmental impacts be prepared. The detailed statement would later be referred to as an environmental impact statement (EIS). Also included in conference was the requirement that certain federal agencies, other than the one preparing the EIS, be required to review the detailed statement. It is unclear from the legislative history whether Congress intended for the EIS requirement to become the central element of NEPA compliance that it has. However, in addition to discussions regarding the need for action-forcing provisions to enforce the environmental policy, the legislative history includes statements regarding the need for federal agencies to consider the impacts of their actions. In discussing the relationship of the proposed legislation to existing policies and institutions, the Senate report states: "Many older operating agencies of the Federal Government ... do not at present have a mandate within the body of their enabling laws to allow them to give adequate attention to environmental values ... [The Senate bill] would provide all agencies and all Federal officials with a legislative mandate and a responsibility to consider the consequences of their actions on the environment." In late December, after minimal debate, both the House and Senate agreed to the conference report. On January 1, 1970, President Nixon signed NEPA into law. In the more than 30 years since passage of NEPA, Congress has amended the law only to include minor technical changes. However, within a year after NEPA's passage, a section was added to the Clean Air Act (42 U.S.C. 7401 et seq.) that affected the way NEPA is implemented. To further clarify agencies' responsibilities with regard to public involvement in the NEPA process, in December 1970, Congress added § 309 to the Clean Air Act. Provisions of § 309 made explicit that the Administrator of the newly formed Environmental Protection Agency (EPA) has a duty to examine and comment on all EISs. After that review, the Administrator was directed to make those comments public and, if the proposal was environmentally "unsatisfactory," to publish this finding and refer the matter to the CEQ. EPA subsequently developed a program for reviewing and rating federal agency projects (see " EPA's Unique Role in the NEPA Process " section, below). Overview of NEPA's Provisions The goals of NEPA are to declare a national environmental policy, provide federal agencies with action-forcing provisions intended to ensure that the goals of the policy are implemented, establish the Council on Environmental Quality (CEQ) to provide advice to the President on environmental matters and to monitor the state of the environment, and require the President to submit to Congress an annual report on the state of the environment. These provisions are contained within NEPA's two titles. Title I declares a national environmental policy that states, in part: [I]t is the continuing policy of the Federal Government, in cooperation with State and local governments, and other concerned public and private organizations, to use all practicable means and measures ... to create and maintain conditions under which man and nature can exist in productive harmony ... The act also specifies broad national goals. NEPA declares that it is the "continuing responsibility of the Federal Government to use all practicable means, consistent with other essential considerations of national policy, to improve and coordinate Federal plans ... [so] that the Nation may— Fulfill the responsibilities of each generation as trustee of the environment for succeeding generations; Assure for all Americans safe, healthful, productive, and aesthetically and culturally pleasing surroundings; Attain the widest range of beneficial uses of the environment without degradation, risk to health or safety, or other undesirable and unintended consequences; Preserve important historic, cultural, and natural aspects of our national heritage, and maintain, wherever possible, an environment which supports diversity, and variety of individual choice; Achieve a balance between population and resource use which will permit high standards of living and a wide sharing of life's amenities; and Enhance the quality of renewable resources and approach the maximum attainable recycling of depletable resources." Title I also includes the action-forcing, procedural requirements intended to ensure that federal agencies adhere to NEPA's goals. Section 102 forms the basic framework for federal decision making under the "NEPA process." This section includes several provisions and requires that policies, regulations, and public laws of the United States be interpreted and administered according to NEPA's policies. Among other things, Section 102 requires federal agencies to use a "systematic, interdisciplinary approach" in planning and decision making that may have an impact on the environment. To ensure that environmental impacts are considered, Section 102(2)(C) of NEPA requires all federal agencies to include in "every recommendation or report on proposals for legislation and other major Federal actions significantly affecting the quality of the human environment, a detailed statement by the responsible official on the environmental impact of the proposed action." In addition to environmental impacts, federal agencies are required to provide an analysis of any adverse environmental effects that cannot be avoided should the proposal be implemented, alternatives to the proposed action, the relationship between local short-term uses of man's environment and the maintenance and enhancement of long-term productivity, and any irreversible and irretrievable commitments of resources that would be involved in the proposed action should it be implemented. NEPA also requires federal agencies to study and develop appropriate alternatives to the recommended action for any project involving "unresolved conflicts concerning alternative uses of available resources." This requirement is not limited to actions that require an environmental impact statement. Section 103 of NEPA directs all federal agencies to review their existing statutory authority, administrative regulations, and policies and procedures to determine whether any deficiencies or inconsistencies would "prohibit full compliance with the purposes and provisions" of the act. After conducting this review, the agencies are directed to take necessary measures to make their policies conform with NEPA's intent. NEPA also states that its policies and goals are supplementary to existing law. Title II of NEPA establishes the CEQ in the Executive Office of the President and specifies its responsibilities. It requires CEQ to submit to Congress an annual Environmental Quality Report on such topics as the condition of the environment, trends in the quality of the environment, and a review of federal, state and local programs to address environmental concerns. Also, the act specifies a list of duties and functions that allow CEQ to support the President in information gathering and policy making with regard to environmental issues. The Evolution of NEPA's Implementation NEPA is a declaration of policy with action-forcing provisions, not a regulatory statute comparable to other environmental laws intended to protect air, water, wetlands, or endangered species. It establishes the basic framework for integrating environmental considerations into federal decision making. However, the law itself does not provide details on how this process should be accomplished. With an initial absence of regulations specifying implementation procedures and no agency authorized to enforce its requirements, federal agencies have reacted in different ways to NEPA's requirements. Some initially had difficulty complying with NEPA. Others believed that they were not required to comply with NEPA's provisions at all. As a result, litigation to enforce agency compliance with NEPA's mandate began almost immediately. In addition to questions of procedure (e.g., how, when, or why an EIS must be prepared), another question ultimately to be determined was how the environmental policy goals of the act should be implemented or enforced. The courts and CEQ played significant roles in determining how those questions were answered and, consequently, how NEPA was ultimately implemented. The Role of the Courts in Implementing NEPA Almost since NEPA's enactment, the courts have played a prominent role in interpreting and, in effect, enforcing NEPA's requirements. Beginning almost immediately and continuing into the early 1980s, the courts emphasized agency compliance with NEPA's procedural EIS requirements but did little to delineate specific compliance requirements connected to the substantive environmental policy goals. In 1983, the U.S. Supreme Court clarified that NEPA has twin aims. First, it places upon an agency the obligation to consider every significant aspect of the environmental impact of a proposed action. Second, it ensures that the agency will inform the public that it has indeed considered environmental concerns in its decisionmaking process. Congress in enacting NEPA, however, did not require agencies to elevate environmental concerns over other appropriate considerations. Rather, it required only that the agency take a "hard look" at the environmental consequences before taking a major action ... Congress did not enact NEPA, of course, so that an agency would contemplate the environmental impact of an action as an abstract exercise. Rather, Congress intended that the "hard look" be incorporated as part of the agency's process of deciding whether to pursue a particular federal action. This specification of NEPA's "twin aims" and the "hard look" requirement are often cited by both federal agencies and environmental advocates to articulate NEPA's mandate. In 1989, the U.S. Supreme Court reiterated that NEPA does not mandate particular results, but simply prescribes a process. If the adverse environmental effects of a proposed action are adequately identified and evaluated, NEPA does not constrain an agency from deciding that other values outweigh the environmental costs. The Court further clarified that "other statutes may impose substantive environmental obligations on federal agencies, but NEPA merely prohibits uninformed, rather than unwise, agency action." In addition to determining the substantive versus procedural question, the courts have determined many specific procedural elements of NEPA compliance. For example, for individual actions, courts have ruled on agency interpretation of the meaning of the phrases "federal action," "significantly affecting," and "human environment." Also, the courts played a significant role in determining how and when federal agencies were required to prepare EISs. Some questions decided by the courts involved such issues as the adequacy of individual EISs, who must prepare an EIS, at what point an EIS must be prepared, and how adverse comments from agencies should be handled. Such decisions were, at least in part, the basis of CEQ guidelines released during the 1970s and were subsequently considered when CEQ promulgated its regulations (see " The Role of CEQ in Implementing NEPA " section, below). The role of the courts in implementing the NEPA process has sometimes been controversial. Critics of NEPA charge that opponents of a given federal project will use litigation related to the NEPA process to delay or halt a project. Others assert that litigation is used primarily when an agency does not comply with its own NEPA procedures (see " NEPA Implementation and Project Delays " section, below). The Role of CEQ in Implementing NEPA Authority to promulgate regulations to implement NEPA's provisions was not expressly included among the duties and responsibilities given to CEQ under NEPA. However, shortly after signing NEPA, President Nixon issued an executive order authorizing CEQ to issue "regulations" for the implementation of the procedural provisions of the act. The executive order directed CEQ to develop regulations that would be [D]esigned to make the environmental impact statement process more useful to decision makers and the public; and to reduce paperwork and the accumulation of extraneous background data, in order to emphasize the need to focus on real environmental issues and alternatives ... [and] require impact statements to be concise, clear, and to the point, and supported by evidence that agencies have made the necessary environmental analyses. The executive order also directed federal agencies to hold public meetings and promote public involvement in the NEPA process. The executive order did not extend to CEQ the authority to make these regulations legally binding on federal agencies. Therefore, they would serve as only guidance for compliance. During the 1970s, CEQ continued to issue guidelines that addressed the basic requirements of EIS preparation. CEQ left NEPA implementation largely to the discretion of federal agencies, which were to use the CEQ guidelines to prepare their own procedures. Still, many agencies were slow to do so, with many initially arguing that NEPA did not apply to them. During the mid-1970s, frequent complaints were raised regarding the delays that the NEPA process was perceived to cause in the decision-making process. Some observers attributed these problems to a lack of uniformity in NEPA implementation and uncertainty regarding what was required of federal agencies. Also, in response to increasing NEPA-related litigation, agencies often produced overly lengthy, unreadable, and unused EISs. In an effort to standardize an increasingly complicated NEPA process, President Carter amended President Nixon's executive order, directing CEQ to issue regulations that would be legally binding on federal agencies. Final regulations replacing the previous guidelines were issued in the fall of 1978 and became effective on July 30, 1979. CEQ's regulations were intended to foster better decision making and reduce the paperwork and delays associated with NEPA compliance. CEQ's regulations also specified that the purpose of the NEPA process was to inform federal agencies of what they must do to comply with the procedures and achieve the goals of NEPA; ensure that the environmental information made available to public officials and citizens is of high quality (i.e., includes accurate scientific analysis, expert agency comments, and public scrutiny); foster better decision making by helping public officials make decisions based on an understanding of the environmental consequences of their actions; and facilitate public involvement in the federal decision-making process. CEQ's regulations, drawn in large part from its guidelines, included several noteworthy clarifications and amplifications to requirements specified in the law. For example, the regulations required agencies to include a project-"scoping" process to identify important environmental issues and related review requirements before writing the EIS; required EISs to be prepared in multiple stages (draft and final), with supplemental EISs required under specific circumstances; provided criteria for determining the significance of impacts and what constituted a "major federal action"; defined and specified the roles of "lead agencies" (those responsible for preparing the NEPA documentation) and "cooperating agencies" (agencies that participate in or contribute to the preparation of the NEPA documentation); allowed lead agencies to set time limits on milestones in the NEPA process and page limits on documentation; specified a dispute resolution process between lead agencies and EPA (required originally under § 309 of the Clean Air Act), if EPA determined the EIS to be "unsatisfactory"; specified environmental review procedures and documents applicable to projects that had uncertain or insignificant environmental impacts; specified how an agency was to involve the public in the NEPA process; required, for actions involving an EIS, that a public record of decision be published when a final agency decision is made; and provided for alternative compliance procedures in the event of an emergency. The CEQ regulations were intended to be generic in nature. Each federal agency was required to develop its own NEPA procedures that would be specific to typical classes of actions undertaken by that agency. Separately, CEQ regulations directed federal agencies to review their existing policies, procedures, and regulations to ensure that they were in full compliance with the intent of NEPA. CEQ's regulations are unique in several aspects. For example, they were issued eight years after enactment of the law they implement. As a result, they reflect not only CEQ's interpretation of NEPA, but also the initial interpretation of the courts and the administrative experiences of other agencies. Also, the CEQ regulations incorporated provisions of another law—§ 309 of the Clean Air Act (i.e., procedures for referring projects to CEQ for dispute resolution when EPA has found them to be environmentally unsatisfactory). Finally, although CEQ has oversight of the implementation of its regulations, it is not authorized to enforce them. In addition to promulgating regulations in 1978, CEQ has provided support and informal guidance to federal agencies implementing NEPA's requirements. For example, in 1981, CEQ issued its "Forty Most Asked Questions Concerning CEQ's NEPA Regulations." Answers to those questions deal with topics such as how to determine the range of alternatives considered in an EIS, how environmental documents should be made public, and the scope of mitigation measures required to be discussed. Also, in 2010, after NEPA's 40 th birthday, CEQ proposed guidance intended to "Modernize and Reinvigorate NEPA." Included was draft guidance for public comment on when and how federal agencies must consider greenhouse gas emissions and climate change in their proposed actions. CEQ had been asked to provide guidance on this subject informally by federal agencies and formally by a petition under the Administrative Procedure Act. The draft guidance was intended to explain how federal agencies should analyze the environmental impacts of greenhouse gas emissions and climate change when they describe the environmental impacts of a proposed action under NEPA. Determining When NEPA Applies Under NEPA, an environmental impact statement must be prepared for "every recommendation or report on proposals for legislation and other major federal actions significantly affecting the quality of the human environment." Interpretation of each element of this phrase has been the subject of myriad court decisions and guidance from CEQ. Two terms of particular relevance are "federal action" and "significantly." In determining whether and how NEPA will apply to an action, it is necessary to determine whether an action is in fact a federal one and, if so, whether its environmental impacts will be significant. Federal Actions Subject to NEPA To determine whether NEPA applies to an action, it is first necessary to determine whether it is a federal one. "Federal" actions include those that are potentially subject to federal control and responsibility. Such actions include "projects and programs entirely or partly funded, assisted, conducted, regulated, or approved by federal agencies." Specifically, federal agency compliance with NEPA may be required for actions that require a federal permit or other regulatory decision to proceed. In many cases, it is immediately apparent that a project or program is federal (as opposed to a strictly private or state action). However, in some instances, such as private actions in which a federal agency has some small involvement, a determination is not as clear. CEQ regulations specify categories of actions within which NEPA-covered federal actions tend to fall (see Table 1 ). A broad NEPA review may be done for the adoption of programs, plans, or policies. Such a review would most likely be followed by a site-specific review for any subsequently implemented projects. This process of producing a broad statement, followed by a more narrowly focused NEPA analysis, is referred to as "tiering." In such a project, the NEPA documentation need only summarize the issues discussed in the broader document and incorporate previous discussions by reference. Such a process is recommended to avoid repetitive discussion of the same issues. See http://www.serconline.org/ SEQA/ stateactivity.html . Table 2 lists examples of projects at selected agencies that may fall into one of the categories of actions that require environmental review under NEPA. Although such application is rare, NEPA also is intended to apply to agency proposals for federal legislation. CEQ's definition of legislation includes "a bill or legislative proposal to Congress developed by or with the significant cooperation and support of a Federal agency." This definition does not include requests for appropriations. The test for "significant cooperation" is whether the proposal is predominantly that of the agency rather than another source. Only the agency with primary responsibility for the subject matter involved is required to prepare a legislative EIS. Determining the Significance of a Federal Action The requirement to prepare an EIS depends on whether the federal action will have impacts "significantly affecting the quality of the human environment." In the years after NEPA was enacted, a question that was often disputed between federal agencies and third parties, and ultimately decided by the courts, was whether a given federal action had a "significant" impact. Most federal actions have some impact on the environment. Determining the degree of impact is necessary to determine how to comply with NEPA's procedural requirements. CEQ regulations do not list specific types of projects that have significant environmental impacts or definitively define "significantly." Instead, the regulations require agencies to determine the significance of a project's impacts on a case-by-case basis, based on its context and intensity. Determining the context of a project involves analyzing the significance of its impacts to society as a whole, an affected region, affected interests, or the locality. A site-specific project may require analysis of the local significance of the project, whereas a programmatic action may have nationwide significance. The degree of significance may depend on factors such as the location and scope of the project. For example, the impacts of a site-specific project on 1 acre of a 2,000-acre wetland may be insignificant compared with a project that affects 1 acre of a 2-acre wetland. Intensity refers to the severity of a project's impacts. Factors used to assess an impact's intensity must be determined on a case-by-case basis. However, CEQ specifies the following minimum factors that must be evaluated: Environmental impacts that may be beneficial and adverse. The degree to which the proposed action affects public health or safety. Unique characteristics of the geographical area, such as proximity to historic or cultural resources, park lands, prime farmlands, wetlands, wild and scenic rivers, or ecologically critical areas. The degree to which the effects on the quality of the human environment are likely to be highly controversial (in this context, "controversy" relates only to the interpretation of the environmental effects of a project—not to the potential controversy or unpopularity of the project as a whole). The degree to which the possible effects on the human environment are highly uncertain or involve unique or unknown risks. The degree to which the action may establish a precedent for future actions with significant effects. Whether the action is related to other actions with individually insignificant but cumulatively significant impacts. The degree to which the action may adversely affect resources listed in, or eligible for, the National Register of Historic Places or may cause loss or destruction of significant scientific, cultural, or historical resources. The degree to which the action may adversely affect an endangered or threatened species or its habitat. Whether the action threatens a violation of federal, state, or local law or requirements imposed for the protection of the environment. Individual agencies may consider additional factors based on environmental impacts common to the types of projects pursued by that agency. Further, to adequately determine an impact's intensity, input from other agencies may be needed. For example, if a highway will cut across prime farmland, the Department of Transportation (DOT) may need assistance from the U.S. Department of Agriculture (USDA) to determine the intensity of the project's impacts. Because degrees of impact must be evaluated to determine project significance, such an evaluation may require subjective judgments. Therefore, a clear administrative record is generally considered necessary to demonstrate that an agency appropriately determined the significance of a project's impacts. Overview of the NEPA Process The NEPA process includes the steps a federal agency must take to document that consideration was given to determine the significance of a proposed action's environmental impacts. For some actions, it may not be readily apparent that environmental impacts will be significant. Some projects clearly have little or no significant impact, but they still require an agency to demonstrate that the level of impacts was considered. To account for this variability, CEQ regulations establish the following three classes of action, which determine how compliance with NEPA analysis is documented: Actions Requiring an EIS—When it is known that the action will have a significant environmental impact. Actions Requiring an Environmental Assessment (EA)—When the significance of environmental impacts is uncertain and must be determined . Actions that are Categorically Excluded—Those which normally do not individually or cumulatively have a significant effect on the human environment. The requirement to produce an EIS is probably the most familiar element of NEPA compliance. However, actions requiring an EIS account for a small percentage of all federal actions proposed in a given year. For example, in 2008, 543 EISs were filed with EPA (this total includes draft, final, and supplemental EISs). CEQ estimates that the vast majority of federal actions require an EA or are categorically excluded from the requirement to prepare an EA or EIS. Determining the total number of federal actions subject to NEPA is difficult, as most agencies track only the number of actions requiring an EIS. Also, as indicated in the figures above, agencies track the total draft, final, and supplemental EISs filed in a given year, not the total number of individual federal actions requiring an EIS in a given year. One agency that does track all projects is DOT's Federal Highway Administration (FHWA). According to FHWA, in 2007, approximately 4% of all highway projects required an EIS, 4% required an EA, and almost 92% were classified as categorically excluded. Although projects requiring an EIS or EA represent a relatively low percentage of all projects, those projects represented a comparatively large percentage of total FHWA funding. For example, while projects requiring an EIS or EA represented 8% of the total number of projects, they accounted for almost 23% of the funds allocated by FHWA in 2007. Projects classified as categorical exclusions accounted for almost 77% of FHWA funds. Environmental Impact Statements As soon as practicable after its decision to prepare an EIS, the agency preparing it (the "lead agency") is required to publish a notice of intent (NOI) in the Federal Register . The NOI acts as the formal announcement of the project to the public and to interested federal, state, tribal, and local agencies. As soon as possible after, or in conjunction with, the determination that an EIS is needed, the agency is required to determine the scope of the project. During the scoping process the "lead agency" must identify and invite the participation of affected parties, including federal, state, or local agencies or Indian tribes; proponents of the actions; and other interested persons; identify significant issues to be analyzed in depth in the EIS; identify and eliminate issues that are not significant or have been covered by prior environmental review from detailed study; allocate assignments for preparing the EIS to relevant agencies; and identify other environmental review and consultation requirements so that analyses and studies required other under federal, state, local or tribal laws may be prepared concurrently, rather than sequentially, with the EIS. During the scoping process, the lead agency may set time and page limits for an individual EIS. The agency should also determine any environmental laws, regulations, or executive orders, in addition to NEPA, that may apply to the project. For example, the agency should determine in the scoping process whether the project may affect property of historical significance, endangered species habitat, or wetlands or navigable waters—each of which may require compliance with the National Historic Preservation Act, the Endangered Species Act, or the Clean Water Act, respectively. Once the scope of the action has been determined, EIS preparation can begin. Preparation is done in two stages, resulting in a draft and a final EIS. The draft EIS should be prepared in accordance with the scope of the project and, to the fullest extent possible, meet requirements of § 102(2)(C) of NEPA. The final EIS should respond to any participating agency comments and address any inadequacies in the draft EIS. A supplemental EIS may be required in some instances. A summary of the components of an EIS, as required under CEQ's regulations, is provided in Table 3 . The action's purpose and need statement is the foundation on which subsequent sections of the EIS are built. No hard-and-fast regulatory definition of "purpose and need" exists. However, as it has been interpreted, the statement cannot be so narrow that it effectively defines competing "reasonable alternatives" out of consideration. The "purpose" of an action may be a discussion of the goals and objective of an action. The "need" may be a discussion of existing conditions that call for some improvement. The goals defined in the purpose and need evaluation facilitate the development of viable project alternatives. CEQ regulations refer to the alternatives section of the EIS as the "heart" of the document. Alternatives that must be considered include those that are practical and feasible from a technical, economic, and common-sense standpoint, rather than simply desirable from the standpoint of the agency or a potentially affected stakeholder. Large, complex projects may have a large number of reasonable alternatives. In this case, CEQ suggests that only a representative number of the most reasonable examples, covering the full range of alternatives, should be presented. Once the final EIS is approved and the agency decides to take action, the lead agency must prepare a public record of decision (ROD). CEQ regulations specify that the ROD must include a statement of the final decision, all alternatives considered by the agency in reaching its decision, and whether all practicable means to avoid or minimize environmental harm from the selected alternative have been adopted and, if not, why they were not. Generally, once the ROD has been issued, an agency's action may proceed (as long as other statutory requirements are met). In addition to the EIS and the ROD, the final procedural record of the NEPA process may include, but is not limited to, planning documents, notices, scoping hearings, documents supporting findings in the EIS, public comments, and agency responses. Environmental Assessments If an agency is uncertain whether an action's impacts on the environment will be significant, it usually prepares an environmental assessment (EA). An EA is carried out to clarify issues and determine the extent of an action's environmental effects. CEQ regulations define an EA as a concise public document that (1) provides sufficient evidence and analysis for determining whether to prepare an EIS or a finding of no significant impact (FONSI), (2) aids agency compliance with NEPA when no EIS is required, and (3) facilitates preparation of an EIS when one is necessary. The CEQ regulations require no standard format for EAs; however, the regulations do require agencies to include a brief discussion of the need for the proposal, alternatives, impacts of the proposal and alternatives, and a list of agencies and individuals consulted. Individual agency regulations and guidance may include more specific requirements. Some agencies suggest that the process for developing an EA should be similar to developing an EIS. For example, the applicant should consult interested agencies to scope the project to determine the potential for social, economic, or environmental impacts; briefly discuss the project's purpose and need; identify project alternatives and measures to mitigate adverse impacts; and identify any other environmental review requirements applicable to the project (e.g., permitting requirements under Section 404 of the Clean Water Act). Public participation in the EA process is left largely to the discretion of the lead agency. If at any time during preparation of the EA, a project's impacts are determined to be significant, EIS preparation should begin. If the impacts are determined not to be significant, the lead agency must prepare a FONSI. The FONSI serves as the agency's administrative record in support of its decision regarding a project's impact. The FONSI also must be available to the public. Categorical Exclusions If a project is of a type or in a category known to have no significant environmental impacts, it is categorically excluded from the requirement to prepare an EA or EIS. Individual agencies are required to specifically list, in their respective NEPA regulations, those projects that are likely to be considered categorical exclusions (CEs). For example, DOT has identified the construction of bicycle and pedestrian lanes, landscaping, and the installation of traffic signals as actions that would generally be classified as categorical exclusions. Whether or what types of documentation may be required to demonstrate that a project is categorically excluded will depend on whether the project involves extraordinary circumstances that may cause a normally excluded action to have a significant environmental effect. An individual agency's NEPA requirements may specify criteria under which otherwise excluded actions may require documentation to prove that the CE determination is appropriate. Although categorically excluded projects do not have significant environmental impacts, an agency may require a certain level of documentation to prove that the CE determination is appropriate. Also, the fact that a project does not have a significant impact, as defined under NEPA, does not mean that it will not trigger statutory requirements of other environmental laws. For example, if historical sites, endangered species habitats, wetlands, or properties in minority neighborhoods, to name a few, are affected by a proposed federal action, compliance with related environmental laws, in addition to NEPA, may be required. In 2010, CEQ released "Guidance Clarifying Use of Categorical Exclusions." This guidance was designed to ensure that agencies establish and use categorical exclusions appropriately and transparently. It also calls on agencies to review their existing categorical exclusions periodically to avoid the use of outdated NEPA procedures. A simplified overview of the NEPA process is illustrated in Figure 1 . Agency Participation in the NEPA Process Federal actions to which NEPA applies involve the participation of a "lead agency" and "cooperating agencies." As stated previously, the lead agency is the federal agency that takes responsibility for preparing the NEPA documentation. State or local agencies may act, with the federal lead agency, as joint lead agencies. The project applicant may initially develop substantive portions of the environmental document; however, the lead agency is responsible for its scope and overall content. A cooperating agency is any federal agency, other than a lead agency, that has jurisdiction by law or special expertise regarding any environmental impact involved in a proposal. A tribal, state, or local agency may also be a cooperating agency. Table 4 lists selected statutes that may apply to a given federal action and the corresponding agency that could subsequently be required to participate in the NEPA process. Responsibilities of the Lead and Cooperating Agencies At the request of the lead agency, the cooperating agency is required to assume responsibility for developing information and preparing environmental analyses, including portions of the EIS related to its special expertise. Such a role may be set out in a memorandum of understanding or agreement between the agencies. A cooperating agency may be excused from some or all of these responsibilities if precluded by other program requirements. Some projects have involved disagreements regarding the authority of and extent to which coordinating agencies should be involved in the NEPA process. For example, some stakeholders have expressed confusion regarding the degree to which a coordinating agency has the right to influence the development of certain elements of an EIS. In 2003, this issue of agency authority was the subject of correspondence between Transportation Secretary Norman Mineta and CEQ Chairman James Connaughton. Secretary Mineta asked for clarification regarding the role of lead and cooperating agencies with regard to developing purpose and need statements. Secretary Mineta referred to the sometimes extended interagency debates over purpose and need statements as a cause of delay in highway project development. In his response, Chairman Connaughton referred to CEQ regulations specifying that the lead agency has the authority and responsibility to define a project's purpose and need. Further, Chairman Connaughton referenced previous federal court decisions giving deference to the lead agency in determining a project's purpose and need. Chairman Connaughton's letter also quotes CEQ's regulations, citing the lead agency's "responsibilities throughout the NEPA process for the 'scope, objectivity, and content of the entire statement or of any other responsibility' under NEPA." Addressing Agency Comments Before completing an EIS, the lead agency is required to consult with and obtain comments from cooperating agencies regarding any environmental impact involved in the proposed action. The CEQ regulations specify requirements for inviting and responding to comments on the draft EIS. In addition to the cooperating agencies, which must comment, the lead agency is required to request comments from appropriate state, local, or tribal agencies; the public, particularly those persons or organizations who may be interested in or affected by the action (see further discussion under the " Demonstrating Public Involvement " section, below); any agency that has requested to receive EISs on similar actions; and the applicant (if there is one). If a lead agency receives comments on a NEPA document, the agency is required to assess and consider those comments and respond in one or more of the following ways: Modify proposed alternatives, including the proposed action. Develop and evaluate alternatives not previously considered. Supplement, improve, or modify its analyses. Make factual corrections in the EIS. Explain why the comments do not warrant further response from the lead agency, citing the sources, authorities, or reasons that support the agency's position and, if appropriate, indicate circumstances that would trigger agency reappraisal or further response. Under CEQ regulations, lead agencies are required to invite comments on a draft EIS, cooperating agencies have a duty to comment on it, and lead agencies are required to respond to those comments. As illustrated in the choices listed above, the lead agency is not precluded from moving forward with a project if it sufficiently addresses those comments. However, if negative comments are received, to avoid a potential legal challenge after the project has reached an advanced stage of development, the lead agency is well-served to resolve the issue. EPA's Unique Role in the NEPA Process Independent of its potential to participate as a lead or cooperating agency, EPA has two distinct roles in the NEPA process. The first regards its duty, under § 309 of the Clean Air Act, to review and comment publicly on the environmental impacts of proposed federal activities, including those for which an EIS is prepared. After conducting its review, EPA must rate the adequacy of the EIS and the environmental impact of the action. The EIS may be rated "adequate," "needs more information," or "inadequate." The lead agency is required to respond appropriately, depending on EPA's rating. With regard to rating the environmental impacts of an action, EPA would rate a project in one of the following four ways: lack of objections, environmental concerns, environmental objections, or environmentally unsatisfactory. If it determines that the action is environmentally unsatisfactory, EPA is required to refer the matter to CEQ for dispute resolution. However, such referral should be made only after concerted, timely, but unsuccessful attempts to resolve differences with the lead agency. EPA's second duty is an administrative one, in which it carries out the operational duties associated with the EIS filing process. In 1978, these duties were transferred to EPA by CEQ in accordance with terms of a Memorandum of Agreement (MOA). Under the MOA, EPA's Office of Federal Activities is designated the official recipient of all EISs prepared by federal agencies. EPA maintains a national EIS filing system. By maintaining the system, EPA facilitates public access to EISs by publishing weekly notices in the Federal Register of EISs available for public review, along with summaries of EPA's comments. Demonstrating Public Involvement As the law has been interpreted, one of the primary goals of NEPA is to give the public a meaningful opportunity to learn about and comment on the proposed actions of the federal government before decisions are made and actions are taken. To meet this goal, CEQ's regulations require agencies to encourage and facilitate public involvement in decisions that significantly affect the quality of the human environment (i.e., projects that require an EIS). Specifically, agencies are required to provide public notice of NEPA-related hearings, public meetings, and the availability of environmental documents so as to inform public stakeholders that may be interested in or affected by a proposed action. Documentation related to the public's participation in the NEPA process (e.g., public comments or hearings transcripts) must be included in the final EIS. As mentioned above, the lead agency must seek and respond to public comments. Public stakeholders likely to comment on federal actions will vary according to the action. They may include individuals or groups expected to benefit from or be adversely affected by the project, or special interest groups with concerns about the project's environmental impacts. For example, a road-widening project may have an impact on adjacent homes or businesses. Such a project may elicit comments from the local business community (e.g., individual businesses, the Chamber of Commerce, or local development organizations) and area home owners. A project with impacts on sensitive environmental resources, such as wetlands or endangered species, may generate comments from environmental interest groups. If stakeholders have concerns about a project's impacts, their comments may be directed at virtually any element of that project, the NEPA process, or related documentation. If stakeholder comments are not addressed sufficiently, stakeholders may respond by filing suit. To avoid conflict after a project has reached an advanced stage of development, CEQ recommends that continuous contact with nonagency stakeholders be maintained throughout the decision-making process—from the earliest project planning stages to the selection of a particular alternative, including the intervening stages to define purpose and need and to develop a range of potential alternatives. The need for such contact was illustrated in a 1997 CEQ study. Study results found that one element of the NEPA process critical to effective and efficient implementation was "the extent to which an agency takes into account the views of the surrounding community and other interested members of the public during its planning and decisionmaking process." CEQ regulations specify public involvement requirements only for federal actions requiring an EIS. Agencies may devise their own policy regarding public involvement in the preparation of an EA or in making a categorical exclusion determination. (For more information, see CRS Report RL32436, Public Participation in the Management of Forest Service and Bureau of Land Management Lands: Overview and Recent Changes , by [author name scrubbed] (pdf).) The Use of NEPA as an "Umbrella" Statute Large, complex actions, such as bridge and highway construction, mining operations, or oil and gas development on public lands, may require compliance with literally dozens of federal, state, tribal, and local laws. Depending on the resources present at a project site, compliance with various categories of legal requirements may apply to a given federal action, as illustrated in Table 5 . To integrate the compliance process and avoid duplication of effort, NEPA regulations specify that, to the fullest extent possible, agencies must prepare the EIS concurrently with any environmental requirements. The EIS must list any federal permits, licenses, and other entitlements required to implement the proposed project. In this capacity, NEPA functions as an "umbrella" statute; any study, review, or consultation required by any other law that is related to the environment should be conducted within the framework of the NEPA process. NEPA forms the framework to coordinate and demonstrate compliance with these requirements. NEPA itself does not require compliance with them. Theoretically, if the requirement to comply with NEPA were removed, compliance with each applicable law would still be required. The use of NEPA as an umbrella statute can lead to confusion in this regard. For example, consider a project alternative that requires compliance with the Endangered Species Act (ESA). One required element of the EIS may include a demonstration that, among other potential requirements, a biological assessment be prepared in compliance with the ESA. The requirement to comply with the ESA, including the involvement of the appropriate agency with jurisdiction over compliance, would simply be identified within the framework of the NEPA process, not required by NEPA. NEPA Implementation and Project Delays Stakeholders such as state and local project sponsors and industry representatives with an interest in the implementation of a federal action sometimes charge that NEPA implementation is inefficient and overly time-consuming, leading to what they perceive as unnecessary delays in needed government actions. Some agency representatives feel that the NEPA process, when implemented as required by the CEQ regulations, actually facilitates a more efficiently executed project. Environmental organizations look at the NEPA process as a necessary step in ensuring that the public gets a voice in the federal decision-making process and that expediting that process is not necessarily in the best interest of the public or the environment. Further, they argue that blaming the environmental compliance process for project delays is misplaced. One argument is that federal projects may be delayed because resource agencies, required by law to participate in the compliance process, are overburdened and not sufficiently funded, staffed, or equipped to meet the demand. Causes of Project Delays Attributed to the NEPA Process Delays attributed to the NEPA process fall into two broad categories—those related to the time it takes to complete required documentation and delays resulting from NEPA-related litigation. In the past, particularly in the years after NEPA was implemented, the preparation of NEPA documentation played a role in delaying individual federal actions. However, there is little data available to demonstrate that NEPA currently plays a significant role in delaying federal actions. This lack of data is attributable to the fact that, other than the Department of Energy and DOT, federal agencies do not routinely maintain information on the time it takes to complete the NEPA process. Therefore, gathering accurate data on how long it takes to prepare NEPA documentation, and whether the NEPA process is directly the cause of project delays, is difficult. For example, the preparation of NEPA documentation is generally done concurrently with preliminary project design. If a project undergoes specification changes, those alterations may necessitate modifications to the NEPA documentation. Consequently, the time to complete the NEPA process may be extended. The perception that NEPA results in extensive delays and additional costs to the successful delivery of certain federal projects can be magnified when compliance with multiple environmental laws and regulations is required (see " The Use of NEPA as an "Umbrella" Statute ," above). The sometimes extensive reviews, documentation, and analysis required by agencies such as the Army Corps of Engineers, the U.S. Fish and Wildlife Service, the Coast Guard, and EPA, as well as various state regulatory and review agencies, add further to the perception that extensive delays are related to the NEPA process. Such "delays" may actually stem from an agency's need to complete a permit process or analyses required under separate statutory authority (e.g., the Clean Water Act or Endangered Species Act), over which the lead agency has no authority. Litigation is probably the most often cited cause of NEPA-related project delays. Although this may have been the case in the past, the total number of NEPA-related cases in the past 10 years has been small (especially when compared with the total number of federal actions requiring some environmental review under NEPA). For example, in 2005, a total of 118 NEPA-related cases were filed. Of those, 43 resulted in an injunction. The majority of cases were filed against two agencies—the USDA's Forest Service (with 50 cases files) and the Department of the Interior's Bureau of Land Management (with 12 cases files). The main reason that plaintiffs filed suit was because they believed that the EIS or EA was inadequate (e.g., information was incomplete or the document did not sufficiently analyze the cumulative or indirect effects of an action). NEPA litigation began to decline in the mid 1970s and has remained relatively constant since the late 1980s. This trend may be due in part to improved agency compliance with promulgated regulations and improved agency expertise in preparing required documentation. However, another factor may be the decrease in the number of federal actions funded by Congress that would be defined as "major federal actions" under NEPA. Although litigation has decreased, agency concern regarding the threat of litigation may still affect the NEPA process, particularly for complex or controversial projects. In addition to CEQ regulations and an agency's own regulations, a project sponsor may be mindful of previous judicial interpretation when preparing NEPA documentation in an attempt to prepare a "litigation-proof" EIS. CEQ has observed that such an effort may lead to an increase in the cost and time needed to complete NEPA documentation, but not necessarily an improvement in the quality of the documents ultimately produced. Studies Into NEPA's Effectiveness and Causes of Delays In the past 20 years, numerous surveys and reports, conducted by both public agencies and private organizations, have studied the effectiveness of the NEPA process. They sought to determine issues such as how the NEPA process is implemented at individual agencies, whether the NEPA process delays project implementation, and, if so, how those delays may be addressed and NEPA more effectively implemented. In 2004, a survey of staff from the Department of Defense, the Department of the Interior, and the Forest Service sought to determine the degree to which the NEPA process slowed decision making and delayed projects. The survey identified the following primary reasons for project delays: Decision maker changes in the project. Court challenges to a project. Poor documentation that needed to be redone. Changes in or additions to project alternatives. Compliance requirements of the Endangered Species Act. Depending on the agency responding, factors "outside the NEPA process" were identified as the cause of delay between 68% and 84% of the time. In 1997, CEQ published a study to determine NEPA's effectiveness and methods to improve its implementation. Study participants included individuals and organizations that were knowledgeable about NEPA and could be characterized as both supporters and critics of NEPA. Generally, participants felt that NEPA's enduring legacy was that it provided a framework for collaboration between federal agencies and those who will bear the environmental, social, and economic impacts of agency decisions. However, they also felt that NEPA often takes too long and costs too much, agencies make decisions before hearing from the public, documents are too long and technical for many people to use, and training for agency officials is inadequate at times. Participants felt that critical elements of efficient NEPA implementation included the extent to which an agency integrates NEPA's goals into its internal planning processes at an early stage and provides information to the public. The study found that the extent to which the public is involved in the decision-making process also influences the potential for litigation. The study also found that some states, citizen groups, and businesses believe that certain EAs are prepared to avoid public involvement (i.e., because public meetings are not always required for EAs). The preparation of an EA, rather than an EIS, is reportedly the most common source of conflict and litigation under NEPA. The study further found that nongovernmental organizations (NGOs) and citizens viewed the NEPA process as a one-way communication process, skeptical that their input was effectively incorporated into agency decision making and hypothesizing that their involvement was often solicited after decisions regarding actions and alternatives have already been made. Citizens also reported being frustrated when they were treated as adversaries rather than welcome participants in the NEPA process. Citizens reported that they often felt overwhelmed by the resources available to project proponents and agencies. As a consequence, litigation may be seen as the only means to affect environmental decisions significantly. In 2002, a comprehensive study of the NEPA process was conducted by CEQ's NEPA Task Force. CEQ formed the task force to review NEPA implementation practices and procedures and to determine opportunities to improve and modernize the process. The task force interviewed federal agencies; reviewed public comments, literature, and case studies; and spoke with individuals and representatives from state and local governments, tribes, and interest groups. In 2003, the task force released a report of its findings and recommendations. In compiling its research, the task force received more than 739 stakeholder comments. Those comments reflected current issues and challenges to NEPA implementation. With regard to delays in and the effectiveness of the NEPA process, a large percentage of comments were directed at factors related to NEPA analysis and documentation requirements and to the role and effects of litigation. According to CEQ, many respondents expressed a belief that the general requirement to provide adequate analysis had been taken to an extreme; that documents had become too time-consuming and costly to produce; and that the resultant "analysis paralysis" forestalled appropriate management of public lands and ultimately left the public distrustful and disengaged. The stakeholders felt this was brought on by vague requirements that were open to considerable interpretation and, therefore, an easy target for litigation. Because the requirements were vague, those commenters further felt that agencies were not sure how much analysis would be considered adequate by the courts, resulting in pressure to produce more. In contrast, other respondents felt the "analysis paralysis" scenario was a misnomer. These respondents believed that agencies often predetermine the outcome of the planning process, that they often fail to consider other reasonable alternatives, and that the analysis agencies provide is often inadequate to support the management plan they propose. These commenters felt that the environmental effects of proposed actions are often inadequately considered, particularly the cumulative effects; that agencies rely on inadequate or outdated data; and that agency research is not held to the same rigorous standards as research in other fields, particularly in terms of scientific reference and peer review. Moreover, they felt that agencies are sometimes intent on following a predetermined course of action and ignore concerns submitted by the public. With regard to the role of litigation, a number of respondents felt that litigation only results when agencies do not comply with NEPA requirements. Some felt that it is only through litigation that concerned parties can get agencies to recognize their concerns and give serious attention to the environmental effects of their proposed actions. One issue discussed in the task force report was challenges faced by agencies with regard to budget, training, and staffing constraints. This issue is discussed in more depth in a report, cited by the task force, that was prepared by the Natural Resources Council (an environmental conservation organization). That report surveyed 12 federal agencies to determine how they implemented the NEPA process. Included in the report was a finding that, due to budget and staff constraints, most agencies' NEPA offices lack an ongoing national tracking system to monitor the numbers and types of NEPA documents that their agency is preparing or has completed. Also, the report found that agencies were unable to document their NEPA workload, calculate average preparation times or costs, show trends in these factors over time, or respond objectively to assertions that excessive time or money is being spent on complying with NEPA's requirements. The absence of such information, the report asserted, leaves agencies in a weak position to respond factually to or critically evaluate administrative or legislative proposals to "streamline" the NEPA process (see discussion, below). Efforts to Streamline the NEPA Process Some members of Congress have expressed concerns that project delays are the result of inefficient interagency coordination required for large, complex projects. As a result, in the 108 th Congress, several laws were enacted that included provisions intended to streamline the NEPA process. Although not defined in any of the legislation, the term "streamlining" was broadly used to describe legislative or administrative procedures intended to expedite the NEPA process. It usually refers to a process or procedures to better coordinate federal, state, tribal, or local agency action, when compliance with multiple environmental laws, regulations, or executive orders is required. In 2008, most agencies filed fewer than 10 EISs. Just over 63% of all EISs were filed by seven agencies—USDA-Forest Service (124); DOT's Federal Highway Administration (64) and Federal Transit Administration (21); the Department of the Interior's Bureau of Land Management (48) and National Park Service (25); the Department of Defense's Army Corps of Engineers (42), and the Department of Energy's Federal Energy Regulatory Commission (19). It may not be surprising, then, that many streamlining activities involve actions sponsored by those agencies. For example, what follows are bills enacted since the 108 th Congress and selected types of projects for which streamlining provisions have been included: The Healthy Forests Restoration Act of 2003 ( P.L. 108-148 ): "hazardous fuel reduction" projects on federal land. Vision 100-Century of Aviation Reauthorization Act ( P.L. 108-176 ): airport capacity enhancement projects at congested airports. The Safe, Accountable, Flexible, and Efficient Transportation Equity Act of 2005: A Legacy for Users ( P.L. 109-59 ): construction of or modifications to surface transportation projects. The Energy Policy Act of 2005 ( P.L. 109-58 ): various energy development projects, such as oil and gas leasing and permitting on federal land, and the designation of energy facility rights-of-way and corridors on federal lands. The Water Resources Development Act (WRDA) of 2007 ( P.L. 110-114 ): water resources projects undertaken by the Army Corps of Engineers. Streamlining provisions are unique to the class of projects at issue. However, most include some or all of the following elements: The designation of specific projects as categorical exclusions. The designation of a specific agency as the "lead agency" for all classes of certain actions (e.g., delegation of DOT as the lead agency for all highway or transit projects requiring review under NEPA). Direction to the lead agency to develop a "coordinated environmental review" process to ensure early coordination and cooperation among federal, state, tribal, and local agencies required to participate in a project. Delegation of specific authority to the lead agency, such as the authority to establish deadlines for cooperating agencies, specify a project's "purpose and need," or specify project alternatives. Delegation of certain federal authority to state or local agencies (e.g., the authority to determine whether certain classes of projects may be categorically excluded from environmental requirements). Direction to the lead agency to develop dispute resolution procedures if agencies reach an impasse in the NEPA process. Streamlining proposals have generated a great deal of controversy among interested stakeholders (e.g., agency representatives, industry groups, and environmental organizations). Most stakeholders agree that the process for complying with environmental requirements applicable to complex federal projects can be implemented more efficiently. How that should be done and the degree to which it is necessary have been the subject of considerable debate. Some stakeholders, such as industry representatives who would like to see projects implemented more quickly, argue that the authority of lead agencies must be strengthened to reduce delays caused by disagreements among agencies. They also contend that lead agencies should have the authority to set and enforce deadlines with regard to the cooperating agency decision-making process. Environmental groups are concerned that by speeding up the compliance process and strengthening lead agency authority, concerns of the public or cooperating agencies will be minimized or ignored, in effect rubber stamping lead agency decisions. Further, some environmental groups contend that "streamlining" is a thinly veiled attempt at weakening environmental protection and reducing public participation in the federal decision-making process. Conclusion NEPA is a procedural statute that, along with CEQ and individual agencies' regulations, specifies procedures that must be followed in the federal decision-making process. It imposes no requirement other than to require agencies to consider the environmental impacts of their actions before proceeding with them and to involve the public in that process. It does not dictate what the decision must be. More specifically, it does not require the agency to select the least environmentally harmful alternative or to elevate environmental concerns above others. The role the courts have played in NEPA's implementation is arguably more pronounced compared to many other environmental laws because of several unique factors. These include the initial lack of binding regulations applicable to the EIS preparation process, the absence of an agency authorized to enforce its requirements, and NEPA's requirement to involve the public in the decision-making process. With regard to the latter, when members of the public oppose a project or feel that their opinions are not given sufficient weight, their involvement may result in turning to the courts to halt the project until their concerns are addressed. During the past 35 years, interested stakeholders have challenged the adequacy of NEPA documentation and agency compliance with NEPA in court and, in some instances, used NEPA litigation to try to halt or slow projects to which they were opposed. As a result, the progress of some federal projects was slowed. However, particularly in the past 10-15 years, the number of projects affected by NEPA-related litigation is very small. Also, unlike other environmental laws, NEPA itself cannot stop a project altogether. This does not mean that, during the course of a NEPA-related lawsuit, an agency may not decide to abandon a given project or project alternative. As a policy statute, NEPA supplements other statutes. Consequently, agencies often are required to comply with provisions of other state, tribal, and federal environmental requirements before they can proceed with a given action. This requirement can lead to confusion when procedures to comply with other laws are integrated with NEPA compliance, and it can give the impression that NEPA alone is responsible for the time it takes to obtain the appropriate authorization or approval for a federal project. Although stakeholders disagree about the extent to which NEPA currently halts or delays federal actions, few disagree that agencies can improve their methods of NEPA compliance. Many elements of recent legislative proposals intended to streamline NEPA compliance already exist in CEQ's regulations. Those include integrating NEPA early in the planning process, integrating NEPA requirements with other environmental requirements, eliminating duplication with state and local procedures, swiftly addressing disputes with other agencies, and establishing appropriate time limits on the EIS process. Debate is likely to continue with regard to if or to what degree further streamlining may be accomplished. Selected References Bear, Dinah. "NEPA at 19: A Primer on an 'Old' Law with Solutions to New Problems," 19 Environmental Law Reporter 10060, February 1989. Caldwell, Lynton. The National Environmental Policy Act: An Agenda for the Future. Bloomington, IN: Indiana University Press, 1998. Council on Environmental Quality. "Forty Most Asked Questions Concerning CEQ's National Environmental Policy Act Regulations," 46 Federal Register 18026, March 23, 1981. Council on Environmental Quality. "Memorandum for General Counsels, NEPA Liaisons and Participants in Scoping," April 20, 1981. Council on Environmental Quality. "The National Environmental Policy Act: A Study of Its Effectiveness After Twenty-five Years," January 1997. Council on Environmental Quality's NEPA Task Force. "Report to the Council on Environmental Quality: Modernizing NEPA Implementation," September 2003. Smythe, Robert and Isber, Caroline. "NEPA in the Agencies: 2002, A Report to the Natural Resources Council of America," October 2002.

Beginning in the late 1950s and through the 1960s, Congress reacted to increasing public concern about the impact that human activity could have on the environment. A key legislative option to address this concern was the declaration of a national environmental policy. Advocates of this approach argued that without a specific policy, federal agencies were neither able nor inclined to consider the environmental impacts of their actions in fulfilling the agency's mission. The statute that ultimately addressed this issue was the National Environmental Policy Act of 1969 (NEPA, 42 U.S.C. §§ 4321-4347). Signed into law by President Nixon on January 1, 1970, NEPA was the first of several major environmental laws passed in the 1970s. It declared a national policy to protect the environment and created a Council on Environmental Quality (CEQ) in the Executive Office of the President. To implement the national policy, NEPA required that a detailed statement of environmental impacts be prepared for all major federal actions significantly affecting the environment. The "detailed statement" would ultimately be referred to as an environmental impact statement (EIS). With an initial absence of regulations specifying implementation procedures and no agency authorized to enforce the law, federal agencies reacted in different ways to NEPA's requirements. Some had difficulty complying with the law's EIS requirements. As a result, litigation that served to interpret NEPA's requirements and enforce agency compliance began almost immediately. In addition to questions of procedure (e.g., how, when, or why an EIS must be prepared), another question was how the environmental policy goals of the act should be implemented or enforced. The courts ultimately decided that NEPA is a procedural statute with twin aims requiring agencies to (1) consider the environmental impacts of their proposed actions and (2) inform the public that they (the agencies) considered environmental concerns in their decision-making process. In that capacity, NEPA has become a primary mechanism for public participation in the federal decision-making process. As it has been implemented, most agencies use NEPA as an "umbrella" statute. As such, NEPA forms a framework to coordinate or demonstrate compliance with any study, review, or consultation required by other environmental laws. The use of NEPA in this capacity can lead to confusion. The need to comply with another environmental law, such as the Clean Water Act, may be identified within the framework of the NEPA process, but NEPA itself is not the source of the obligation. Theoretically, if the requirement to comply with NEPA were removed, compliance with each applicable law would still be required.

Background Both the House and Senate Committees on Agriculture have jurisdiction over "forestry in general" and acquired national forests. Thus, the committees have been able to exert considerable influence over federal forestry activities over the years. For example, the Forest and Rangelands Renewable Resources Planning Act of 1974 ( P.L. 93-378 ; 16 U.S.C. §§ 1600-1614) and the National Forest Management Act of 1976 ( P.L. 94-588 ), which guide U.S. Forest Service (USFS) planning and management, were both initially referred to the Agriculture Committees. More recently, the Healthy Forests Restoration Act of 2003 ( P.L. 108-148 ; 16 U.S.C. §§ 6501-6591) was referred to and reported by the Agriculture Committees. In addition to general forestry for national forests, the Agriculture Committees have jurisdiction over forestry research and forestry assistance to states and to private landowners. Forestry research is governed largely by the Forest and Rangeland Renewable Resources Research Act of 1978 ( P.L. 95-307 ; 16 U.S.C. §§ 1641-1647), which revised and updated the McSweeney-McNary Act of 1928. Forestry assistance is governed largely by the Cooperative Forestry Assistance Act of 1978 ( P.L. 95-313 ; 16 U.S.C. §§ 2101-2111), which revised and updated the Clarke-McNary Act of 1924. Both laws were referred to and reported by the Agriculture Committees. Recent farm bills have also included forestry provisions, primarily addressing the forestry assistance programs. The first to contain a separate forestry title was the 1990 farm bill (the Food, Agriculture, Conservation, and Trade Act of 1990, P.L. 101-624 ), which: created four new forestry assistance programs; revised two existing forestry assistance programs; amended two forestry assistance programs; revised the administrative provisions for forestry assistance; created five special forestry research programs; amended three existing forestry research programs; authorized a private, nonprofit tree planting foundation; and created a new USFS branch: international forestry. The 1996 farm bill (the Federal Agriculture Improvement and Reform Act of 1996, P.L. 104-127 ) included only a few forestry provisions, extending the authorization for the one expiring assistance program and adding a new funding option within an existing program. The 2002 farm bill (the Farm Security and Rural Investment Act of 2002, P.L. 107-171 ) contained a separate forestry title. The conference could not resolve many of the differences between the House and Senate forestry provisions, and thus the conference report contained fewer provisions than either. (Some of the disputed provisions were enacted one year later in the Healthy Forests Restoration Act, P.L. 108-148 .) The 2008 farm bill (the Food, Conservation, and Energy Act of 2008, P.L. 110-246 ) included a forestry title and several forestry provisions in other titles. The forestry title: established national priorities for private forest management and assistance; required statewide forest assessments and strategies for assistance; provided for competitive funding for certain programs; created new programs for open space conservation and for emergency reforestation; established a USFS tribal relations program for cultural and heritage cooperation and a competitive grants program for Hispanic-serving institutions; reauthorized four existing programs; amended the Lacey Act Amendments to prohibit imports of illegally logged wood products; and modified three national forest boundaries and certain timber contract provisions. In addition, the 2008 farm bill conservation title revised the definition of conservation actions to include forestry activities for all conservation programs. The statute required special reporting on softwood lumber imports, to assure implementation of the 2006 U.S.-Canada Softwood Lumber Agreement. Three provisions altered tax treatments for forests and landowners. Finally, the energy title of the 2008 farm bill included two new woody biomass energy programs. Possible Forestry Issues for a Future Farm Bill Reauthorization of the many agriculture programs is a major reason for the periodic farm bills, but most forestry programs are permanently authorized. This may reduce the pressure to include a forestry title in a future farm bill. Nonetheless, interest groups have raised various forestry issues other than the authorization levels for possible discussion within a farm bill. Possible issues include funding forestry assistance programs; controlling invasive species; increasing wildfire protection; producing energy from woody biomass; marketing ecosystem services; supporting carbon sequestration projects; and diversifying local economies. Forestry Assistance Funding Federal funding for forestry assistance programs has generally been rising, but the increase has not been spread equally among the various programs. Funding has risen for cooperative fire programs (assistance to states and volunteer fire departments) and for Forest Legacy (acquisition of lands or easements on lands threatened with conversion to non-forest uses). In contrast, the Economic Action Program (economic assistance to rural, forest-dependent communities) has been proposed for termination, having fallen from peak funding of $54 million in FY2001 to $5 million or less since FY2008, with no funds in FY2012 (see the " Diversified Economies " section, below, for more information). Funding for private landowner assistance programs has been a concern for many. These programs provided cost-shares to qualified landowners for forestry practices to increase tree growth, improve wildlife habitat, protect watersheds (thus improving water quality), and more. One of the changes enacted in the 2002 farm bill was to replace two programs—the Forestry Incentives Program (FIP) and the Stewardship Incentives Program (SIP)—with the Forest Land Enhancement Program (FLEP). Because funding for FIP and SIP had been discretionary and either stagnant (FIP) or absent (SIP), FLEP was given mandatory funding through the Commodity Credit Corporation of $100 million total through the end of FY2007. However, some FLEP funds were "borrowed" (temporarily transferred to another account) to pay for firefighting and were not repaid, and other funding was cancelled; in total, about half of the $100 million "guaranteed" for FLEP was actually spent on landowner assistance. FLEP was not reauthorized in the 2008 farm bill, but Congress might revisit the issue of separate funding for forest landowner assistance programs in the next farm bill. However, some question whether a modest forestry-specific assistance program is needed, since a small share of the much larger conservation programs might provide more forestry assistance funding. Most farm bill conservation programs are authorized to receive mandatory funding, which some view as a more consistent annual funding source compared to discretionary programs funded in the annual appropriations process. The 2008 farm bill included forestry as an accepted practice for almost all agriculture conservation programs. Control of Invasive Species Invasive species—non-native plants and animals that are displacing native ones—are becoming recognized as a substantial problem. According to the USFS National Strategy and Implementation Plan for Invasive Species Management, invasive species as one of the four major threats to the nation's forests and rangelands. The USFS Forest Health Management Program has evolved from a mechanism to survey and control insects and diseases to a program to address all forest pests, including invasive species. Programs to address rapidly developing problems of invasive species have been proposed, but not enacted or funded. In its deliberations over a future farm bill, Congress could address the structure and financing of programs to prevent and control invasive species in federal, state, and private forests. Congress could also choose, implicitly or explicitly, to have the agencies address invasive species through existing programs. Improved Wildfire Protection The threat of wildfire damages to resources and property seems to have increased in recent years. Attention has focused on high biomass fuel levels (particularly in federal forests) and on homes in or near at-risk forests, an area known as the wildland-urban interface. The 2002 farm bill (§ 8003) created a new Community and Private Land Fire Assistance Program to assist communities and private landowners in planning and other activities to protect themselves from wildfires. The program was authorized at $35 million annually through FY2007 and "such sums as are necessary ... thereafter." The USFS has included such expenditures as authorized activities in its State Fire Assistance Program. However, Congress has not appropriated funds explicitly for this program. Despite being a state and not a federal responsibility, protecting private lands and structures from wildfires continues to garner congressional attention, as the threat of wildfire persists. Whether and how to assist private landowners and communities, to combine this assistance with other assistance and incentive programs, and to fund such assistance could be debated in the farm bill context or in other legislative settings, such as the annual appropriations bills, or not at all. Energy Production from Woody Biomass Interest in producing energy from woody biomass and other renewable sources derives from both demand and supply interests. Demand is driven by the need to produce renewable transportation fuels, such as ethanol, to meet the renewable fuel standard; by state requirements, and possible federal standards, for electricity production from renewable sources; and by the general interest in, and possible legislation for, reducing greenhouse gas emissions (e.g., cap-and-trade legislation). Supply interests are driven by concerns over hazardous wildlife fuels and invasive species—the removal of both provides biomass that could be converted into renewable energy rather than disposed of in ways that contribute their carbon to the atmosphere. Numerous programs exist to induce or assist energy production from biomass. Some were created in the 2008 farm bill, including two directed specifically at woody biomass. Others have been created under authorities such as § 210 of the Energy Policy Act of 2005 ( P.L. 109-58 ) and § 203 of the Healthy Forests Restoration Act of 2003 ( P.L. 108-148 ). Concerns over these programs include duplication and inconsistencies among authorities, definitions, and efforts; and the potential diversion of wood waste from existing markets (e.g., for pulp and paper, particleboard, and other products that use wood fiber) to energy production, rather than increasing sustainable and beneficial removals of biomass from the forests. Congress might examine and modify existing programs to be more consistent and efficient in encouraging sustainable and beneficial use of biomass to produce renewable energy. Some, concerned about incentives or "subsidies" for renewable energy, might seek to constrain or terminate programs that could shift biomass from current beneficial uses to energy production. Markets for Ecosystem Services Forests provide a broad array of environmental services—clean air and water, wildlife habitats, pleasant scenery, and more—for which private landowners are generally not compensated, because these services are typically not bought and sold in a marketplace. A variety of interests have examined the possibility of finding ways to compensate landowners for continuing to provide ecosystem services. One means would be to develop such markets, and the 2008 farm bill included a provision (§ 2709) to facilitate this development. A new farm bill might extend, expand, alter, or terminate the 2008 provision. Alternatively, some propose federal "green payments" to directly reward farmers and other landowners who provide environmental benefits through their land management practices. Others suggest that farmers should simply be required to provide such public benefits, while still others assert that the environmental benefits farmland can provide are too modest to warrant compensation. Green payments or market development for forest and other landowners' ecosystem services might be discussed in Congress's deliberations on a future farm bill. Carbon Sequestration Projects The potential for forest landowners to sell the carbon sequestered by their forests and forestry projects has attracted substantial attention. While voluntary markets for forest carbon projects exist, they are relatively small and carbon prices are quite low. Legislation to establish a domestic cap-and-trade system to reduce emissions of carbon dioxide and other greenhouse gases was introduced and debated in the 111 th Congress, but no similar action has been taken in the 112 th Congress. Most of these legislative proposals exclude agriculture and forestry from the regulated sectors required to reduce emissions, and allow those regulated sectors to buy carbon sequestered by offset projects in the unregulated agriculture and forestry sectors. This could significantly expand carbon markets and raise carbon prices for forest carbon sequestration activities. There are various concerns about the nature and structure of carbon offsets. Some relate to carbon markets generally—concerns about additionality (ensuring that projects go beyond business-as-usual), verification (proof that carbon is sequestered), and more. Such concerns have particular implications for forestry. For example, projects need to be additional—beyond legal requirements and business as usual—to qualify as offsets; thus reforestation following timber harvests, in states that require reforestation, would not qualify as a carbon offset. Verification—measuring and monitoring carbon sequestration—can be a particular challenge for forestry. In addition, some interests are concerned about the potential impacts of significant carbon markets for farmers and landowners. These several concerns, as well as the possibly substantial benefits, might lead Congress to consider the nature and structure of carbon offsets in a future farm bill. Alternatively, Congress might choose to address provisions and protocols for agriculture and forestry carbon offsets in other legislative vehicles or not at all. Diversified Economies The economies of many rural communities have evolved around the use—finding, extracting, processing, and selling—of natural resources. In some of these areas, one resource (e.g., timber, minerals, livestock) has traditionally dominated the local economy, and the economies of such areas can be devastated when that resource is depleted or when its markets are depressed (permanently or even temporarily). Many communities have sought approaches to diversifying their economies, to mitigate the economic and social disruption that can occur when a dominant economic sector is depressed. The National Forest-Dependent Rural Communities Economic Diversification Act of 1990 was enacted in §§ 2372-2379 of the 1990 farm bill to authorize forestry and economic diversification technical assistance to "economically disadvantaged" rural communities. Funding for such assistance, provided under the Economic Action Program, rose from $14 million in FY1996 to $54 million in FY2001, but has declined since, and has been proposed to be terminated in several budget requests from the Bush and Obama Administrations. In its future farm bill deliberations, Congress might consider whether and how to perpetuate economic assistance programs for traditional wood products-dependent communities, either as a continued USFS program or as part of other USDA rural assistance programs, or whether to terminate forestry-related economic assistance programs.

Forest management generally, as well as forest research and forestry assistance, have long been within the jurisdictions of the Agriculture Committees. Although most forestry programs are permanently authorized, forestry has usually been addressed in the periodic farm bills to reauthorize many agriculture programs. The 2008 farm bill (the Food, Conservation, and Energy Act of 2008, P.L. 110-246) contained a separate forestry title, with provisions establishing national priorities for forestry assistance; requiring statewide forest assessments and strategies; providing competitive funding for certain programs; creating new programs for open space conservation and for emergency reforestation; reauthorizing four existing programs; and prohibiting imports of illegally logged wood products, among other provisions. Forestry provisions were included in other titles as well—the conservation title revised the definition of conservation actions to include forestry activities for almost all conservation programs; the trade title required special reporting on softwood lumber imports; the energy title established two woody biomass energy programs; and the tax title included three provisions altering tax treatments for forests and landowners. Additional forestry issues have been suggested by various interests for inclusion in the next farm bill. Funding is likely to play a central role in the overall farm bill debate. While forestry was included for almost all agriculture conservation programs in the 2008 farm bill, the previous sole forest-specific assistance program was not reauthorized. Whether reauthorization of these programs is necessary or whether additional funds are needed to assist landowners in implementing sustainable forestry practices are issues for debate. Protecting communities from wildfire continues to be a priority for some, while controlling invasive species that threaten native forests is a priority for others. Congress could address programs for these purposes in the next farm bill. Also, use of woody biomass for renewable energy could be combined with wildfire protection and invasive species control, and the next farm bill could extend, expand, alter, or add to the woody biomass energy programs created in the 2008 farm bill and in other legislation. Ecosystem services—forest values that have not traditionally been sold in markets, such as clean air and water, wildlife habitats, and scenic beauty—were addressed in the 2008 farm bill, and Congress could extend, expand, alter, or terminate the existing ecosystem services program. Protocols—or a direction to establish protocols—for measuring, monitoring, and verifying forest carbon sequestration projects, which might qualify as offsets under existing or proposed regulatory schemes (e.g., regional programs or a national cap-and-trade system) or in voluntary carbon markets, could also be included in the farm bill. Finally, assisting forest-dependent communities in diversifying their economies has also been debated.

Renewable Energy, Energy Efficiency, and Green Jobs In the United States, growing awareness of greenhouse gas (GHG) emissions and the possible implications for global climate change have combined with recent high energy prices and economic uncertainty to rekindle interest in renewable energy. Fossil fuels have long met the needs of economic growth, which has been a primary driver of energy demand worldwide. But with half of electric power in the United States currently generated from coal, electric power generation is responsible for 40% of domestic carbon dioxide emissions (the primary anthropogenic GHG), and over one-third of all U.S.GHG emissions. The prospect of federal climate change mitigation policies is seen as spurring the growth of renewable energy in the near future. Renewable energy technologies generate electricity from resources such as the sun, wind, or biomass, with essentially no net GHG emissions. Approximately 567,000 people are employed in the utilities sector in the United States. With renewable energy technologies accounting for about 10 percent of total U.S. energy production, jobs in renewable energy currently represent a small part of this overall workforce. President Obama has declared a goal for the United States to become the world's leading exporter of renewable energy technologies, setting out policy objectives for the development of related "green jobs" and the investment of $150 billion over 10 years in energy research and development (R&D) for the next generation of energy technologies. The American Recovery and Reinvestment Act of 2009 (ARRA, P.L. 111-5 ) included more than $60 billion for clean energy investments, including $6.3 billion for state and local efforts in renewable energy and energy efficiency, and $500 million for jobs training to help prepare workers for careers in energy efficiency and renewable energy. Other drivers are also pushing the growth of renewable energy and energy efficiency. Renewable energy technologies can provide clean electricity to help meet regional air quality standards. Goals of energy independence and energy security can also be advanced if trends in fuel efficiency continue and automotive vehicles become significantly powered by electricity from renewable sources. Additionally, as part of corporate social responsibility, many corporations are embracing sustainability as a core principle and consider "green," renewable energy goals as part of the same concept. Industrial processes and supply-chain operations are being examined and redesigned to key on low carbon emission, environmentally-friendly solutions as part of the corporation's perceived overall responsibility to its customers and the communities impacted by its operations. If such changes are adopted across the economy and incorporated into business norms, green, sustainable practices will then become standard for business operations. This report will examine the current debate on green jobs, looking at the different renewable energy technologies to provide a context for the discussion of the potential for green jobs and issues associated with maximizing growth in the renewable electricity sector. Green Jobs Studies Current policy discussions of shifting the nation toward greater use of renewable sources of energy production almost inevitably have included the subject of green jobs. Although there is no consensus on the term's meaning, it often has been defined to include at a minimum jobs that result directly from increasing reliance on renewables for generating electricity and powering vehicles as well as jobs that result directly from achieving greater energy efficiency. Less often, green jobs have been defined to also include employment that results directly from reducing and mitigating pollution and from conserving natural resources (e.g., water). To this direct employment (i.e., direct jobs), indirect and induced employment are sometimes added as well. A variety of researchers, usually with the financial support of advocacy groups, have operationalized the diverse definitions of green jobs in order to estimate the number of green jobs at present or at some time in the future. The estimates are based on varying assumptions about, for example, the percentage of U.S. electricity that will be generated by different combinations of renewable resources in the coming decades or the level of public and private sector investments in various renewable energy sources. Less often, the job estimates are based on firm-specific information about the number of persons who are currently employed producing green goods (e.g., solar panels) or providing green services (e.g., energy audits). As a consequence of differences in definitions, assumptions, and methodologies, analysts have produced widely divergent estimates of current and prospective green jobs. Complicating the estimation of the number of green jobs is the absence of an authoritative data source. Federal statistical agencies, such as the Bureau of Economic Analysis and the Bureau of Labor Statistics (BLS), categorize the data they collect according to the North American Industry Classification System (NAICS). In the case of the utility industry, for example, NAICS disaggregates firms into the categories of hydro, fossil fuel, nuclear and "other" sources. NAICS does not disaggregate the "other" category into those that use renewable sources of electricity production such as wind, solar and biomass. Because renewables are part of the "other" category, no government series provides data on their output and employment. Analysts consequently have developed ways to address the data deficiency, although their methods usually are not clearly articulated. For its part, the government agency responsible for labor force statistics, BLS, has requested funding for FY2010 to develop data on the number of green jobs and their characteristics (e.g., wages, training requirements) by industry and occupation. Industry statistics are expected to be available in FY2011. In addition, much of the empirical research has estimated only the numbers of green jobs. Estimation or discussion of the net impact on total U.S. employment generally is lacking. Net estimates take into account jobs throughout the economy eliminated or forgone in addition to those created to advance toward a low-carbon environmentally friendly economy. Similarly, the literature does not take into account factors, such as supply constraints (e.g., a tight labor market) and improvements in labor productivity (i.e., output per hour worked), that could affect attainment of estimated levels of green employment. A review of several analyses of the number of green jobs associated specifically with the use of renewable energy sources is presented below. The distinctions between definitions, assumptions and methodologies of green job studies are addressed when possible. (1) Management Information Services, Inc. (MISI) prepared the report Defining, Estimating, and Forecasting the Renewable Energy and Energy Efficiency Industries in the U.S. and in Colorado for the American Solar Energy Society. The economic research firm developed the following definition of the renewable energy (RE) "industry": an employee working in one of the major RE technologies included in this report – wind, photovoltaics, solar thermal, hydroelectric power, geothermal, biomass (ethanol, biodiesel, and biomass power), and fuel cells and hydrogen. In addition, in this study, jobs in RE include persons involved in RE activities in the federal, state, and local governments, universities, trade and professional associations, NGOs, consultants, investment company analysts, etc. MISI estimated that there were 217,600 direct jobs in the domestic RE industry in 2007. The great majority (154,100 or 70%) were in the biomass segment, chiefly ethanol and biomass power. MISI further estimated the number of indirect and induced jobs supported by the RE industry to be more than twice the number of direct jobs. Although MISI included induced jobs, it acknowledged that some jobs are less green than others (e.g., "ancillary jobs created across the street from a factory producing solar collectors shortly after it opens, such as a doughnut shop, fast food restaurant, dry cleaner, etc. whose customers are primarily the workers at the renewable energy factory"). Based on this broad definition, the report states that there were a total of 503,500 (direct, indirect and induced) jobs in the RE industry in 2007. MISI took the analysis further by specifying, in vague terms, three scenarios for the future use of RE and projecting associated job creation. The base case is a "business as usual" scenario "based loosely on the EIA [Energy Information Administration] reference case." The base case scenario yields a direct, indirect, and induced job total of 1.3 million in 2030. The moderate scenario, which assumes among other things an increase over the base case in government RE initiatives, produces a total of 2.8 million jobs in 2030. The advanced scenario "pushes the envelope" in terms of what might be economically and technologically feasible as a result of greatly heightened government support for RE through 2030. Under the study's most ambitious assumption of RE utilization almost 20 years in the future, 7.3 million direct, indirect and induced jobs might be created. The analysis does not estimate the impact of labor market conditions on achieving the job projections. If the unemployment rate is low in 2030, there might not be sufficient numbers of jobless workers to fill the projected RE positions. RE employment would either be less than forecast or the jobs would be filled largely by individuals working elsewhere in the economy. In the latter case, job growth in the RE industry would to some degree come at the expense of employment in other industries. The study also does not estimate the number of jobs that might be forgone or lost due to reduced production of energy from fossil fuel sources. (2) The Renewable and Appropriate Energy Laboratory (RAEL) at the University of California-Berkeley prepared Putting Renewable s to Work: How Many Jobs Can the Clean Energy Industry Generate? The researchers developed three scenarios which assume that a 20% Renewable Portfolio Standard (RPS) would be attained by 2020, and that electricity demand in 2020 would remain unchanged from 2002 (with gains in efficiency offsetting the usual 2%-3% annual increase in demand). The difference between the three scenarios is the proportions of the RPS composed of biomass (wood and waste) electricity, wind energy and photovoltaic (PV) solar. Two additional scenarios were developed in which the 20% of electricity produced by renewables in the first three scenarios is instead produced by different mixes of fossil fuels. All five scenarios are shown in Table 1 . RAEL concluded that substituting any one of the three renewable scenarios for either of the fossil fuel scenarios would create more direct and indirect jobs. The results also show that increasing use of renewables could result in a reduction of jobs in the fossil fuel industry. In acknowledgement of this point, the authors note that a study conducted by Tellus Institute and MRG Associates for the World Wide Fund for Nature projected a net loss of 23,900 jobs in coal mining and 61,400 jobs in oil and gas extraction by 2020 due to implementation of various clean energy policies. There are several ways in which the RAEL and MISI studies differ. The primary difference is one of definition, which causes the job estimates of the RAEL analysis to be considerably lower than those of the MISI analysis. First, RAEL does not include induced employment which some do not regard as green jobs. Second, it excludes hydropower. And third, RAEL focuses on electricity generation alone. In addition, the timeframes of the two studies differ (i.e., 2020 RAEL vs. 2030 MISI), and no growth in demand is assumed by RAEL. (3) Global Insight prepared Current and Potential Green Jobs in the U.S. Economy for the U.S. Conference of Mayors. The economic research firm estimated that there were 751,051 green (direct and indirect) jobs in 2006, with the largest number related to renewable power generation (127,246). A green job is defined as: any activity that generates electricity using renewable [including hydroelectric] or nuclear fuels, agriculture jobs supplying corn or soy for transportation fuel, manufacturing jobs producing goods used in renewable power generation, equipment dealers and wholesalers specializing in renewable energy or energy-efficiency products, construction and installation of energy and pollution management systems, government administration of environmental programs, and supporting jobs in the engineering, legal, research and consulting fields. Global Insight next forecast the number of green jobs in the categories of renewable electricity generation, residential and commercial retrofitting, and renewable transportation fuels. The second category, retrofitting, is beyond the scope of this report and will not be discussed. In terms of power generation, Global Insight relied on its Energy Group's forecast of a 30% increase in net electricity generation between 2008 and 2038. It assumed that 40% of net electricity generation in the United States during the 30-year period will come from five sources, with wind comprising 30%; solar, 20%; geothermal, 10%; biomass, 30%; and incremental hydropower, 10%. The analysis used several factors to calculate direct green energy jobs in manufacturing and construction and in operations and maintenance. The factors come from research conducted by other parties, which is also the case in the RAEL report. Unlike that study, the Global Insight analysis includes more sources of renewable energy and assumes that energy demand increases over time. In terms of renewable transportation fuels, Global Insight used a forecast of total fuel production rising to 142,000 million gallons between 2008 and 2038. It assumed that 30% of the total gasoline and diesel consumed by passenger cars and light trucks in 2038 will come from alternative fuels. The analysis used separate factors to calculate direct jobs in manufacturing and construction needed to build additions to the ethanol and biodiesel infrastructure, and in agriculture to grow the feedstock and operate the facilities to turn it into fuel. The factors come from research conducted by the Renewable Fuels Association. According to this report, there might be 407,200 (direct and indirect) jobs in renewable electric power generation by 2018; 802,000 by 2028; and 1,236,800 by 2038. In renewable transportation fuels, there might be 1,205,700 (direct and indirect) jobs by 2018; 1,437,700 by 2028; and 1,492,000 by 2038. Global Insight does not provide estimates of potentially slower job growth elsewhere in the economy due to competition for workers in future years or of jobs forgone due to the assumed percent increases in electricity generation and transportation fuels from renewables. Global Insight does caution that: It is important to recognize these forecast results depend heavily on our chosen scenarios. Altering any of the assumptions regarding the share of electricity to be generated from alternative resources, the extent of retrofitting, or the share of transportation fuels from renewable sources would obviously change the results. (4) In Study of the Effects on Employment of Public Aid to Renewable Energy Sources , Gabriel Calzada of the King Juan Carlos University analyzed the net jobs impact of Spain's policy initiatives to increase its capacity to generate electricity by wind, mini-hydro, and PV solar power. The study reportedly was conducted with support from the Institute for Energy Research. It adopted the direct and indirect job creation estimates for Spain's three main renewable sources of electricity that MITRE, a research firm, previously had developed. Specifically, MITRE estimated that Spain's subsidies created 15,000 jobs in wind power, 4,700 jobs in mini-hydro and 14,500 jobs in PV solar between 2000 and 2008, for a total of 50,200 direct and indirect jobs. The researcher then calculated the total public subsidy that created these green jobs to be 28,671 million Euros, or an average government subsidy per worker added of 571,138 Euros. In order to know how many net jobs are destroyed by a green job program for each one that it is intended to create, we use two different methods: with the first, we compare the average amount of capital destruction (the subsidized part of the investment) necessary to create a green job against the average amount of capital that a job requires in the private sector; with the second, we compare the average annual productivity that the subsidy to each green job would have contributed to the economy had it not been consumed in such a way, with the average productivity of labor in the private sector that allows workers to remain employed. Both methods produced the same outcome, namely, an average of 2.2 jobs were not created elsewhere in Spain's economy for each subsidized job created. This study takes a much different approach than other job creation analyses by estimating the number of jobs had Spain's government not subsidized the three renewable sources of electricity generation. In developing its estimate, the author relies on average measures of capital and productivity across the entire private sector of the economy – but the cost of job creation can differ substantially from economic activity to another. A better comparison might have been with measures of capital and productivity in other electricity-generating industries (e.g., fossil fuel). (5) Robert Pollin, James Heintz and Heidi Garrett-Peltier of the Political Economy Research Institute at the University of Massachusetts prepared The Economic Benefits of Investing in Clean Energy with support from the Center for American Progress. The study, which provides perhaps the clearest explanation of its assumptions and methodology, estimates the number of jobs per year that might be created as a result of spending and other provisions in the American Recovery and Reinvestment Act of 2009 and a version of the American Clean Energy and Security Act of 2009 which is being considered by Congress. The analysts calculate that the two measures working together might yield $151 billion per year in new "clean-energy investments" made by the government and private firms, and generate a net annual increase of about 1.7 million direct, indirect and induced jobs. This net employment gain is composed of a gross increase economy-wide of approximately 2.5 million jobs and a gross loss of 795,000 jobs if the entire $151 billion annual investment in clean energy came at the expense of the fossil fuel industry. About one-fourth ($41 billion) of the total spending is estimated to occur in the following renewable energy areas: on-grid renewable electricity production and transmission to residential, commercial, and industrial customers ($30 billion), off-grid renewable electricity generated by solar panels on buildings ($3 billion); off-grid nonelectric renewable energy production by geothermal pumps ($3 billion); and alternative motor fuels such as cellulosic biofuels ($5 billion). Thus, the researchers estimate that the great majority of clean-energy investments prompted by the two pieces of legislation involve energy efficiency activities, which they defined as building retrofits, mass transit/freight rail, and smart grid. The data in Table 2 below underpin the analysts' conclusion that an expenditure on "clean energy sources" creates more jobs than an equivalent expenditure on fossil fuel energy sources. Estimates of jobs per $1 million of spending on renewable resources of energy production are shown in the bottom third of the table, and estimates for comparable spending on fossil fuel sources of energy production are shown in the top third. For example, the wind energy industry (as defined by the analysts) would generate 9.5 direct and indirect jobs per $1 million invested, while $1 million invested in the oil and gas energy industry (as defined by the analysts) would generate 3.7 direct and indirect jobs. From the perspective of spending that provides the most "bang for the buck" – a major concern when government tries to mitigate the labor market impact of an economy in recession – the results of this analysis suggest that investment in renewable energy sources is superior to fossil fuel sources in terms of job creation. (Both the American Recovery and Reinvestment Act of 2009 and H.R. 2454 , the American Clean Energy and Security Act of 2009, have been characterized by some as "jobs bills.") With an unemployment rate of 9.7% in August 2009 and forecasts that the rate will continue to rise through at least year-end and remain elevated for some time to come, the supply of labor is unlikely in the near-term to prevent reaching the analysts' estimate of green job creation. Once the labor market recovers from the recession, however, attainment of the annual job estimate could become increasingly untenable even if $151 billion per year continued to be invested in clean energy (including renewable) sources. (6) The Pew Charitable Trusts and Collaborative Economics , a policy research firm, developed The Clean Energy Economy: Repowering Jobs, Businesses and Investments Across America . Unlike the above-described analyses which largely were based on models of the U.S. economy, the authors of this report attempted to identify companies engaged in clean energy activities and the number of clean energy jobs at those individual businesses. Put very succinctly, the researchers used multiple sources of information to develop a database of "clean energy economy" firms in selected industry classification codes. Employment statistics for the individual companies in these industry codes came from the National Establishment Time Series (NETS) database, which is based on Dun & Bradstreet information covering the population of business establishments in the United States. Our analysis is conservative relative to other studies because we count actual clean energy economy businesses and jobs rather than entire occupations (such as all jobs in mass transit, or all electricians). For example, our report counts the workers who manufacture hybrid cars and buses, technicians who construct wind turbines, electricians who install solar panels on homes and engineers who research fuel cell technology, but it does not include all auto manufacturers, electricians, technicians and engineers. In addition, we focus exclusively on producers and suppliers in the clean energy economy. We do not count jobs that use these products and services—for example, jobs within utilities responsible for purchasing energy monitoring equipment or the mass transit operations that buy hybrid buses—because data limitations prevented the disaggregation of specific jobs within these types of companies. The researchers define the clean energy economy as (1) clean energy, (2) energy efficiency, (3) environmentally friendly production, (4) conservation and pollution mitigation, and (5) training and support. The five categories are further divided into 16 segments. In the case of clean energy, the segments are energy generation (e.g., wind, solar, geothermal, biomass, hydro, marine and tidal, hydrogen), energy transmission (e.g., power monitoring and metering services, smart grid), and energy storage (e.g., advanced batteries, fuel cells). Nuclear power is excluded "because of significant, ongoing questions about how and where to safely store its waste." In 2007, according to the Pew analysis, there were 770,385 jobs in the clean energy economy. The clean energy category of renewable sources of energy generation, transmission and storage accounted for 89,000 jobs or 11.6% of the total. About two-thirds of the jobs (501,551) were in the conservation and pollution mitigation category. Each of the remaining categories accounted for fewer jobs than clean energy: 73,000, energy efficiency (e.g., geothermal heating and cooling, smart lighting); 53,700, environmentally friendly production (e.g., biofuel, coal gasification, ethanol, hybrid vehicles, biodegradable products; and aquaculture); and 50,000, training and support (e.g., research in renewable sources of energy generation and in alternative fuels, emissions trading and offsets, and project financing). Some of the jobs in these three categories likely were included by other analysts in their renewable energy estimates. For example, the MISI analysis appears to define the RE industry to encompass related research and investment activities. The Pew report, in contrast, classifies such activities in its "training and support" rather than "clean energy" category. In summary, the preceding studies of green job creation in the renewable energy industry vary greatly in a few key respects. As a result of differences in definitions, assumptions, and methodologies, the analyses produce wide-ranging estimates of the number of green jobs. Renewable Energy Technologies and Green Jobs Growth As previously noted, there is no universally-accepted definition of green jobs. The preceding studies of green jobs generally consider these to be jobs in energy efficiency activities and/or renewable energy. Improving the energy efficiency of current buildings and residences is seen as the easiest way to reduce GHG emissions, and is an area in which many workers could be employed for years to come in energy audit and retrofit activities. But energy efficiency may see as much or more achieved from new construction standards than may be achieved from retrofits to today's existing buildings and housing. Most of the future growth in green jobs is generally envisioned as coming from the growth in deployment of renewable energy technologies. A common misperception in the studies of green jobs seems to be that all renewable energy technologies have generally the same qualities, with regard to job creation potential. Little effort is made to differentiate between them. However, renewable energy technologies are designed to harness renewable energy resources with very different physical characteristics, such as the wind and the sun. Different technologies have seen different levels of investment over the years based upon various evaluations of potential and economic readiness to serve current markets or applications. The timeframe under consideration is important in any discussion of the potential for renewable energy technologies to create jobs, for the technologies are at different stages in their development cycles and have attributes suited to different applications. Consequently, the costs of generating electricity varies with each renewable energy technology, and the potential for deployment often depends upon local incentives and the quality of the renewable resource. As such, renewable energy deployment programs from state governments have had a great influence on the current deployment levels of renewable energy technologies and resultant jobs. Historically, the federal investment in renewable energy technologies in the United States has not been about creating jobs, but instead simply focused on developing the technologies to a point where they are considered ready for commercialization. Even though renewable energy projects are currently being deployed, further development of the technologies is needed if these technologies are to meet the perceived future needs of the marketplace. Some of today's renewable energy technologies may in fact turn out to be "transitional" as advances in technology have and could further lead to new research directions. Innovation could be stimulated from within the industry or induced by developments ancillary to the industry, such as the development of the Smart Grid or schemes to encourage Demand Response. Further research, development, and deployment is likely necessary to develop a more robust renewable energy industry and potential spillover benefits to the economy at large from the R&D spending. Enabling mechanisms for renewable energy technologies, such as those discussed to help with deployment (i.e., the feed-in tariff in Europe), were designed not so much to create jobs as they were to encourage the use of the new technologies. The U.S. government is now discussing how to invest in renewable energy technologies as a growth engine for future jobs. The investment may not result in large direct jobs creation in the short-term, but prepares for potential growth in the near future especially as climate change considerations may shift paradigms regarding electricity generation choices. This transition would likely require further domestic policies to develop the supporting infrastructure and supply chains to enable the success of new clean energy industries. Additionally, a transition to low carbon energy technologies may result in jobs being lost in other parts of the economy, but this may be considered part of the opportunity cost of making the decision. Many of the studies concerning green jobs and renewable energy technologies provide estimates of employment reflecting the state of technology at a specific point in time. It is important to recognize that as a specific renewable energy technology becomes more efficient, the number of jobs per Megawatt (MW) of output is likely to decrease. The increase in efficiency may also be reflective of an increase in productivity of manufacturing processes. This has particular relevance if most jobs in renewable energy are likely to be in manufacturing and construction, as opposed to fossil energy in which most jobs relate to fuel processing and operations and maintenance activities. Outlook for Renewable Energy in the United States Renewable energy resources may be defined as naturally replenishing (in that they are virtually inexhaustible) resources limited in the amount of energy that is available in a particular period of time. This definition illustrates both the promise and the problems associated with renewable energy technologies which seek to produce electrical energy from renewable resources. Many of today's renewable energy technologies were largely developed in the United States as the federal government explored ways to reduce our dependence on imported oil. Renewable electricity technologies are designed to harness very different renewable energy resources. Some of these renewable resources are fairly constant and predictable, while others can vary significantly according to location, and even time of the day or year. Estimates of market growth are provided to illustrate the potential size of future markets for a particular renewable energy technology. The U.S. Department of Energy's (DOE's) Energy Information Administration (EIA) annually performs an analysis of trends to arrive at long-term projections of energy supply, demand, and the effect on energy prices. For 2009, the Annual Energy Outlook (AEO 2009) has a Reference Case which assumes that existing laws and regulations as of 2007 will be maintained through to 2030. This scenario expects a global economic recovery to begin in 2010, spurring demand for oil and corresponding increases in oil prices to $110 per barrel (2007 dollars) by 2015, increasing to $130 per barrel in 2030. The AEO 2009 Reference Case therefore does not assume climate change legislation will be in effect for the period. This can be compared to EIA's case for a future in which GHG mitigation is required by legislation and calls this scenario the LW110 case, modeling such a provision on S. 2191 , the Lieberman-Warner Climate Security Act of 2007 introduced in the 110 th Congress. EIA also has a scenario called No GHG Concern case which removes cost-of-capital adjustments for GHG-intensive technologies from the Reference Case. The AEO 2009 Reference Case shows all renewable energy sources accounting for approximately 8.5% of electricity generation in the base year of 2007. Projecting forward to 2030, the Reference Case sees renewable electricity growing to 14% of total generation. Using the LW110 case, the analysis projects renewable energy sources accounting for 22% of all electricity generated. EIA also has analyzed two additional scenarios specifically for changes in the cost of renewable energy technologies. In the case of High Renewable Energy Cost, capital costs, operating and maintenance costs, and performance levels for wind, solar, biomass, and geothermal resources are assumed to remain at 2009 levels through to 2030. In this case, it is assumed that dedicated energy crops do not become available. In its Low Renewable Energy Cost scenario, EIA assumes that levelized costs of generating renewable energy will decline 25% below AEO 2009 Reference Case costs by 2030. Generally, this is realized through lower capital costs to construct the plants, and in the case of biomass, fuel supplies are assumed to be 25% less expensive compared to the Reference Case costs. Under the Low Renewable Energy Cost scenario analysis of AEO 2009, renewable electricity sources could account for as much as 22% of power generation for the (non-nuclear) electric power and end-use sectors by 2030. What these scenarios illustrate is that domestically, a relatively high rate of growth may be expected for renewable electricity overall even if no federal GHG mitigating legislation is enacted during the period to 2030, based on the conditions described. Outlook for Renewable Energy Markets Overseas According to EIA projections in its International Energy Outlook for 2009 (IEO2009), global renewable electricity generation could rise by an average 2.9% per year (from 2006 to 2030). If realized, that would mean that renewable electricity would make up 21% of global supply in 2030 as compared to 19% in 2006. With oil prices expected to increase with an expected global economic recovery, renewables are projected to be fastest-growing source of electricity internationally. Wind and hydroelectric power are expected to represent much of the increase. Solar power can be cost-competitive in areas with especially high electricity prices or where government incentives are available. Government subsidies often provide the necessary support for building renewable generation facilities. Renewable sources also offer an opportunity for electrification of regions with unreliable or no centralized electricity services. Renewable Energy Technology Status and Development Needs A summary of the current status of current major renewable energy technologies follows, using figures for domestic estimated growth based on AEO 2009 projections. Some of the major perceived barriers the technologies must overcome in order achieve a greater share of the electricity generation market are presented. Capacity estimates are for the electric power sector, whose primary business is to sell electricity to the public. Estimates of net summer capacity in 2030 are from AEO 2009's Low Price scenario (which assumes technology improvements and other factors will continue a trend of declining prices for electricity from renewable energy technologies) unless otherwise stated. Biomass Biomass for electric power or biopower has a large potential and is arguably the most conventional of all renewable electricity technologies. Biomass is the largest source of renewable energy in the United States. Approximately 53% of all renewable energy comes from biomass, represented by biofuels, landfill gas, biogenic municipal solid waste, wood, wood-derived fuels and other biomass such as switchgrass and poplars. Agricultural wastes (such as corn stover) are another potential feedstock. With wood and biomass net summer capacity reported at 7 Gigawatts (GW) for 2007, DOE estimates that 41 GW of domestic biomass generation could be available by 2030. Sustainable management of biomass resources, especially forests, will be critical to this future. Biomass combustion is a relatively mature technology but it is not widely used and is generally not very efficient unless it is used in a combined heat and power application. As of 2003, there were approximately 66,000 direct jobs in the biomass power segment. Large scale co-firing of biomass with coal is a higher efficiency, lower per unit cost application. Technologies for biomass gasification could result in higher efficiencies when used to produce synthesis gas or hydrogen for heat and/or power production. Demonstration and deployment of newer industrial gasification technologies is needed to scale-up plants and provide economical designs with high degrees of availability. Huge potential exists for the biomass category, as it is generally regarded as a carbon-neutral source of energy. Wood-burning stoves and solar water heaters are the most common applications of residential renewable energy. But improvements are needed to increase fuel efficiency and lower toxic air pollutants for wood stoves. Liquid biofuels can readily be made from biomass using fermentation processes. Ethanol, the most widely produced biofuel today, is commonly blended with gasoline as a transportation fuel thus reducing GHG and particulate emissions. Other biofuels with transportation potential are methanol and butanol, both of which can be made from renewable sources such as wood wastes, agricultural or municipal solid wastes. Methanol also has electric power production potential, and can be used to fuel combustion turbines to produce electricity, either directly or in its dehydrated form of DiMethyl Ether, a diesel substitute. Wind Electricity produced from wind power is growing at a faster rate than natural gas, with a net summer capacity in 2007 of 16.23 GW. This growth has caused a surge in employment with over 85,000 jobs reported by the American Wind Energy Association, of which about 8,000 jobs are construction-related. Most wind power projects today are onshore, but several coastal regions around the United States also have good quality offshore wind resources that may see development in the near future. Wind turbine sizes are increasing in generating capacity, with domestic turbines in 2007 averaging 1.6 MW in size. When the wind is blowing at speeds which can be harnessed, electricity can be generated at prices nearly competitive with conventional fossil energy based generation. Most of today's wind turbines use a three-bladed windmill rotor design to generate electricity from the wind, but new turbine designs are being developed to generate power at lower wind speeds. Since the wind doesn't blow all the time and varies in strength, integration of large amounts of wind into an electricity grid has often been raised as an issue. Backup generation in the form of natural gas combustion turbines has been the standby choice in some instances. Energy storage (using batteries or other means) is often suggested as a potential answer to deal with intermittency and load variability concerns. Since many of the best wind resource areas in the United States are far from population centers where the electricity generated will be used, the development of transmission facilities to carry power to population centers will likely be needed for wider development. Given these factors, DOE estimates domestic capacity from wind could reach 61 GW by 2030. Additionally, DOE projects as much as 20% of the nation's electrical supply could be provided by wind energy by 2030. This would require wind power capacity to reach 300 GW, or a growth of over 280 GW over the next 21 years. Achieving such a prodigious goal would mean addressing significant challenges in technology, manufacturing, employment, transmission and grid integration, markets, and siting strategies. Solar PV Another renewable resource with enormous potential is sunlight. Solar photovoltaic power converts sunlight directly into electricity using photovoltaic (PV) cells which today are largely made from crystalline silicon. Research is underway to reduce the cost of PV cells using base materials other than silicon (such as cadmium telluride) and improved manufacturing techniques which may increase the efficiency of solar cells. Recent advances in "thin-film" technology using cadmium telluride have resulted in module production costs dropping from $2,940 per kilowatt (kW) of capacity in 2004 to $1,120 per kW in 2007. DOE estimates that there were 46 companies manufacturing PV modules and cells in the United States in 2007, with 6,170 person-years of direct employment (representing the equivalent of 6,170 full-time jobs). Solar PV is currently used in a number of off-grid applications where distributed energy resources are useful, and in peaking power applications to reduce power usage from the electric utility grid. Battery storage is important to off-grid usage to extend hours of usage past peak daylight. While Solar PV installations only represented 0.47 GW of capacity in 2007, DOE estimates generating capacity from solar PV could reach almost 18 GW by 2030 in the United States. Since the amount of electricity that can be produced from solar PV depends on the intensity of sunshine (and the angle at which PV panels face the sun), significant potential exists for applications in sunny regions. But the relative success of solar PV installations in Germany (with a capacity of 3,000 MW in 2007) prove the wider applicability of the technology in less than optimal climes. Integration of PV cells and materials into building structures and designs for could be a major step for the technology. The cost of electricity in the United States today from solar PV is relatively high at approximately 18 to 23 cents per kilowatt-hour (kWh) when compared to electricity from fossil energy sources. However, the costs of solar PV capacity have been decreasing. Increases in the efficiency of solar PV cells, combined with other technological advances, could result in solar PV prices of 5 to 10 cents per kWh by 2015 which is close to parity with fossil-fueled electricity. Concentrating Solar Thermal Concentrating solar thermal technologies use mirrors to concentrate sunlight and generate heat usually for steam production. This steam is then used to generate electricity or provide high-temperature hot water for industrial or other process uses such as heating and cooling. Fairly large areas of land are needed, plus access to water since it is used for steam generation and condenser cooling purposes. Some novel applications heat air directly to generate thermal gradients which are harnessed to produce electricity. Solar thermal technologies are currently used for utility-scale power generation, but costs of 12 cents per kWh in the United States are higher than for fossil-fuel power generation. Advances in the designs and materials of absorbers, reflectors and heat transfer fluids in next-generation solar thermal systems could potentially reduce costs to 6 cents per kWh by 2015. As of 2007, DOE estimates that employment in the U.S. solar thermal industry represented the equivalent of 686 manufacturing jobs. Improved energy storage schemes would benefit both conventional power generation and off-grid applications in particular. New utility-scale solar thermal facilities will likely be located mostly in the southwestern region of the United States, an area where water resources may be under stress. As such, EIA projects slow growth in domestic power generation from solar thermal technologies from 0.53 GW capacity in 2007 to 0.86 GW by 2030. Applications in residential and smaller industrial/commercial facilities are another area of potential solar thermal use. Solar hot water heaters are growing in use in the United States, with wide applications in parts of Europe and Asia. Additional R&D investment may be needed to increase energy conversion efficiencies and bring down energy costs if smaller solar thermal systems are to become mainstream choices domestically. Geothermal Steam or hot water extracted from geothermal reservoirs in the Earth's crust can be used to generate electricity, or to provide thermal energy for heating or thermal processes. EIA projects this hydrothermal capacity could reach 3 GW by 2030, up from 2.36 GW in 2007. But geothermal energy may no longer depend upon the availability of suitable natural geothermal resources. Enhanced Geothermal Systems (EGS) are man-made geothermal reservoirs. By drilling into the Earth's crust and injecting water to create steam, EGS offers the potential to provide geothermal energy almost anywhere, not just in areas where steam or hot water occur naturally. EGS offers the possibility for large scale generation of clean energy. Improvements in drilling technology can lower costs, and better fluid flow can increase the amounts of power generated. Ground Source Heat Pumps (GSHP) are used mostly in residential applications and take advantage of the differential of the ground compared to surface air temperatures. GSHP require a piping network to be buried underground to serve the customer's heating and cooling needs. Energy efficiency standards focused on home heating and cooling could lead to improved technologies and wider deployment in new construction. Direct employment in the geothermal heat pump sector as of 2007 represented the equivalent of 1,219 jobs. Hydroelectric Power Only 2,400 of the 80,000 dams in the United States produce electricity. Building a new hydroelectric power plant is expensive, and construction uses much water and land. As such, with most of the better sites already developed, DOE does not expect much growth in large conventional hydroelectric capacity. But DOE has identified approximately another 5,677 sites with the potential to generate about 30 GW of power using small-scale hydroelectric technologies. Opportunities with small head and low flow applications may need further R&D to optimize the power generation potential. Most of the future employment opportunities in hydroelectric power are likely to come from small scale projects. Hydrokinetic energy technologies generate power from the movement of water. Electricity can be generated from the flow of water in rivers, or additionally from the flow of released water at existing dams. Wave energy and tidal applications are just beginning demonstrations of the various technologies to tap the potential. Micro- and pico-hydropower are options for power in "village scale" or distributed settings. Transmission lines from turbine to service application may be required. Battery storage may not be necessary, depending on the application. Micro-hydropower systems are less than 100 kW. Pico-hydropower systems are less than 5 kW. Focusing on Potential Markets for Jobs Growth If green jobs from renewable energy technologies is a goal, then understanding the future needs and structures of markets for renewable electricity could help the development of a market focus, and provide a strategy for U.S companies to become a global provider of equipment for the next generation of renewable energy technologies. Serving these demands can potentially mean growth in domestic green jobs. While most studies of the potential for green jobs from renewable energy focus on growth in U.S. electricity markets, the developing world may present opportunities for the future. Evolving domestic energy policy concepts (such as the development of a Smart Grid or Demand Response programs) may have an impact on the physical infrastructure and development of services in energy markets internationally. The sections that follow describe some of the major trends which are likely to influence future renewable electricity markets. Centralized vs. Distributed Electricity Generation Most communities in the United States are served by a local electric utility which brings power to businesses and residences via electric transmission lines from steam-electric power generating facilities located miles away from large population centers. In fact, a network of power plants generally connects to a grid of transmission lines which then distribute electric power over smaller lines for customer use. These plants commonly burn coal or natural gas (i.e., fossil fuels) to generate electricity, and are usually operating twenty-four hours a day. Efficiency of operation (i.e., as ratio of fuel input to energy produced) has been achieved from large economies of scale, resulting in electrical power being generated fairly cheaply, but with a consequence of commensurately large GHG emissions. This central station concept allows for a number of power plants to serve multiple communities, providing reliable power, and allowing different generating options to be incorporated into networks including renewable electricity. Some renewable electricity technologies are also capable of serving as base load capacity, notably geothermal, biomass, and hydroelectric facilities with impoundments. Wind power is considered intermittent because the wind doesn't blow all the time, and may not be predictable as a resource. Similarly, solar facilities are dependent on sunlight. Storage schemes may provide an answer for variability of power generation issues thus improving dispatchability, i.e., the capability to generate power to meet system loads. This could allow for more widespread use of renewable energy technologies for traditional electric utility-type operations. Energy storage capabilities could also be key to increasing distributed generation applications of renewable electricity technologies. Distributed generation does not rely upon a grid or centralized power station for electricity, instead allowing electric power to be generated at or near the point of consumption (i.e., the customer or load). Wind and Solar PV are well-suited to distributed generation, serving as back-up or main power supplies for single customers or communities. Similarly, on-site generation is used by industrial facilities such as pulp and paper mills with biomass generation. Communities or consumers seeking back-up or independent power supplies using stand-alone generators or renewable electricity technologies may seek to take advantage of these opportunities. Some renewable electricity technologies lend themselves to modular, scalable energy solutions which may be more favorable to distributed energy solutions. While traditional lead-acid batteries are usually thought of for today's electricity bulk storage systems, new energy storage technologies are on the horizon. For example, advanced battery and fuel cell technologies may be able to efficiently use hydrogen from dissociated water, thus employing distributed generation technologies like solar PV or wind power to generate hydrogen as well as power during peak hours of operation, and provide power for night-time use. Charging stations for electric vehicles may also be ideal applications for renewable electricity solutions. Developed vs. Developing Economies: A Two-Tiered Energy Future? In 2009, developing countries surpassed developed countries in total energy use for the first time, reaching a high of 51.2%. EIA has estimated a growth rate for renewable electricity technologies in non-OECD countries at 3.2% annually for the period 2006 to 2030, compared to 2.5% for OECD countries in the same period. Countries in the developed world may be moving towards building economies based on a low-carbon, technology-based energy future following legislative proposals for climate change mitigation. More robust versions of today's renewable electricity technologies could be the future, hybridized with other renewable technologies or possibly natural gas-powered fuel cells or generation. The evolution of a Smart Grid could enable wider deployment of renewable energy technologies as part of a larger centralized network, or alternatively, it could provide for more distributed customer based applications interfaced with electric utility controllers allowing for Demand-Side Management options. In contrast, the cost and refinements of a smart grid future may not be necessary at this time for markets in the developing world. But that does not mean that these markets do not provide opportunities for U.S. firms. Many of today's existing renewable energy technologies may be adequate for many "village" or distributed applications. Grid-connected electricity systems in many developing countries may not be as reliable or robust as in the United States, providing an opportunity for U.S. manufacturers to provide modular renewable systems as "back-up" or alternative power systems in areas of high-electricity cost. Energy-efficient appliances specifically designed for renewable-powered village applications in developing countries is another possible area for U.S. manufacturers to focus on product development. Renewable Energy and Climate Change Assistance Developing countries are less likely to have the resources to afford technologies to help mitigate the potentially detrimental effects of climate change, therefore providing assistance for developing countries to deploy clean energy technologies has been discussed at international forums. By understanding the needs and operational parameters of segments of these markets, or designing products to serve the specific needs of communities in developing countries, U.S. manufacturers could build products for markets in almost any country. Distributed generation schemes can bring renewable sources of electricity to off-grid communities (or communities underserved by a central grid) in developing countries. Such "village applications" could serve GHG reduction goals, enable access to equipment and services which could help improve the health of local populations, and further goals of good will. Electrification is often the first step to the development of modern services for many regions and an educational system providing access to centralized teaching and tools. By providing options or simply giving assistance in the form of renewable electricity technologies, developed economies can help developing countries avoid GHG emissions from coal or other fossil fuel power generation technologies which may be easier to acquire. U.S. legislative proposals for climate change mitigation include provisions for use of emissions allowances to provide exactly such assistance. In the short-term, U.S.-made products could be provided to communities in developing countries. A possible positive benefit of such assistance could be the development of "brand awareness," which may help to develop long-term customers interested in purchasing U.S. manufactured products. Developing an Industry, Not Just Jobs Investment in renewable energy technologies in the United States until recently was not about creating jobs. Any employment in areas related to or growing out of renewable energy has often been considered as a spillover economic benefit of the original R&D investment rather than a specific focus. Helping technology ventures to become viable manufacturing companies capable of competing for the domestic clean energy market is another step. Supporting structures involving academic institutions and manufacturing supply chains may have to be developed to enable a larger, competitive, domestic renewable energy manufacturing capability. Transitioning renewable energy companies into an industry capable of competing for global clean energy markets to build related green jobs in the United States over the longer-term may require coordinated policies and further government involvement. Companies must be capable of competing in the domestic market for renewable energy first and foremost, as the potential growth of U.S. renewable markets already has significant international participation. Success in building new manufacturing industries can often be traced to planned, cooperative approaches working with government entities. States and local communities have embraced these ideas for years as part of public-private partnerships in assisting technology to manufacturing ventures. Globally Competitive Manufacturing Clusters Many economists believe that complex industrial ecosystems, or Clusters , are the drivers of a growing economy. Clusters can be defined as geographic concentrations of interconnected companies, specialized suppliers, service providers, and associated institutions in a particular field that are present in a nation or region. Clusters arise because they increase the productivity with which companies can compete. They do this in three broad ways: first, by increasing the productivity of companies based in the area; second, by driving the direction and pace of innovation; and third, by stimulating the formation of new businesses within the cluster. Achieving a critical mass with regard to the number of firms may be necessary for renewable electricity technology companies to develop the technological innovations enabling U.S. firms to be competitive in future markets. Competitive companies working with supplier industries and academic institutions in diverse geographic regions can aid the innovation cycle. The close manufacturer-supplier relationships in clusters help companies to learn about technological needs or developments. Clusters make opportunities for innovation more visible, and provide the capacity and the flexibility to act rapidly. Local suppliers and partners can and do get closely involved in the innovation process, thus ensuring a better match with customer requirements. Clusters competing with other similar regional clusters can increase the industry's competence domestically. Clusters are particularly well-suited to connections between manufacturing and technology, especially as these are advantaged by research institutions, and highlight the importance of a well-prepared workforce in enhancing productivity. If more green jobs is the goal, then these concepts may need to be applied to develop the renewable electricity industry. Cluster development could possibly trigger the type of innovation that can lead to the next generation of marketable renewable energy technologies resulting in opportunities for U.S. green jobs growth. Market and Policy Challenges for Green Jobs Growth Renewable energy resources have an unmatched potential for clean energy production, if the right technologies can be employed to harness them. U.S. national energy policy with goals for use of renewable electricity and greenhouse gas mitigation will add to efforts in the states to grow the markets for renewable energy technologies. While the growth in power generation pointed to by EIA projections speaks to the potential market for sales of equipment and systems to provide renewable energy and hence manufacturing-related green jobs, the question of where the systems and components will be designed and built is quite another issue. International Competition The attraction of growing markets for clean energy and technologies will likely mean increasing international competition for renewable energy technology product orders. Most of the developed economies and a number of developing countries have or are seeking to create their own renewable electricity technology manufacturing sectors, and U.S. companies are helping other countries to develop or increase these capabilities. Additionally, slowing renewable energy markets in Europe have turned the attention of European companies to the U.S. market. In fact, with the growing requirements from individual state renewable energy standards (and a possible federal requirement) spurring the sales of equipment and many Gigawatt-hours of renewable electricity sales for years to come, new entrants into the market could come from a number of countries with renewable energy expertise. Existing companies with prior experience serving renewable energy markets will likely have an advantage. European-based companies (or their subsidiaries) currently dominate the wind turbine business in the United States. These companies have marketing and technical expertise honed from serving their home markets, and are setting up joint ventures with U.S. firms (which can benefit from the knowledge base of their overseas partner). In such a setting, a new entrant which is purely a U.S. enterprise likely has a competitive disadvantage. Such limitations are amplified in instances where the entrant is effectively subsidized by a national government. For example, China is seeking to be a global leader in sales of renewable energy equipment, and in a bid to build market share, is allegedly selling solar panels in the United States at prices less than the cost of materials, assembly and shipping. Chinese companies are embracing foreign direct investment as part of this strategy with plans to build U.S. assembly plants for solar panel sold in the United States to avoid protectionist legislation. Incentivizing Domestic Production A key to maximizing U.S. green jobs growth from renewable energy is the domestic design and manufacturing of equipment and components. The more of these functions that take place in the United States, the greater the number of higher paying jobs that will likely be located here. Plants to assemble components built and designed elsewhere miss the opportunity for intellectual capacity development and learning that may result in advances in the technology. These advances may eventually result in competitive advantages throughout a supply chain or manufacturing cluster. A renewable energy industry capable of serving the export market may create many more jobs than an industry which only serves domestic needs since production would necessarily be at internationally competitive prices. This can be achieved all the easier if the domestic market has sufficient demand to bring renewables rapidly down the cost curve. Many factors and considerations may influence the decision of where to build a factory. For example, labor costs overseas can be a fraction of those in the United States. If such overhead costs for manufacturing products can be reduced and reflected in the final price of a product, the resulting competitive advantage could result in increased sales. For other firms, having a technically competent, well-educated workforce may be a paramount consideration. This may ease the training process for workers with an unfamiliar product and help accelerate the process of getting plant operations online and functioning. Given the growing international competition for renewable energy markets and green jobs, policy mechanisms and incentives may be necessary to encourage manufacturers to locate production of renewable energy products and components in the United States. Incentives are commonly used by countries (and states within countries) to give a competitive advantage to domestic manufacturers. Some of the more frequently used policy tools include financial and tax incentives, local content requirements, and quality certification requirements. Each of these policy tools can be designed to favor domestic manufacturers in varying degrees. The degree to which such incentives can be used depend to a certain extent on the size of the domestic market, a factor which may favor U.S. production. Technological Challenges, Opportunities, and Risks Renewable electricity technologies face well-defined challenges in making the transition from niche to mainstream power generation choices. Given the raw potential of certain renewable energy resources and results from ongoing research, further R&D investment is expected to increase the efficiency and applicability of the technologies. However, research efforts do not always prove successful, and competitors may be quicker to bring improvements to the market. Incremental improvements may benefit a mature product, but most renewable energy technologies are not at that stage. Real breakthroughs in efficiency and applicability would benefit especially solar and wind energy technologies. Such innovations may provide opportunities to differentiate products and lead to competitive advantages, if these are adequately financed and appropriately focused on customer and market needs. Developing the technical manufacturing capabilities needed to build today's and future generations of renewable electricity technologies may require better educated, highly trained workers capable of operating sophisticated equipment and controlling sensitive processes. A lack of qualified workers was identified as a potential barrier to growth of the U.S. renewable energy industry and was addressed by the Energy Independence and Security Act of 2007, Title 10, with additional funds subsequently provided by ARRA for green workforce training. The opportunity exists for governments and educational institutions to work together with industry to assure that workers are properly prepared in sufficient numbers to meet anticipated increases in demand for electricity production from renewable resources. Green Jobs as a Sustained National Focus Over the last few decades, government interest and funding of renewable energy R&D has trailed the peaks and valleys of fossil energy prices. Most of the U.S. energy research budget has been spent on fossil fuels and nuclear energy, the old mainstays of central station generation. But whatever advances in fossil fuels R&D may bring, legislative proposals to mitigate climate change concerns propose to levy a price on carbon emissions which could add significant costs to any future use of fossil fuels. Few doubt the potential of renewable energy to help address climate change concerns; the question is whether the desired benefits merit the investment. While green jobs also encompasses jobs in energy efficiency and powering vehicles, growth of green jobs is generally envisioned as coming from the future development and deployment of renewable energy technologies. Renewable energy technologies will likely be an increasing part of the U.S. energy future. But developing the next generation of renewable energy technologies and building an internationally competitive industry may require a significant and sustained national investment. Without it, the majority of the solar panels, wind turbines, and components providing the clean energy of tomorrow may continue to be designed and built by workers overseas.

In the United States, growing awareness of greenhouse gas (GHG) emissions and the possible implications for global climate change have combined with recent high energy prices and economic uncertainty to rekindle interest in renewable energy. Renewable energy technologies generate electricity from resources such as the sun, wind, or biomass, with essentially no net GHG emissions. President Obama has declared a goal for the United States to become the world's leading exporter of renewable energy technologies, setting out policy objectives for the development of related "green jobs". Green jobs have often been defined to include (at a minimum) jobs that result directly from renewables for generating electricity and powering vehicles as well as jobs that result directly from achieving greater energy efficiency. Studies of green job creation in the renewable energy industry vary greatly as a result of differences in definitions, assumptions, and methodologies, with the resulting analyses producing wide-ranging estimates of the number of green jobs. Complicating the estimation of the number of green jobs is the absence of an authoritative data source. The North American Industry Classification System disaggregates firms into the categories of hydro, fossil fuel, nuclear and "other" sources. Renewables are part of the "other" category. The Bureau of Labor Statistics has requested funding for FY2010 to develop data on the number of green jobs and their characteristics (e.g., wages, training requirements) by industry and occupation. Most of the future growth in green jobs is generally envisioned as coming from the growth in deployment of renewable energy technologies. Renewable energy deployment programs from state governments have had a great influence on the existing deployment levels of renewable energy technologies and resultant jobs. Historically, the federal investment in renewable energy technologies in the United States has not been about creating jobs, but was focused on developing the technologies to a point where they are ready for commercialization. The timeframe under consideration is thus important in any discussion of the potential for renewable energy technologies to create jobs, for the technologies are at different stages in their development cycles. It is also important to recognize that as a specific renewable energy technology becomes more efficient, the number of jobs per Megawatt of output is likely to decrease. A key to maximizing green jobs growth in the United States from renewable energy is the domestic design and manufacture of equipment and components. Given the growing international competition for renewable energy markets and green jobs, policy mechanisms and incentives may be necessary to encourage manufacturers to locate production in the United States. Companies must be capable of competing in the domestic market for renewable energy first and foremost, as the potential growth of U.S. renewable markets already has attracted significant international participation. A renewable energy industry capable of serving the export market may create many more jobs than an industry which only serves domestic needs. Few doubt the potential of renewable energy to help address climate change concerns; the question is whether the desired benefits merit the investment. But developing the next generation of renewable energy technologies and building an internationally competitive industry may require a significant and sustained national investment. Without it, the majority of the solar panels, wind turbines, and components providing the clean energy of tomorrow may continue to be designed and built by workers overseas.

Background Before the breakup of Yugoslavia in 1991, Bosnia and Herzegovina (sometimes referred to informally as Bosnia) was one of Yugoslavia's six republics. It had an ethnically mixed population. The rise of hardline nationalism in Serbia under Slobodan Milosevic and a similar movement in Croatia led by Franjo Tudjman in the late 1980s and early 1990s posed a grave threat to Bosnia-Herzegovina's unity. Bosnia's own republic government was split among Bosniak (Slavic Muslim), Croat, and Serb nationalists. The secession of Slovenia and Croatia in June 1991 upset the delicate balance of power within Yugoslavia. Milosevic conceded Slovenia's independence after a few days, but Croatia's secession touched off a conflict between Croat forces and Serb irregulars supported by the Serb-dominated Yugoslav Army. Bosnian Serb nationalists demanded that Bosnia remain part of a Serbian-dominated Yugoslavia. Bosnian Croat nationalists threatened to secede if Bosnia remained in Yugoslavia. Bosnian President Alija Izetbegovic, a Bosniak, worried about the possible spread of the conflict to Bosnia and tried to find a compromise solution. However, these efforts were made very difficult by the Milosevic and Tudjman regimes, both of which had designs on Bosnian territory. In addition, Izetbegovic's hand was forced by the European Community (EC) decision in December 1991 to grant diplomatic recognition to any of the former Yugoslav republics that requested it, provided that the republics held a referendum on independence and agreed to respect minority rights, the borders of neighboring republics, and other conditions. Izetbegovic and other Bosniaks felt they could not remain in a Milosevic-dominated rump Yugoslavia and had to seek independence and EC recognition, even given the grave threat such a move posed to peace in the republic. Bosnian Serb leaders warned that international recognition of Bosnia-Herzegovina would lead to civil war. In March 1992, most Bosniaks and Croats voted for independence in a referendum, while most Serbs boycotted the vote. In April 1992, shortly before recognition of Bosnia by the European Community and the United States, Serbian paramilitary forces and the Yugoslav Army launched attacks throughout the republic. They quickly seized more than two-thirds of the republic's territory and besieged the capital of Sarajevo. More than 96,000 people were killed in the war. Approximately 2.3 million people were driven from their homes, creating the greatest flow of refugees in Europe since World War II. Serbian forces attacked Bosniak and Croat civilians in order to drive them from ethnically mixed areas that they wanted to claim. Croats and Bosniaks were initially allied against the Serbs, but fighting between Croats and Bosniaks broke out in ethnically mixed areas in 1993-1994, resulting in "ethnic cleansing" by both sides. Bosniak forces also engaged in ethnic cleansing against Serbs in some areas. In addition to the inter-ethnic bitterness it created and the damage it caused to Bosnia's economy, the war also greatly strengthened organized crime groups and their links with government officials, an important stumbling block to Bosnia's postwar recovery. The war came to an end in 1995, after NATO conducted a series of air strikes against Bosnian Serb positions in late August and early September. The strikes were in response to a Bosnian Serb refusal to withdraw its artillery from around Sarajevo after an artillery attack on a Sarajevo marketplace caused many civilian deaths. Bosniak and Bosnian Croat forces, now better equipped and trained than ever before, simultaneously launched an offensive against reeling Bosnian Serb forces, inflicting sharp defeats on them. The Bosnian Serbs agreed to a cease-fire in October 1995. Serbian President Slobodan Milosevic, Croatian President Franjo Tudjman, and Bosnian President Alija Izetbegovic, as well as representatives of the Bosnian Serbs and Croats, met at the Wright-Patterson Air Force base in Dayton, OH, in November 1995 to negotiate a peace agreement mediated by the United States, the EU, and Russia. On November 21, 1995, the presidents of Serbia-Montenegro, Croatia, and Bosnia-Herzegovina, as well as Bosniak, Croat, and Serb leaders in Bosnia, initialed a peace agreement. The final agreement was signed by the parties at a peace conference in Paris on December 14. Under the Dayton Peace Accords, Bosnia-Herzegovina remains an internationally recognized state within its pre-war borders. Internally, it consists of two semi-autonomous "entities": the (largely Bosniak and Croat) Federation of Bosnia-Herzegovina and the (Bosnian Serb-dominated) Republika Srpska (RS). Under the accords, the Bosnian Federation received roughly 51% of the territory of Bosnia-Herzegovina, while the Republika Srpska received about 49%. The multi-ethnic town of Brcko separates the RS into two parts and divides the western part of the RS from Serbia. This would make any effort to unite the RS with Serbia (a longstanding dream of Serbian nationalists) more difficult. Its strategic position made it a bone of contention. In a compromise move, it was not granted to either entity at Dayton, and was directly administered by the international community. It was later formally awarded to both entities jointly, while remaining a self-governing district. Each of the entities has its own parliament and government with wide-ranging powers. Each entity may establish "special parallel relationships with neighboring states consistent with the sovereignty and territorial integrity" of Bosnia-Herzegovina. Most powers are vested in the entities; the central government has responsibility for foreign policy, foreign trade and customs policy, monetary policy, and a few other areas. Decisions of the central government and parliament are nominally taken by a majority, but any of the three main ethnic groups can block a decision if it views it as against its vital interests. The Federation is further divided into 10 cantons, each of which has control of policy in areas such as policing and education. A U.N.-appointed Office of the High Representative (OHR), created by the Dayton accords, oversees civilian peace implementation efforts. The High Representative is supported by the Peace Implementation Council (PIC), a broad umbrella group of 55 countries and agencies. As the PIC's size and composition makes it unwieldy for decision-making, the PIC provides ongoing political guidance to OHR mostly through a Steering Board composed of key countries and institutions, including the United States, Russia, France, Germany, Britain, Italy, Canada, Japan, Turkey, and the EU Commission and Presidency. At a December 1997 PIC conference in Bonn, Germany, the international community granted the High Representative powers (known as the "Bonn powers") to fire and take other actions against local leaders and parties as well as to impose legislation in order to implement the peace agreement and more generally bring unity and reform to Bosnia. The High Representative also holds the post of the European Union's Special Representative in Bosnia. A peacekeeping force, at first NATO-led, but led by the EU since 2004, implements the military aspects of the accord. Since 1997, the United States and other Western countries have pressed local leaders in Bosnia to build the effectiveness and governing capacity of the Bosnian central government. The United States and the EU have maintained that the Dayton institutions have proved to be too cumbersome to provide for the country's long-term stability, prosperity, and ability to integrate into Euro-Atlantic institutions. Some successes have been scored in this area, including merging the armed forces and intelligence services of the two entities, and creating central government institutions such as border and customs services, and a state prosecutors' office and ministry of justice. However, even these achievements have required pressure on local leaders or even direct imposition of changes by the High Representative. International efforts have had the support of Bosniak politicians, but usually have faced strong resistance from Serbian ones, as well as from some Croat leaders. The state consolidation process suffered a serious setback in April 2006, from which it has not recovered. A constitutional reform package pushed by the United States and EU was defeated in the Bosnian parliament by a narrow margin. The relatively modest proposal would have replaced the three-member collective central government presidency with a single presidency, increased the powers of the prime minister, and strengthened the central Bosnian parliament. The electoral campaign in the run-up to Bosnia's October 2006 general elections was notable for its nationalist tone, making reform efforts more difficult. Bosnian leaders made an effort to restart constitutional reform in late 2008 and early 2009, but it did not produce an agreement. Another round of constitutional reform talks, brokered by the United States and the European Union, took place in October and November 2009 at the Bosnian army base at Butmir, near the capital, Sarajevo. No agreement was reached at these talks, either. After the failure of the Butmir talks, constitutional reform remained on the back burner as campaigning got underway for Bosnia's October 2010 general elections. Current Situation Political Situation In February 2012, Bosnian leaders formed a new Bosnian central government, 16 months after the country's October 2010 elections. The chairman of the Council of Ministers is Vjekoslav Bevanda. This very lengthy political stalemate was due to the insistence by two leading Croat parties, the HDZ and HDZ 1990, that only a person nominated by them, as the largest Croat parties in Bosnia, should be chairman of the Council of Ministers. The new government's period of relative effectiveness was short-lived. The country was plunged into a new round of political squabbling in May 2012, this time between two largely Bosniak parties. The Party of Democratic Action (SDA), a key Bosniak party in the government, voted against the government's budget, provoking the ire of the largest party in the government, the nominally multi-ethnic but largely Bosniak Social Democratic Party (SDP). In November 2012, after months of maneuvering and horse-trading, the SDP succeeded in convincing the main Croat parties and the leading Serb party, the Alliance of Independent Social Democrats (SNSD) to dump the SDA. Critics charged that in exchange for the move, the SDP agreed to SNSD demands to weaken central government institutions and the independence of the judiciary. The SDA was replaced in the central government by another Bosniak party, the Alliance for a Better Bosnia, which is headed by a controversial business tycoon. These political squabbles have seriously detracted from Bosnia's ability to engage in reforms needed to boost its economy and move closer to the EU. While the conflicting ambitions of party leaders is an important factor in this failure, it should be noted that in any case a parliamentary majority in the Bosnian political system has less significance than in other systems, as representatives of an ethnic group, even if in a minority, can veto any decision that they feel does not accord with their interests. This means in effect that all major decisions have to be made by consensus among the main ethnic parties, which is often very difficult since they have fundamentally different views on Bosnia's future. Perhaps the biggest single problem is the lack of support in the Republika Srpska for a more effective central government. Indeed, some observers believe that RS President Milorad Dodik's strategy has been to obstruct the functioning of Bosnian institutions so much that the Bosniaks, Croats, and the international community will eventually agree to let the Republika Srpska become independent. Dodik has repeatedly said that Bosnia was being kept alive artificially by foreigners, and that alternatives such as peaceful dissolution of the country should be discussed. Dodik has also expressed support for the partition of Kosovo, perhaps seeing it as a model for Bosnia. Some observers have claimed that Dodik's position in the RS may be eroding, given such factors as the defeat his SNSD party suffered in local elections in 2012, factionalism within his party, a deteriorating economic situation that has led to protests and strikes, and corruption investigations in neighboring Serbia that could implicate Dodik and others in Bosnia. However, it should be noted that while a new RS leadership might have a less confrontational style than Dodik, RS positions on key issues would not likely change, as they are shared by most Bosnian Serbs. New elections are not scheduled until 2014. In the meantime, Dodik has stepped up his nationalistic, anti-EU, anti-US rhetoric, as he has in the past when he appeared to have felt threatened. The other entity within Bosnia, the Federation, has also been plagued with political divisions. In March 2011, the Federation parliament approved a new Federation government, led by the SDP. It included small Croatian parties, but not the HDZ and the HDZ 1990. These two parties claimed the government was formed illegally. They asked the Central Election Commission (CEC) for a ruling on the issue. The commission ruled that the government was illegal, but the High Representative annulled the decision of the CEC, allowing the new government to continue working. In addition to concerns about its legality, the HDZ and HDZ 1990 did not see the government as legitimate. They claimed it did not represent Croat interests, since they, having received the most Croat votes in the election, are not participants. This "problem" may be solved as a result of the November 2012 reshuffle of the central government. As part of the deal, the SDP agreed to reshuffle the Federation government to include the HDZ and HDZ 1990 and oust the smaller Croat parties. However, Federation President Zivko Budimir has refused to dismiss ministers from these parties, as he is a member of one of them. In return, the new majority called on Budimir to resign. As in the case of the central government, these political intrigues in the Federation are but a symptom of more fundamental, structural problems. The complicated division of powers and bureaucratic overlap between the Federation government and the 10 canton governments within the Federation has created a dysfunctional situation that has hindered the Federation's economic development and threatens the fiscal collapse of Bosnia as a whole. A report by the International Crisis Group suggested that constitutional reform at the Federation level would not only improve the dire situation in the Federation itself, but provide momentum for reform at the central government level. However, Croat leaders are suspicious of efforts to streamline the Federation, fearing they could result in greater power for the more numerous Bosniaks. Indeed, some Bosnian Croats have called for a third, Croat, entity to be carved out of Bosnia to ensure their rights. The international community has opposed the idea, viewing it as likely to result in an even less effective Bosnian governmental system. Opinion polls in Bosnia have shown a broad-based disgust with the Bosnian political class, due in part to the petty squabbling of the kind noted above over government posts (and the privileges and opportunities for corruption that come with them), while the country continues to suffer serious problems with unemployment and poverty. For example, in a poll done for the National Democratic Institute in 2010, 87% of the citizens said the country was moving in the wrong direction, with only 12% saying their lives had improved in the past four years. Yet the October 2010 elections resulted in many of the same ethnically based parties and leaders being returned to power, and no viable non-nationalist alternative taking hold. This paradox is explained by some observers by the nature of the Dayton system and the election laws, which favor ethnically-based politics. Other experts also point to reflexive distrust of the other ethnic groups, a lingering effect of the war. Economic Situation Bosnia's economic growth has been hampered by Bosnia's cumbersome governing structure, excessively large and expensive government bureaucracies, and long-standing problems with organized crime and corruption. Bosnia's public sector amounts to nearly 50% of the country's GDP. The Federation has also been plagued by infighting among politicians that has delayed some privatization projects and driven away foreign investors. Dodik's hegemony has simplified matters in the RS, while at the same time allegedly fostering high-level corruption. Nevertheless, despite these problems, living standards improved in Bosnia before the global economic crisis; real wages increased by 44% between 2000 and 2007. Real GDP increased by 30% in the same period. The global economic crisis caused a drop in real GDP of 3.1% in 2009. Since then, Bosnia's economy has stagnated. Real GDP rose by 0.7% in 2010 and 1.3% in 2011. The Economist Intelligence Unit estimates Bosnia fell back into recession in 2012, with GDP shrinking by 0.5%. This double-dip recession, due to the effects of the Eurozone crisis, has had a negative impact on trade, remittances from Bosnians working abroad, and foreign investment. In this climate, budget deficits have increased and tax receipts have declined. In order to secure funding from the International Monetary Fund (IMF), both the Federation and the Republika Srpska have been forced to make highly unpopular cuts in veterans' benefits and government salaries (including those of teachers) in order to bring the budget deficit in line with the IMF-mandated target of 3%. In December 2012, the IMF released a second tranche of a two-year, $522 million stand-by loan in recognition of Bosnia's fiscal consolidation efforts. However, austerity may be exacerbating long-standing social problems. Living standards remain low for many Bosnians and unemployment remains a severe problem. According to the European Commission's October 2012 report on Bosnia's progress toward EU membership, unemployment in Bosnia was 28% in 2011, while youth unemployment was 57.9% International Role in Bosnia There has been a debate about the future role of the international community in Bosnia. The Peace Implementation Council (PIC) has appeared eager to end the direct international oversight of Bosnia through the OHR. This may partly be due to "political fatigue" after having played such a prominent role in the country for so long. Since 2007, the High Representative has been reluctant to use his wide-ranging Bonn powers to impose legislation and fire obstructionist officials, due to a lack of political support for such actions by leading countries in the PIC. Indeed, in 2012, the Bonn powers were used only to lift restrictions on persons previously sanctioned by the OHR. Since 2009, Valentin Inzko, formerly Austria's ambassador to Slovenia, has been the High Representative. The international community's desire to move away from direct oversight may be designed to encourage Bosnian leaders to take greater responsibility for their country. Direct international tutelage will have to be eliminated if the country is to join NATO and the EU, the members of which are all fully sovereign states. The PIC has agreed to close OHR after five objectives have been met. These include a decision on ownership of state property; a decision on defense property; implementing the Brcko Final Award (which made the town of Brcko a self-governing unit within Bosnia); ensuring fiscal sustainability; and entrenching the rule of law. The PIC and OHR have demanded specific action and legislation from the central and entity levels to meet these objectives. Two additional conditions were also set: the signing of a Stabilization and Association Agreement with the EU (already accomplished) and a positive assessment of the situation in Bosnia by the PIC. In March 2011, the EU decided to establish "a reinforced, single EU Representative in Bosnia and Herzegovina who will take a lead in supporting the country" on its path towards EU integration. Peter Sorensen from Denmark was chosen for this post in May 2011. The move appeared to be part of some countries' efforts to try to consolidate and strengthen the role of the EU in Bosnia and limit that of the OHR. The March 2011 EU Council decision that announced the reinforcement of the EU Delegation in Bosnia also suggested that OHR could be reduced in size and relocated outside of the country. This suggestion has been repeated in EU Council documents since then, most recently in December 2012. In August 2012, the OHR office in the strategic Brcko district was effectively closed, allegedly due to progress in reforms, but reportedly also because the EU was eager to reduce the role of OHR and expand its own presence there. In June 2011, OHR lifted almost all the bans from holding office that previous High Representatives had imposed on Bosnian politicians for violations of the Dayton Peace Accords. Many observers in and outside of Bosnia believe that OHR retains little credibility in Bosnia, and therefore should be eliminated in the near future. On the other hand, some countries, including the United States, do not want to eliminate OHR before the objectives and conditions are met, perhaps for fear of suffering a blow to their own credibility. The EU has added a possible means of persuasion for EU officials faced with intransigence by Bosnian leaders. In March 2011, the EU Council approved a decision on imposing a ban on travel to EU countries and asset freezes on persons whose actions threaten Bosnia's sovereignty and territorial integrity, threaten the security situation in Bosnia, or undermine the Dayton Peace Accords. The Council would decide to put a person on the list based on the recommendation of a member state or that of the EU foreign policy chief. The EU-led peacekeeping force in Bosnia, dubbed EUFOR Althea, has about 600 troops. Its mission is to assist Bosnian defense reform efforts, as well as helping to ensure a safe and secure environment in Bosnia. Some two dozen EU and non-EU countries contribute to the force, but the core of the contingent is supplied by Austria, Hungary, and Turkey. An "over-the-horizon" capability is available to bolster EUFOR in case of a crisis. Possible NATO and EU Membership for Bosnia As direct control has declined, the international community encourages reform in Bosnia by providing aid, advice, and the eventual prospect of joining NATO and the EU. In November 2006, NATO leaders invited Bosnia to join its Partnership for Peace (PFP) program, which provides Bosnia with assistance in improving its armed forces and making them interoperable with NATO. At their April 2008 summit in Bucharest, the allies agreed to upgrade their relationship with Bosnia by launching an "Intensified Dialogue." In April 2010, NATO foreign ministers agreed to permit Bosnia to join the Membership Action Plan (MAP) program, a key stepping-stone to membership for NATO aspirants. However, the ministers stressed that NATO will not accept Bosnia's Annual National Plan under the program until the entities agree to the registration of defense installations as the property of the central government. The main parties in Bosnia have reached an agreement on the principles for such a division, but have not implemented the decision. The main stumbling block is Dodik's refusal to allow the registration of military installations on RS territory as central government property, presumably because such a move could strengthen central government institutions. As part of its effort to receive a MAP, the Bosnian presidency agreed in April 2010 to send a peacekeeping contingent to the NATO-led International Security Assistance Force (ISAF) in Afghanistan. Bosnia currently has 53 troops in ISAF. Bosnia participates in a team of about 40 persons, which also includes members from Albania, Croatia, Macedonia, Montenegro, and Slovenia, to train Afghan military police. Despite these efforts, the Republika Srpska's dedication to NATO membership is highly questionable. In 2012, Dodik renounced his earlier support for joining NATO, and has advocated the demilitarization of Bosnia, which would be incompatible with NATO membership. Moreover, as he and other Bosnian Serb leaders point out, NATO membership enjoys very low public support in the Republika Srpska, according to opinion polls. Bosnia has not formally withdrawn from the MAP process, however. In 2008, Bosnia signed a Stabilization and Association Agreement (SAA) with the European Union, a steppingstone to an EU membership candidacy. However, the agreement has not entered into force due to Bosnia's failure to meet conditions set by the EU. For 2013, the EU has budgeted 111.8 million Euro (just under $150 million) in aid for Bosnia for political and economic reform under the Instrument for Pre-Accession Assistance (IPA). The aid provides support for the rule of law, promoting economic growth, and for public administration reform. The EU is discussing the amount to be allocated for the IPA program as a whole for the period 2014-2020. No decision has been reached yet, but given the EU's financial difficulties, funding may be at least slightly reduced in real terms when compared to the 2007-2013 period. The EU has set several conditions for Bosnia to become a credible membership candidate. The EU demanded that Bosnia adopt a law on state aid at the central government level to prohibit government aid that would distort foreign trade. Bosnia was required to adopt a law on holding a new census. The EU wanted to see Bosnia amend its constitution to comply with the ruling of the European Court of Human Rights on the Sejdic-Finci case, which said that the constitution's reservation of some political offices (the three-person collective presidency and seats in the House of Peoples, the upper house of the central Bosnian parliament for members of a specific ethnic group contravenes the European Convention on Human Rights. The EU also insisted that Bosnia's many levels of government establish an effective coordinating mechanism for cooperation with the EU. Bosnia met two of these three criteria in February 2012. The Bosnian parliament approved a census law and a state aid law. Little progress has been made on the Sejdic-Finci issue, however. In any case, if an agreement between the main ethnic parties is reached, it will likely be a mere technical fix, not one that will genuinely open the way to a less ethnically-based political system. To comply with the ECHR, the solution will have to omit specific references to ethnic groups, but will likely substitute a more indirect method that will nevertheless ensure that each major ethnic group will get same quota of offices as before. The Croat parties are particularly insistent on this point, as they are by far the smallest of the three main ethnic groups in Bosnia. Although it has called for Bosnia to solve the Sejdic-Finci problem and develop an effective coordination mechanism among its levels of government, the EU has not made deeper constitutional reforms to improve the effectiveness of Bosnia's governing institutions a condition for EU membership candidacy. However, EU officials say changes may be required during the accession process in order for the country to conform to EU standards. The EU may be leery of putting forward specific details for constitutional reform at this stage, fearing that to do so may cause Dodik and the RS to scuttle the whole EU integration process before it starts. In its October 2012 report on Bosnia's progress toward EU membership, the European Commission was critical of Bosnia's performance, noting "limited progress," or "little progress," or even "very little progress" in almost all reform areas. While expressing disappointment with these shortfalls in its December 2012 conclusions on enlargement, the EU Council promised continued support for Bosnia's EU membership aspirations. U.S. Policy The United States has strongly supported Bosnia's integration into Euro-Atlantic institutions. However, the U.S. role in the country has declined in recent years. There have been no U.S. peacekeeping troops in Bosnia since 2004, when a NATO-led peacekeeping force was replaced by the current EU-led force. Many observers have claimed that the U.S. political role in Bosnia has also declined, particularly since the failure of constitutional reforms in 2006, despite strong U.S. pressure on the Bosnian parties at the time. The Obama Administration has touted the close working relationship it has maintained with the EU on Bosnia as a key success of its policy. The United States has provided large amounts of aid to Bosnia. According to the USAID "Greenbook," the United States provided just under $2 billion in aid to Bosnia between FY1993 and FY2010. Aid levels were high in the years immediately after the 1992-1995 war, when the country was rebuilding. Aid totals gradually declined thereafter, and current U.S. aid to Bosnia is relatively modest. U.S. aid to Bosnia has continued to decline in recent years, but less sharply than U.S. aid to other countries in the region. In FY2011, Bosnia received $42 million in aid for political and economic reforms; $4.491 million in Foreign Military Financing (FMF); $0.986 million in IMET military training funds; and $1.25 million in the Nonproliferation, Antiterrorism, Demining, and Related (NADR) account. In FY2012, Bosnia was slated to receive an estimated $39 million in assistance to promote political and economic reform, $4.5 million in FMF, $1 million in IMET assistance, and $5.25 million in NADR aid. For FY2013, the Administration has requested $28.556 million in aid for political and economic reforms from the Economic Support Fund account, $6.735 million in the International Narcotics Control and Law Enforcement account (INCLE), $4.5 million in FMF, $1 million in IMET aid, and $4.75 million in NADR funding. According to the FY2012 Congressional Budget Justification for Foreign Operations, U.S. aid has focused on strengthening state-level institutions in Bosnia. The United States provides assistance to Bosnia's state-level police organizations to fight organized crime and terrorism. U.S. aid also is aimed at improving the functioning of Bosnia's judiciary; improving its border controls; and creating a better legal and regulatory environment for economic growth and investment. The objective of U.S. military aid is to unify Bosnia's military more effectively and improve its capabilities so that it may become interoperable with NATO. Vice President Joseph Biden set the tone for the Obama Administration's policy toward Bosnia during a visit to the region in May 2009. In a speech to the Bosnian parliament he warned that the "sharp and dangerous rise in nationalist rhetoric" that has occurred in Bosnia since 2006 must stop. He warned that Bosnia faced a future of poverty and possibly even violence if it did not abandon this path. Biden appeared to tacitly underscore continued U.S. support for the framework of the Dayton Peace Accords by saying Bosnia could integrate into Euro-Atlantic institutions as a state "with two vibrant entities." However, he said that Bosnia needed a functioning central government that controls the national army, prevails where there is a conflict between central and local laws, has an electoral system that does not exclude any group, has the power to raise revenue, and has the authority to negotiate with the EU and other states to implement its obligations. Biden warned that the United States would not support the closure of OHR until the five objectives and two conditions were met. Since the failure of the Butmir talks in 2009, U.S. policymakers have disavowed any intention to lead an effort to scrap or even revise the Dayton Accords and the Bosnian constitution, saying that any such efforts must come from the Bosnians themselves. However, press sources in the region claim that the United States has been working behind the scenes to promote talks among local leaders on reforming the Federation to make it function more efficiently, including by reducing the number of cantons. Secretary of State Hillary Clinton visited the region from October 29 to November 2, 2012, stopping in Bosnia, Serbia, Kosovo, Croatia, and Albania. In a move that underlines the U.S. focus on coordination with the EU, she visited Bosnia, Serbia, and Kosovo jointly with EU foreign policy chief Baroness Catherine Ashton. In Bosnia, Clinton stressed that the United States and the EU share the same goals in Bosnia – to see the country become a stable, prosperous, multiethnic democracy integrated into Euro-Atlantic organizations. She said the United States was "frustrated" by the lack of leadership shown by politicians in Bosnia toward these goals. She said that it was "totally unacceptable" that some leaders in Bosnia continued to question Bosnia's territorial integrity and sovereignty. She warned that Bosnia risked being left behind as its neighbors moved forward in their integration with the EU. Clinton said the United States would push for Bosnia's participation in NATO's Membership Action Plan program, if Bosnian leaders resolved the issue of the division of military property. Although Bosnia has not been considered a hot spot in the global war on terror, given the pro-American attitudes of most Bosnian Muslims, the existence of at least some threat of Islamic extremism and terrorism in Bosnia was underlined by an October 2011 attack on the U.S. Embassy in Sarajevo. Mevlid Jasarevic walked up to the embassy building with an AK-47 assault rifle and began firing at the building. He continued shooting for about a half-hour before being shot by police and arrested. No Americans were hurt, but Jasarevic wounded one Bosnian policeman. Bosnian police raided several villages in central Bosnia where Jasarevic and other Islamic fundamentalists were known to reside. The Bosnian police arrested two men who drove Jasarevic to Sarajevo from central Bosnia. Serbian police questioned several persons in Novi Pazar, the capital of the Sandjak region of Serbia, where Jasarevic was raised, but made no arrests. The FBI assisted Bosnian authorities with the investigation. In December 2012, Jasarevic was convicted by a Bosnian court and sentenced to 18 years in prison. The two men accused of aiding Jasarevic were acquitted. Policy Concerns The international community has reduced its direct role in Bosnia, and holds out the timetable for its elimination as an incentive for the local parties in Bosnia to make progress on key issues. This is expected to work together with the other main incentive, Euro-Atlantic integration. However, it is unclear whether these incentives are strong enough for Bosnian leaders (particularly Dodik) to change their policies. One important consideration is what policy objectives the international community realistically expects to achieve in Bosnia and its analysis of the consequences of failure. Avoiding widespread violence or even the breakup of Bosnia would presumably be the most basic international objective. Large-scale violence would put EUFOR in danger and require a U.S. and NATO military response, at a time when forces are severely stretched due to missions in Afghanistan and elsewhere. In addition, neighboring Serbia and Croatia could be pulled into such a conflict. This could also implicate NATO, as Croatia is a member of the Alliance. Increased regional instability could also revive conflict between Serbs and Albanians in Kosovo. Those who argue that a renewed conflict is unlikely note that the political environment around Bosnia now is completely different than it was during the 1990s. Then, nationalist regimes in Serbia and Croatia tried to cement their support at home by expanding their countries' borders at Bosnia's expense. Now, governments in these countries appeal to their electorates by trying to build prosperous democracies integrated with Europe. This goal would be shattered by renewed war. Bosnia's army is also much smaller now than during the war, with fewer heavy weapons. Some observers assert that police forces, private security companies, and a well-armed population could in principle provide forces for substantial levels of violence. Public opinion polls indicate very little support for violence in support of nationalist causes. Most Bosnians appear more concerned about high unemployment and low living standards. Renewed conflict (if perhaps on a smaller and more localized scale than in the 1990s) would be most likely to occur if the RS attempted to secede from Bosnia and Herzegovina, and Bosniaks tried to prevent such an action by force of arms. Observers are divided on whether the current impasse, caused in part by RS obstructionism, could eventually destabilize the country even without a provocative act such as secession. If the United States and other international actors conclude that such a nightmare scenario is unlikely to unfold, they may continue to follow their current approach, even if it does not bear fruit in the short term, in part due to a lack of alternatives and in part due to their focus on more pressing international issues. The international community has not considered trying to broker a peaceful breakup of Bosnia. This is despite the possibility that Bosnia's shortcomings as a state may not be primarily due to the inherent flaws of the Dayton accords, the alleged lack of skill of international overseers, or the foibles of Bosnian politicians. Instead, it can be argued that many of the failures ultimately stem from a more fundamental problem—the fact that at least a large minority of the population (Bosnian Serbs and many Croats) never wanted to be part of an independent Bosnia. International rejection of partition is in part due to strong opposition by the Bosniaks, who would have the most to lose in such an arrangement. A mainly Bosniak Bosnia would be a small, landlocked country surrounded by less than sympathetic neighbors. In contrast, Bosnian Serb and Croat nationalists would hope for support from and eventual union of territories they control with Serbia and Croatia respectively. The United States and other Western countries may feel that they owe the Bosniaks a lingering moral debt, due to the perceived indecision and tardiness of the international community in averting or ending the 1992-1995 war, in which the Bosniaks were the main victims. Perhaps at least equally importantly, there are concerns that a partition of Bosnia could be destabilizing for the region as a whole, given that Kosovo and Macedonia have ethno-territorial problems of their own. Leaders in the Balkans often look to the example of others in the region as justification for their own positions and actions. The international community's more ambitious goals include encouraging political and economic reforms in order to bring Bosnia into NATO and the EU. Bosnia's deep-rooted structural problems may prevent rapid success in these areas in the near future, unless NATO and the EU decide to advance Bosnia's candidacies even in the absence of marked improvement, in hopes such moves themselves would help stabilize the country.

In recent years, many analysts have expressed concern that the international community's efforts over the past 17 years to stabilize Bosnia and Herzegovina are failing. Milorad Dodik, president of the Republika Srpska (RS), one of the two semi-autonomous "entities" within Bosnia, has obstructed efforts to make Bosnia's central government more effective. He has repeatedly asserted the RS's right to secede from Bosnia, although he has so far refrained from trying to make this threat a reality. Some ethnic Croat leaders in Bosnia have called for more autonomy for Croats within Bosnia, perhaps threatening a further fragmentation of the country. The Office of the High Representative (OHR), chosen by leading countries and international institutions, oversees implementation of the Dayton Peace Accords, which ended the 1992-1995 war in Bosnia. It has the power to fire Bosnian officials and impose laws, if need be, to enforce the Dayton Accords. However, the international community has proved unwilling in recent years to back the High Representative in using these powers boldly, fearing a backlash among Bosnian Serb leaders. As a result, OHR has become increasingly ineffective, according to many observers. The international community has vowed to close OHR after Bosnia meets a series of five objectives and two conditions. The EU's main inducement to enlist the cooperation of Bosnian leaders—the prospect of eventual EU membership—has so far proved insufficient. The prospect of NATO membership has also had little effect. In April 2010, NATO foreign ministers agreed to permit Bosnia to join the Membership Action Plan (MAP) program, a key stepping-stone to membership for NATO. However, the ministers stressed that NATO will not accept Bosnia's Annual National Plan under the program until the entities agree to the registration of defense installations as the property of the central government. Dodik has rejected doing so for installations on RS territory. The U.S. political role in the country appears to have declined in recent years as the EU role has increased. The Obama Administration has stressed the importance of maintaining a close partnership with the EU in dealing with Bosnia. Like the EU, the United States has urged Bosnian politicians to agree among themselves to constitutional and other reforms to make Bosnia's government institutions more effective and better coordinated, so that the country can become a better candidate for eventual NATO and EU membership. The United States provided just over $2 billion in aid to Bosnia from the country's independence through FY2012. Aid to Bosnia has declined in recent years. For FY2013, the Administration requested $28.556 million in aid for political and economic reforms in Bosnia from the Economic Support Fund, $6.735 million in the International Narcotics Control and Law Enforcement account (INCLE), $4.5 million in FMF, $1 million in IMET aid, and $4.75 million in NADR funding.

Overview of America COMPETES Act The America COMPETES Act ( P.L. 110-69 ) has eight titles that authorize programs and activities at the White House Office of Science and Technology Policy (OSTP), the National Aeronautics and Space Administration (NASA), the Department of Energy (DOE), the Department of Education (ED), the National Science Foundation (NSF), and the Department of Commerce's National Institute of Standards and Technology (NIST), and National Oceanic and Atmospheric Administration (NOAA). Among its provisions, the act authorizes the following: Research Funding of research supported by NIST, the DOE Office of Science, and the NSF for FY2008-FY2010 at a rate that, if sustained, would double these agencies' research budgets over seven years; Early career and new investigator grants for science, engineering, and mathematics researchers at DOE and NSF; A new Advanced Research Projects Agency-Energy (ARPA-E) in DOE that would sponsor transformational energy technology research projects; and New Discovery Science and Engineering Innovation Institutes at DOE National Laboratories, which are multidisciplinary institutes that are intended to apply fundamental science and engineering discoveries to technological innovations. Education Scholarship and training programs to recruit new K-12 STEM teachers who would simultaneously earn STEM degrees plus teacher certification, and enhance the skills of existing STEM teachers through a variety of activities administered by the DOE, NASA, NSF, and ED; Student-focused STEM programs at ED, DOE, and NSF including Math Now for elementary and middle school students, grants to states for public, statewide, specialty, secondary schools in science and mathematics, Advanced Placement (AP) or International Baccalaureate (IB) courses at the high school level, scholarships and fellowships for undergraduate and graduate students, and enhanced mentoring for postdoctoral scholars; New STEM education activities at ED, DOE, and NSF including establishment of a summer term educational program focused on mathematics, technology, and problem-solving at ED; a Director of Science, Engineering, and Education position, National Laboratory educational activities, and graduate fellowship program at DOE; and a professional science master's program and high school laboratory program at NSF. The act also includes White House efforts, under OSTP, to foster innovation and competitiveness activities including a National Science and Technology Summit, National Technology and Innovation Medal, and President's Council on Innovation and Competitiveness. Overview of U.S. Competitiveness Initiatives For the nation to maintain economic growth and a high standard of living, the United States must be competitive in a global economy. To be competitive, U.S. companies must engage in trade, retain market shares, and offer high quality products processes and services. Scientific and technological advances can further economic growth because they contribute to the creation of new goods, services, jobs, and capital, or increase productivity. Such advances can compensate for possible disadvantages in the cost of capital and labor faced by firms by enhancing the quality or efficiency in the production of existing goods and services. Scientific advances, government activity, the organization and management of firms, and serendipity can all influence technological progress regardless of economic conditions. In addressing U.S. competitiveness, two policy approaches have primarily been used. One relies on direct measures that include budget outlays and the provision of services by government agencies. The other uses indirect measures such as financial incentives and legal changes. Since World War II, the United States has used a combination of direct and indirect approaches to enhance current and future U.S. competitiveness. Following World War II, the Steelman report was issued expressing concerns about U.S. competitiveness: "the future is certain to confront us with competition from other national economies of a sort we have not hitherto had to meet." Interest in the competitiveness issue perhaps reached its peak in the 1970s, when some experts became concerned that Japan, Europe, and newly industrialized countries were becoming major competitors with the United States. The United States had lost market share in autos, cameras, stereos, television sets, steel, machine tools, and microelectronics. Some also expressed concerns that U.S. technological superiority, as exhibited by the balance of trade in high-technology products, was declining as the U.S. share of world exports on research and development (R&D)-intensive goods fell while the Japanese share rose. Other indicators were lower productivity growth in the United States than Japan, a narrowing in the gap of the production in the number of scientists and engineers graduating from U.S. universities and those engaged in R&D in the United States compared to Japan and West Germany, the relative proficiency of U.S. high school students in science and mathematics, and a decline in the number of patents granted to Americans while those to foreign inventors doubled. The cause, some believed, was due to U.S. expenditures for civilian R&D falling behind that of Europe and Japan, or some European countries and Japan deriving more economic benefit from their R&D expenditures. Congress responded by taking a number of actions including passing the Stevenson-Wydler Technology Innovation Act of 1980 ( P.L. 96-480 ), the Patent and Trademark Act Amendments of 1980 (known as the Bayh-Dole Act, P.L. 96-517 ), the Federal Technology Transfer Act ( P.L. 99-502 ), the National Cooperative Research Act ( P.L. 98-462 ), and the Omnibus Trade and Competitiveness Act of 1988 ( P.L. 100-418 ). In addition, the Semiconductor Manufacturing Technology, or SEMATECH, consortium, an on-site test facility and a conduit for new technological advances for the U.S. semiconductor industry, was created. Additional congressional actions also focused on increasing corporate spending on research and development in response to competitiveness concerns included the 1981 Economic Recovery Tax Act ( P.L. 97-34 ) and the Tax Reform Act of 1986 ( P.L. 99-514 ), which provided for a research and experimentation (R&E) tax credit. The Small Business Development Act ( P.L. 97-219 ; P.L. 99-443 ) established a set-aside of federal R&D funds to support work in innovative small firms. The competitiveness concerns continued until the mid-1990s when the United States economy and technological innovation improved. Actions were taken by U.S. manufacturers to improve their quality and efficiency, universities and national laboratories increased their linkages to U.S. companies, and the United States was successful in many innovation-based industries such as Internet applications, biotechnology, and nanotechnology while the Japanese economy was in a decline. Now that the nation has entered the 21 st century, today's competitiveness concerns tend to be focused on issues related to globalization—that is, a global economy—along with some of the same concerns discussed in previous competitiveness debates—these include whether or not federal science and engineering research funding is sufficient, questions about STEM education quality, and the number of Americans obtaining science and engineering degrees. Much of what Americans consume or buy is produced in other countries, and much of what Americans produce is exported abroad. For example, a growing number of the largest U.S. companies rely on international markets for over 50% of their sales and employ more foreign workers than domestic. This globalization has a growing impact, both positive and negative, on the economic futures of American companies, workers, and families. Increasing integration with the world economy can make the United States more productive, leading to increases in living standards and real disposable incomes. However, rising trade with low-wage developing countries increases workers' concerns about job loss, lower wages, and benefits as American companies take actions to compete in a global economy. The information technology revolution has expanded these competitiveness concerns to U.S. white collar jobs. Three broad trends influence today's globalization of the economy. The first is technology, which has sharply reduced the cost of communication and transportation that previously divided markets. The second is a dramatic increase in the world supply of labor producing goods and services traded internationally. The third is government policies that have reduced barriers to trade and investment. The America COMPETES Act includes policies that address each of these trends. The act addresses these issues by authorizing primarily direct measures in each of these policy areas. In addition, the act authorizes two committees—one inside government and the other outside government—to look at indirect policy mechanisms. With respect to technology, some believe that today's federal funding of basic science and engineering research is inadequate to generate the technological progress needed to create new industries and the associated jobs. The act responds to that concern by increasing federal funding of basic research at the federal agencies primarily responsible for funding physical sciences, engineering, mathematics, and computer science—fields that are considered to be major contributors to competitiveness due to their potential for innovation and job creation. In addition, the America COMPETES Act renames and refocuses an existing program that helps fund high-risk research and development at small and medium-sized businesses. With respect to labor, the act takes actions that are intended to make the U.S. labor pool more competitive with the world supply of labor. Currently, some believe that inadequate numbers of American students are proficient in science and mathematics. In addition, the number of Americans pursuing post-secondary STEM degrees is considered to be low relative to students in countries considered to be U.S. competitors. The act responds to these concerns by initiating a number of actions to increase the quality and quantity of STEM teachers as well as mechanisms to encourage more American students to undertake advanced STEM classes and post-secondary STEM degrees. With respect to government trade and investment policies, the act authorizes meetings, studies, and committees to identify possible actions the United States might undertake. This includes, for example, studying and reviewing the costs faced by U.S. businesses engaged in innovation compared with foreign competitors. Beyond the America COMPETES Act, other recent legislative initiatives propose federal efforts that encourage industry to spend more on research and development, promote joint research activities between companies, foster cooperative work between industry and universities, facilitate the transfer of technology from federal laboratories to the private sector, and provide incentives for quality improvements. Issues for Congress The America COMPETES Act had strong bipartisan support; however, while some experts believe that actions should be taken to make the United States more competitive, others do not. Other experts believe that actions should be taken in response to competitiveness concerns, but express doubts that the actions proposed in the America COMPETES Act are the best actions to take. Perspectives on the Definition of Competitiveness The definition of a nation's competitiveness, and the public's response to particular policies, can vary depending on whether it is from the perspective of an individual domestic firm, a multinational corporation, or domestic labor. For an individual domestic firm, the focus of competitiveness is trade and the firm's ability to compete for market share against imports from abroad or to compete with foreign firms in overseas export markets. From this perspective, a key measure of competitiveness is the economy's trade balance. Trade Balance Table 1 shows U.S. trade in advanced technology products. This includes about 500 commodity classification codes representing products whose technology is from a recognized high technology field (e.g., biotechnology) or that represent the leading technology in a field. The United States long ran a surplus in these products, but that surplus dropped sharply in 2000 and turned into a deficit in 2002. The U.S. trade balance in high technology products was last in surplus in 2001. In 2002 to 2005, the United States ran a trade deficit in high technology products which grew roughly ten billion dollars per year, from $16.6 billion to $43.6 billion. In 2006 this deficit dropped to $38.1 billion, but in 2007 resumed its former path of growing ten billion dollars per year, to $52.6 billion, but in 2008, this deficit grew to only $55.5 billion. This deficit does not necessarily imply that the United States is losing the high technology race, since many of the high technology imports are from U.S. companies (particularly electronics manufacturers) who assemble the products overseas. However, this growing deficit may warrant closer policy scrutiny. Foreign Direct Investment For a U.S. multinational corporation, one based in the United States but with production facilities abroad, competitiveness is defined as the ability of its overseas operations to compete for market share with firms from foreign host countries or firms from third countries. From this perspective, a key measure of competitiveness is the degree to which these firms invest their resources in the United States or in other countries (known as "foreign direct investment"). As shown in Figure 1 , foreign direct investment in the United States declined sharply after 2000, when a record $300 billion was invested in U.S. businesses and real estate, but rebounded to $184 billion by 2006. Domestic labor is likely to share some of the same concerns of the firms and corporations for whom they work, but is also likely to define competitiveness as the firm's ability to compete against foreign firms in export markets or in markets within the United States. Competition is viewed as being between different investment sites and the ability of the United States to compete with foreign countries as a location for what domestic labor views as a job-creating business investment. Key measures for domestic labor are the level of employment and the wages received from employment in the economy. The United States is both the largest recipient of foreign direct investments as well as the largest investor abroad. Investment by U.S. firms abroad was $249 billion in 2006 (see Figure 1 ). While some view these investments as an economic gain, others express concern about displaced U.S. workers and lower wages. Seventy percent of U.S. foreign direct investment, however, is concentrated in high-income developed countries and the share of investment going to developing countries has fallen in recent years. As a result, most economists conclude that direct investment abroad is due to a broad restructuring of U.S. manufacturing industries and does not lead to fewer jobs or lower incomes overall for Americans. Workforce and Wages NSF statistical analysts have indicated that determining the science and engineering workforce and the jobs created as a result of science and engineering is a challenging task. NSF identifies five broad categories of science and engineering occupations: computer and mathematical scientists, life scientists, physical scientists, social scientists, and engineers. This classification, however, does not account for all those with science and engineering degrees who use this knowledge in their occupations. For example, a chemist who teaches high school chemistry and an engineer who manages a manufacturing plant are classified as a teacher and a manager, respectively, and are not included in NSF's analysis of the science and engineering (S&E) workforce. In addition, there are those who are in science- and engineering-related occupations who use science and engineering knowledge in their jobs, but who may or may not have degrees in science and engineering: for example, a patent attorney or a physician. Some also use their S&E training in nominally non-S&E occupations such as writers, salesmen, financial managers, and legal consultants. As the need for science and engineering knowledge has increased for a growing number of occupations, traditional accounting of such occupations provides less understanding of the science and engineering workforce and it could be considerably larger, perhaps two to three times, than provided in government analyses by the NSF, the Bureau of Labor Statistics (BLS), and the U.S. Census Bureau. According to the National Science Board (NSB), depending on the definition and perspective used, the size of the science and engineering workforce varied between approximately 5.0 million and 21.4 million individuals in 2006. NSB suggests that the most relevant number may be 17.0 million, which in 2006 was the number of individuals who had at least one degree in a science and engineering field, or 21.4 million, which also includes those who have degrees in an S&E related field such as health or technology. According to the NSB, these numbers reflect the many ways science and technical knowledge is used in the United States. This is quite different from that of NSF's science and engineering occupation data (5.0 million in 2006), the U.S. Census Bureau's data (3.9 million in 2005), or BLS data (5.4 million for S&E and 7.4 for STEM occupations in May 2006). A third option is provided by NSF's data that is based on workers' own reporting of their need for at least a bachelor's degree level of science and engineering knowledge (12.9 million in 2003). Statistical analysts also find challenging accounting for the need of all workers to have a basic understanding of STEM and of the workers whose employment is related to new technologies. Figure 2 provides an analysis that shows how the skills needed for employment have changed due to computerization. This computerization has reduced the need for routine manual and cognitive tasks and replaced them with high-level tasks. This analysis found that "Translating task shifts into education demand, the model can explain sixty percent of the estimated relative demand shift favoring college labor during 1970 to 1998. Task changes within nominally identical occupations account for almost half of this impact." The most long-term analysis of S&E workforce trends is that of the U.S. Census Bureau. As shown in Figure 3 , the number of workers in science and engineering occupations grew significantly—7.7 times larger in 2000 than in 1950. This growth rate is higher than that of the total labor force, which grew 2.3 times, and that of all managers and professionals, which grew 4.9 times. The STEM growth rate in the 1990s was a little more than three times that of the overall labor force. More recent data of STEM workforce trends from BLS shows mixed results. These data show a decline in STEM professionals as a percentage of the employed civilian workforce beginning in 2000. On the other hand, BLS reports that science and engineering occupations are projected to grow by 21.4% from 2004 to 2014, compared to a growth of 13% in all occupations during the same time period. It is anticipated that approximately 65% of the growth in science and engineering occupations will be in the computer-related occupations. Faster than average growth is expected as well in the life sciences, social sciences, and the science and engineering-related occupations of post-secondary teachers, healthcare practitioners and technicians, and science managers. In addition, unemployment in S&E occupations was 1.6% in 2006. And, as discussed above, it is important to remember that these projections involve only the demand for strictly defined S&E occupations, and do not include the wider range of jobs in which S&E degree holders often use their training. Figure 4 shows that the compensation for those in most STEM occupations is above those for the entire U.S. labor force while the growth rate in compensation is about the same. For all STEM workers, compensation ranges from $53,000 to $58,000 per annum compared to $47,000 to $49,500 for people in the professions, and $31,500 to $34,500 for all workers in 2005. The mean real salary for recent S&E bachelor's degree recipients increased an average of 15% across all fields from 1993 to 2003. In 2003, median salaries for S&E bachelor's degree holders 15-19 years after receiving their degree had the highest salary, $65,000—higher than non-S&E bachelor's degree recipients whose salary at that stage of their career was $49,000. There can be a great deal of variance, however, among STEM occupations, fields, and sub-fields. Competitiveness in Perspective The Council on Competitiveness contends that these traditional measures of competitiveness—trade balance, foreign direct investment, level of employment and wages—do not fully capture a nation's competitiveness. For firms, factors such as foreign affiliate sales, intrafirm trade, fragmentation of global supply chains, and lack of inclusion of services and intangibles such as knowledge and intellectual property are not incorporated into today's assessment of the nation's competitiveness. The Council on Competitiveness also suggests that due to the global economy, assessing a nation's trade balance is not as useful a measure as it once was. Today, competition is not as much domestic companies competing with foreign companies (as captured in trade balances), but a world where "value is created through intangible assets flowing through constantly shifting global networks of multinational firms." For individuals, the Council on Competitiveness suggest that factors such as pension funds, real estate, value of healthcare benefits, and purchasing power should be additional measures to understand an individual's prosperity. They also propose assessing whether or not prosperity is equivalent across all levels of society, and the potential individuals have to improve their prosperity through their own efforts. General Issues The America COMPETES Act is based on a set of assumptions such as the following: STEM knowledge is necessary for all Americans, not just those entering science and engineering careers. American K-12 students do not have sufficient proficiency in STEM due to a lack of teachers with education or training in STEM. Scientists, engineers, and teachers with STEM degrees or enhanced STEM knowledge will generate more enthusiasm for STEM in students than those without such degrees; more enthusiastic students will lead to a better-trained and more competitive workforce. An insufficient number of Americans obtain degrees in science, technology, engineering, and mathematics compared to the nation's economic competitors. More Americans need to be encouraged to pursue such fields so that the United States has the workforce necessary to generate the new ideas that led to the new industries. Individuals who obtain STEM degrees are smart people who can work in a variety of occupations beyond those traditionally assumed for those who earn such degrees. Science and engineering research is important to U.S. competitiveness because of its influence on U.S. economic growth. Current science and engineering basic research funding, particularly in the physical sciences, engineering, mathematics, and computer science, is insufficient compared to other countries with whom the United States competes. Additional federal funding of basic science and engineering research will make the nation more competitive by creating whole new industries, and the related jobs, and enhancing existing ones. These assumptions are based on a variety of analyses. For example, in K-12 STEM education, the Organization for Economic Cooperation and Development's (OECD) Program for International Student Assessment (PISA) compared the scores of U.S. 15-year-old students in science and mathematics literacy to the scores of their peers internationally in 2006. American students scored an average of 489 points on science literacy, lower than the OECD average of 500 points, and 474 points in mathematics literacy, lower than the OECD average score of 498. Further, another study found that middle school mathematics teachers in the United States are not as well prepared to teach mathematics as many of their counterparts in five other countries, and this inadequate teacher preparation joins deficiencies in mathematics curriculum as reasons contributing to lower scores for American middle-schoolers. The United States has one of the lowest rates of first university degrees awarded in STEM fields to that in non-STEM degree production in the world according to NSF data. In 2002, STEM degrees accounted for 16.8% of all first university degrees awarded in the United States compared to an international average of 26.4%. In science and engineering research, the U.S. Bureau of Economic Analysis, with support from the National Science Foundation, has developed a research and development satellite account to estimate the effect of investment in research and development on U.S. economic growth. By this analysis, if R&D were treated as investment, it would have accounted for 5% of real gross domestic product (GDP) growth between 1959 and 2004, and 7% between 1995 and 2004. These are illustrations of the many analyses available that emphasize such themes. Some, however, question these fundamental assumptions. They question, for example, if the United States invests in federal research programs, to what extent can the U.S. exclusively benefit from those investments? Since research is international, could not any country benefit from these investments? At what point is the nation's research investment sufficient to reach its goals? In STEM education, is this not a state and local issue? Can the federal government really have any major influence in this policy area? Will STEM education investments take too long to reach fruition relative to other investments? Will federal investments in research and STEM education provide jobs for all Americans as opposed to just scientists and engineers? Others question whether or not the actions in the act are by themselves sufficient to enhance U.S. competitiveness as many other factors beyond STEM research and education contribute to U.S. competitiveness. Further, some question the fundamental premise that any action is necessary at all regarding U.S. competitiveness. They question whether or not science and engineering research and STEM education are problems at all. These analysts express doubts as to whether additional scientists and engineers in the United States are needed given current workforce projections, and why if the demand is so high, salaries for those in STEM occupations are not higher. Other analysts indicate that the quality and number of scientists and engineers in China and India are exaggerated. Another set of issues focuses on the possible unintended side-effects of implementation. For example, will the act result in an oversupply of scientists and engineers? Can the doubling of funding for some research programs be properly managed? Will the agencies who receive these funds face the same challenges as NIH faces today once the funding declines? Assuming that policymakers' concerns about U.S. competitiveness are sufficient for a response, both direct (such as increased funding) and indirect measures (such as tax policy) are proposed by proponents. The act focuses on direct measures while studying possible indirect measures that can be taken. When looking at technology development, those favoring direct government assistance contend that the government's scarce resources should focus on technologies that have the greatest promise, as determined by industry and indicated by industry's willingness to match funds. Those favoring indirect measures contend that the market is superior to government in deciding which technologies are worthy of investment, and worry about potential political interests' influences on an agency's decision to assist one technology in preference to another. Indirect policy mechanism proponents instead support policies that enhance the market's opportunities and abilities to make such choices. Those who prefer direct measures contend that indirect measures are wasteful, ineffective, and can compromise other public policy goals. American Competitiveness Initiative President Bush announced the American Competitiveness Initiative in January 2006 during his State of the Union address. The America COMPETES Act and the ACI responded to the same concern—that the United States may not be able to compete economically with other nations in the future due to insufficient investment today in science and technology research and workforce development. Many, but not all, of the provisions of ACI were part of the America COMPETES Act. Provisions of ACI found in the America COMPETES Act included increased research funding at the NSF, NIST laboratories, and the DOE Office of Science. Two STEM Education programs, Math Now and the AP/IB program, were also in both ACI and the America COMPETES Act. Science and Engineering Research The America COMPETES Act authorizes increases in funding for the NSF, NIST laboratories, and the DOE Office of Science, as well as two new research organizations: the Advanced Research Projects Agency-Energy (ARPA-E) and the Discovery Science and Engineering Innovation Institutes. In addition, the act expresses a sense of the Congress that each executive agency that funds research is requested to set a goal of allocating an "appropriate" percentage of its annual basic research budget to fund high-risk, high-reward basic research projects. The act also expresses the sense of the Congress that appropriately funding NASA at the authorized levels contained in the NASA Authorization Act of 2005 ( P.L. 109-155 ) would allow it to contribute significantly to U.S. innovation and competitiveness. Research Funding The America COMPETES Act authorizes increases in funding for the NSF, NIST laboratories, and the DOE Office of Science over FY2008-2010. If maintained beyond 2010, the increases would double funding for these agencies over seven years. Many organizations have advocated increasing research funding for the physical sciences, engineering, mathematics, and computer science. The specific rate of increase in the America COMPETES Act is based on the National Academies Rising Above the Gathering Storm report, which called for the federal government to increase its investment in long-term basic research by 10% annually over the next seven years. The National Academies committee that developed the report concluded that this rate of change was necessary, particularly in the physical sciences, engineering, mathematics, and information sciences, because federal funding in these fields has remained relatively flat for 15 years. According to the National Academies, agencies are less likely to support high-potential high-risk research when funding is stagnant. In addition, this type of research tends to be overlooked when there are inadequate funds to support all proposals that independent external reviewers rate as very good or excellent. Corporations are unlikely to fill this need, according to the National Academies; they fund little basic research, as it typically offers greater benefits to society than its sponsor, and is riskier than shareholders are willing to tolerate. The National Academies committee reviewed proposals from a wide variety of organizations before determining that a 10% annual increase over a seven-year period would be most appropriate. In particular, the NSF Authorization Act of 2002 ( P.L. 107-368 ) authorized doubling NSF's research budget over five years. The committee took this into account and expanded it to other federal agencies. In sum, "The committee believes that this rate of growth strikes an appropriate balance between the urgency of the issue being addressed and the ability of the research community to apply new funds efficiently." The Administration has not indicated why it selected a 7% annual rate, that would provide a doubling-path for these research activities over 10 years, as an appropriate rate of increase for these agencies. The Administration has indicated, however, that the amount of funding available is limited: Wide consensus ... exists on the importance of federally funded science to our nation's long term economic competitiveness.... The National Academies' 2005 report "Rising Above the Gathering Storm…" was an important expression of this view, and echoed findings of many other reports. Notable among its recommendations was increased funding for basic research in the physical sciences, mathematics, and engineering—areas that had stagnated while the budget for biomedical research soared. The report even recommended that investment in these areas should increase "ideally through reallocation of existing funds, but if necessary via new funds." That statement is a rare recognition of the fact that federal funds for science are limited and that some programs may have to be held constant or reduced to fund priorities. The Administration's response to this consensus was the American Competitiveness Initiative, which among other things proposed doubling budgets for NSF, NIST and the Department of Energy's Office of Science over ten years. NASA Funding The America COMPETES Act states that NASA should be a full participant in any interagency effort to promote innovation and economic competitiveness through near-term and long-term basic scientific and engineering research and development and in the promotion of STEM education consistent with NASA's mission. The act also expresses the sense of the Congress that "robust" funding of NASA, at the levels authorized in the National Aeronautics and Space Act of 2005 ( P.L. 109-155 ) and subsequent years, would allow NASA to contribute significantly to U.S. innovation and competitiveness, enable a fair balance of funding among its science, aeronautics, education, exploration, and human space flight programs, and allow full participation in any interagency efforts to promote innovation and economic competitiveness. The Senate and House appropriations committees have expressed concern that the President's FY2008 budget is not appropriately balanced and that insufficient funds are requested for both the President's Vision for Space Exploration and the other important initiatives at NASA. Similarly, a National Research Council report indicated that "NASA is being asked to accomplish too much with too little." The report recommended that "both the executive and the legislative branches of the federal government need to seriously examine the mismatch between the tasks assigned to NASA and the resources that the agency has been provided to accomplish them and should identify actions that will make the agency's portfolio of responsibilities sustainable." Others also question if NASA has the right priorities. High-Risk, High-Reward Research The America COMPETES Act also expresses the sense of the Congress that each executive research agency should set a goal of allocating an appropriate percentage of its basic research funding for high-risk, high reward ("transformative") projects. Such transformative research, the act states, should meet fundamental technological or scientific challenges, and involve multidisciplinary work and a high degree of novelty. The America COMPETES Act high-risk research provision responds to some researchers' concerns that current federal research funding review mechanisms are not as open as they could be to new, unproven ideas. The National Science Board (NSB) found that Transformative research frequently does not fit comfortably within the scope of project-focused, innovative, step-by-step research or even major centers, nor does it tend to fare well wherever a review system is dominated by experts highly invested in current paradigms or during times of especially limited budgets that promote aversion to risk. Further, "investigators are reluctant to submit radical or paradigm-challenging research ideas to NSF given the low conventional success rate (over $2 billion of highly rated proposals were declined in FY2004)." The National Institutes of Health also has indicated that this issue is a concern and, in response, has developed the Pioneer's Award to foster high-risk research. The Consolidated Appropriations Act, 2008 ( P.L. 110-161 ) explanatory language states the following regarding transformative research at NSF: Transformative research is considered to be both revolutionary and "cutting edge." While the Foundation currently conducts research that could be considered transformational, several reports including the National Science Board's (NSB) Enhancing Support of Transformative Research at the National Science Foundation notes that no funds are dedicated for this express purpose. The Appropriations Committees direct the Foundation to review current practices supporting the solicitation of, and the support of, transformational proposals. The Foundation shall provide a report regarding this review to the Committees on how this emerging area can be addressed, 90 days after enactment of this Act, and provide semi-annual reports with any updates thereafter. The initial report should include the Foundation's definition of transformative research. The House Committee on Appropriations also indicated that $10 million of NSF's budget should be for a "new and dedicated program emphasizing transformative research." Advanced Research Projects Agency-Energy The America COMPETES Act authorizes ARPA-E. If funded, ARPA-E would be a new federal organization in DOE. As outlined in the America COMPETES Act, the goal of ARPA-E is to enhance the economic and energy security of the United States through the development of technologies that reduce foreign energy imports, reduce energy-related greenhouse gas emissions, improve energy efficiency in all economic sectors, and ensure the United States is a technical leader in developing and deploying advanced energy technologies. ARPA-E is intended to achieve this goal through energy technology projects by identifying and promoting revolutionary advances in fundamental sciences, translating scientific discoveries and cutting-edge inventions into technological innovations, and accelerating transformational technological advances in areas that industry, by itself, is not likely to undertake because of technical and financial uncertainty. ARPA-E is based on the DARPA research management model used by the Department of Defense. Currently, DARPA seeks to sponsor revolutionary, high-payoff research that "bridges the gap between fundamental discoveries and their military use." Although the concept for ARPA-E in the act was based on that in the National Academies report Rising Above the Gathering Storm, proposing the DARPA model for other parts of the U.S. federal research system has been explored before. Historically, a number of similar initiatives have been proposed. For example, a number of initiatives including an advanced civilian technology agency were proposed in the 100 th and 101 st Congresses. In 1992, a National Academy of Sciences report recommended that the government consider a civilian technology corporation or a civilian technology agency, in limited areas, including energy research. A similar action was proposed by the Progressive Policy Institute in 1993. At the time presidential candidate Bill Clinton and Senator Al Gore proposed the creation of a civilian advanced research agency to support research on renewable technologies and renewable fuels. In congressional testimony, members of the committee that wrote the National Academies report, including Secretary of Energy Steven Chu, indicated ARPA-E should have four objectives: 1. Bring a freshness, excitement, and sense of mission to energy research that will attract many of our best and brightest minds—those of experienced scientists and engineers, and, especially, those of students and young researchers, including those in the entrepreneurial world. 2. Focus on creative, out-of-the-box, potentially transformational research that industry cannot or will not support. 3. Utilize an ARPA-like organization that is flat, nimble, and sparse, yet capable of setting goals and making decisions that will allow it to sustain for long periods of time those projects whose promise is real, and to phase out programs that do not prove to be productive or as promising as anticipated. 4. Create a new tool to bridge the troubling gaps between basic energy research, development, and industrial innovation. It can serve as a model for how to improve science and technology transfer in other areas that are essential to our future prosperity. The report proposed that funding for ARPA-E start at $300 million the first year and increase to $1 billion per year over five to six years. At that point, the program's effectiveness would be evaluated and appropriate actions taken. Regarding the funding of ARPA-E, National Academies committee members testified that it was critical that ARPA-E funding not jeopardize the basic research supported by the DOE's Office of Science. The National Academies committee did not believe it appropriate to specify the organization and mission of ARPA-E in great detail, but rather that those details should be "worked out by the Secretary of Energy and the Under Secretary for Science in rapid, but intense, consultation with experts from the scientific and engineering communities." For more information on ARPA-E, see CRS Report RL34497, Advanced Research Projects Agency - Energy (ARPA-E): Background, Status, and Selected Issues for Congress , by [author name scrubbed]. Discovery Science and Engineering Innovation Institutes The America COMPETES Act directs DOE to establish multidisciplinary Discovery Science and Engineering Innovation Institutes at DOE National Laboratories to apply fundamental science and engineering discoveries to technological innovations. The institutes, along with their higher-education and private industry partners, would support science and engineering research on emerging technologies determined by the Secretary of Energy to be critical to global competitiveness. In addition, the Institutes are intended to train undergraduate and graduate science and engineering students, develop innovative undergraduate and graduate educational curricula, conduct research with higher-education partners, and develop innovative technologies with industrial partners. Those supporting the institutes believe it will provide an opportunity for DOE National Laboratories to work with universities to train engineers in such areas as nanoscience and microsystems. The training of those engineers and the tasks they perform, proponents indicate, require a reshaping of the nation's engineering research, education, and practices to respond to challenges in global markets, national security, energy sustainability, and public health. They contend that the changes are not only technological, but also cultural, and they will affect the structure of organizations and relationships between institutional sectors of the country. This task, proponents indicate, cannot be accomplished by any one sector of society but must involve the federal government, states, industry, foundations, and academia. Science, Technology, Engineering, and Mathematics (STEM) Education The America COMPETES Act authorizes many new STEM education programs focused on recruiting more STEM teachers and enhancing the knowledge and skills of current STEM teachers. The act also encourages and supports students at all levels to undertake STEM education through a variety of initiatives that include not only traditional education, but also summer institutes and research internships at national labs. Many of the programs in the act place an emphasis on outreach and mentoring for women and minorities and inclusion of students and teachers from high-need schools. The STEM education programs in the America COMPETES Act include a pilot program of grants to states to help establish or expand statewide specialty high schools in STEM education; experiential-based learning opportunities, internships for middle and high-school students including hands-on learning at the DOE national labs; centers of excellence in STEM education in at least one high-need, public secondary school in each DOE National lab region, in order to develop and disseminate best practices in STEM education; summer institutes at the DOE national labs and partner universities, in order to improve the STEM content knowledge of kindergarten through 12 th grade teachers throughout the country; a newly appointed Director for STEM Education at the Department of Energy, who would also serve as an interagency liaison for K-12 STEM education; a graduate research fellowship program for outstanding graduate students, called Protecting America's Competitive Edge (PACE), in fields of interest to the DOE plus imagination, creativity, and excellent written and oral communication skills; two new competitive grant programs at the Department of Education (ED), called Teachers for a Competitive Tomorrow, that would enable partnerships to implement, in STEM fields, courses of study that lead to a baccalaureate degree with concurrent teacher certification, and at the graduate level, a two- or three-year, part-time, master's degree program for current teachers to improve their content knowledge and teaching skills in these areas as well as a one-year master's degree program for STEM professionals to enhance their teaching skills and teacher certification. a program called Math Now would improve instruction in mathematics by providing teachers with research-based tools and professional development to enhance elementary and middle school students' achievement in math; a new program called the Advanced Placement/International Baccalaureate (AP/IB) Program would expand low-income students' access to AP/IB coursework by training more high school teachers to lead AP/IB courses in math, science, and critical foreign languages in high-need schools; increased support for a number of existing NSF programs including the –Robert Noyce Teacher Scholarship program, which seeks to encourage talented science, technology, engineering, and mathematics majors and professionals to become K-12 mathematics and science teachers; –Math and Science Partnerships program, which develops and implements ways of advancing mathematics and science education for students; –STEM talent expansion program (STEP), whose goal is increasing the number of students receiving associate or baccalaureate STEM degrees; –Advanced Technological Education (ATE) program, which promotes improvement in the education of science and engineering technicians at the undergraduate and secondary school levels; –Graduate Research Fellowships (GRF), which provide three years of support for graduate study in STEM fields; and –Integrative Graduate Education and Research Traineeship (IGERT) program, which seeks to catalyze a cultural change in graduate education by establishing innovative new models. The issues for Congress related to these provisions are discussed below. Department of Energy A number of the America COMPETES Act programs are to be managed by the DOE and its National Laboratories, which have not previously played a major role in K-12 STEM education. The Administration has opposed several of the DOE-Managed STEM initiatives, including the Specialty Schools in Math and Science, Experiential-based Learning Opportunities, Summer Institutes, and the National Laboratories Centers of Excellence, indicating such programs should not be a DOE responsibility. Proponents counter that the biggest challenge in K-12 STEM education is inspiring children to learn math and science, and that the best way to inspire teachers and students is by providing them with an opportunity to interact with DOE scientists and engineers actively conducting research. The DOE specialty schools for math and science are to be public secondary schools whose students reside in the state where the school is located. These schools are intended to offer students a high-quality, comprehensive STEM curriculum designed to improve the academic achievement of students in science and mathematics. The Administration contends that establishing or expanding K-12 schools should not be a DOE responsibility. Supporters state that such schools will be important because states that have similar specialty schools have been a "nucleus of excellence" in math and science, that attracts and inspires the best students and teachers. The America COMPETES Act authorizes summer internship programs at DOE national laboratories for middle and secondary school students to provide them with experiential, hands-on learning in science, technology, engineering, and mathematics. The Administration advocates that resources instead should be focused on identifying what works and improving the effectiveness of existing efforts before starting a new program for which the Administration believes that there is no clear and compelling need. Proponents counter that the few weeks students spend in such programs makes a "remarkable" difference in the quality of education. DOE National Laboratory Centers of Excellence in STEM education are designed to assist teachers and allow them to use national laboratory equipment to teach courses located in at least one high-need public secondary school in the region served by a DOE national laboratory, in partnership with local higher education institution. The Administration believes that establishing school-based centers is not a proper role for DOE and would divert national laboratory resources that currently benefit their surrounding communities. Proponents counter that such programs inspire teachers and students, and provide them with necessary resources. National Science Foundation The America COMPETES Act reauthorizes a number of existing STEM education programs at the NSF and authorizes one new program. The Administration has opposed two provisions in the act: increasing funding for an existing program, the Robert Noyce Teacher Scholarship program, and establishing funding for a new program, the Laboratory Science Pilot program. The Consolidated Appropriations Act, 2008 explanatory language states the following regarding NSF STEM education programs and the Noyce Program: NSF not only includes research, but also shares in the responsibility for promoting quality math and science education as intertwining objectives at all levels of education across the United States. Math and science educators play a major role in keeping the U.S. competitive in the 21 st century. Increasing the number of highly qualified K-12 math and science teachers is critical to the creation of a new generation of innovators. Recommendations included in the National Academies' Rising Above the Gathering Storm report discussed the importance of expanding programs to enhance the undergraduate education of the future science and engineering workforce. Within the amounts provided, an additional $5,000,000, for a total of $15,000,000, shall be provided for the Robert Noyce Scholarship program.... The Robert Noyce Scholarship program encourages talented Science, Technology, Engineering, and Mathematics (STEM) undergraduate students and postgraduate professionals to become K-12 mathematics and science teachers. The Noyce program awards grants to higher education institutions to recruit and prepare undergraduate students majoring in science, technology, engineering, and mathematics to become elementary and secondary mathematics and science teachers. Students receive scholarships and stipends in exchange for two to six years of service as a mathematics or science teacher in a high-need K-12 school district. This program, and ED's Teachers for a Competitive Tomorrow (see next section), which provides funds to institutions of higher education to manage these programs, are based on the UTeach and California Teach programs, both considered to be successful in better preparing teachers for the classroom. The program is considered by some to be radical because academic research institutions have traditionally trained science and mathematics teachers in education departments rather than in science and mathematics departments. In addition, many of the current programs use master K-12 classroom teachers to educate students in the program and serve as role models, rather than relying solely upon the education department faculty. Further, universities involved with the program have had to change their traditional viewpoint that they are preparing students just for research careers, but also for education careers, and that these students are not "washouts," but some of their best science, engineering, and mathematics undergraduates. The act also authorizes a new program at NSF that would provide grants to institutions of higher education to create or improve professional science master's (PSM) degree programs that emphasize practical training and preparation for the workforce in high-need fields. PSM programs have been advocated for a number of years as an educational mechanism to better meet industry workforce needs. While other educational programs, such as those in engineering and business, have long viewed master's degrees as a way to serve this need, the same is not true of science programs, which have instead seen master's degrees as an interim degree on the way to a PhD. A PSM is seen by some experts as a way to achieve similar goals, by allowing "students to pursue advanced training in science or mathematics, while simultaneously developing workplace skills highly valued by employers." Approximately 120 PSM programs at 60 institutions, generally developed with industry guidance, include two years of academic training in an emerging or interdisciplinary area, internships, and "cross-training" in business and communications. The NSF Laboratory Science Pilot program would award grants to partnerships of higher education institutions, high-need local educational agencies, businesses, eligible nonprofit organization, and others to improve school laboratories and instrumentation as part of a comprehensive program to enhance the quality of STEM instruction. The program would provide professional development and training for teachers; purchase, rental, or leasing of equipment, instrumentation, and other scientific educational materials; develop instructional programs to integrate laboratory experiences with classroom instruction; and design and implement hands-on laboratory experiences. A National Research Council report on the state of America's high school labs found that the current quality of laboratory experiences is poor for most students, and schools with higher concentrations of non-Asian minorities and schools with higher concentrations of poor students are less likely to have adequate laboratory facilities than other schools. Department of Education The America COMPETES Act authorizes a number of new programs in the Department of Education. The Teachers for a Competitive Tomorrow program would provide grants to institutions of higher education to increase the number of STEM teachers with training in STEM fields. The bachelor degree portion of the program is focused on encouraging undergraduate students already pursuing STEM degrees to concurrently pursue teacher certification. The master's degree portion of the program would encourage current teacher to improve their STEM content knowledge and pedagogical skills through a two- or three-year, part-time, master's degree program. (This program is related to the Robert Noyce Teacher Scholarship program described in the NSF section above.) The goal of Math Now is to improve instruction in mathematics by providing teachers with research-based tools and professional development to improve elementary and middle school students' achievement in math. Office of Science and Technology Policy The America COMPETES Act includes a number of general provisions requiring actions by the President's Office of Science and Technology Policy. For example, the act directs the establishment of a President's Council on Innovation and Competitiveness, and states that the council is to include the Secretary or head of a number of federal agencies, OSTP, and OMB. The chair of the council is to be the Secretary of Commerce. President Bush responded to this requirement by establishing a National Science and Technology Committee (NSTC) on Technology subcommittee. The subcommittee has met several times to respond to the act. The act also states that the President, acting through OSTP, shall convene a National Science and Technology Summit to examine the health and direction of the U.S. science, technology, engineering, and mathematics enterprises. This summit was held on August 18-19, 2008. The act then directs OSTP to submit, as part of the annual budget submission, a description of how the Administration's R&D budget priorities relate to the conclusions and recommendations of the summit. In addition, the America COMPETES Act directs OSTP to develop an overarching set of principles to ensure the communication and open exchange of data by federal scientists and engineers. Bush Administration On May 28, 2008, in response to this requirement, the Bush Administration OSTP sent a memorandum to federal agencies that sponsor research. The memorandum provides guidance and the following "Core Principle for Communication of the Results of Scientific Research Conducted by Scientists Employed by Federal Civilian Agencies": Robust and open communication of scientific information is critical not only for advancing science, but also for ensuring that society is informed and provided with objective and factual information to make sound decisions. Accordingly, the Federal government is committed to a culture of scientific openness that fosters and protects the open exchange of ideas, data and information to the scientific community, policymakers, and the public. The memorandum also indicates that NASA's science communications policy should be a model for other federal agencies. The NASA policy states that, "In keeping with the desire for a culture of openness, NASA employees may, consistent with this policy, speak to the press and the public about their work." Exceptions exist for privileged and other controlled information. The following are actions designated for OSTP by the America COMPETES Act where no action appears to have been taken by the Bush Administration: Study on barriers to innovation; National Technology and Innovation Medal; Semiannual Science, Technology, and Mathematics Days; Study of service science; National coordination of research infrastructure; Sense of Congress on innovation acceleration research. A summary of these activities is provided in Appendix B in the section on Title I. Obama Administration On February 12, 2009, the Senate Committee on Commerce, Science, and Transportation Committee held a hearing on the Nomination of Dr. John Holdren to be OSTP Director. Dr. Holdren's nomination as OSTP Director was confirmed on March 19, 2009. During his testimony at his nomination hearing, Dr. Holdren stated the following on the issue of the communication of scientific and technical information by federal scientists and engineers: Besides efficiency in the use of the available human resources, a further key challenge for OSTP is carrying out its responsibility to ensure the science and technology advice the President and Congress receives, whether from inside or outside the government, is as objective and accurate as the state of the relevant fields permits, regardless of the political implications. If confirmed, I will consider this one of my highest obligations, which would extend to working with the federal agencies that generate and process scientific and technological information to be sure the best technical judgments of the scientists and engineers working there are never censored or distorted for ideological reasons. In response to a question during the hearing, Dr. Holdren stated the following: The America Competes Act, signed into law in August 2007, actually requires the director of the Office of Science and Technology Policy to develop and issue an overarching set of principles to ensure the open communication of data and results from federal scientists, and to prevent the intentional or unintentional suppression or distortion of such research findings. That's actually a big challenge in thinking about scientific integrity in the federal government. I think getting it done is going to require clarifying policies for disseminating research results, developing processes for appealing those dissemination decisions, providing training to inform, reinforce and update managers, researchers and the public information staffs on those policies. On March 9, 2009, President Obama issued a memorandum on Scientific Integrity that stated he is assigning OSTP "the responsibility for ensuring the highest level of integrity in all aspects of the executive branch's involvement with scientific and technological processes.... Specifically, 1. Within 120 days from the date of this memorandum, the Director shall develop recommendations for Presidential action designed to guarantee scientific integrity throughout the executive branch, based on the following principles: (a) The selection and retention of candidates for science and technology positions in the executive branch should be based on the candidate's knowledge, credentials, experience, and integrity; (b) Each agency should have appropriate rules and procedures to ensure the integrity of the scientific process within the agency; (c) When scientific or technological information is considered in policy decisions, the information should be subject to well-established scientific processes, including peer review where appropriate, and each agency should appropriately and accurately reflect that information in complying with and applying relevant statutory standards; (d) Except for information that is properly restricted from disclosure under procedures established in accordance with statute, regulation, Executive Order, or Presidential Memorandum, each agency should make available to the public the scientific or technological findings or conclusions considered or relied on in policy decisions; (e) Each agency should have in place procedures to identify and address instances in which the scientific process or the integrity of scientific and technological information may be compromised; and (f) Each agency should adopt such additional procedures, including any appropriate whistleblower protections, as are necessary to ensure the integrity of scientific and technological information and processes on which the agency relies in its decisionmaking or otherwise uses or prepares. 2. Each agency shall make available any and all information deemed by the Director to be necessary to inform the Director in making recommendations to the President as requested by this memorandum. Each agency shall coordinate with the Director in the development of any interim procedures deemed necessary to ensure the integrity of scientific decisionmaking pending the Director's recommendations called for by this memorandum." For more information on this topic, see CRS Report RL34736, The President's Office of Science and Technology Policy (OSTP): Issues for Congress , by [author name scrubbed]. Appropriations Status Table 2 summarizes the FY2008 and FY2009 appropriation and the FY2010 authorization for America COMPETES Act programs. For more information, see CRS Report RL34396, The America COMPETES Act and the FY2009 Budget , and CRS Report R40519, America COMPETES Act and the FY2010 Budget , both by [author name scrubbed]. Programs Funded at Authorized Levels A review of Table 2 finds that the combined funding provided by the Omnibus Appropriation Act (Omnibus) and the American Investment and Recovery Act (ARRA) led to funding of several America COMPETES Act programs at the authorized level (see Table 3 ). Other programs were either funded below authorized levels, or not funded. In the case of ARPA-E, the FY2008 authorization was $300.0 million and the FY2009 authorization is for "such sums as are necessary." The FY2009 appropriation is $415.0 million. One issue for the future is whether or not these funding levels will be maintained at the authorization level when there may or may not be a supplemental for those funds as was the case in FY2009. If not, this may pose challenges for institutions and individuals sponsored by some programs, particularly those related to research or education. Programs Presumably Not Funded As mentioned earlier, a lack of an enumerated appropriation does not necessarily mean that a given program is not funded. At DOE, in particular, the budget proposed in the Bush Administration for FY2009 did not align with that in the America COMPETES Act making it challenging to determine the status of these programs. In its FY2010 budget request, the Obama Administration also did not realign its existing programs with the America COMPETES Act. At this time, there is insufficient evidence that the following new America COMPETES Act programs are funded: DOE Pilot Program of Grants to Specialty Schools for Science and Mathematics Experiential Based Learning Opportunities Summer Institutes National Energy Education Development Nuclear Science Talent Expansion Program Hydrocarbon Systems Science Talent Expansion Program Early Career Awards for Science, Engineering, and Mathematics Researchers Discovery Science and Engineering Innovation Institutes Protecting America's Competitive Edge Graduate Fellowship Program Distinguished Scientist Program ED Advanced Placement & International Baccalaureate Program Math Now Summer Term Education Program Math Skills for Secondary Skill Students Advancing America Through Foreign Language Partnership Program Mathematics and Science Partnership Bonus Grants NSF Laboratory Science Pilot Program FY2010 Appropriation As Congress deliberates the FY2010 appropriation, an issue for Congress is what level, if any, it will appropriate funds for America COMPETES Act programs. Although the Obama Administration requested FY2010 funding for most America COMPETES Act R&D programs at levels below that authorized, it contends that FY2009 (due to ARRA funding), and, if approved as requested, FY2010 appropriations would fund federal R&D programs at the highest levels in U.S. history. Several programs newly authorized in the act have never been appropriated funds and the Obama Administration has not proposed funding them. An issue for these programs is whether or not they will receive the funding necessary to establish them. The America COMPETES Act provides authorization levels only through FY2010. For more information on the status of the FY2010 appropriations, see CRS Report R40519, America COMPETES Act and the FY2010 Budget , by [author name scrubbed]. Evaluation of the America COMPETES Act Should Congress decide to appropriate funds for the actions authorized in the America COMPETES Act, how will the nation know if it is successful? The purpose of the act is "to invest in innovation through research and development, and to improve the competitiveness of the United States." (See the earlier discussion on issues related to the definition of competitiveness.) Many policy actions and other factors influence these indicators beyond the act, so cause and effect is difficult to analyze, but such indicators can provide some understanding of how the overall U.S. economy is faring relative to other countries. The United States currently ranks first on the international competitiveness rankings available. As stated in the legislation, the goal of the act is to maintain this ranking even as other nations increase their science and technology investments and activities. There are evaluation mechanisms within the act as well as longitudinal analysis conducted by international organizations that assess competitiveness by ranking the ability of the United States to compete compared with other countries. These mechanisms use a combination of inputs, outputs, and outcomes to make their assessments. In assessing the nation's competitiveness and the evaluation mechanisms discussed in more depth below, it is important to keep the following caveats in mind. There are no direct measures of innovation or competitiveness: numerous indicators of innovation activity are available. These indicators are quantitative assessments of actions that play a role in the innovation process, but adding these indicators together is not necessarily an accurate assessment of innovation or a nation's competitiveness. Other factors such as necessity or serendipity may also play a critical role. The ability to evaluate the quality of an innovation, its contribution to improved quality of life, and its value to economic growth is limited and can differ depending on a company or individual's perspective. There is no guarantee that inputs, such as increased spending for research and development, will lead to new or enhanced technologies. And, should technologies result or improve, there is no guarantee that they will be "innovative" or used in the marketplace or by society. Further, innovation may occur regardless of research and development due to market demand, perceived need, or minor alterations in existing products and processes. The federal government, the industrial sector, and universities all play a major role in funding R&D and innovation. Innovation measures often focus on research and development funding without differentiating between the two. While federal funding of basic research is the primary focus of the America COMPETES Act, the industrial sector also plays a critical development role in technological innovation and advancement in both the public and private sector. University-industry cooperation is also a critical component serving as a liaison between basic research and industry through the education and training of scientists, engineers, and managers. In relating R&D funding to gross domestic product, it is important to keep in mind that while much of U.S. R&D funding is for defense-related research, that is not the case in other countries. Analyzing non-defense R&D may provide a different picture than all of R&D. In examining industry R&D, the nature of the investment may be an important factor such as the degree of funding spent on research versus development, and the degree of funding spent in particular industrial sectors. For example, more industry funding might be spent on electronic equipment research in one country, while another may spend more of its industrial R&D funding on transportation. Although patent data can be an indicator of the state of innovation, not all that results from R&D, such as new ideas, are able to be patented and some companies and individuals choose not to patent in order to prevent disclosure of an idea or plans for an activity, or because of the time needed to obtain a timely patent relative to marketplace needs. The number of scientists and engineers may or may not reflect a nation's innovative capacity as new industries have been developed by individuals with and without college degrees. In sum, there are no guarantees that any particular action will result in innovation or enhanced competitiveness. Instead, the focus of government policy is on creating an environment where innovation has an opportunity to flourish with the result that the United States is competitive with the other nations who are also taking steps to increase their innovation environment. Both international and U.S. government monitoring and assessments of the effect of U.S. policies is important so that policy adjustments can be made as these other nations take policy actions of their own. Evaluation Mechanisms Within the America COMPETES Act A number of mechanisms within the act are designed to measure its effectiveness at both the general and program specific level. For example, the act calls for a President's Council on Innovation and Competitiveness whose members include the Secretary or head of departments of independent agencies linked to science and innovation. The Council is to monitor implementation of public laws and initiatives for promoting innovation, provide advice to the President with respect to global trends in competitiveness and innovation, identify opportunities and make recommendations to improve innovation including monitoring and reporting on the implementation of the recommendations, and develop metrics for measuring the progress of the federal government in improving conditions for innovation, including through talent development, investment, and infrastructure improvements. In addition, there are provisions to evaluate specific research and education programs. For example, in research, ARPA-E is to be evaluated after it has been in operation for four years by the National Academy of Sciences to determine how well ARPA-E is achieving its goals and mission. A similar provision is in place for the Discovery Science and Engineering Innovation Institutes. Current White House guidelines also require federal research programs to be evaluated using the criteria of quality, relevance, and performance in response to the Government Performance and Results Act of 1993 ( P.L. 103-62 ). A merit-based, competitive process is used by agencies in an attempt to determine which research activities, graduate students, distinguished scientists, etc. to fund. In education, the DOE summer institutes are to submit an annual report to Congress as part of the annual budget submission as to the degree to which the summer institutes improve STEM teaching skills of participating teachers, increase the number of STEM teachers who participate, and improve student academic achievement on State STEM assessments. Similarly, the recipients of grants in the ED STEM baccalaureate degree with concurrent teacher certification and the Master's program in STEM education are to evaluate their programs and provide information on their ability to increase the number and percentage of new STEM teachers in schools deemed to be most in need, increase the number of underrepresented groups teaching STEM, bring professionals in STEM into the field of teaching, and retain teachers who participate in the program. In addition, the act authorizes conducting an annual independent evaluation to assess the impact of the activities on student academic achievement with a report to the Senate Committee on Health, Education, Labor, and Pensions, the House Committee on Education and Labor, and the Senate and House Committees on Appropriations. Evaluation Mechanisms Beyond Those in the America COMPETES Act Mechanisms are also available to monitor and evaluate the status of U.S. competitiveness outside of the act's provisions. These include inputs, outputs, and outcomes. Outcomes In terms of outcomes, overall indicators such as the annual World Economic Forum's (WEF) Global Competitiveness Report and the Organisation for Economic Co-operation and Development's (OECD) annual Science, Technology and Industry Scoreboard might be useful. The WEF Global Competitiveness Report rankings are based on publicly available data and an executive opinion survey of over 11,000 business leaders in 131 countries. An illustrative country profile for the United States from the 2007-2008 Global Competitiveness report is shown in Figure 5 . The OECD Science, Technology and Industry Scoreboard report provides information on innovation by regions and industries, innovation strategies by companies, and patterns in trade competitiveness and productivity. These analyses are both based on a variety of input and output indicators. Output Indicators The nation's economic trade balance, foreign direct investment, employment, and wages are examples of output indicators. As discussed earlier in the section discussing the definition of competitiveness, different audiences are interested in different output indicators. The Bureau of Economic Analysis (BEA), the Bureau of Labor Statistics (BLS), the U.S. Census Bureau, and the National Science Foundation monitor output indicators on a regular basis. The NSF releases a biannual Science and Engineering Indicators report that monitors the health of the science and engineering enterprise that compiles much of this information. The BEA, on behalf of NSF, is currently conducting an experimental analysis that examines the contribution of R&D to GDP growth. Input Indicators The quality of education, the availability of a STEM workforce, and the nation's quality and capacity for innovation are examples of input indicators. All of the reports described above monitor input indicators to some extent. These can provide a useful indicator of policy areas on which the United States needs to focus relative to its competitors, and many of these are more directly linked to the act. For example, although the United States is ranked number one overall in the WEF competitiveness analysis, it does not currently rank number one on each of these input/output indicators in the WEF analysis. Provided below is a list of some of the key sub-indicators related to the America COMPETES Act programs and the U.S. ranking in each of these sub-indicators out of 131 countries (see Figure 5 ): quality of primary education (28 th ) quality of math and science education in higher education (45 th ) capacity for innovation (9 th ) quality of scientific research institutions (2 nd ) availability of scientists and engineers (12 th ). Analysis of state-level competitiveness—relative to other states, not internationally—is also available. Some of the input/output indicators in these analyses are factors that would be influenced by the America COMPETES Act. For example, the Milken Institute uses 77 unique indicators categorized into five major components: human capital investment; research and development inputs; risk capital and entrepreneurial infrastructure; technology and science work force; and technology concentration and dynamism. The Information Technology and Innovation Institute uses factors such as the number of high-tech jobs and scientists and engineers in the workforce and workforce educational attainment. Alera uses factors such as R&D expenditures, human capital, and public education. Suffolk University's Beacon Hill Institute uses factors such as academic R&D funding and STEM degrees. Concluding Observations As noted earlier, the America COMPETES Act is an authorization act. New programs established by the act would not be initiated, and authorized increases in appropriations for existing programs would not occur unless funded through subsequent appropriation acts. The 110 th Congress provided FY2008 appropriations to establish ED's Teachers for a Competitive Tomorrow program, and NIST's Technology Improvement Program (TIP), which replaced the existing Advanced Technology Program. The 111 th Congress provided FY2009 appropriations to establish DOE's ARPA-E and NSF's PSM program. In addition, portions of the P-16 Alignment of Secondary School Graduate Requirements with the Demands of 21 st Century Postsecondary Endeavors and Support for P-16 Education Data Systems was funded through the ARRA. Although some America COMPETES Act research and STEM education programs received appropriations at authorized levels in FY2009, others did not, as described below. As Congress deliberates the FY2010 budget, an issue for Congress is what level, if any, will it provide America COMPETES Act programs an appropriation, and whether or not the President's budget request will propose to do so. Several programs newly authorized in the act have never been appropriated funds. An issue for these programs is whether or not they will receive the funding necessary to establish them. The America COMPETES Act provides authorization levels only through FY2010. Now that Congress has decided to fund some America COMPETES Act programs, some policymakers may be observing its impact to determine if the act truly addresses concerns about U.S. competitiveness and the role of the United States in the global economy. For some, this will be the test as to whether U.S. investments in R&D and STEM education can truly enhance the U.S. competitive position. Appendix A. Summary of Legislative History The America COMPETES Act ( P.L. 110-69 ) originated as the 21 st Century Competitiveness Act of 2007 ( H.R. 2272 /Gordon) and the America Creating Opportunities to Meaningfully Promote Excellence in Technology, Education, and Science Act ( S. 761 /Reid), in the 110 th Congress. The Senate passed S. 761 by 88-8 on April 25, 2007. The House passed H.R. 2272 by voice vote on May 21, 2007. On July 19, 2007, the Senate agreed to incorporate S. 761 into H.R. 2272 as an amendment and passed this bill by unanimous consent. A conference committee negotiated the final version of the America COMPETES Act ( H.R. 2272 ) and filed its report on August 1, 2007. The House, by a 367-57 vote, and the Senate, by unanimous consent, both passed the bill on August 2, 2007. The President signed the bill into law ( P.L. 110-69 ) on August 9, 2007. The act incorporated several House bills that had been introduced, and in some cases passed, earlier in the 110 th Congress, including the 10,000 Teachers, 10 Million Minds Science and Math Scholarship Act ( H.R. 362 /Gordon); the Sowing the Seeds Through Science and Engineering Research Act ( H.R. 363 /Gordon); an act to amend the High-Performance Computing Act of 1991 ( H.R. 1068 /Baird); the National Science Foundation Authorization Act of 2007 ( H.R. 1867 /Baird); the Technology Innovation and Manufacturing Stimulation Act of 2007 ( H.R. 1868 /Wu); and an act to provide for the establishment of the Advanced Research Projects Agency-Energy ( H.R. 364 /Gordon). All of these bills were reported by the House Committee on Science and Technology. In the 109 th Congress, the major House bills addressing these issues were the 10,000 Teachers, 10 Million Minds Science and Math Scholarship Act ( H.R. 4434 / Gordon); an act to provide for the establishment of the Advanced Research Projects Agency-Energy ( H.R. 4435 /Gordon), the Sowing the Seeds Through Science and Engineering Research Act ( H.R. 4596 /Gordon), the Early Career Research Act ( H.R. 5356 /McCaul), and the Science and Mathematics Education for Competitiveness Act ( H.R. 5358 /Schwarz). H.R. 5356 and H.R. 5358 were reported by the House Committee on Science. On the Senate side in the 110 th Congress, S. 761 was a reintroduction of a similar bill introduced at the end of the 109 th Congress, the National Competitiveness Investment Act [NCIA] ( S. 3936 /Frist). Senators Frist and Reid, then the majority and minority leaders, respectively, in the 109 th Congress, cosponsored S. 3936 . Similarly, Senators Reid and McConnell, the Senate majority and minority leaders, respectively, in the 110 th Congress introduced S. 761 . The NCIA was based on two bills that were introduced and reported by the relevant Senate committees earlier in the 109 th Congress: Protecting America's Competitive Edge Through Energy Act of 2006 [PACE-Energy] ( S. 2197 /Domenici), reported by the Senate Committee on Energy and Natural Resources and the American Innovation and Competitiveness Act ( S. 2802 /Ensign), reported by the Senate Committee on Commerce, Science, and Transportation. In the 110 th Congress, the provisions of S. 761 , S. 2197 , H.R. 2272 , H.R. 362 , H.R. 363 , and H.R. 364 and in the 109 th Congress, the PACE-Energy bill ( S. 2197 /Domenici), PACE-Education ( S. 2198 /Domenici), and PACE-Finance ( S. 2199 /Domenici) were based largely on the recommendations of the National Academies report Rising Above the Gathering Storm, also known as the "Gathering Storm Report" or "Augustine Report." This report was written in response to a request from Senator Lamar Alexander, Senator Jeff Bingaman, Congressman Sherwood Boehlert, and Congressman Bart Gordon. The American Innovation and Competitiveness Act bill ( S. 2802 /Ensign) was in response to both the Council of Competitiveness report Innovate America and the Gathering Storm report. Appendix B. Legislative Information System Summary of America COMPETES Act America COMPETES Act or America Creating Opportunities to Meaningfully Promote Excellence in Technology, Education, and Science Act Title I: Office of Science and Technology Policy; Government-Wide Science (Sec. 1001) Directs the President to: (1) convene a National Science and Technology Summit to examine the health and direction of the United States' science, technology, engineering, and mathematics enterprises; and (2) issue a report on Summit results. Requires, beginning with the President's budget submission for the fiscal year following the conclusion of the Summit and for each of the following four budget submissions, the analytical perspectives component of the budget that describes the research and development (R&D) priorities to include a description of how those priorities relate to the conclusions and recommendations of the Summit. (Sec. 1002) Requires the: (1) Director of the Office of Science and Technology Policy (OSTP) to contract with the National Academy of Sciences (NAS) to conduct and complete a study to identify, and review methods to mitigate, new forms of risk for businesses beyond conventional operational and financial risk that affect the ability to innovate; and (2) NAS to report study results to Congress. Authorizes appropriations. (Sec. 1003) Amends the Stevenson-Wydler Technology Innovation Act of 1980 to rename the National Technology Medal established under such Act the National Technology and Innovation Medal. (Sec. 1004) Expresses the sense of Congress that the OSTP Director should: (1) encourage all elementary and middle schools to observe a Science, Technology, Engineering, and Mathematics Day twice in every school year; (2) initiate a program to encourage federal employees with scientific, technological, engineering, or mathematical skills to interact with school children on such Days; and (3) promote involvement in such Days by appropriate private sector and institution of higher education employees. (Sec. 1005) Expresses the sense of Congress that the federal government should better understand and respond strategically to the emerging management and learning discipline known as service science. Requires the OSTP Director to study and report to Congress on ways the federal government could support service science through research, education, and training. (Sec. 1006) Directs the President to establish a President's Council on Innovation and Competitiveness to undertake various activities for promoting innovation and competitiveness in the United States, measure progress in such promotion, and report annually to the President and Congress on such progress. Requires the NAS to submit to the President a list of 50 recommended advisors to such Council. (Sec. 1007) Requires the Director of OSTP, through the National Science and Technology Council, to: (1) identify and prioritize the deficiencies in research facilities and major instrumentation at federal laboratories and national user facilities at academic institutions that are widely accessible for use by researchers in the United States; and (2) coordinate the planning by federal agencies for the acquisition, refurbishment, and maintenance of research facilities and major instrumentation to address the deficiencies identified. Requires submission annually to Congress of reports: (1) describing the deficiencies in research infrastructure identified; (2) listing projects and budget proposals of federal research facilities for major instrumentation acquisitions that are included in the President's budget proposal; and (3) explaining how the projects and instrumentation acquisitions relate to the identified deficiencies and priorities. (Sec. 1008) Expresses the sense of Congress that (1) each federal research agency should strive to support and promote innovation in the United States through high-risk, high-reward basic research projects; and (2) each executive agency that funds research in science, technology, engineering, or mathematics should set a goal of allocating an appropriate percentage of the annual basic research budget of that agency to funding such projects. Requires each such executive agency to report annually with respect to its funding goals. (Sec. 1009) Requires the OSTP Director to develop and issue a set of principles to ensure the communication and open exchange of data and results to other agencies, policymakers, and the public of research conducted by a scientist employed by a federal civilian agency and to prevent the intentional or unintentional suppression or distortion of such research findings. Requires such principles to take into consideration the policies of peer-reviewed scientific journals in which federal scientists may currently publish results. Title II: National Aeronautics and Space Administration (Sec. 2001) Requires that the National Aeronautics and Space Administration (NASA) be a full participant in any interagency effort to promote innovation and economic competitiveness through near- and long-term basic scientific R&D and the promotion of science, technology, engineering, and mathematics education. Requires an annual report from the NASA Administrator to Congress and the President on promotional activities conducted. Requires the NASA Administrator to submit to Congress a report on its plan for instituting assessments of the effectiveness of NASA's science, technology, engineering, and mathematics education programs in improving student achievement, including with regard to challenging state achievement standards. (Sec. 2002) Requires the Administrator to coordinate, as appropriate, NASA's aeronautics activities with relevant programs in the Department of Transportation, the Department of Defense (DOD), the Department of Commerce, and the Department of Homeland Security (DHS), including the activities of the Joint Planning and Development Office established under the Vision 100-Century of Aviation Reauthorization Act. (Sec. 2003) Requires the NASA Administrator, the Director of the National Science Foundation (NSF), and the Secretaries of Energy, Defense, and Commerce to coordinate basic research activities related to physical sciences, technology, engineering, and mathematics. (Sec. 2004) Expresses the sense of Congress that the NASA Administrator should implement a program to address aging workforce issues in aerospace that (1) documents technical and management experiences before senior people leave NASA; (2) provides incentives for retirees to return and teaches new employees about career lessons and experiences; and (3) provides for development of an award to recognize outstanding senior employees for their contributions to knowledge sharing. (Sec. 2005) Expresses the sense of Congress that the NASA Administrator should utilize the existing Undergraduate Student Research Program to support basic research projects on subjects of relevance to NASA that (1) are to be carried out primarily by undergraduate students; and (2) combine undergraduate research with other research supported by NASA. (Sec. 2006) Requires the NASA Administrator to develop: (1) a plan for implementation of at least one education project that utilizes the resources offered by the International Space Station, and in developing any such plan, make use of the findings and recommendations of the International Space Station National Laboratory Education Concept Development Task Force; and (2) a plan for identification and support of research to be conducted aboard the Space Station, which offers the potential for enhancement of U.S. competitiveness in science, technology, and engineering. Title III: National Institute of Standards and Technology (Sec. 3001) Authorizes appropriations to the Secretary of Commerce (the Secretary) for the National Institute of Standards and Technology (NIST) for FY2008-FY2010 for: (1) scientific and technical research and services laboratory activities; (2) construction and maintenance of facilities; and (3) Industrial Technology Services activities. (Sec. 3002) Amends the Stevenson-Wydler Technology Innovation Act of 1980 to repeal provisions regarding the establishment of the Technology Administration within the Department of Commerce. Makes technical and conforming amendments with respect to the Experimental Program to Stimulate Competitive Technology. Amends the National Institute of Standards and Technology Act to provide for the Director of the NIST to report directly to the Secretary. (Sec. 3003) Amends the National Institute of Standards and Technology Act to generally revise provisions concerning eligible contributions for the financial support of regional centers responsible for implementing the objectives of the Hollings Manufacturing Extension Partnership Program. Amends the National Institute of Standards and Technology Act to require that a Manufacturing Center that has not received a positive evaluation shall be notified of the deficiencies in its performance and placed on probation for one year, after which an evaluation panel shall reevaluate such Center. Authorizes the acceptance of funds from other federal departments and agencies and the private sector for the purpose of strengthening U.S. manufacturing. Requires the NIST Director to determine whether funds accepted from other federal departments or agencies shall be counted in calculating the federal share of capital and annual operating and maintenance costs required to create and maintain such Centers. Establishes within NIST a Manufacturing Extension Partnership (MEP) Advisory Board. Requires such Board to provide to the Director advice on: (1) MEP programs, plans, and policies; (2) assessments of the soundness of MEP plans and strategies; and (3) assessments of current performance against MEP program plans. Requires such Board to transmit annual reports to the Secretary for transmittal to Congress within 30 days after the submission to Congress of the President's annual budget request which shall address the status of the MEP program and comment on the relevant sections of the programmatic planning document and updates thereto transmitted to Congress by the NIST Director pursuant to this title. Requires the Director to establish within the MEP program a program to award competitive grants among the Centers, or a consortium of such Centers, for the development of projects to solve new or emerging manufacturing problems. Permits one or more themes for the competition to be identified, which may vary from year to year, depending on the needs of manufacturers and the success of previous competitions. Bars recipients of such grant awards from being required to provide a matching contribution. (Sec. 3004) Requires the NIST Director, concurrent with submission to Congress of the President's annual budget request, to transmit a three-year programmatic planning report for NIST, including programs under the Scientific and Technical Research and Services, Industrial Technology Services, and Construction of Research Facilities functions, and subsequent updates. (Sec. 3005) Amends the National Institute of Standards and Technology Act to provide that annual reports to the Secretary and Congress be submitted by the Visiting Committee on Advanced Technology not later than 30 days (under current law, on or before January 31 in each year) after the submittal to Congress of the President's annual budget request. Requires that such report also comment on the programmatic planning document and updates thereto submitted to Congress by the Director. (Sec. 3006) Amends the National Institute of Standards and Technology Act to provide for the Visiting Committee on Advanced Technology to meet at least twice each year (under current law at least quarterly) at the call of the chairman of the Committee or whenever one-third of the Committee's members so request in writing. (Sec. 3007) Requires the Director to establish a manufacturing research pilot grants program to make awards to partnerships to foster cost-shared collaborations among firms, educational and research institutions, state agencies, and nonprofit organizations in the development of innovative, multidisciplinary manufacturing technologies. Requires such partnerships to include at least one manufacturing industry partner and one nonindustry partner. Requires partnerships receiving awards to conduct applied research to develop new manufacturing processes, techniques, or materials that would contribute to improved performance, productivity, and competitiveness of U.S. manufacturing, and build lasting alliances among collaborators. Bars: (1) awards from providing for not more than one-third of the costs of a partnership; and (2) not more than an additional one-third of such costs from being obtained directly or indirectly from other federal sources. Instructs the Director, in selecting applications, to ensure, a distribution of overall awards among a variety of manufacturing industry sectors and a range of firm sizes. Requires the Director to run a single pilot competition to solicit and make awards. Limits each award to a three-year period. (Sec. 3008) Requires the Director, in order to promote the development of a robust research community working at the leading edge of manufacturing sciences, to establish a program to award: (1) postdoctoral research fellowships at NIST for research activities related to manufacturing sciences; and (2) senior research fellowships to establish researchers in industry or at institutions of higher education who wish to pursue studies related to the manufacturing sciences at NIST. Requires the Director to provide stipends for post-doctoral research fellowships at a level consistent with the National Institute of Standards and Technology Postdoctoral Research Fellowship Program, and senior research fellowships at levels consistent with support for a faculty member in a sabbatical position. (Sec. 3009) Allows the Director, through September 30, 2010, to annually procure the temporary or intermittent services of up to 200 experts or consultants to assist with urgent or short-term projects. Directs the Comptroller General to report on whether additional safeguards would be needed with respect to the use of such authority if it were to be made permanent. (Sec. 3010) Amends the Stevenson-Wydler Technology Innovation Act of 1980 to revise the limitation on the number of Malcolm Baldrige National Quality Awards that may be made in any year by permitting not more than 18 awards to be made in any year to recipients who have not previously received such an award. Prohibits any award from being made within any category in which such an award may be given if there are no qualifying enterprises in that category. (Sec. 3011) Requires the NIST Director to submit a report on efforts to recruit and retain young scientists and engineers at the early stages of their careers at the NIST laboratories and joint institutes. (Sec. 3012) Abolishes the Advanced Technology Program (ATP) and replaces it with the Technology Innovation Program (TIP), while continuing support originally awarded under ATP. Provides for TIP to assist U.S. businesses and institutions of higher education or other organizations, such as national laboratories and nonprofit research institutions, to support, promote, and accelerate innovation in the United States through high-risk, high-reward research in areas of critical national need. Requires the Director to award competitive, merit-reviewed grants, cooperative agreements, or contracts to: (1) eligible companies that are small or medium-sized businesses; or (2) joint ventures. Sets forth limitations on single company and joint venture awards. Limits the federal share of a project funded by an award under TIP to not more than half of total project costs. Bars any business that is not a small or medium-sized business from receiving any funding under TIP. Requires the Director to solicit proposals at least annually to address areas of critical national need for high-risk, high-reward projects. Requires: (1) the NIST Director to submit annually reports on TIP's activities; and (2) the first annual report to include best practices for management of programs to stimulate high-risk, high-reward research. Requires the Director, in carrying out TIP, as appropriate, to coordinate with other senior state and federal officials to ensure cooperation and coordination in state and federal technology programs and to avoid unnecessary duplication of efforts. Requires that funds accepted from other federal agencies be included as part of the federal cost share of any project funded under TIP. Establishes within NIST a TIP Advisory Board. Requires such Board to provide to the Director: (1) advice on programs, plans, and policies of TIP; (2) reviews of Tip's efforts to accelerate the R&D of challenging, high-risk, high-reward technologies in areas of critical national need; (3) reports on the general health of the program and its effectiveness in achieving its legislatively mandated mission; and (4) guidance on investment areas that are appropriate for TIP funding. Requires such Board to transmit annual reports to the Secretary for transmittal to Congress not later than 30 days after the submission to Congress of the President's annual budget request which shall address the status of TIP and comment on the relevant sections of the programmatic planning document and updates thereto transmitted to Congress by the Director. Defines "high-risk, high-reward research" to mean research that (1) has the potential for yielding transformational results with far-ranging or wide-ranging implications; (2) addresses critical national needs within NIST's areas of technical competence; and (3) is too novel or spans too diverse a range of disciplines to fare well in the traditional peer review process. Requires the NIST Director to carry out ATP as it was in effect before the enactment of this act with respect to applications for grants under ATP submitted before such date, until the earlier of: (1) the date that the Director promulgates the regulations required by this act for the operation of TIP required under this act; or (2) December 31, 2007. (Sec. 3013) Amends the National Institute of Standards and Technology Act to: (1) increase funding for research fellowships and other financial assistance to students at institutions of higher education within the United States and to U.S. citizens for research and technical activities on NIST programs; (2) add as a function of the Secretary and NIST, the authority to enter into contracts which include grants and cooperative agreements to further the purposes of NIST; (3) repeal the act of July 21, 1950 (relating to the legal units of electrical and photometric measurement in the United States and relating to the establishment of the values of the primary electric and photometric units in absolute measure and the legal values for these units); and (4) repeal the non-energy inventions program. (Sec. 3014) Authorizes the Director to retain all building use and depreciation surcharge fees collected pursuant to OMB Circular A-25 (relating to fees assessed for government services and for sale or use of government goods or resources). Requires such fees to be collected and credited to the construction of research facilities appropriation account for use in maintenance and repair of NIST's existing facilities. (Sec. 3015) Amends the National Institute of Standards and Technology Act to double the number of fellows per fiscal year to be included in the postdoctoral fellowship program. Title IV: Ocean and Atmospheric Programs (Sec. 4001) Directs the Administrator of the National Oceanic and Atmospheric Administration (NOAA) to establish a program of ocean, coastal, Great Lakes, and atmospheric R&D, in collaboration with academic institutions and other nongovernmental entities, to focus on the development of advanced technologies and methods to promote U.S. leadership in ocean and atmospheric science as well as competitiveness in applied uses of such R&D. (Sec. 4002) Requires the NOAA Administrator to: (1) conduct, develop, support, promote, and coordinate educational activities to enhance public awareness and understanding of ocean, coastal, Great Lakes, and atmospheric science and stewardship by the general public and other coastal stakeholders; and (2) develop a 20-year ocean, coastal, and atmospheric science education plan. (Sec. 4003) Requires that NOAA be a full participant in any interagency effort to promote innovation and economic competitiveness through basic scientific R&D and the promotion of science, technology, engineering, and mathematics education. Title V: Department of Energy — Protecting America ' s Competitive Edge Through Energy Act, or the PACE-Energy Act (Sec. 5003) Amends the Department of Energy Science Education Enhancement Act (Act) to require the Secretary of Energy (Secretary in this title), acting through the Under Secretary for Science, to: (1) appoint a Director of Science, Engineering, and Mathematics Education (Director) to administer science, engineering, and mathematics education programs across all functions of the Department of Energy (DOE); and (2) offer to contract with the National Academy of Sciences (NAS) to assess the performance of such programs. Directs the Secretary to establish a Science, Engineering, and Mathematics Education Fund. Requires the Secretary, acting through the Director, to: (1) award competitive grants to states in a pilot program to assist them in establishing or expanding public, statewide specialty secondary schools that provide comprehensive science and mathematics; and (2) establish a summer internship program for middle school and secondary school students to provide experiential-based learning opportunities at the National Laboratories. Directs the Secretary to establish at each of the National Laboratories: (1) a program to support a Center of Excellence in Science, Technology, Engineering, and Mathematics in at least one high-need public secondary school; (2) programs of summer institutes to provide additional training to strengthen the science, technology, engineering, and mathematics teaching skills of teachers employed at public schools for kindergarten through grade 12 (K-12); and (3) a program to coordinate and make available to teachers and students web-based kindergarten through high school science, technology, engineering, and mathematics education resources relating to the DOE science and energy mission. Instructs the Director to establish a recruiting and mentoring program for women and underrepresented minorities to pursue careers in science, engineering, and mathematics. Directs the Secretary to award each fiscal year to institutions of higher education: (1) up to three competitive grants for new academic degree programs in nuclear science; (2) up to five competitive grants for existing academic degree programs that produce graduates in nuclear science; (3) up to three competitive grants for new academic degree programs in hydrocarbon systems science; (4) up to five competitive grants for existing academic degree programs that produce graduates in hydrocarbon systems science. Authorizes appropriations for FY2008-FY2010. (Sec. 5006) Instructs the Director of the DOE Office of Science to: (1) award grants to scientists and engineers at an early career stage at certain institutions of higher education, organizations, or National Laboratories to conduct research in fields relevant to the DOE mission; and (2) report to certain congressional committees on the Director's efforts to recruit and retain young scientists and engineers at early career stages at the National Laboratories. (Sec. 5007) Amends the Energy Policy Act of 2005 to authorize FY2010 appropriations for research, development, demonstration, and commercial application activities of the Office of Science. (Sec. 5008) Directs the Secretary to establish: (1) distributed, multidisciplinary institutes centered at National Laboratories to apply fundamental scientific and engineering discoveries to technological innovations relating to the DOE mission and the global competitiveness of the United States; and (2) a Protecting America's Competitive Edge (PACE) graduate fellowship program for students pursuing a doctoral degree in a DOE mission area. Authorizes appropriations for FY2008-FY2010. (Sec. 5010) Expresses the sense of Congress that (1) DOE should implement the recommendations contained in the report of the Government Accountability Office numbered 04-639; and (2) the Secretary should conduct annual reviews in accordance with title IX of the Education Amendments of 1972 of at least two DOE grant recipients. (Sec. 5011) Instructs the Secretary to establish a program to support the joint appointment of distinguished scientists by institutions of higher education and by the National Laboratories. Authorizes appropriations for FY2008-FY2010. (Sec. 5012) Establishes within DOE the Advanced Research Projects Agency-Energy (ARPA-E) to overcome long-term and high-risk technological barriers in the development of energy technologies. Directs the Secretary after four years to offer to contract with the NAS to evaluate how well ARPA-E is achieving its goals and mission. Establishes in the Treasury the Energy Transformation Acceleration Fund to implement the ARPA-E program. Authorizes appropriations for FY2008-FY2010. Title VI: Education Subtitle A: Teacher Assistance Part I: Teachers for a Competitive Tomorrow—(Sec. 6113) Authorizes the Secretary of Education (Secretary, for purposes of this Title) to award competitive matching grants to enable educational partnerships to develop and implement programs to provide courses of study in science, technology, engineering, mathematics, or critical foreign languages that (1) are integrated with teacher education; and (2) lead to a baccalaureate degree with concurrent teacher certification. (Sec. 6114) Authorizes the Secretary to award competitive matching grants to educational partnerships to develop and implement: (1) two- or three-year part-time master's degree programs in science, technology, engineering, mathematics, or critical foreign language education for teachers in order to enhance the teachers' content knowledge and teaching skills; or (2) programs for professionals in science, technology, engineering, mathematics, or a critical foreign language that lead to a one-year master's degree in teaching that results in teacher certification. (Sec. 6115) Directs the Secretary to award each of the above grants for up to five years. Requires 50% nonfederal matching funds. (Sec. 6116) Authorizes appropriations. Part II: Advanced Placement and International Baccalaureate Programs—(Sec. 6123) Authorizes the Secretary to award competitive matching grants for up to five-year periods to enable educational agencies or partnerships to carry out activities designed to increase the number of: (1) qualified teachers serving high-need (low-income or rural area) schools who are teaching advanced placement or international baccalaureate courses in mathematics, science, or critical foreign languages; and (2) students attending such schools who enroll in and pass the examinations for such courses. Requires 200% nonfederal matching funds, but requires no more than 100% from high-need local educational agencies (LEAs). Permits the Secretary to waive the match for educational agencies if it would cause them serious hardship or prevent them from carrying out the program. Part III: Promising Practices in Science, Technology, Engineering, and Mathematics Teaching—(Sec. 6131) Requires the Secretary to contract with the National Academy of Sciences (NAS) to convene an expert panel to identify promising practices for, and synthesize the scientific evidence pertaining to, improving the teaching and learning of science, technology, engineering, and mathematics in kindergarten through grade 12. Requires the dissemination of the panel's findings and recommendations to the public and state and local educational agencies. Authorizes appropriations. Subtitle B: Mathematics (Sec. 6201) Authorizes the Secretary to award competitive three-year matching grants to states and, through them, subgrants to high-need LEAs to: (1) implement mathematics programs or initiatives that are research-based; (2) provide professional development and instructional leadership activities for teachers and administrators on the implementation of mathematics initiatives; and (3) conduct student mathematics progress monitoring and identify areas in which students need help in learning mathematics. Applies the program to students and teachers in kindergarten through grade 9. Requires state grantees to contribute 50% of program costs. Authorizes appropriations. (Sec. 6202) Directs the Secretary to carry out a demonstration program under which the Secretary awards up to five grants each fiscal year to states for the provision of summer learning grants to disadvantaged students. Requires the summer programs to emphasize mathematics, technology, engineering, and problem-solving through experiential learning opportunities. Limits to 50% the federal share of such grants. Authorizes appropriations. (Sec. 6203) Requires the Secretary to establish a program that provides competitive three-year matching grants to states and, through them, subgrants to eligible LEAs to establish new services and activities to improve the overall mathematics performance of secondary school students. Provides: (1) a minimum grant amount of $500,000; and (2) a state matching funds requirement of 50% of program costs. Authorizes appropriations. (Sec. 6204) Directs the Secretary to establish peer review panels to review state applications for the mathematics grant programs, excluding the demonstration grant program. Subtitle C: Foreign Language Partnership Program (Sec. 6303) Authorizes the Secretary to award grants to enable partnerships of institutions of higher education and LEAs to establish programs of study in critical foreign languages that will enable students to advance successfully from elementary school through postsecondary education and achieve higher levels of proficiency in such languages. Makes such grants for five-year periods, authorizing the Secretary to renew them for up to two additional five-year periods. Outlines matching funds requirements. (Sec. 6304) Authorizes appropriations. Subtitle D: Alignment of Education Programs (Sec. 6401) Authorizes the Secretary to award competitive grants to enable states to work with statewide partnerships to: (1) promote better alignment of content knowledge requirements of secondary school graduation with the knowledge and skills needed to succeed in postsecondary education, the 21 st century workforce, or the Armed Forces; or (2) establish or improve statewide P-16 (preschool through baccalaureate degree) education data systems. Requires each state to match grant fund amounts. Authorizes appropriations. Subtitle E: Mathematics and Science Partnership Bonus Grants (Sec. 6501) Directs the Secretary to award grants, during school years 2007-2008 through 2010-2011, to each of the three elementary and three secondary schools with a high concentration of low-income students in each state whose students demonstrate the most improvement in mathematics and science, respectively. (Sec. 6502) Authorizes appropriations. Title VII: National Science Foundation (Sec. 7002) Authorizes appropriations for FY2008-FY2010 to the National Science Foundation (NSF) for: (1) research and related activities; (2) education and human resources; (3) major research equipment and facilities construction; (4) agency operations and award management; (5) the Office of the National Science Board; and (6) the Office of Inspector General. (Sec. 7003) Prohibits anything in this title or title I from being construed to alter or modify the NSF merit-review system or peer-review process. (Sec. 7004) Expresses the sense of Congress that the Director of the NSF and the Secretary of Education should have ongoing collaboration to ensure that their respective mathematics and science partnership programs continue to work in concert (and not duplicatively) for the benefit of states and local practitioners. (Sec. 7005) Prohibits anything in this title from being construed to limit the authority of state governments or local school boards to determine the curricula of their students. (Sec. 7006) Requires the continuation of the program of Centers for Research on Learning and Education Improvement as established in section 11 of the National Science Foundation Authorization Act of 2002 (relating to the establishment of such Centers). Amends the National Science Foundation Authorization Act of 2002 to provide for the awarding of grants to eligible nonprofit organizations and their consortia to establish such Centers. (Sec. 7007) Directs the National Science Board to evaluate: (1) the role of NSF in supporting interdisciplinary research, including through the Major Research Instrumentation program, the effectiveness of NSF's efforts in providing information to the scientific community about opportunities for funding of interdisciplinary research proposals, and the process through which interdisciplinary proposals are selected for support; and (2) the effectiveness of NSF's efforts to engage undergraduate students in research experiences in interdisciplinary settings, including through the Research in Undergraduate Institutions program and the Research Experiences for Undergraduates program. Requires the Board to provide the results of its evaluation, including a recommendation for the proportion of the NSF's research and related activities funding that should be allocated for interdisciplinary research. (Sec. 7008) Instructs the Director to: (1) require that all grant applications that include funding to support postdoctoral researchers include a description of mentoring activities; and (2) ensure that this part of the application is evaluated under NSF's broader impacts merit review criterion. Instructs the Director to require that annual reports and the final report for research grants that include funding to support postdoctoral researchers include a description of the mentoring activities provided to such researchers. (Sec. 7009) Instructs the Director to require that each institution that applies for financial assistance from NSF for science and engineering research or education describe in its grant proposal a plan to provide appropriate training and oversight in the responsible and ethical conduct of research to participating undergraduate students, graduate students, and postdoctoral researchers. (Sec. 7010) Instructs the Director to ensure that all final project reports and citations of published research documents resulting from research funded, in whole or in part, by the NSF are made available to the public in a timely manner and through NSF's website. (Sec. 7011) Makes an investigator supported under a NSF award, whom the Director determines has failed to comply with the provisions of section 734 (concerning the dissemination and sharing of research results) of the Foundation Grant Policy Manual, ineligible for a future award under any NSF supported program or activity. Allows the Director to restore the eligibility of such an investigator on the basis of the investigator's subsequent compliance with such provisions and with such other terms and conditions as the Director may impose. (Sec. 7012) Requires the Director to annually evaluate all NSF's grants that are scheduled to expire within one year and that primarily: (1) meet the objectives of the Science and Engineering Equal Opportunity Act; or (2) provide teacher professional development. Allows the Director, for grants that are identified and that are deemed by the Director to be successful in meeting the objectives of the initial grant solicitation, to extend those grants for not more than three additional years beyond their scheduled expiration without the requirement for a recompetition. Requires the Director to annually submit a report that (1) lists the grants extended; and (2) provides recommendations regarding the extension of such authority to programs other than those specified in this section. (Sec. 7013) Requires the National Science Board to: (1) evaluate certain impacts of its policy to eliminate cost sharing for research grants and cooperative agreements for existing and new programs involving industry participation; and (2) report the results of such evaluation. (Sec. 7014) Requires the National Science Board to evaluate the appropriateness of: (1) the requirement that funding for detailed design work and other preconstruction activities for major research equipment and facilities come exclusively from the sponsoring research division rather than being available from the Major Research Equipment and Facilities Construction account; and (2) NSF's policies for allocation of costs for, and oversight of, maintenance and operation of major research equipment and facilities. Requires the Board to report on the results of such evaluations and on any recommendations for modifying the current policies related to allocation of funding for such equipment and facilities. Requires that plans for proposed construction, repair, and upgrades to national research facilities include estimates of the total project cost and the source of funds for major upgrades of facilities in support of Antarctic research programs. Requires the Director to transmit: (1) a specified report cataloging all elementary and secondary school, informal, and undergraduate educational programs and activities supported through appropriations for research and related activities; and (2) as part of the President's FY2011 budget submission, a report listing the funding success rates and distribution of awards for the Research in Undergraduate Institutions program. Requires the Director, not later than 60 days after enactment of legislation providing for the annual appropriation of funds for NSF, to submit a plan for the allocation of education and human resources funds authorized by this title for the corresponding fiscal year, including any funds from within the research and related activities account used to support activities that primarily improve education or broaden participation. (Sec. 7015) Amends the National Science Foundation Authorization Act of 2002 to require: (1) the Inspector General of NSF to conduct triennial audits (currently, annual audits) of the compliance by the National Science Board with the requirements specified under the act for open meetings; (2) the Board to maintain the General Counsel's certificate, the presiding officer's statement, and a transcript or recording of any closed meeting for at least three years after such meeting; and (3) appointment of technical and professional personnel on leave of absence from academic, industrial, or research institutions for a limited term and such operations and support staff members (currently, such clerical staff members) as may be necessary. Amends the National Science Foundation Authorization Act of 1976 to limit the number of Alan T. Waterman Awards that may be made in any one fiscal year to not more than three (under current law, to no more than one). (Sec. 7016) Requires rendering of National Science Board reports to the President and Congress (under current law, rendered to the President for submission to Congress). (Sec. 7017) Amends the Program Fraud Civil Remedies Act of 1986 to include the NSF as an authority with respect to the provisions of such Act relating to administrative remedies for false claims and statements. (Sec. 7018) Requires the NSF Director to: (1) consider the degree to which NSF-eligible awards and research activities may assist in meeting critical national needs in innovation, competitiveness, safety and security, the physical and natural sciences, technology, engineering, social sciences, and mathematics; and (2) give priority in the selection of NSF awards, research resources, and grants to entities that can be expected to make contributions in physical or natural science, technology, engineering, social sciences, or mathematics, or that enhance competitiveness, innovation, or safety and security. (Sec. 7019) Permits the NSF, in carrying out its research programs on science policy and on the science of learning, to support research on the process of innovation and the teaching of inventiveness. (Sec. 7020) Requires the NSF Director to develop and publish a plan describing the current status for broadband access for scientific research purposes at institutions in EPSCoR (Experimental Program to Stimulate Competitive Research) eligible states, at institutions in rural areas, and at minority serving institutions and outlines actions to ensure that such connections are available to participate in NSF programs that rely heavily on high-speed networking and collaborations across institutions and regions. (Sec. 7021) Requires the NSF Director to carry out a pilot program to award one-year grants to individuals to assist them in improving research proposals that were previously submitted to NSF but not selected for funding. Requires that such grants be used to enable individuals to resubmit updated research proposals for review by NSF through NSF's competitive merit review process. Requires the Director to make awards under this section based on the advice of program officers of the NSF. Permits using funds made available under this section for the generation of new data and the performance of additional analysis. Allows the Director to carry out this section through the Small Grants for Exploratory Research program. Directs the National Science Board to conduct a review and assessment of the pilot program. (Sec. 7022) States that, among the types of activities that the NSF shall consider as appropriate for meeting the requirements of its broader impacts criterion for the evaluation of research proposals are partnerships between academic researchers and industrial scientists and engineers that address research areas identified as having high importance for future national economic competitiveness, such as nanotechnology. Requires the Director to report on the impact of the broader impacts grant criterion used by NSF. (Sec. 7023) Amends the National Science Foundation Act of 1950 to permit NSF to receive and use funds donated to NSF for specific prize competitions for "basic research" as defined in the Office of Management and Budget Circular No. A-11 (Preparation, Submission, and Execution of the Budget). (Sec. 7024) Amends the High-Performance Computing Act of 1991 to revise program requirements for the National High-Performance Computing Program. Requires the Director of the Office of Science and Technology Policy to: (1) establish the goals and priorities for federal high-performance computing research, development, networking, and other activities; (2) establish Program Component Areas that implement such goals and identify the Grand Challenges (i.e., fundamental problems in science or engineering, with broad economic and scientific impact, whose solutions will require the application of high-performance computing resources and, as amended by this section, multidisciplinary teams of researchers) that the Program should address; and (3) develop and maintain a research, development, and deployment road map covering all states and regions for the provision of high-performance computing and networking systems. Revises requirements for annual reports by requiring that such reports: (1) describe Program Component Areas, including any changes in the definition of or activities under such Areas and the reasons for such changes, and describe Grand Challenges supported under the Program; (2) describe the levels of federal funding and the levels proposed for each Program Component Area; (3) describe the levels of federal funding for each agency and department participating in the Program for each such Area; and (4) include an analysis of the extent to which the Program incorporates the recommendations of the advisory committee on high-performance computing. Eliminates the requirement for inclusion of reports on Department of Energy activities taken to carry out the National High-Performance Computing Program. Requires the advisory committee on high-performance computing to conduct periodic evaluations of the funding, management, coordination, implementation, and activities of the Program, and to report at least once every two fiscal years to specified congressional committees. Prohibits applying provisions for the termination, renewal, and continuation of federal advisory committees under the Federal Advisory Committee Act to such advisory committee. Instructs the NSF, as part of the Program, to support basic research related to advanced information and communications technologies that will contribute to enhancing or facilitating the availability and affordability of advanced communications services for all people of the United States. Requires the NSF Director to award multiyear grants to institutions of higher education, nonprofit research institutions affiliated with such institutions, or their consortia to establish multidisciplinary Centers for Communications Research. Increases funding for the basic research activities described in this section, including support for such Centers. Requires the NSF Director to transmit to Congress, as part of the President's annual budget submission, reports on the amounts allocated for support of research under this section. (Sec. 7025) Revises the Science, Mathematics, Engineering, and Technology Talent Expansion program to require the Director to issue grants to institutions of higher education for the creation of not more than five centers to increase the number of students completing undergraduate courses in science, technology, engineering, and mathematics and to improve student academic achievement in such courses. Requires the NSF Director to strive to increase the representation of students from public secondary schools that serve students from families with incomes below the poverty line or are designated with a school locale code of 41, 42, or 43, as determined by the Secretary of Education when providing grants under the Talent Expansion program to increase the number of students studying and completing associate's or bachelor's degrees, concentrations, or certificates in science, technology, engineering, or mathematics by giving priority to programs that heavily recruit female, minority, and disabled students who are from such schools. (Sec. 7026) Requires the NSF Director to establish a Partnerships for Access to Laboratory Science research pilot program for awarding grants to partnerships to improve laboratories and provide instrumentation as part of a comprehensive program to enhance the quality of science, technology, engineering, and mathematics instruction in secondary schools. Requires such partnerships to include significant teacher preparation, unless such preparation is addressed through other means. Limits the federal share of partnership costs to 40%. Requires the Director to report to specified congressional committees not later than five years regarding the program's effect on student achievement. Sunsets the provisions of this section on the last day of FY2010. Authorizes appropriations for the program for FY2008-FY2010. (Sec. 7027) Requires the NSF Director to report to Congress not later than two years on the extent to which institutions of higher education and private entities are donating used laboratory equipment to elementary and secondary schools. (Sec. 7028) Revises requirements for the Mathematics and Science Education Partnership program (Partnership program), which provides grants to institutions of higher education or nonprofit organizations for the improvement of elementary and secondary mathematics and science instruction. Includes the department, college, or program of education at an institution of higher education, in addition to LEAs, state educational agencies, and businesses, among the entities with which institutions of higher education and nonprofit organizations may partner. Adds to the list of grant fund uses: (1) professional development activities to prepare mathematics and science teachers to teach challenging mathematics, science, and technology college-preparatory courses; (2) laboratory training and support for teachers; (3) induction programs (as defined by in section 6113 of this act) for teachers in their first two years of teaching; (4) technology and engineering, in addition to mathematics and science, in the student enrichment programs which are to include after-school programs and summer programs for female, minority, and disabled students; and (5) the development and dissemination of curriculum tools that foster inventiveness and innovation. Requires grantees providing challenging college preparatory courses to encourage companies employing scientists, technologists, engineers, or mathematicians to provide mentors to teachers and students. Requires the Director to transmit to Congress not later than four years of this act's enactment, a summary of partnership evaluations that describes recommended changes to the program. (Sec. 7029) Amends the National Science Foundation Authorization Act of 2002 to provide additional Program requirements for the NSF Teacher Institutes for the 21 st Century. (Sec. 7030) Amends the National Science Foundation Authorization Act of 2002 concerning the Robert Noyce Scholarship Program to: (1) rename such Program the Robert Noyce Teacher Scholarship Program and rewrite Program requirements, including by allowing participation in the Program by an institution of higher education that receives grant funds on behalf of a consortium of institutions of higher education; and (2) require the NSF Director to establish a separate program to award grants to eligible entities to enable them to administer NSF Teaching Fellowships and Master Teaching Fellowships according to this section. Requires that grants be used by participating partnerships to develop and implement a program to recruit and prepare mathematics, science, or engineering professionals to become NSF Teaching Fellows, and to recruit existing teachers to become NSF Master Teaching Fellows. Requires Teaching Fellows and Master Teacher Fellows to serve as a mathematics or science teacher for four years and five years, respectively, in an elementary or secondary school served by a high-need LEA. Requires a 50% matching funds requirement from non-federal sources. Increases Program scholarship amounts and sets stipend amounts. Requires the Director: (1) to transmit to specified congressional committees a report on the effectiveness of the programs carried out under this section; and (2) in consultation with the Secretary of Education, to evaluate whether the scholarships, stipends, and fellowships authorized under this section have been effective in increasing the numbers of high-quality mathematics, and science teachers teaching in high-need LEAs and whether there continue to exist significant shortages of such teachers in such LEAs. (Sec. 7031) Amends the Scientific and Advanced-Technology Act of 1992 to require the establishment of innovative partnership arrangements under the national advanced scientific and technical education program that encourage the participation of female, minority, and disabled students. Requires the NSF Director to: (1) establish a program to encourage and make grants available to institutions of higher education that award associate degrees to recruit and train individuals from the fields of science, technology, engineering, and mathematics to mentor female, minority, and disabled students in order to assist such students in identifying, qualifying for, and entering higher-paying technical jobs in those fields; (2) make grants available to associate-degree-granting colleges to carry out such program; and (3) establish metrics to evaluate programs established by NSF for encouraging female, minority, and disabled students to study and prepare for careers in science, technology, engineering, and mathematics and report annually to Congress on evaluation results. (Sec. 7032) Directs the NSF Director to arrange with the National Academy of Sciences (NAS) for a report to Congress about barriers to increasing the number of underrepresented minorities in science, technology, engineering, and mathematics fields and to identify strategies for bringing more underrepresented minorities into the science, technology, engineering, and mathematics workforce. (Sec. 7033) Authorizes the NSF Director to establish a new program to award grants on a competitive, merit-reviewed basis to Hispanic-serving institutions to enhance the quality of undergraduate science, technology, engineering, and mathematics education at such institutions and to increase the retention and graduation rates of students pursuing associate's or baccalaureate degrees in science, technology, engineering, and mathematics. Specifies that the grants awarded shall support: (1) activities to improve courses and curriculum in science, technology, engineering, and mathematics; (2) faculty development; (3) stipends for undergraduate students participating in research; and (4) other activities consistent with the grant program authorized by this section, as determined by the Director. States that funding for instrumentation is an allowed use of grants awarded under this section. (Sec. 7034) Requires the NSF Director to establish a clearinghouse, in collaboration with four-year institutions of higher education, industries, and federal agencies that employ science-trained personnel, to share program elements used in successful professional science master's degree programs and other advanced degree programs related to science, technology, engineering, and mathematics. Requires the Director to award grants to institutions of higher education to facilitate their creation or improvement of professional science master's degree programs that may include linkages between institutions of higher education and industries that employ science-trained personnel, with an emphasis on practical training and preparation for the workforce in high-need fields. Allows the Director to award up to 200 of such grants, which shall be for a three-year period, with one authorized renewal for an additional two-year period. Requires the Director to evaluate the programs and report evaluation results to Congress. (Sec. 7035) Expresses the sense of Congress that institutions of higher education receiving awards under the NSF Integrative Graduate Education and Research Traineeship program should, among the activities supported under these awards, train graduate students in the communication of the substance and importance of their research to nonscientist audiences. Requires the NSF Director to transmit a report describing . such training programs provided to graduate students who participated in the program. Requires that such report include data on the number of graduate students trained and a description of the types of activities funded. (Sec. 7036) Sets minimum and maximum amounts of awards under the Major Research Instrumentation program. Permits, in addition to the acquisition of instrumentation and equipment, funds made available by awards under the Major Research Instrumentation program to be used to support the operations and maintenance of such instrumentation and equipment. Requires an institution of higher education receiving an award under such program to provide at least 30% of the cost from private or non-federal sources. Exempts institutions of higher education that are not Ph.D.-granting institutions from such cost sharing requirement and allows the NSF Director to reduce or waive such requirement for: (1) certain institutions that are not ranked among the top 100 institutions receiving federal R&D funding; and (2) consortia of institutions of higher education that include at least one institution that is not a Ph.D.-granting institution. (Sec. 7037) Revises the selection process for awards that require the submission of preproposals and that also limit the number of preproposals. Requires the National Science Board to: (1) assess the effects on institutions of higher education of NSF policies regarding the imposition of limitations on the number of proposals that may be submitted by a single institution for programs supported by NSF; (2) determine whether current policies are well justified and appropriate for the types of programs that limit the number of proposal submissions; and (3) summarize in a report the Board's findings and any recommendations regarding changes to the current policy on the restriction of proposal submissions. Title VIII: General Provisions (Sec. 8001) Directs the Secretary of Commerce, acting through the Director of the Bureau of Economic Analysis, not later than January 31, 2008, to report to Congress on the feasibility, annual cost, and potential benefits of a program to collect and study data relating to the export and import of services. (Sec. 8002) Expresses the sense of the Senate that the Securities and Exchange Commission (SEC) and the Public Company Accounting Oversight Board should complete promulgation of the final rules implementing section 404 of the Sarbanes-Oxley Act of 2002 (concerning auditing standards and their effect on small and mid-sized businesses). (Sec. 8003) Directs the Comptroller General, not later than three years after enactment of this act, to submit a report to Congress that (1) assesses a representative sample of the new or expanded programs and activities required to be carried out under this act; and (2) includes recommendations as the Comptroller General determines are appropriate to ensure effectiveness of, or improvements to, the programs and activities, including termination of programs or activities. (Sec. 8004) Expresses the sense of the Senate that federal funds should not be provided to any organization or entity that advocates against a U.S. tax policy that is internationally competitive. (Sec. 8005) Directs the Secretary of Education to arrange with the NAS to conduct a study and provide a report to such Secretary, the Secretary of Commerce, and Congress which shall consider: (1) the mechanisms and supports needed for an institution of higher education or nonprofit to develop and maintain a program to provide free access to online educational content as part of a degree program, especially in science, technology, engineering, mathematics, or foreign languages, without using federal funds, including funds provided under title IV of the Higher Education Act of 1965; and (2) whether such a program could be developed and managed by such institution or nonprofit and sustained through private funding. Authorizes appropriations. (Sec. 8006) Expresses the sense of the Senate that (1) government policies of the U.S. government relating to deemed exports should safeguard US national security and protect fundamental research; (2) the Department of Commerce has established the Deemed Export Advisory Committee to develop recommendations for improving current controls on deemed exports; and (3) the President and Congress should consider the Committee's recommendations in the development and implementation of export control policies. (Sec. 8007) Expresses the sense of the Senate that (1) Congress, the President, regulators, industry leaders, and other stakeholders should take necessary steps to reclaim the preeminent U.S. position in the global financial services marketplace; (2) federal and state financial regulatory agencies should take certain steps to avoid adverse consequences on innovation with respect to financial products and services, and regulatory costs that are disproportionate to their benefits; and (3) Congress should exercise vigorous oversight over federal regulatory and statutory requirements affecting the financial services industry and consumers. (Sec. 8008) Prohibits a grant or contract funded by amounts authorized by this act from being used for defraying the costs of a banquet or conference that is not directly and programmatically related to the purpose for which the grant or contract was awarded. Requires: (1) reporting to the appropriate department, administration, or foundation of the records of total costs related to, and justification for, all banquets and conferences; and (2) such department, administration, or foundation to make such records available to the public not later than 60 days after their receipt. Requires any person awarded a grant or contract funded by such amounts to submit a statement to the Secretary of Commerce, the Secretary of Energy, the Secretary of Education, the Administrator, or the Director, as appropriate, certifying that no funds derived from the grant or contract will be made available through a subcontract or in any other manner to another person who has a financial interest or other conflict of interest in the person awarded the grant or contract, unless such conflict is previously disclosed and approved in the process of entering into a contract or awarding a grant. Provides for the appropriate Secretary, Administrator, or Director to make all documents received that relate to the certification available to the public. Makes such amendments effective 360 days after enactment of this act. Bars such amendments from being applicable to grants or contracts authorized under sections 6201 and 6203 of this act.

The America COMPETES Act (P.L. 110-69) became law on August 9, 2007. The act responds to concerns that the United States may not be able to compete economically with other nations in the future due to insufficient investment today in science and technology research and science, technology, engineering, and mathematics (STEM) education and workforce development. The America COMPETES Act is intended to increase the nation's investment in science and engineering research and in STEM education from kindergarten to graduate school and postdoctoral education. It is designed to focus on two perceived concerns believed to influence future U.S. competitiveness: inadequate research and development funding to generate sufficient technological progress, and inadequate numbers of American students proficient in science and mathematics or interested in science and engineering careers relative to international competitors. The act authorizes funding increases for the National Science Foundation (NSF), National Institute of Standards and Technology (NIST) laboratories, and the Department of Energy (DOE) Office of Science over FY2008-FY2010. If maintained, the increases would double the budgets of those entities over seven years. The act establishes the Advanced Research Projects Agency – Energy (ARPA-E) within DOE, designed to support transformational energy technology research projects with the goal of enhancing U.S. economic and energy security. A new program, Discovery Science and Engineering Innovation Institutes, would establish multidisciplinary institutes at DOE National Laboratories to "apply fundamental science and engineering discoveries to technological innovations," according to the act. Among the act's education activities, many of which are focused on high-need school districts, are programs to recruit new K-12 STEM teachers, enhance existing STEM teacher skills, and provide more STEM education opportunities for students. The new Department of Education (ED) Teachers for a Competitive Tomorrow and existing NSF Robert Noyce Teacher Scholarship programs provide opportunities, through institutional grants, for students pursuing STEM degrees and STEM professionals to gain teaching skills and teacher certification, and for current STEM teachers to enhance their teaching skills and understanding of STEM content. The act also authorizes a new program at NSF that would provide grants to create or improve professional science master's degree (PSM) programs that emphasize practical training and preparation for the workforce in high-need fields. The America COMPETES Act is an authorization act. New programs established by the act will not be initiated and authorized increases in appropriations for existing programs will not occur unless funded through subsequent appropriation acts. The 110th Congress provided FY2008 appropriations to establish ED's Teachers for a Competitive Tomorrow program, and NIST's Technology Improvement Program (TIP), which replaced the existing Advanced Technology Program. The 111th Congress provided FY2009 appropriations to establish DOE's ARPA-E and NSF's PSM program. Although some America COMPETES Act research and STEM education programs received appropriations at or above authorized levels in FY2009, others did not. As Congress deliberates the FY2010 budget, an issue for Congress is what level, if any, will it provide America COMPETES Act programs an appropriation, and whether or not the President's budget request will propose to do so. Several programs newly authorized in the act have never been appropriated funds. An issue for these programs is whether or not they will receive the funding necessary to establish them. The America COMPETES Act provides authorization levels only through FY2010.

FY2010 Budget Request District of Columbia appropriations acts typically include the following three components: 1. S pecial federal payments appropriated by Congress to be used to fund particular initiatives or activities of interest to Congress or the Administration. 2. The District's operating budget , which includes funds to cover the day-to-day functions, activities, and responsibilities of the government, enterprise funds that provide for the operation and maintenance of government facilities or services that are entirely or primarily supported by user-based fees, and long-term capital outlays such as road improvements. District operating budget expenditures are paid for by revenues generated through local taxes (sales and income), federal funds for which the District qualifies, and fees and other sources of funds. 3. G eneral provisions are typically the third component of the District's budget reviewed and approved by Congress. These provisions can be grouped into several distinct but overlapping categories with the most predominant being provisions relating to fiscal and budgetary directives and controls. Other provisions include administrative directives and controls, limitations on lobbying for statehood or congressional voting representation, congressional oversight, and congressionally imposed restrictions and prohibitions related to social policy. The President's Budget Request On May 7, 2009, the Obama Administration released its detailed budget requests for FY2010. The Administration's proposed budget included $739.1 million in special federal payments to the District of Columbia, which was slightly lower than the District's FY2009 appropriation of $742.4 million. Approximately three-quarters ($544.1 million) of the President's proposed budget request for the District would have been targeted to the courts and criminal justice system. This included: $248.4 million in support of court operations; $52.2 million for Defender Services; $203.5 million for the Court Services and Offender Supervision Agency for the District of Columbia, an independent federal agency responsible for the District's pretrial services, adult probation, and parole supervision functions; $1.8 million for the Criminal Justice Coordinating Council; $37.3 million for the public defender's office; and $500,000 to cover costs associated with investigating judicial misconduct complaints and recommending candidates to the President for vacancies to the District of Columbia Court of Appeals and the District of Columbia Superior Court. The President's budget request also included $109.5 million in support of education initiatives, including $74.4 million to support elementary and secondary education and $35.1 million for college tuition assistance. This represented 17% of the Administration's budget request. District's Budget District revenues, like those of most local governments and states, have been negatively affected by the current economic recession. On March 20, 2009, the mayor of the District of Columbia submitted a proposed budget to the District of Columbia Council. On May 12, 2009, the council approved a FY2010 budget that included $8.9 billion in operating funds, $1.4 billion in enterprise funds, and $631.6 million in capital outlays. In June the District's chief financial officer issued 2009 revenue estimates that identified a projected $340 million budget gap, including a $190 million shortfall in FY2009 and a $150 million budget gap for FY2010. On July 16, 2009, the mayor noted that the projected budget shortfall had grown to $603 million, including a $453 million shortfall in FY2009 and a $150 million projected budget gap for FY2010. He also outlined proposals to address the FY2009 and FY2010 revenue shortfalls, including the reallocation or conversion of previous years' unspent dedicated tax revenues to local funds, agency spending reductions and savings, the use of federal stimulus funding from the American Recovery and Reinvestment Act, the sale of District assets, and the use of the city's contingency reserve fund, which must be replenished within two years. Because of efforts to close the budget gap, District officials did not complete final action on the general fund budget for FY2010 until late into the fiscal year. On August 26, 2009, the mayor signed into law the District of Columbia Budget Request Act for FY2010, D.C. Act 18-188. While city officials developed a FY2010 budget to address the projected revenue shortfall, both the House and the Senate took up consideration of other components of the District of Columbia appropriations act, namely, special federal payments and general provisions. Congressional Action Congress not only appropriates federal payments to the District to fund certain activities, but also reviews, and may modify, the District's entire budget, including the expenditure of local funds as outlined in the District's Home Rule Act. Since FY2006, the District's appropriations act has been included in a multi-agency appropriations bill; before FY2006 the District budget was considered by the House and the Senate as a stand-alone bill. It is currently included in the Financial Services and General Government Appropriations Act. House Bill On June 25, 2009, a House subcommittee conducted a markup of the Financial Services and General Government Appropriations Act of 2010, H.R. 3170 , and forwarded the bill to the Appropriations Committee for its consideration. On July 10, 2009, the committee reported out the bill ( H.Rept. 111-202 ), which included $768.3 million in special federal payments to the District. This was $29.2 million more than requested by the Administration and $25.9 million more than appropriated for FY2009. The bill included a substantial increase ($20 million) above the amount requested by the Administration for court operations. The bill also would have directed $20 million in additional funding to support the District of Columbia Public Schools while reducing funding for school vouchers by almost $2 million. On July 16, 2009, the House approved H.R. 3170 by a vote of 219 to 208 (Roll no. 571). General Provisions The House bill included several general provisions governing budgetary and fiscal operations and controls including prohibiting deficit spending within budget accounts, establishing restrictions on the reprogramming of funds, and allowing the transfer of local funds to capital and enterprise fund accounts. In addition, the bill would have required the city's Chief Financial Officer to submit a revised operating budgets for all District government agencies and the District public schools within 30 days after the passage of the bill. The House bill also included several general provisions relating to statehood or congressional representation for the District, including provisions that would have continue prohibiting the use of federal funds to: support or defeat any legislation being considered by Congress or a state legislature; cover salaries, expenses, and other costs associated with the office of Statehood Representative and Statehood Senator for the District of Columbia; and support efforts by the District of Columbia Attorney General or any other officer of the District government to provide assistance for any petition drive or civil action seeking voting representation in Congress for citizens of the District. In addition, the bill proposed significant changes in a number of controversial provisions (social riders) that city officials had sought to eliminate or modify, including those related to medical marijuana, needle exchange, and abortion services. Despite objections raised by Republican Members of the House, the bill was brought to the floor under a restrictive rule ( H.Res. 644 ) that did not allow Members to offer amendments on several controversial provisions related to same-sex marriage, medical marijuana, abortion, and needle exchange. As passed by the House, H.R. 3170 proposed retaining the prohibition on the use of federal funds, but recommended lifting the prohibition on the use of District funds to: provide abortion services; and regulate the medical use of marijuana. The bill also would called for eliminating the prohibition on the use of both federal and District funds to support a needle exchange program so long as the distribution of sterile hypodermic syringes was not conducted within 1,000 feet of certain public facilities or youth-oriented activity centers, including schools, colleges and universities, parks, playgrounds, and recreational centers. The House-passed provisions represented a lifting of restrictions on the use of District and federal funds that were put in place when Republicans controlled the House. Removal of these so-called social riders has been long sought by District officials who viewed them as antithetical to the concept of home rule. Senate Bill On July 8, 2009, the Senate Appropriations Committee reported S. 1432 , its version of the Financial Services and General Government Appropriations Act for FY2010, with an accompanying report ( S.Rept. 111-43 ). As reported, the bill recommended $727.4 million in special federal payments to the District. This was $40 million less than recommended by the House, and $12 million less than requested by the Administration. The bill included $10 million more in funding for court operations than recommended by the Administration. It would have appropriated an additional $21 million in funding to support the District of Columbia Public Schools while increasing funding for school vouchers by almost $1 million. General Provision The Senate bill's general provisions mirrored some of the language included in the House bill. Like the House bill, S. 1432 included provisions governing budgetary and fiscal operations and controls. It also included provisions restricting the use of federal funds to support District statehood or congressional voting representation, including provisions that would have continue prohibiting the use of federal fund s to : support or defeat any legislation being considered by Congress or a state legislature; cover salaries expenses and other costs associated with the office of Statehood Representative and Statehood Senator for the District of Columbia; and support efforts by the District of Columbia Attorney General or any other officer of the District government to provide assistance for any petition drive or civil action seeking voting representation in Congress for citizens of the District. The bill also included changes in two provisions that city officials have sought to eliminate or modify. The bill proposed: lifting the prohibition on the use of District funds to provide abortion services, which was consistent with the House bill; maintaining the prohibition of the use of federal and District funds to regulate and decriminalize the medical use of marijuana (unlike the House bill it would have allowed the use of District funds to regulate medical marijuana); and maintaining the current prohibition on the use of federal funds to support a needle exchange program (unlike the House bill, which would have lifted the restriction on both federal and District funding for such a program). Enacted Provisions Congress was unable to complete action on the Financial Service and General Government Appropriations Act for FY2010, H.R. 3170 and S. 1432 , before the beginning of FY2010. Instead it passed a continuing budget resolution providing short term funding for federal agencies and priorities while working on a consolidated appropriations act for FY2010. On October 1, 2009, President Obama signed the Continuing Appropriations Resolution for FY2010, P.L. 111-68 . The act included a provision (Division B, Sec. 126) allowing the District of Columbia government to spend locally generated funds (operating budget) at a rate set forth in the budget approved by the District of Columbia in D.C. Act 18-118. On December 8, 2009, a conference committee reported H.R. 3288 , the Consolidated Appropriations Act for FY2010, which included the FY2010 appropriations for the District of Columbia. The conference report, H.Rept. 111-366 , which accompanied the bill, was approved by the House on December 10, 2009 and by the Senate on December 13, 2009. The bill was signed into law as P.L. 111-117 , the Consolidated Appropriations Act of FY2010, by the President on December 16, 2009. The act included $752.2 million in special federal payments to the District of Columbia. This is $13.1 million more than requested by the President, $24.8 million more than recommended by the Senate Appropriations Committee, but $16.1 million less than recommended by the House. The act also included a substantial increase ($12 million) above the amount appropriated in FY2009 for court operations. In addition, it directed $20 million in additional funding to support the District of Columbia Public Schools, while reducing funding for school vouchers by almost $1 million. General Provisions Consistent with the House bill, P.L. 111-117 included several general provisions relating to statehood or congressional representation for the District, including provisions that continued the practice of prohibiting the use of federal funds to: support or defeat any legislation being considered by Congress or a state legislature; cover salaries, expenses, or other costs associated with the office of Statehood Representative and Statehood Senator for the District of Columbia; and support efforts by the District of Columbia Attorney General or any other officer of the District government to provide assistance for any petition drive or civil action seeking voting representation in Congress for citizens of the District. While the statute extended these proscriptions, it also included significant changes in a number of controversial provisions related to medical marijuana, needle exchange, and abortion services. P.L. 111-117 : lifts the prohibition on the use of District funds to provide abortion services, but continues to restrict the use of federal funds for such purposes, except in cases of rape, incest, or threat to the mother's life; allows the use of District, but not federal, funds to regulate and decriminalize the medical use of marijuana; and eliminates the prohibition on the use of both federal and District funds to support a needle exchange program. Removal of these so called social riders had been long sought by District officials who viewed them as antithetical to the concept of home rule. Special Federal Payments Both the President and Congress may propose financial assistance to the District in the form of special federal payments in support of specific activities or priorities. The Obama Administration budget proposals for FY2010 included a request for $739.1 million in special federal payments for the District of Columbia. The Financial Services and General Government Appropriations Act for FY2010, H.R. 3170 , as reported by the House Appropriations Committee on July 10, 2009, included $768.3 million in special federal payments to the District of Columbia. Two days earlier, on July 8, 2009, the Senate Appropriations Committee reported its version of the Financial Services and General Government Appropriations Act, S. 1432 . The Senate bill recommended $727.4 million in special federal payments for the District of Columbia. On December 16, 2009, President Obama signed into law the Consolidated Appropriations Act of FY2010, P.L. 111-117 , which included $752.2 million in special federal payments for the District of Columbia Table 2 of this report shows details of the District's federal payments, including the FY2009 enacted amounts, the amounts included in the President's FY2010 budget request, the amounts recommended by the House and Senate Appropriations Committees, and the amount enacted with the passage of P.L. 111-117 . Local Operating Budget On May 12, 2009, the District of Columbia Council approved a FY2010 operating budget that totaled $8.9 billion dollars ( Table 3 ). However, the mayor did not sign the bill because of concerns raised about declining revenue projections. On July 17, 2009, the mayor submitted a revised budget for the council's consideration. Two weeks later, on July 31, 2009, the city council approved a modified FY2010 budget in an effort to close what was then projected as a $150 million budget gap. On August 26, the mayor signed into law the Second Fiscal Year 2010 Budget Request Act of 2009, D.C. Act 18-188. On October 1, 2009, President Obama signed the Continuing Budget Resolution for FY2010, P.L. 111-68 . Section 126 of Division B of that act released the city's General Fund (operating budget) from further congressional review, allowing the city to spend its local funds as outlined in D.C. Act 18-188. Key Policy Issues Needle Exchange Whether to continue a needle exchange program or whether to use federal or District funds to address the spread of HIV and AIDS among intravenous drug abusers is one of several key policy issues that Congress faced in reviewing the District's appropriations for FY2010. The controversy surrounding funding a needle exchange program touches on issues of home rule, public health policy, and government sanctioning and facilitating the use of illegal drugs. Proponents of a needle exchange program contend that such programs reduce the spread of HIV among illegal drug users by reducing the incidence of shared needles. Opponents of these efforts contend that such programs amount to the government sanctioning illegal drugs by supplying drug-addicted persons with the tools to use them. In addition, they contend that public health concerns raised about the spread of HIV and AIDS through shared contaminated needles should be addressed through drug treatment and rehabilitation programs. Another view in the debate focuses on the issue of home rule and the city's ability to use local funds to institute such programs free from congressional 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 Columbia Appropriations Act for FY1999, P.L. 105-277 . The 1999 act did allow private funding of needle exchange programs. The District of Columbia Appropriations Act for FY2001, P.L. 106-522 , continued the prohibition on the use of federal and District funds for a needle exchange program; it also restricted the location of privately funded needle exchange activities. Section 150 of the District of Columbia Appropriations Act for FY2001 made it unlawful to distribute any needle or syringe for the hypodermic injection of any illegal drug in any area in the city that is within 1,000 feet of a public elementary or secondary school, including any public charter school. The provision was deleted during congressional consideration and passage of the District of Columbia Appropriations Act of FY2002, P.L. 107-96 . The act also included a provision that allowed the use of private funds for a needle exchange program, but it prohibited the use of both District and federal funds for such activities. At present, one entity, Prevention Works, a private nonprofit AIDS awareness and education program, operates a needle exchange program. The FY2002 District of Columbia Appropriations Act required such entities to track and account for the use of public and private funds. During consideration of the FY2004 District of Columbia Appropriations Act, District officials unsuccessfully sought to lift the prohibition on the use of District funds for needle exchange programs. A Senate provision, which was not adopted, proposed prohibiting only the use of federal funds for a needle exchange program and allowing the use of District funds. The House and final conference versions of the FY2004 bill allowed the use of private funds for needle exchange programs and required private and public entities that receive federal or District funds in support of other activities or programs to account for the needle exchange funds separately. The Financial Services and General Government Appropriations Act for FY2008, P.L. 110-161 , contained language that modified the needle exchange provision included in previous appropriations acts. The act allowed the use of District funds for a needle exchange program aimed at reducing the spread of HIV and AIDS among users of illegal drugs. The provision was a departure from previous appropriations acts which prohibited the use of both District and federal funds in support of a needle exchange program. In addition, the explanatory statement accompanying the act encouraged the George W. Bush Administration to include federal funding to help the city address its HIV/AIDS health crisis. For FY2010, the District was again seeking to lift the restriction on the use of local funds to finance a needle exchange program. The President's budget proposal for FY2010 and S. 1432 , as reported by the Senate Appropriations Committee, included language that would have retained the then current law that allowed the use of District funds, but prohibited the use of federal funds, in support of a needle exchange program. However, H.R. 3170 as approved by the House on July 16, 2009, would have allowed the use of District and federal funds for a needle exchange program. The bill proposed prohibiting the distribution of sterile hypodermic needles within 1,000 feet of certain youth-oriented public institutions and activity centers, including schools, colleges and universities, and recreational centers. Consistent with the Administration's budget proposal and the Senate Appropriations Committee's reported bill, P.L. 111-117 allows the use of District, but not federal, funds to administer a needle exchange program. Medical Marijuana The city's medical marijuana initiative is another issue that engenders controversy. The District of Columbia Appropriations Act for FY1999, P.L. 105-277 (112 Stat. 2681-150), included a provision that prohibited the city from counting ballots of a 1998 voter-approved initiative that would have allowed the medical use of marijuana to assist persons suffering from debilitating health conditions and diseases, including cancer and HIV infection. Congress's power to prohibit the counting of a medical marijuana ballot initiative was challenged in a suit filed by the DC Chapter of the American Civil Liberties Union (ACLU). On September 17, 1999, District Court Judge Richard Roberts ruled that Congress, despite its legislative responsibility for the District under Article I, Section 8, of the Constitution, did not possess the power to stifle or prevent political speech, which included the ballot initiative. This ruling allowed the city to tally the votes from the November 1998 ballot initiative. To prevent the implementation of the initiative, Congress had 30 days to pass a resolution of disapproval from the date the medical marijuana ballot initiative (Initiative 59) was certified by the Board of Elections and Ethics. Language prohibiting the implementation of the initiative was included in P.L. 106-113 (113 Stat. 1530), the District of Columbia Appropriations Act for FY2000. Opponents of the provision contend that such congressional actions undercut the concept of home rule. The District of Columbia Appropriations Act for FY2002, P.L. 107-96 (115 Stat. 953), included a provision that continued to prohibit the District government from implementing the initiative. Congress's power to block the implementation of the initiative was again challenged in the courts. On December 18, 2001, two groups, the Marijuana Policy Project and the Medical Marijuana Initiative Committee, filed suit in U.S. District Court, seeking injunctive relief in an effort to put another medical marijuana initiative on the November 2002 ballot. The District's Board of Elections and Ethics ruled that a congressional rider that has been included in the general provisions of each District appropriations act since 1998 prohibits it from using public funds to do preliminary work that would put the initiative on the ballot. On March 28, 2002, a U.S. district court judge ruled that the congressional ban on the use of public funds to put such a ballot initiative before the voters was unconstitutional. The judge stated that the effect of the amendment was to restrict the plaintiff's First Amendment right to engage in political speech. The decision was appealed by the Justice Department, and on September 19, 2002, the U.S. Court of Appeals for the District of Columbia Circuit reversed the ruling of the lower court without comment. The appeals court issued its ruling on September 19, 2002, which was the deadline for printing ballots for the November 2002 general election. On June 6, 2005, the Supreme Court, in a six-to-three decision, ruled that Congress possessed the constitutional authority under the Commerce clause to regulate or prohibit the interstate marketing of both legal and illegal drugs. This includes banning the possession of drugs in states and the District of Columbia that have decriminalized or permitted the use of marijuana for medical or therapeutic purposes. The President's budget proposal and S. 1432 , as reported by the Senate Appropriations Committee, recommended maintaining the status quo of prohibiting the use of federal and District funds to decriminalize and regulate the medical use of marijuana. Conversely, H.R. 3170 , as passed by the House, recommended lifting the prohibition on the use of both District and federal funds to legalize the use of marijuana for medical or therapeutic purposes. P.L. 111-117 removes the prohibition on the use of District funds for to regulate and legalize the medical use of marijuana. 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 District of Columbia appropriations. District officials have cited the prohibition on the use of District funds as another example of congressional intrusion into local matters. Since 1979, with the passage of the District of Columbia Appropriations Act of 1980, P.L. 96-93 (93 Stat. 719), Congress has placed some limitation or prohibition on the use of public funds for abortion services for District residents. From 1979 to 1988, Congress restricted the use of federal funds for abortion services to cases where the mother's life was endangered or the pregnancy resulted from rape or 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 (102 Stat. 2269-9), it restricted the use of District and federal funds for abortion services to cases where the mother's life would be endangered if the pregnancy were taken to term. The inclusion of District funds, and the elimination of rape or incest as qualifying conditions for public funding of abortion services, was endorsed by President Reagan, who threatened to veto the District's appropriations act if the abortion provision was not modified. In 1989, President George H.W. Bush twice vetoed the District's FY1990 appropriations act over the abortion issue. He signed P.L. 101-168 (103 Stat. 1278) after insisting that Congress include language prohibiting the use of District revenues to pay for abortion services except in cases where the mother's life was endangered. The District successfully sought the removal of the provision limiting District funding of abortion services when Congress considered and passed the District of Columbia Appropriations Act for FY1994, P.L. 103-127 (107 Stat. 1350). The FY1994 act also reinstated rape and incest as qualifying circumstances allowing for the public funding of abortion services. The District's success was short-lived, however. The District of Columbia Appropriations Act for FY1996, P.L. 104-134 (110 Stat. 1321-91), and subsequent District of Columbia appropriations acts, limited the use of District and federal funds for abortion services to cases where the mother's life was endangered or cases where the pregnancy was the result of rape or incest. Both H.R. 3170 and S. 1432 , proposed lifting the prohibition on the use of District funds to provide abortion services, but recommended continuing the prohibition on the use of federal funds for abortions. The Obama Administration proposed revising language included in previous years appropriations acts prohibiting the use of District and federal funds for abortion services, but would have essentially continue to restrict the use of public funds for abortion services except in cases of rape, incest, or the woman's health is threatened. The language proposed by the Administration, and included in its budget appendix, would have prohibit the use of federal funds for abortion services, including any health insurance plan that may be funded in part with federal funds. However, this restriction was not apply if the pregnancy was the result of rape or incest, or the woman suffered from a disorder, injury, condition, or illness that endangered her life. The provision included a clarifying clause that noted that the restriction on the use of federal funds would not prohibit the use of District or private funds, except the District's Medicaid matching fund contribution. P.L. 111-117 lifts the prohibition on the use of District funds for abortion services, but maintains the restriction on the use of federal funds for such services except in cases of rape, incest, or a threat to the life of the mother. District of Columbia Opportunity Scholarship Program17 The Consolidated Appropriations Act for FY2004, P.L. 108-199 , which combined six appropriations bills—including the FY2004 District of Columbia Appropriations Act—authorized and appropriated funding for the Opportunity Scholarship program, a federally funded school voucher program for the District of Columbia. It also provided funding for the District of Columbia Public Schools (DCPS) for the improvement of public education and for the State Education Office for public charter schools. The provision of federal funds for DCPS, public charter schools, and vouchers is commonly referred to as the "three-prong approach" to supporting elementary and secondary education in the District of Columbia. More specifically, the Opportunity Scholarship program was enacted under the D.C. School Choice Incentive Act of 2003, which was included in P.L. 108-199 . The Opportunity Scholarship program provides scholarships (also known as vouchers) to students in the District of Columbia to attend participating private elementary and secondary schools, including religiously affiliated private schools. Appropriations for the program were authorized through FY2008. While the program is no longer authorized, appropriations for the program were provided through FY2009 under the Omnibus Appropriations Act, 2009, P.L. 111-8 , which are to be used to fund vouchers for students currently enrolled in the program for the 2009-2010 school year. P.L. 111-8 specified that the use of any funds in any act for Opportunity Scholarships after the 2009-2010 school year shall be available only upon reauthorization of the program and the adoption of legislation by the District of Columbia approving such reauthorization. The Administration's FY2010 budget request proposed eliminating this restriction on funding and sought continued appropriations for the Opportunity Scholarship program, as well as school improvement funding for DCPS and public charter schools in the District of Columbia. H.R. 3288 , the Consolidated Appropriations Act for FY2010, which was signed into law on December 16, 2009 as P.L. 111-117 , appropriated $42.2 million to DCPS, $20 million to public charter schools, and $13.2 million for Opportunity Scholarships. The act does place eligibility restrictions on Opportunity Scholarships, specifying that only students who received scholarships in the 2009-2010 school year may be eligible to receive additional funds for Opportunity Scholarships.

On May 7, 2009, the Obama Administration released its detailed budget requests for FY2010, which included $739.1 million in special federal payments to the District of Columbia. Approximately three-quarters—$544.1 million—of the President's proposed budget request for the District would be used to support the courts and criminal justice system. The President also requested $109.5 million in support of college tuition assistance and elementary and secondary education initiatives. On May 12, 2009, the District of Columbia Council passed the city's FY2010 operating budget. The bill, which was not signed by the mayor, proposed an operating fund budget of $8,917.8 million, and included $1,433.1 million in enterprise funds. However, on July 17, 2009, the mayor submitted a revised budget to address a growing budget shortfall currently projected at $150 million for FY2010. This delay in the submission of a budget for congressional review is due in large part to declining revenue projections related to the current economic recession. According to the mayor and the city's chief financial officer, the city faces the task of closing a $603 million budget gap, including a $453 million shortfall in its current FY2009 budget and a $150 million projected shortfall for FY2010. In the absence of a formal submission of the city's budget, Congress has begun consideration of special federal payments and general provision components of the District appropriations act. On July 8, 2009, the Senate Appropriations Committee reported its version of the Financial Services and General Government Appropriations Act for FY2010, S. 1432 with an accompanying report (S.Rept. 111-43). As reported, the bill recommends $727.4 million in special federal payments to the District. This is $40 million less than recommended by the House, and $12 million less than requested by the Administration. On July 16, 2009, the House approved the Financial Services and General Government Appropriations Act for FY2010, H.R. 3170, by a vote of 219 to 208 (Roll no. 571). The bill included $768.3 million in special federal payments to the District. This was $29.2 million more than requested by the Administration and $25.9 million more than appropriated for FY2009. On October 1, 2009, President Obama signed, P.L. 111-68, Continuing Appropriations Resolution for FY2010. The act included a provision (Division B, Sec. 126) allowing the District of Columbia government to spend locally generated funds at a rate set forth in the budget approved by the District of Columbia on August 26, 2009. On December 16, 2009, President Obama signed into law the Consolidated Appropriations Act for FY2010, P.L. 111-117, which included $752.2 billion in special federal payments to the District of Columbia. The act included significant changes in a number of controversial provisions related to medical marijuana, needle exchange, and abortion services. P.L. 111-117 lifts the prohibition on the use of District funds to: provide abortion services, regulate and decriminalize the medical use of marijuana, and support a needle exchange program to stop the spread of AIDS and HIV infections. Removal of these so called social riders had been long sought by District officials who viewed them as antithetical to the concept of home rule.

Introduction The Foreign Intelligence Surveillance Act of 1978 (FISA), P.L. 95-511 , 50 U.S.C. § 1801 et seq., as amended, provides a statutory framework for the U.S. government to engage in electronic surveillance and physical searches to obtain foreign intelligence information. It also provides a statutory structure for the installation and use of pen registers and trap and trace devices for use in federal investigations to obtain foreign intelligence information not concerning a U.S. person or to protect against international terrorism or clandestine intelligence activities. Such an investigation of a U.S. person may not be conducted solely on the basis of activities protected by the First Amendment to the Constitution. In addition, FISA provides statutory authority for the Director of the Federal Bureau of Investigation (FBI) or his designee to seek a U.S. Foreign Intelligence Surveillance Court (FISC) order authorizing the production of any tangible things (including books, records, papers, documents, and other items) for an investigation to obtain foreign intelligence information not concerning a U.S. person or to protect against international terrorism or clandestine intelligence activities. Again, such an investigation of a U.S. person may not conducted solely on the basis of First Amendment-protected activities. A production order for tangible things may be accompanied by a nondisclosure order. Under Section 501(d) of FISA, 50 U.S.C. § 1861(d), no person shall disclose to any other person that the FBI has sought or obtained tangible things pursuant to an order under this section, other than to those persons to whom disclosure is necessary to comply with such order, an attorney to obtain legal advice or assistance with respect to the production of things in response to the order, or other persons as permitted by the Director of the FBI or the designee of the Director. A person to whom a disclosure is made is also subject to the nondisclosure requirements. Any person making or intending to make a disclosure to a person to whom disclosure is necessary to comply with the order or to whom disclosure is permitted by the Director of the FBI or his designee must, at the request of the Director or his designee, identify the person to whom disclosure is to be or has been made. With limited exceptions, electronic surveillance and physical searches may be conducted under FISA pursuant to court orders issued by a judge of the FISC, and pen registers and trap and trace devices may be installed and used pursuant to the order of a FISC judge or a U.S. Magistrate Judge authorized to act in that judge's behalf. In all instances in which the production of any tangible thing is required under FISA, an order from a FISC judge or a U.S. Magistrate Judge authorized to act in the judge's behalf must be obtained. Appeals from the denial of applications for FISC orders approving electronic surveillance, physical search, or production of tangible things may be made by the U.S. government to the U.S. Foreign Intelligence Court of Review (Court of Review). If the denial of an application is upheld by the Court of Review, a petition for certiorari may be filed to the U.S. Supreme Court. This report discusses the creation and structure of the Foreign Intelligence Surveillance Court and the Foreign Intelligence Court of Review and their respective jurisdictions. Membership and Structure of the U.S. Foreign Intelligence Surveillance Court and the U.S. Foreign Intelligence Surveillance Court of Review Section 103 of the Foreign Intelligence Surveillance Act, as amended, 50 U.S.C. § 1803, establishes the U.S. Foreign Intelligence Surveillance Court and the U.S. Foreign Intelligence Surveillance Court of Review. The FISC is composed of 11 U.S. district court judges publicly designated by the Chief Justice of the United States from seven circuits, at least three of whom must reside within 20 miles of the District of Columbia. The Chief Justice publicly designates one of the FISC judges to be presiding judge. Although there is a procedure for the publication of FISC opinions, such publication is extremely rare. Only one opinion has been published since the court's inception in 1978, In re All Matters Submitted to the Foreign Intelligence Surveillance Court , 218 F. Supp. 2d 611 (U.S. Foreign Intell. Surveil. Ct. 2002). Under Foreign Intelligence Surveillance Court Rule 5(c), [o]n request by a Judge, the Presiding Judge, after consulting with other Judges of the Court, may direct that an Opinion be published. Before publications, the Opinion must be reviewed by the Executive Branch and redacted, as necessary, to ensure that properly classified information is appropriately protected pursuant to Executive Order 12958 as amended by Executive Order 13292 (or its successor). Three of the FISC judges who reside within 20 miles of the District of Columbia, or, if all of those judges are unavailable, other FISC judges designated by the presiding judge of the FISC, comprise a petition review pool that has jurisdiction to review petitions filed pursuant to subsection 501(f)(1) of FISA, 50 U.S.C. § 1861(f)(1), to challenge a production order for tangible things in a foreign intelligence, international terrorism, or clandestine intelligence activities investigation under section 501 of FISA, or a nondisclosure order imposed in connection with such a production order. The Court of Review is composed of three judges publicly designated by the Chief Justice from the United States district courts or courts of appeals. The Chief Justice also publicly designates one of the three judges as the presiding judge of the court. Only one opinion has been published by the Court of Review, In re Sealed Case , 310 F.3d 717 (U.S. Foreign Intell. Surveil. Ct. Rev. 2002), which is the first opinion the court has issued. Each FISC and Court of Review judge serves for a maximum of seven years and is not eligible for redesignation. Jurisdiction of the U.S. Foreign Intelligence Surveillance Court Electronic Surveillance and Physical Searches The FISC has jurisdiction to hear applications for and to grant court orders approving electronic surveillance or physical searches anywhere in the United States to obtain foreign intelligence information under FISA. No FISC judge may hear an application for electronic surveillance or a physical search under FISA that has been denied previously by another FISC judge. In general, such applications are either granted, granted as modified, or denied. If a FISC judge denies an application for an order authorizing electronic surveillance under FISA, such judge shall provide immediately for the record a written statement of each reason for his or her decision and, on motion of the United States, the record shall be transmitted, under seal, to the Court of Review. Proceedings in the FISC, conducted pursuant to procedures adopted under subsection 103(f)(1) of FISA, 50 U.S.C. § 1803(f)(1), and proceedings of the Court of Review, are to be conducted as expeditiously as possible. The record of such proceedings, including applications made and orders granted, must be maintained under security measures established by the Chief Justice in consultation with the Attorney General and the Director of National Intelligence. Pen Registers and Trap and Trace Devices Either a FISC judge or a U.S. Magistrate Judge publicly designated by the Chief Justice to act on behalf of such judge may hear applications for and grant orders approving installation and use of pen registers and trap and trace devices for an investigation to obtain foreign intelligence information not concerning a U.S. person or to protect against international terrorism or clandestine intelligence activities, provided that such investigation of a U.S. person is not conducted solely on the basis of activities protected by the First Amendment to the Constitution. Production of Tangible Things As in the case of pen registers and trap and trace devices, either a FISC judge or a U.S. Magistrate Judge publicly designated by the Chief Justice to act on behalf of such judge may hear applications for and grant orders approving production of any tangible thing for an investigation to obtain foreign intelligence information not concerning a U.S. person or to protect against international terrorism or clandestine intelligence activities, provided that such investigation of a U.S. person is not conducted solely upon the basis of activities protected by the First Amendment to the Constitution. Review of Petitions Challenging Production Orders for Tangible Things or Related Nondisclosure Orders A person who receives a production order may challenge that order by filing a petition with the petition review pool created by section 103(e) of FISA, 50 U.S.C. § 1803(e). The recipient of a production order must wait at least a year before challenging the nondisclosure order imposed in connection with that production order by filing a petition with the petition review pool to modify or set aside the nondisclosure order. If the judge denies a petition to modify or set aside a nondisclosure order, the recipient of such order must wait at least another year before filing another such petition with respect to such nondisclosure order. Any production or nondisclosure order not explicitly modified or set aside remains in full effect. Judicial proceedings under this subsection are conducted under the Procedures for Review of Petitions filed pursuant to Section 501(f) of the Foreign Intelligence Surveillance Act of 1978, as Amended, and are to be concluded as expeditiously as possible. The record of proceedings, including petitions filed, orders granted, and statements of reasons for decision, are maintained under security measures established by the Chief Justice of the United States, in consultation with the Attorney General and the Director of National Intelligence. All petitions under this subsection are filed under seal. In any proceedings under this subsection, the court shall, upon request of the government, review ex parte and in camera any government submission, or portions thereof, that may include classified information. Motions to suppress information obtained by or derived from electronic surveillance, physical search, or pen registers or trap and trace devices under FISA are heard by U.S. district courts The procedure for challenging production or nondisclosure orders before the petition review pool of the FISC contrasts with that applicable to motions to suppress information obtained through or derived from electronic surveillance, physical search, or the installation and use of a pen register or trap and trace device under FISA, which a federal, state, or local government intends to use or disclose in a trial or other official proceeding. If a federal, state, or local government intends to use or disclose information obtained by or derived from a FISC order authorizing electronic surveillance, a physical search, or the use of a pen register or trap and trace device, any challenges to the use or disclosure of that information must be made in the U.S. district court in which the motion or request is made, or, if the motion or request is made before another federal, state, or local authority, in the United States district court in the same district as that authority. Such challenges may include motions to suppress made under FISA by an "aggrieved person" against whom such information is intended to be used or disclosed; and any motion or request made by an aggrieved person pursuant to any other statute or rule of the United States or any state before any court or other authority of the United States or any state to discover or obtain applications or orders or other materials relating to FISA electronic surveillance, physical search, or use of a pen register or trap and trace device or to discover, obtain, or suppress evidence or information obtained or derived from the use of such investigative techniques under FISA. Similar, but not identical, to the proceedings before the petition review panel regarding production orders or nondisclosure orders, the U.S. district court proceedings addressing motions to suppress information obtained by or derived from a FISA electronic surveillance, physical search, or pen register or trap and trace device, or seeking to discover or obtain related materials may be considered ex parte and in camera if the Attorney General files an affidavit under oath that disclosure or any adversary hearing would harm the national security of the United States. If the United States district court determines that the electronic surveillance, physical search, or installation and use of the pen register or trap and trace device in regard to the aggrieved person was not lawfully authorized or conducted, it shall, in accordance with the requirements of law, suppress the evidence that was unlawfully obtained or derived therefrom or otherwise grant the motion of the aggrieved person. If the court determines that the electronic surveillance, physical search, or installation and use of a pen register or trap and trace device was lawfully authorized or conducted, it shall deny the motion of the aggrieved person except to the extent that due process requires discovery or disclosure. Orders granting such motions or requests, decisions that a FISA electronic surveillance, physical search, or installation and use of a pen register or trap and trace device was not lawfully authorized or conducted, and orders of the United States district court requiring review or granting disclosure of applications, orders, or other materials relating thereto shall be final orders and binding upon all courts of the United States and the several states except a United States Court of Appeals or the Supreme Court. Jurisdiction of the Court of Review The government may seek review of a denial of an application for a court order under FISA authorizing electronic surveillance, physical search, or production of any tangible thing before the Court of Review. If the denial is upheld by the Court of Review, the government may seek U.S. Supreme Court review of the decision by a petition for certiorari. In addition, the Court of Review has jurisdiction over petitions for review of a decision under section 501(f)(2) of FISA, 50 U.S.C. § 1861(f)(2), to affirm, modify, or set aside a production order or nondisclosure order filed by the government or any person receiving such an order. Upon the request of the government, any order setting aside a nondisclosure order shall be stayed pending such review. The Court of Review shall provide for the record a written statement of the reasons for its decision and, on petition by the government or any person receiving such order for writ of certiorari, the record shall be transmitted under seal to the Supreme Court of the United States, which shall have jurisdiction to review such decision. U.S. Supreme Court Jurisdiction The U.S. Supreme Court has jurisdiction, on a petition for certiorari, to review decisions of the Court of Review affirming a denial of an application for an order authorizing electronic surveillance, physical searches, production orders, or nondisclosure orders under FISA.

The national debate regarding the National Security Agency's Terrorist Surveillance Program (TSP) focused congressional attention on the U.S. Foreign Intelligence Surveillance Court and the U.S. Foreign Intelligence Surveillance Court of Review created by the Foreign Intelligence Surveillance Act. Congressional interest in these courts has been heightened by the January 17, 2007, letter from Attorney General Gonzales to Chairman Leahy and Senator Specter advising them that a Foreign Intelligence Surveillance Court judge had "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," stating that all surveillance previously occurring under the TSP will now be conducted subject to the approval of the Foreign Intelligence Surveillance Court, and noting that the President has determined not to reauthorize the TSP when the current authorization expires. This report examines the creation, membership, structure, and jurisdiction of these courts. It will be updated as subsequent events may require.

A New Paradigm The globalized American economy poses challenges for U.S. trade and regulatory policy. The traditional paradigm for policy was that the American economy consisted of U.S. businesses that operated primarily in the domestic market, hired U.S. workers, and sold to U.S. consumers, but some production was either imported or exported. International trade took place between countries according to each nation's competitive and comparative advantage. A trade policy aimed at a particular country had impact on businesses in that country. Only indirectly would adverse effects rebound to harm U.S. business interests such as when foreign governments retaliated in kind. U.S. import restrictions assisted competing industries in the U.S. market even though those restrictions also generally raised prices for American consumers. The world now has changed. Like a child's neural network, the global economy is constantly organizing and reorganizing itself with new linkages, supply networks, manufacturing chains, and marketing channels that rise in response to market forces and government policies. This integrated world economy raises both challenges and opportunities for U.S. policymakers. How U.S. policy responds to this new reality directly affects the well-being of Americans. The existing paradigm based on geographical boundaries, country-to-country trade, vertical integration of manufacturing, and retailers acting as market takers rather than as market makers seems to be in need of updating. A new policy paradigm should account for the evolving world of business in which large U.S. manufacturers and providers of services have become part of increasingly complex international chains in which parts and components are made in multiple locations and assembled in others. In the delivery of services, some still require face-to-face contact (e.g., airline passenger travel or food services) but other business services can be delivered through high speed Internet connections (e.g., computer programming, data analysis, customer relations, or ticket sales). International trade now is less between countries than it is within a global supply network that may include headquarters, design, branding, and engineering in the United States but manufacturing in China with parts from Singapore, Japan, and the European Union and call center services in India. For example, a U.S. company may make a computer in Shanghai, but it could have been assembled from chips designed in Texas with a motherboard from Taiwan and manufactured according to specifications by the U.S. brand-name holder in California with software from Washington state and shipped through Hong Kong directly to a retailer either in the American market or abroad. The product service department might be located partly in India or the Philippines. Such supply chain relations tend to be long-term with "upstream" processes directly connected to "downstream" activities and both pitfalls and opportunities for policy at various junctures in the supply chain. Some supply chain relationships are cemented through ownership ties, but others are contractual. In either case, the relationships tend to be long-term in which product development, design, and manufacturing tends to be a collaborative process. One indicator of the extent to which international trade increasingly is being conducted within companies can be seen in data on exports and imports by U.S. non-bank multinational companies (MNCs) with affiliated and non-affiliated companies. Note that many non-affiliated companies may belong to a company's supply chain. As shown in Figure 1 , in 2007, U.S. MNCs exported $214 billion to their foreign affiliated companies and $344 billion to non-affiliated companies. These exports accounted for 44% of all U.S. exports of goods in that year. U.S. MNCs also imported $272 billion from their foreign affiliated companies and $456 from non-affiliates. This accounted for 34% of all U.S. imports. In 2007, U.S. parent non-bank MNCs employed 22.0 million people in the United States and 11.7 million abroad in affiliated companies. Not shown in Figure 1 are exports by multinational companies of foreign parentage located in the U.S. market. These include companies such as Toyota, Nokia, Seagram, or Bayer. These American subsidiaries comprise key components of foreign supply chains. In 2007, they employed 5.5 million people in the U.S. economy (4.6% of total employment), exported $216 billion and imported $533 billion in goods. Their U.S. operations often are part of a far flung global network. For example, in 2007, the operations of Hitachi of Japan included 16,242 employees in 75 companies in North America, 56,305 employees in China, 49,340 in other Asian nations, 9,468 in Europe, and 251,702 employees in Japan. In a survey on the future of manufacturing undertaken by Industry Week magazine in 2008, the U.S. manufacturers that responded indicated that 18% of their products in 2008 were manufactured or directly sourced from outside the United States and that by 2011, they expected 25% would be foreign-sourced. The manufacturers also indicated that 16% of their products in 2008 were being sold outside the United States and that by 2011, they expected 22% would be sold abroad. Of the major regions of the world where companies were sourcing product in 2008, 54% said China, 30% said the European Union, 27% Mexico/Latin America, 22% Southeast Asia, 21% Canada, and 17% said India. Foreign sourcing was expected to increase by 2011 from China, Mexico/Latin America, Southeast Asia, and India but decrease from the European Union and Canada. One example of a typical supply chain may be that for Apple Computer's iPod music playing device. This is made by a manufacturing chain that stretches across several countries in the Pacific basin. As shown in Figure 2 , the value of $144 for an iPod imported from China in 2005 had its major parts and services originate from China, the United States, Japan, South Korea, Taiwan, and Singapore. Each of these major components, moreover, may have involved parts from various countries of the world. The iPod supply chain included design, supply chain management, parts production, assembly, shipping, distribution, and retail. Note that less than half of the $299 retail cost is accounted for by the $144 import price. The largest share of the retail price arises from Apple Computer's profit and other activities and in U.S. distribution and retail. Some of the parts also originate from U.S. companies. The supply chain also includes transportation and logistics management, financing, risk management, and quality control. Many of these services may be provided by an American company . Apple Computer also sells iPods in the global marketplace. Although, these may be shipped directly from China, they contain U.S. parts and generate profits for Apple. In this globalized business world, products may be pushed through the international supply network by an American holder of the brand name, or they may be pulled through the network by a major U.S. retailer. In either case, relevant U.S. policies include those affecting international trade, exchange rates, product safety, shipping security, as well as costs of fuel and raw materials, labor quality and price, and the existence of production infrastructure. These combine to affect the shape, geographical location, and operation of the supply chain. Conversely, the existence of the supply chain may affect U.S. policymaking. Trade policy aimed at curbing imports from China, for example, would likely affect Chinese exporters and ancillary sectors, but it also may hit subsidiaries of U.S. companies and manufacturers whose supply chains stretch there. It is not surprising, therefore, that some of the strongest voices both for and against trade protectionism come from American-based manufacturers and service providers. The manufacturing sector, moreover, can operate only if it is supported by a robust and capable financial sector. Manufacturing managers tend to focus their energies on producing goods and use financial services companies to handle most financial activities. Many companies rely heavily on banks, brokerage houses, investment funds, and insurance companies to raise capital, finance transactions, insure against risks, and issue stock. When the financial sector is in crisis, the manufacturing sector is usually not far behind. For manufactures, such as General Motors, with in-house financial services, the current financial crisis may have hit them with a dual punch. It may have clobbered both their financial subsidiaries and their sales of product. Trade transactions, moreover, rely heavily on trust and credit. In 2008, thinly capitalized suppliers in other countries were finding it increasingly difficult to obtain new letters of credit. Available loans, moreover, were at higher rates of interest. This was threatening to disrupt the intricate supply chains that reached into China and emerging markets in eastern Europe. Global Supply Chains: Manufacturing in the 21st Century The commerce clause of the U.S. Constitution ensured that the various state economies would unite into a vast American market allowing for the free movement of goods, capital, and labor anywhere within the nation. As the economy developed, the government intervened to subsidize the building of a transportation infrastructure (roads, railways, ports, and airports) and communication facilities, to regulate business, and to protect intellectual property. This huge, unified market gave U.S. businesses a distinct advantage in global markets because they could spread their operations across multiple state markets and take advantage of concentrations of consumers, natural resource endowments, and different labor skills and wages but still operate under a common federal regulatory system. Over the past half century, three revolutionary changes have redefined business production methods and spawned the development of globalized supply chains. The first has been the development of low-cost shipping along with fast and cheap communications. The second has been the rise of business management strategies that call for a focus on core competencies, just-in-time production, steady improvement in product quality, risk minimization, flexibility in meeting consumer demand, and profit maximization over a supply chain rather than for each entity within that chain. The third has been the reduction in international trade and investment barriers worldwide through both multilateral and bilateral trade agreements. Underlying these three revolutionary changes has been a period of relative stability in the world and the absence of global warfare that would have threatened international shipping. These changes have encouraged the globalization of business, but this globalization also may either coincide with or conflict with national goals of full employment, economic growth, balance in international trade accounts, and national security. Typical Supply Chains In the world today, a supply chain exists for almost all products traded in the international marketplace. Figure 3 illustrates a typical supply chain for furniture companies with headquarters in either the United States or China but with most of the manufacturing done in China with some inputs from the United States. This could be a brand-name furniture chain with headquarters in the United States, or it could be a major retailer that pulls product through its network of suppliers. In 2007, the United States exported $593 million in wood (for all uses) to China and imported $20 billion in furniture. The United States also provided furniture design and branding, distribution, some upholstery fabric, certain machinery and tools, some chemicals, quality control to a certain extent, and some shipping and other logistics as well as U.S. distribution and retail operations. Where in this supply chain does the United States have an advantage? American companies specialize in high-value added activities such as chemicals, seeds, upholstery design, machinery manufacturing, and the design and advertising of the final product. Abundant natural forests and land also allow the United States to specialize in production of lumber, some of which goes to China. China also procures lumber, particularly hardwoods, from Southeast Asia and Russia. High end furniture that requires customization, skilled woodworking, and is bulky also tends to be manufactured closer to the customer in the United States, and custom cabinetry and wood countertops usually require local manufacture. Still, about half of the mass marketed wood furniture (non-upholstered) market is supplied by imports, and U.S. employment in this sector has fallen by almost half over the 2000-2005 period. The shift to foreign manufacturing by wood furniture manufacturers and the focus on retail and distribution is highlighted by the change in the name of the "American Furniture Manufacturers Association" to the "American Home Furnishings Alliance." It should be noted, however, that some furniture manufacturing is returning to or being located in the United States. The Swedish firm Ikea has established a production plant in Virginia, and certain high-end brands either are expanding operations in the United States (such as Stickley ) or are relocating some production back from overseas to North Carolina (such as La-Z-Boy). Business Decisions and the Public Interest In this world of global supply chains, corporate and national interests may coincide with or conflict with each other. For example, a business seeks to minimize costs of production and may turn to lower cost assembly plants abroad while a nation seeks to provide full employment for its citizens. A business seeks continual improvement in the technology and quality embodied in its products and may turn to a foreign manufacturer of a component, while a nation seeks to generate technological change at home. A business seeks to maximize profits and satisfy consumer demand by using a combination of domestic and imported products, while a nation seeks to balance its international trade accounts and to generate economic growth at home. A fundamental issue is whether the claim still holds that what is good for business is good for the country, and vice versa (this was originally phrased as what is good for General Motors is good for the country. ) In an alternative way of stating the problem, Adam Smith postulated in 1776 that individuals seeking their economic self-interest, as if guided by an "invisible hand," actually benefit society more than they would if they tried to benefit society directly. In short, the issue is whether efficiency and profitability for businesses also translate into efficiency and economic well-being for the country as a whole. Do the benefits of greater business efficiency and profitability trickle down to society in general in the form of higher pay and more jobs created? Supply chains have added complexity to this issue. In the case of Adam Smith's invisible hand or in the statement in 1953 about General Motors, U.S. business referred to companies located in the United States and doing most of their business here. With supply chains, business headquarters may be located in the United States, but production networks may be global. The company usually will attempt to maximize profits and efficiency across the entire supply chain and not just for the domestic part of it. Profits may accrue to the U.S. parent company, but many of the supplier and assembly jobs may be overseas. Whether a policy that is good for business is also good for the United States, therefore, depends on how the profits of business are distributed, how much of the value generated by the business supply chain is created in the United States, and what effect the supply chain has on the U.S. balance of trade and other international accounts. In establishing a global supply chain, a corporation faces three basic issues. First, what are the core competencies of the company? What part of the manufacturing chain should the company do in-house and what should be contracted out? Second, where should the product be assembled and packaged? Should it be done in the United States, in China, or elsewhere? Third, should the company invest in manufacturing facilities and own the process or rely on suppliers? The outcome of these decisions determine the shape, location, and interconnections within the supply chain. For example, the new Boeing 787 Dreamliner passenger aircraft (first deliveries scheduled for 2010) is based on a supply chain that incorporates many business and policy decisions involved in making a complex product. Although final assembly is done near Seattle, Boeing outsources about 70% of the total content of the aircraft (up from about 50% in previous planes) with about 30% of the content outsourced from foreign suppliers. As shown in Figure 4 , many components and parts of the airplane come from Europe and Asia as well as from the United States. France makes passenger doors; the U.K. provides Rolls Royce engines, Italy the center fuselage and horizontal stabilizers, Sweden cargo doors, Germany the main cabin lighting, Japan wings and the central wing box as well as carbon fiber jointly developed with Boeing, China the rudder and other parts; and Australia provides the trailing wing edge. Since passenger airplanes are purchased by airlines that often are owned by or have close relationships with governments, part of Boeing's marketing strategy is to get major customer nations involved in production to provide them a vested interest in the financial success of the aircraft. Boeing is a leading U.S. exporter, but it does so partly because it also cooperates with potential customer countries in the development and production of aircraft. The U.S. Export-Import Bank also plays a role in funding exports of aircraft. Boeing's supply chain for the 787 Dreamliner illustrates several of the central tenets of 21 st century manufacturing. Boeing focuses on its core competencies (designing, assembling, and marketing airplanes), attempts to maximize efficiency over the entire production network, minimizes inventories through a just-in-time manufacturing process, and works with suppliers to engender technological progress and more exacting quality control. Some of these business goals favor foreign sourcing of production or parts while others favor domestic sources. Some critics of producing wings in Japan, for example, fear that Boeing may be fostering a Japanese aircraft industry that may become a future competitor. Boeing also must consider U.S. and foreign government policies in various aspects of its business decisions. Many aspects of U.S. public policy support Boeing's production of aircraft. These arguably include procurement by the Department of Defense, the financing of exports through the Export-Import Bank, subsidies for research and development, subsidies for the education and training of engineers and other skilled workers, subsidies for airport construction, and official trade complaints aimed at European government subsidies of Airbus. Boeing is a major U.S. exporter and generates job opportunities for thousands of Americans despite its supply chain that reaches overseas. These imports of parts and components, however, tend to be offset by exports of final product. The iPod supply chain in Figure 2 represents a corporate network that is a net importer. The production of iPods or similar consumer electronics also may benefit from U.S. government policies. These may include government procurement, the financing of trade transactions, subsidies for research and development, subsidies for aerospace activities (including satellite launches) and the Internet, various government market-opening initiatives, and efforts at strengthening the protection of intellectual property. Critics of globalization tend to focus on lower costs (because of lower wages or less stringent environmental or other regulations) of manufacturing abroad. For supply chains, however, production decisions cannot rest solely on calculations of cost. Cost calculations are combined with estimates of risk to produce expected values for future operations. For example, in deciding whether to assemble a product in China, the risk of currency appreciation, shipping disruptions, political turmoil, changes in Chinese government policy, differential rates of inflation, miscommunication, accidents, terrorist incidents, and other such factors also enter into the calculations. In addition, measures that need to be taken for long-distance quality control and product safety come into play. For example, the pharmaceutical company Pfizer is undergoing a massive overhaul of its manufacturing and supply network worldwide. Pfizer Global Manufacturing currently supplies more than 500 products with 100 manufacturing plants that it is whittling down to 43. Some plants have been closed, some sold outright, and others sold with trailing supply agreements. Now the company manufactures internally when that makes sense, and it buys the rest from outside sources. The company says that their decisions are not based entirely on cost but on creating value for its customers. This includes cost, quality, reliability, and the speed of product development as well as supply chain security. The Public Policy Dimension of Global Supply Chains A crucial issue for U.S. policymakers is how to create conditions that make the U.S. economy more attractive as a location for both headquarters of supply chains and for each segment of both U.S. and foreign parented supply chains. In general, the more value that is added domestically, the more domestic job opportunities that may be created and greater the well-being of Americans. A possible test for policy is to ask if the predominant effect is one of diversion or creation. Does a proposed policy divert production (including services, research, and marketing) and employment that goes with production from the U.S. economy to a foreign location, draw production toward a U.S.-based location, or shift production between two foreign locations? Does the proposed policy create more production, or does it discourage productive activity? Does it induce foreign-owned businesses to locate segments of their supply chains here? Does the policy disrupt or enhance supply chain operations and decrease or increase overall supply chain efficiency and profitability? How does a policy affect the distribution of benefits among corporate executives, workers, shareholders, and consumers? Does a proposed policy encourage the delivery of products for consumers that are high in quality yet low in price? Also, does a proposed policy affect where intellectual property is created or resides, and what are the spinoff benefits for the rest of society? Public policy affects businesses in two distinct ways. The first is in the environment for business or the economic, political, and social crucible in which it operates. This includes a wide range of factors including basic institutions of private property, commercial law and rights, market access, rights of establishment, national treatment, border barriers, exchange rate policy, protection of intellectual property, infrastructure, education and training of workers, energy policy, the climate for innovation, political governance, and the panoply of policies aimed at the general climate for business that all companies face. The second way that public policy affects business is in actions that affect the internal operations of companies. These are actions that directly affect costs of production and profitability, and may include tax policy, specific customs duties, wage and employment policies, accounting and reporting rules, health and safety requirements, specific environmental requirements, and product safety. Some policies affecting the general business environment, such as energy costs and subsidies for research and development, also affect internal costs. The development of global supply chains adds another dimension to the impact of public policy. This appears in the incidence (who is affected) by policy. Since manufacturing processes now have become fractured, the incidence of policy likewise has become fractured. A supply chain consists of a domestic parent, domestic suppliers, foreign suppliers, and a community of supporting functions that include logistics, supply chain management, and quality assurance. Public policy may provide incentives or disincentives for supply chain parent companies to establish and retain their headquarters in the U.S. market. This applies both to historically American companies and to foreign companies that may locate regional headquarters in the United States. Public policies favorable to business in the United States also may induce both American and foreign-owned supply chains to locate more segments of their supply chains in the United States (and vice versa). U.S. policies, however, also may lower the costs of manufacturing abroad. Reciprocal tariff reductions; free trade areas; reducing market access barriers in other countries; improving U.S. seaports, airports, and other freight handling infrastructure; promoting faster and more efficient communications networks; and certain tax provisions may increase the incentive to source from abroad or to invest in business operations there. While such policies may work counter to efforts to induce businesses to locate activities in the United States, they also may increase the overall profitability of a U.S. parented global supply chain and may better enable U.S. businesses to leverage their supply chain operations in order to sell product in the foreign market. Therefore, while U.S. efforts at decreasing border barriers abroad tend to have an unequivocally positive impact on U.S. economic well-being by increasing U.S. exports, efforts at improving the business environment in foreign countries (such as protecting intellectual property or easing restrictions on foreign investment) tend to have a dual impact. While such efforts may encourage the location of segments of a supply chain in foreign countries, they also may increase the profitability of the supply chain operations for the U.S. parent company. An analogous argument holds for a policy such as imposing additional import tariffs in the United States. While such a policy may increase the incentive to locate production in the U.S. market, it also may reduce the profitability and competitiveness of supply chain operations for U.S. companies. As a result, the chain as a whole may be less able to compete with other global supply chains, may lose business, and may end up with fewer American employees overall. The proliferation of global supply chains, therefore, has exacerbated certain trade-offs with respect to the effect or incidence of policies. For a given policy proposal, is the larger effect on the supply chain parent, on overseas operations that also affect the parent company, or on company operations, both domestic and foreign, in the United States? The varying effects of the policy may cause seemingly contradictory reactions to policy initiatives. It should not be a surprise to find various interest groups, even those within certain business sectors, at odds with each other. In view of these disparate responses, business associations, such as the National Association of Manufacturers, tend to take positions only on issues of general interest to their members. They usually do not speak out on industry sectoral issues, unless such issues are non-controversial or have wide member support. Public policy, therefore, affects different segments of the supply chain in different ways. A policy aimed at increasing the number of scientists and engineers in the U.S. economy may help to retain the research and development segment in the United States, but the focus on such high-level skills may lessen the number of new graduates who are willing to take jobs that require only lower-level labor skills and face work processes that tend to be repetitive. A policy aimed at keeping out certain types of imported materials, such as carbon steel, to assist the domestic steel industry may lessen the competitiveness of the automobile and other industries that use steel in their assembly process. The fracturing of the manufacturing process and the outsourcing of components of that process to foreign suppliers, therefore, implies that public policy also may need to be fractured (multidimensional and discriminating), designed to have different effects on different segments of the production chains and the workforce associated with those production activities. One example of how public policy may enter into business decision making to determine where to manufacture product is an analytical tool reportedly used by Dow Chemical. Dow has manufacturing capacity in several countries and can move production from location to location on short notice. The company has used a linear programming model that takes account of international differences in exchange rates, tax rates, and transportation and labor costs to determine the best mix of production by location for each planning period. The company is able to respond quickly to government policies that may affect exchange rates, taxes, or other cost factors. In policies aimed at creating a favorable climate for business in the American market, the United States seems to do quite well, Measures of general business climate usually place the United States first in the world in terms of "competitiveness." Relative competitiveness, however, is difficult to measure and metrics tend to be quite general. The measures do, however, indicate how a country compares with other nations as a potential generator of economic growth and as a host for international business. For example, the World Economic Forum publishes the Global Competitiveness Index for 134 countries. Under this index in 2008, the United States ranked first, Switzerland second, Denmark third, Sweden fourth, Germany fifth, Finland sixth, Singapore seventh, Japan, eighth, United Kingdom ninth, and the Netherlands tenth. China was 34 th . Likewise, the Institute for Management Development in Lasuanne, Switzerland publishes a World Competitiveness Scoreboard each year that "analyzes the factors and policies that shape the ability of a nation to create and maintain an environment that sustains more value creation for its enterprises and more prosperity for its people." The analysis divides the national environments of 55 countries into four main factors (with 331 criteria): economic performance, government efficiency, business efficiency, and infrastructure. The 2008 scorecard placed the United States first, Singapore second, Hong Kong third, Switzerland fourth, and Luxembourg fifth. China was number 17. According to these analyses, the United States leads the world in providing an economic environment favorable for business. These comparative indices however, tend to examine underlying performance factors that lead to high incomes and business development. While the United States ranks first in both of these international comparisons, they do not explain why companies headquartered in the United States choose to manufacture in countries that rank lower in "competitiveness." This is where supply chains enter the analysis. Major Policies Affecting Global Supply Chains The United States pursues a range of economic policies, some industrial in nature, each carrying a package of economic and political justifications. However, in general, Washington relies mainly on monetary and fiscal policy to generate full employment and economic growth, even though the federal government does support specific industries, such as agriculture or aerospace, and occasionally intervenes directly to provide emergency assistance to firms such as AIG, Citigroup, or General Motors and Chrysler. The policies of most concern in this section are microeconomic in nature and affect both the environment for business and the international operations of companies. Figure 5 illustrates a typical supply chain with manufacturing in China or other country but with brand headquarters and major retailing in the United States. The figure also shows selected public policies that affect decisions within the supply chain, particularly those dealing with where and how each step in the supply chain is accomplished. Other policies also are important to supply chains, but they are beyond the scope of this report (such as health care, workplace regulation, accounting standards, lawsuits and other legal issues, financial regulations, and executive compensation). Much of the analysis of the policies considered, however, also may apply to these policies. Taxation The public policies shown in Figure 5 are not necessarily ranked according to magnitude of effect, but taxes tend to be at the top of any list of issues for international business. Under the current system, U.S. taxes are applied on a worldwide basis to U.S. firms while granting foreign tax credits in order to alleviate double taxation of the same income. In short, multinational corporations pay taxes on their global income but receive credit for taxes paid to foreign governments. The system permits U.S. firms to defer taxes on foreign-source income indefinitely by not repatriating profits. In effect, the current system provides an incentive for companies to retain profits abroad and to invest in low-tax countries and a disincentive to invest in high-tax countries. There have been numerous proposals to "fix the tax code" internationally. One proposal that would provide for a country-neutral tax system would be for all countries to tax businesses at the same rate (so that a country's corporate taxes would provide neither an incentive nor a disincentive to invest or manufacture there) and for the United States to retain its foreign tax credit. Governments, however, seem reluctant to cede the ability to change tax policy and appear to be less willing to equalize taxes than, for example, to equalize import tariff rates under a free trade or other agreement. A proposal that would favor keeping investment and production in the United States would be to retain the system of worldwide taxation for U.S. companies but to impose higher taxes on investments or income derived from abroad. One proposal to accomplish this would be to permit only a deduction from income, and not a credit to be deducted from the total tax bill, for taxes paid abroad. Other proposals are to end provisions that allow companies to defer foreign-source income indefinitely, to restrict deductions for costs associated with deferred income, or to neutralize the tax benefits for companies moving their "headquarters" to a tax haven (such as Bermuda or the Cayman Islands). Another proposal, however, that would respond to the globalization of businesses is to exempt U.S. companies from paying taxes on their overseas income from investments. Numerous other tax provisions affect U.S. businesses and their manufacturing decisions. The taxation of income by Americans working abroad, the rate of taxation of corporations, various tax incentives or rebates aimed at promoting specific desired activities (such as technological change), the taxation of corporate dividends, and other tax-related issues are being debated widely. These are beyond the purview of this report. As with other policies and their impact on global supply networks, the issue is twofold. Is the predominant effect of a change in policy one of diversion or creation? Does a change divert production from the U.S. economy to a foreign location, or does it draw production toward a U.S.-based location? Does the change create more production overall, or does it discourage economic activity? Trade and Investment Policy Global supply trains could not exist without international trade. Traditionally, trade and investment policy deals with border barriers. These include customs duties, import quotas, the freedom to move capital across borders, and the right to establish businesses (including taking over an existing company) in a given country. The development of globalized supply networks does not alter the role of traditional trade and investment policies. Tariffs or customs duties are national taxes imposed on imports (and sometimes exports) and were originally used primarily to raise revenues for governments, particularly those with weak systems for collecting taxes. Currently for most industrialized countries, the main purposes of tariffs and quotas are to provide protection for domestic industries, to offset some of the cost advantage of foreign suppliers, and also to generate income for governments. For the major countries of the world, average tariff rates are now quite low (2.9% for the 10 advanced industrialized nations) but higher at 9.8% for the 142 developing nations of the world. In the United States, certain import-sensitive products may have relatively high tariff rates (e.g., 25% for pickup trucks, 50% for cotton jackets/coats). Other nations also protect certain sectors either through high tariffs or stringent import quotas. With respect to supply chains, border barriers still raise the cost of imports regardless of whether the product is traded within a supply chain or is traded in open markets. An established supply chain, however, is likely to be less sensitive to border barriers, since such networks are based on long-term relationships and established lines of communication. Over the long-term, however, if border barriers are raised or lowered enough to offset other non-monetary considerations, companies may change the location of manufacturing or other segment of the manufacturing process. Border barriers play a greater role in business decisions on initial plant location, but such decisions also call into play the whole range of factors affecting the competitiveness of the location being considered. Traditional trade and investment policy, therefore, still appears viable in pursuing U.S. goals of economic growth, employment, and a rising standard of living over the long term. Currently, three major avenues exist to reduce tariffs. First, tariff reductions and other trade liberalizing measures are being negotiated on a multilateral basis through the World Trade Organization (WTO), although the current Doha Round is stalled. Second, on a bilateral or regional basis, countries are negotiating free or preferential trade agreements. Countries also provide trade preferences to certain nations (particularly those with the lowest income levels) or nations with special historical relationships (e.g., former member of an empire). A third, but rarely used method, is to provide normal trade relations status (most favored nation status) to a country that currently does not enjoy such status (e.g., North Korea, Cuba). Two major avenues are used to increase tariffs or other barriers to trade. For countries that are members of the WTO, tariffs are bound (normally cannot be increased), but they can be raised as a result of various escape clause or market disruption cases. The escape clause or safeguard procedures include anti-dumping or countervailing duty investigations. Also current U.S. tariffs as actually applied tend to be lower than the levels that are bound under World Trade Organization agreements. A second method is through trade sanctions imposed for security or other political considerations (e.g., banning trade with Burma/Myanmar). The use of dispute settlement mechanisms (at the World Trade Organization or provided for in free trade agreements), the use of escape clauses, and invoking safeguard procedures provide a way to target trade policy at a specific product. A complication in trade policy caused by the globalization of supply networks occurs in the incidence of policy. An increase in customs duties in the United States, for instance, may end up raising costs not only for the foreign exporter but for the American headquarters of a company that has a supply chain with a foreign subsidiary that manufactures the product for export to the United States. It also usually raises the cost of the import to the American consumer. For example, some have proposed raising tariffs on all imports from China in response to its arguably undervalued exchange rate, a rate which is seen as making Chinese exports cheaper and harming import-competing industries in the United States. Under traditional economic models, imposing tariffs on imports from China would increase the price of such imports (assuming no change in exchange rates), reduce the quantity of imports from China purchased in the United States, and shift some production either to a competing supplier located in the United States or to an exporter in another country that makes similar products. Such protection of domestic industries helps import-competing industries in the United States and hurts exporters from China, although it also may help exporters from Mexico, Southeast Asia, or other countries that make products that compete with those from China. However, more than half of China's exports originate from foreign-owned or foreign-affiliated companies located there. Most of these companies are parts of globalized supply networks. A Chinese exporter, therefore, actually may be a company wholly or partly owned by an American multinational corporation. An increase in an import tariff, therefore, may help U.S. companies competing with imports from China, but it also may end up hurting the U.S. headquarter company as well as its associated Chinese supplier. It also may hurt a U.S. retail-oriented supply chain (such as a discount big box store) that stocks its shelves with items from China. Debate over the Korea-U.S. Free Trade Agreement (KORUS FTA) also highlighted the effect of globalized supply networks on trade policy. Among the Big Three U.S. automakers, Ford and Chrysler were reported as opposing the KORUS FTA, while GM has remained neutral. GM's position is thought to stem partly from its ownership of Daewoo Motors in Korea. Opponents of the FTA point out that the United States exported only 6,500 cars to Korea in 2007 (for a market share of less than 5%), while Korean automakers sold 775,000 automobiles in the United States (for a market share of nearly 30%). What these figures do not indicate, however, is that GM Daewoo sold some 125,000 automobiles in the Korean market in 2007. If these cars are counted as U.S. sales there, the American market share in Korea would be about 12.8%. That is still considerably less than the 30% market share for Korean automakers in the U.S. market, but this Korean share also includes about 250,000 vehicles that were made at the Hyundai plant in Alabama. This illustrates the complexity for policy caused by multinational corporations with significant operations in foreign countries. In the GM case, its Korean operations are primarily aimed at the Korean market, and Hyundai's U.S. operations are mainly aimed at the U.S. market. Each subsidiary hires local workers, while profits (not reinvested) flow back to the parent companies. Countries around the world currently are actively engaged in negotiating bilateral and regional free-trade agreements (FTA). FTAs normally contain provisions that require a phased reduction or elimination of tariffs by each side and either elimination or expansion of import quotas. FTAs also address a range of other trade-related issues, such as investment flows, access for service providers, and protection of intellectual property rights. The United States already has FTAs with fourteen countries: Canada and Mexico (NAFTA), Israel, Jordan, Morocco, Singapore, Chile, Bahrain, and certain Central American nations (CAFTA). FTAs with Columbia, Panama, and South Korea have been negotiated but await congressional approval, and several more are in the process of being negotiated. What effect does an FTA have on a global supply chain? For the sake of brevity, consider a reduction in tariffs under an FTA between the United States and another country such as Thailand. The United States and Thailand have had intermittent talks on establishing a U.S.-Thailand FTA. The United States has an average tariff rate of 2.7% while Thailand's is 10%. Eliminating import duties in the United States on products from Thailand implies that the assembled price of the product imported into the U.S. market avoids an increase in cost that would have been collected by U.S. Customs at the port of entry. Depending on the number of competing products in the domestic market, such tariff costs usually are passed on to the consumer or absorbed by the producer. Eliminating the tariff, therefore, either reduces costs to the U.S. consumer or increases profitability of the import supply chain. It also decreases U.S. government revenues and increases the incentive to produce in Thailand. This may divert production from the U.S. market, even though certain parts of the supply chain still located in the United States may become more profitable and employ more workers (e.g., research and development, branding, advertising, and management). Eliminating import duties in Thailand have a comparable effect on U.S. exports there. The cost of U.S. products in Thailand would be reduced for the Thai consumer, and U.S. exports would be expected to increase. The impact of the mutual tariff reductions on the U.S. balance of trade with Thailand depends on how responsive imports in each country are to tariff reductions (demand elasticities) and the size of the trade flows before the FTA is implemented. In addition to the bilateral trade effects, FTAs also may affect trade with other countries through the diversion of product flows. The increased trade or production within the FTA countries may either be a net addition to economic activity in the countries involved (because of the larger bilateral market) or a diversion of economic activity away from other countries and into the countries in question. In most cases, countries that negotiate FTAs with the United States also participate in other bilateral and regional FTAs. For example, Thailand also has an FTA-type agreement with China. The combination of the two FTAs would provide a two-fold incentive for the U.S. producer. If the U.S. company has assembly operations in Thailand but obtains parts or components from the United States or from China (with whom it also as an FTA), the U.S. company may ship more parts and components directly from the United States and China to Thailand and bring more finished product to the American and other markets. If the U.S. company provides raw materials for parts or components shipped to Thailand from either the United States or China, U.S. exports would tend to rise but to do so less than if the final product were manufactured directly in the United States and then shipped to Thailand. Either way, the income earned by the U.S. company managing the supply chain would tend to rise. Any increase in profits to the U.S. company could be repatriated to the United States or could be reinvested abroad. The net effect on a supply chain and the U.S. trade balance because of a cut in tariffs under an FTA, therefore, depends on the relative magnitude of the tariff reductions on each side, the nature of and location of the supply chain, and the responsiveness of trade flows to tariff reductions. In general, however, since U.S. tariffs tend to be lower than those of FTA partner countries, the greater benefit of trade liberalization arguably will go to U.S.-based companies. For an American company with a global production network, the more countries that participate in a free trade area the better. Such a "common market" with no internal tariffs not only eliminates the need to pay duties as components and final products circulate within the national borders defining the FTA, but it also reduces the required documentation and calculations to determine country of origin. U.S. multinational companies generally support efforts to establish regional free trade areas and to eliminate border barriers. The growing maze of bilateral FTAs, however, pose a different problem for businesses, particularly for their operations in other countries. For example, Thailand has become a manufacturing location for many companies. Thailand has had held talks with the United States on establishing a bilateral FTA, has signed a limited FTA with China, has a framework agreement with India, and has broad FTAs with Australia and New Zealand and with other members of the Association of Southeast Asian Nations. It also is in FTA discussions with Japan, India, and Peru. If each FTA that has been implemented has different provisions and rules, the cost of complying with rules of origin requirements or the paperwork involved in documenting that the goods fall under the FTA may exceed the lower tariffs provided by the FTA. Some international businesses have indicated that because of the "nuisance" cost of complying with rules of origin or other requirements in FTAs, they just pay the usual tariff rather than try to qualify for a lower FTA rate. This is an argument for the U.S. approach of using a "template" for FTAs in order to ensure consistency across such agreements. Other aspects of international trade and investment policy include the right of establishment of foreign-owned businesses in countries and the right to national treatment. In essence, these rights ensure that foreign-owned and domestic companies are treated equally both in terms of the right to establish and operate a business and in terms of applicable laws and government action. National treatment also may allow governments to prohibit foreign companies from doing anything not allowed for domestic companies. With the exception of foreign investment that raises security or antitrust complications , the United States provides both national rights of establishment and national treatment as do the countries that are members of the WTO. The more established these rights are in countries, the more likely that globalized supply networks will consider locating in those countries—including in the United States. How successful is the United States in attracting segments of global supply chains? Data on investments by U.S. and foreign multinational corporations indicate that the United States has been an attractive market for foreign direct investments (FDI, investments in a controlling interest [at least 10% of equity] in productive assets by a foreign corporation). In 2007, FDI in the United States was $232.8 billion of which $144.9 billion (62%) came from Europe. Of the total, $108.1 billion (46%) was in manufacturing. On balance, however, U.S. corporations invest more abroad in productive assets than foreigners invest in the United States. In 2007, U.S. direct investment abroad was $313.8 billion with $55.2 billion (18%) invested in foreign manufacturing. Labor and Health Care Costs Labor Costs Labor costs are one of the most controversial aspects of globalized manufacturing chains. The argument is that U.S. companies are "shipping jobs overseas" or "outsourcing jobs" in search of cheap labor to reduce costs of production. In 2007, for example, hourly compensation costs for production workers were $24.59 in the United States, $28.91 in Canada, $2.92 in Mexico, $16.02 in Korea, and $37.66 in Germany. Compensation costs for China for all manufacturing employees in 2006 were estimated at about $0.81. One of the major drivers of globalized manufacturing networks has been to internalize differences in labor costs within the supply chain. Companies match wages, productivity, and skills with the variety of tasks required in the production process. Tasks requiring skilled workers, such as design, engineering, research and development, and marketing, tend to be located in high wage areas (such as the United States, Europe, Japan, and Singapore), while those requiring low skilled workers, such as assembly and packaging, tend to be located in low wage areas. Companies that produce in the United States also must do such skill and wage matching (such as Caterpillar or Boeing) by locating assembly or supplying plants in lower cost regions and by establishing global supply chains to import certain parts or materials from lower cost countries in Asia, Latin America, and elsewhere. In most cases, companies with assembly plants in the United States buy some manufacturing inputs from abroad. It also should be noted that firms tend to cluster to take advantage of concentrations of skills, similar production processes, and specialized suppliers. Within the United States, there is Silicon Valley in California, the Research Triangle, in North Carolina, the High-Tech Community along Route 128 in Boston, financial services and transportation in Atlanta, and plastics and aerospace in Wichita, Kansas. The same is true for clusters of industries abroad, including financial services in London, medical research and development in Singapore, and fashion design in Paris. These centers seem to attract industries regardless of their relatively high cost of labor. Studies of such clusters indicate that the most important sources of prosperity can be created and are not dependent on "inherited" advantages, such as relative wage costs. Still, the difference in labor costs between, for example, the United States and China ($23.82 per hour vs $0.67 in 2006) are striking. The level of wages, however, is not the only factor in determining where segments of the supply chain are located. Labor costs, for many products, account for a relatively small share of total manufacturing costs, and high wages can be offset by high productivity. However, the fracturing of the production process implies that the labor-intensive segment of a supply chain can be concentrated in a low-wage country. For example, fashion design may be centered in Paris, but garment assembly still may be done in lower wage locations. Low wages, though, may not stay low. American businesses in China, for example, have found that once workers gain certain skills, there is so much competition for those workers that their wages are bid up by competitor companies. Also inflation rates, exchange rate appreciation, and rising shipping costs can offset some of the wage differential. When this is combined with political risk, product safety concerns, and other factors, the supply chain manager may not always choose the country with the lowest wages. For example, wages in Bangladesh may be even lower than those in China, but for a variety of reasons (e.g., low labor productivity, lack of supporting infrastructure, and shipping costs), Bangladesh has not become a major manufacturing platform for U.S. businesses. A 2007 survey of U.S. companies in China indicated that a major shift in perceptions is occurring regarding China as a low-cost country. Companies there have been experiencing increases of 7% to 10% per year in costs for white collar management, support staff, blue-collar workers, and raw materials. More than half of the companies surveyed agreed or strongly agreed that India, Thailand, and Vietnam are challenging China's position as the leading low-cost export platform. In the survey, the leading reason for establishing manufacturing bases in China was access to the local market with labor costs savings second and access to the Asian market third. Those who oppose moving segments of supply chains from the United States to foreign countries where labor costs are lower generally raise issues such as lower labor standards and working conditions abroad. In cases, they have put pressure on the U.S. headquarters of the supply chain to require higher labor standards from its supplier companies located in countries such as China. Some large U.S. companies have adopted workplace codes of conduct for their Chinese suppliers. Labor standards have become an issue in various free trade agreements negotiated by the United States. In a May 2007 "Bipartisan Agreement on Trade Policy" the Bush Administration and leaders of Congress agreed to include certain provisions related to labor (as well as the environment and intellectual property rights) in trade agreements. An early implementation of this trade deal appeared in the pending free trade agreement with Peru. On June 25, 2007, the United States and Peru signed amendments to the pending U.S.-Peru Trade Promotion Agreement that included labor provisions from the bipartisan trade deal. This included a statement that the United States and Peru would be required to adopt, maintain and enforce their own labor laws as well as five basic internationally-recognized labor standards, as stated in the 1998 International Labor Organization Declaration. These included (1) freedom of association; (2) the effective recognition of the right to collective bargaining; (3) the elimination of all forms of forced or compulsory labor; (4) the effective abolition of child labor and a prohibition on the worst forms of child labor; and (5) the elimination of discrimination in respect of employment and occupation. The Peru amendments also provide that any decision made by a signatory on the distribution of enforcement resources would not be a reason for not complying with the labor provisions, and that parties would not be allowed to derogate from labor obligations in a manner affecting trade or investment. Labor issues also have been raised in debates over proposed free trade agreements with Columbia and South Korea as well as in considering renewal of trade promotion authority. The declining share of U.S. employment accounted for by manufacturing over the past half century has long been a concern for policymakers. For the 21 sub-sectors comprising the manufacturing sector in the United States, between the fourth quarter of 2000 and third quarter of 2008, employment declined by 22% or 3.8 million jobs. This occurred despite an increase of 7 million jobs in all private employment—excluding manufacturing. The current U.S. recession began in December 2007 and the global financial crisis erupted in the fall of 2008. Since then employment has fallen considerably across the United States and in many countries of the world (with the exception of China). These declines, however, arguably are cyclical, and as economies recover so should employment. Over the long term, however, the decline in U.S. manufacturing employment can be traced to increases in labor productivity and import competition but also is related to the focus on core competencies in global supply chains and the outsourcing of noncore functions (such as accounting, security, shipping, and janitorial services provided by companies in the service sector). Increases in productivity and technological change are part of the normal development of an economy. Most workers displaced by technology find employment elsewhere, although some may be negatively affected (lower wages, fewer benefits) for some period of time. Those displaced by imports, however, may find it difficult to transfer their skills to other industries because they tend to be in traditional industries, such as apparel, leather, textile mills, and primary metals. In apparel, for example, the global supply chains include producers (such as brand name clothing manufacturers) who may contract with overseas suppliers to manufacture garments according to their specifications with their brand labels. Apparel supply chains also include big box retailers who may source and sell product both from U.S. brand name suppliers and from non-U.S. manufacturers located in markets around the world. While the lower prices enabled by the various supply chains may benefit the consumer, and the wholesale and retail sectors in the United States claim much of the revenue from sales of the imported product, the import-competing industries may turn to the government for help through programs such as Trade Adjustment Assistance in retaining workers or for assistance in retooling factories or in pursuing innovations or through trade remedy laws. Health Care Costs In early 2009, the debate over and legislation on health care is addressed partly toward the costs for health care by businesses in the United States. The result could affect supply chains. In the United States, much of health care is provided by employers, so health care costs have become an integral part of labor costs. The costs for health care in the United States are the highest in the world. The Congressional Budget Office (CBO) estimates that spending on health care and related activities will account for about 17% of gross domestic product in 2009 ($2.6 trillion or $8,300 per capita) and under current law CBO projected that share to reach nearly 20% ($13,000 per capita) by 2017. Business interests have claimed that these costs are hurting the ability of U.S.-based businesses to compete in world markets and are causing firms to move production to other countries. General Motors, for example cites health care costs as a major burden when compared with manufacturers in Japan and Europe. This issue is complex, and reform to improve the competitiveness of the U.S. market as a base for supply chain operations is but one consideration in a range of factors pushing health care reform high onto the agenda of many interest groups. Organizations representing international business agree that something needs to be done to reduce the cost of health care paid by businesses, but there is less of a consensus on the specifics of how that could be achieved. Environmental Regulation As with labor issues, environmental regulation both as applied to businesses in the United States and as contained in various international trade and other agreements tends to be quite controversial. The issue for governments is how to find a balance between three potentially conflicting objectives: security of supply, industrial competitiveness, and environmental sustainability. For the U.S.-based part of global supply chains, environmental regulation may affect costs of production as well as consumer perceptions and demand. Foes of globalization and international supply chains, moreover, sometimes accuse U.S. businesses of sourcing products overseas where environmental requirements may be less stringent and compliance less costly. One solution proposed is to harmonize environmental regulations across countries. The May 2007 "Bipartisan Agreement on Trade Policy" between Congressional leaders and the Bush Administration contained key provisions related to the environment. In the agreement, the Administration and Congress agreed to incorporate a specific list of multilateral environmental agreements in free trade agreements. The list included the Convention on International Trade in Endangered Species, Montreal Protocol on Ozone Depleting Substances, Convention on Marine Pollution, Inter-American Tropical Tuna Convention, Ramsar Convention on Wetlands, International Whaling Convention, and Convention on Conservation of Antarctic Marine Living Resources. The competitiveness of U.S. industry often is raised in debates over environmental policy. The policy discussion on greenhouse gasses, for example, turned partly on the effect of environmental policy on the ability of companies to compete in the global marketplace. If a country has legally binding carbon control restrictions while others do not, the potential exists that the country with the restrictions will find itself at a competitive disadvantage vis-à-vis countries without comparable policies and could lose global market share for certain carbon emitting production. In addition, this potential shift in production could result in some of the U.S. carbon reductions being counteracted by increased production in less regulated countries (commonly known as "carbon leakage"). Debates over environmental policy, therefore, often center on what can be categorized as the three-Cs: Cost, Competitiveness, and Comprehensiveness. Supply chains also have entered into policy debates over other environmental issues, such as illegal logging and sustainable development. Some headquarters firms have been targeted for protest because of actions of overseas members of their supply chains. Currencies and Exchange Rates Exchange rates determine the value of one currency in terms of another. The exchange rates of most industrialized nations are allowed to float while many developing nations actively intervene to manage their exchange rates. For floating currencies, their value is determined by international financial transactions with occasional intervention by governments. Managed exchange rates usually are pegged to or managed against either one currency, such as the dollar, or to a basket of currencies that usually contains the dollar along with currencies such as the Euro or Japanese yen. China has such an exchange rate regime. Exchange rates can change dramatically over relatively short periods of time relative to the life of a typical manufacturing chain. When the value of the dollar declines, it increases the dollar cost of all products produced in countries whose currency has appreciated relative to the dollar. If a country's exchange rate is tied to the value of the dollar, that currency will decline in tandem with dollar, and the dollar depreciation will have no effect on the price of goods traded between the two countries. The prices of goods traded with countries without a dollar tie (such as Europe, Japan, India, or South Korea), however, will change. A country that ties the value of its currency to the dollar, however, still has to pursue policies to maintain its exchange rate that may cause domestic interest rates to rise or the rate of inflation to increase. Figure 6 shows the value of several currencies relative to the dollar between January 2004 and December 2008 (a time when the global financial crisis worsened). This has been a period of high volatility in exchange rates with the Canadian dollar up by 34% at one point in 2005 before dropping to almost parity in December 2008, the Japanese yen down by 12% in 2005 but up 16% at the end of 2008, and the Chinese Renminbi (RMB) up by 21% since Beijing announced its managed float in July 2005. The Euro also has risen and fallen over the period. At the end of 2008, the Korean won was 33% below its peak in October 2007. Figure 7 shows indexes of the values of selected exchange rates over the global financial crisis. Again it shows the volatility of exchange rates and the surge in the value of the dollar relative to the Euro and South Korean won. It also shows the strengthening of the yen and the gradual appreciation of the Chinese currency. The effect of currency appreciation on a supply chain can be illustrated by the Chinese RMB. The appreciation of the RMB has a similar effect on production costs (calculated in U.S. dollars) as a wage (or other cost) increase in China. However, it has one major difference. Exchange rates fluctuate more than wage rates. Exchange rates move in both directions, while wage rates tend to be "sticky downward." They rise but rarely fall. A supply chain manager, therefore, is less likely to shift production because of an appreciation in China's exchange rate than in response to a comparable rise in wages. In China's case, however, the exchange and wage rates are both moving in the same direction. Together they work to magnify the increase in costs to manufacture there. Over the long term, however, exchange rate appreciation can dramatically affect the relative cost of production in a country. At the time of the Plaza Accord in September 1985, for example, the Japanese yen was worth 230 yen per dollar. At the end of 2008, the rate had been around 90 yen per dollar for a 155% appreciation in the yen. This greatly affected the price competitiveness of products exported from Japan and also many of its imports and has been a major factor in the movement of considerable amounts of production by Japanese multinational companies to locations overseas. In a survey of U.S. manufacturers in 2008, 40% of 500 survey participants indicated that the value of the dollar had an effect on where they choose to source their business. At the time of the survey, the value of the dollar was falling, and nearly half of the responses said that they were already sourcing more business in the United States. Infrastructure and Transportation Global supply chains could not exist without efficient transportation networks supported by infrastructure (ports, roads, railroads, airports, etc.) that enable products within the manufacturing network to move freely from one segment of the chain to the next. Infrastructure also can be defined to include the electrical grid, pipelines, the Internet, or telecommunications equipment. The issue of infrastructure in general is beyond the purview of this report. One part of infrastructure and transportation that is critical to global supply chains seems to be oceanic shipping and air freight. The oceans are no longer a barrier that isolates and protects countries. Instead, modern communications and transportation have brought markets of the world onto each other's doorsteps. The oceans and skies have become avenues of interaction rather than barriers of separation. Shipping, however, raises certain issues for public policy. These revolve around risks in the supply chain, particularly costs, security risks and delays in shipping. The spike in petroleum prices in 2007-2008 exposed a vulnerability of oceanic and other transportation to a critical cost variable. When the price of oil rose to $140 per barrel, the cost of shipping a standard 40-foot container from Shanghai to the United States rose to $8,000 compared with $3,000 early in the decade. Shipping speeds also were reduced to conserve on fuel. The increase in shipping costs was equivalent to a 9% import tariff on trade or what amounted to a reversal of most of the trade liberalization that had been accomplished over the previous three decades. the net result of the rise in shipping costs was that some companies switched production to locations closer to home, some in the United States. For example, in October 2007, the cost of shipping residential heaters from China to Bowling Green, Kentucky became too high for Desa LLC, and the company shifted manufacturing operations back to the United States. Not only had the cost of ocean shipping risen but the 2,000 mile inland trucking costs from the West Coast to Kentucky (along with a cut in the export rebate by the Chinese government, rise in price of Chinese steel, and the rising value of the Chinese currency) also made sourcing from China unprofitable. During the global financial crisis, however, the bottom "dropped out" of the container shipping market. As economic activity and trade contracted, so did the need for transoceanic shipping. About 12 million standardized shipping containers arrive at U.S. seaports annually. With the exception of automobiles or bulk commodities, this the preferred method for transporting manufactured goods from overseas factories to wholesale distributors in the United States. Air freight is more expensive but is critical for lighter products such as electronic components used in "just-in-time" assembly operations. The possibility that a shipping container sent from a foreign port might contain terrorism-related devices, weapons, counterfeit products, and other prohibited items has raised concerns over container security to a new level. A distinct trade-off exists, however, between ensuring security and facilitating the free flow of commerce. For example, the Maritime Commerce Security Plan of the U.S. Department of Homeland Security states that the plan is to improve the security of the maritime supply chain to lower the risk that it will be used to support terrorism while at the same time to protect and facilitate lawful maritime commerce. Simply stated, the question for policy makers relative to global supply chains and shipping rests on what measures are required to reduce the probability of a terrorist or other incident without unduly interfering with commerce. In the 110 th Congress, for example, H.R. 1 ( P.L. 110 - 53 ), "Implementing Recommendations of the 9/11 Commission Act of 2007" required by the year 2012 container scanning by imaging and radiation detection equipment at a foreign port before a container is loaded. The SAFE Port Act enacted in 2006 required, among other things, that U.S. Customs and Border Protection (CBP) conduct a pilot program to determine the feasibility of scanning 100% of U.S.-bound containers. In order to fulfill this and other requirements, in December 2006, the CBP and the U.S. Department of Energy jointly announced the formation of the Secure Freight Initiative. Scanning While the security benefits associated with the requirement for 100% scanning of all cargo containers bound for the United States seem to be obvious and apparent, actual implementation has raised numerous issues. This is one example of the tradeoff between national security and supply chain efficiency. In testimony before Congress in 2008, the U.S. Government Accountability Office laid out the major challenges related to this requirement. Among them were concerns over the lack of information on the efficacy of host government examination systems, additional time and cost requirements (particularly for equipment placed miles from where the cargo containers are stored and the comparatively short period of time containers are available for scanning when transshipped), the inconsistency with widely accepted risk management principles, and the possibility that foreign governments would call for reciprocity of 100% scanning by the United States of outbound containers. Many foreign shippers, port authorities, and U.S. businesses overseas are viewing this goal of 100% scanning with some alarm. Shanghai, for example, is the world's second most busy port with total container throughput of 26.1 million units in 2007. In Shanghai most containers are shipped from manufacturers on smaller boats that gather at an island port offshore where they are loaded onto ocean going vessels. Scanning a container as it is being transferred from one boat to another is extremely difficult. The American Chamber of Commerce in China has stated that, the scanning of every container bound for the United States "will no doubt lead to major logistics bottlenecks as the massive volume of shipped goods funnels through a limited number of scanning stations. This is a potential deal-breaker for perishable goods and just-in-time supply." Singapore has the world's largest container shipping center. Singapore is the 13 th largest source of U.S. imports and accounted for 13% of all U.S. imports of goods in 2007. Singapore's Ports Command of the Immigration and Checkpoints Authority reported that in 2007 it was scanning about 15% of the 24 million cargo containers that pass through its ports each year. It is able to scan an incoming container truck in a few minutes, although the scan takes extra time to set up and interpret the results. Singapore signed on early to the Cargo Security Initiative of the United States and has been operating for several years as a pilot port. The Authority indicated its concern that the American side keeps announcing new initiatives (e.g., the Megaports Initiative and the Secure Freight Initiative) that seem to overlap and have different sponsoring agencies. With so many containers being handled, the port authority also is concerned that even adding a few seconds to the handling of each container would have cumulative effects on the efficiency of its operations. It views with dread the requirement for 100% container screening. In April 2008, the Association of German Seaport Operators (Zentralverband der Deutschen Seehafenbetriebe, ZDS) sharply critiqued the 100% scanning requirement. ZDS argued that scanning 100% of United States bound container cargo would require tremendous financial outlays and time. The port of Hamburg, for example, ships 120,000 containers to the United States per year. At a cost of €300 ($375) per container, additional outlays would reach € 36 million ($45 million) per year not counting the 15 minutes per container for an assessment (and longer for the containers tagged for physical inspection). On the airfreight side, however, in October 2008, the United States and the European Union did reach an agreement for screening air cargo on U.S.-bound passenger aircraft. Logistics Security in China In 2007, the Global Supply Chain Council in Shanghai conducted a survey of international companies there dealing with secure logistics. The respondents indicated that security in logistics had become an important element in their strategy and operations. Many of the companies surveyed had reorganized their international supply chains to comply with new international regulations, such as the Container Security Initiative. In addition, many technological initiatives had been launched that were aimed at improving the security of the supply chain. These included the use of radio frequency identification, E-seals (physical locking mechanisms with technology to detect and report tampering), satellite supported tracking of containers, electronic locks, image recognition devices, and biometric identification. In this survey, 62% indicated that security was a critical factor for their company. The respondents considered the probability of a terrorist attack low. They were more concerned with damage due to neglect by their own employees or theft. They were the least concerned with smuggling of cargo or people. Two thirds of the respondents in the survey had been engaged in working with and certifying known suppliers and service providers, introducing security and audit procedures, using information technology for more visibility, and using dual sourcing. The number of companies that had audited their own procedures was twice as high as the number of companies that had audited their partners in their supply chain. Product and Food Safety The safety of imported manufactured products and food gained significant attention in 2007 when items such as lead in paint, adulterated pet food, and melamine in milk products, drew wide public attention. Fears of mad cow disease also have hurt U.S. beef exports. Until the recent rise in such cases, companies manufacturing abroad often were less likely to take measures to ensure quality in purchased inputs than they did in their own production processes. Now, however, companies are realizing that their reputation as a company and their whole supply chain can break down if even a single sub-contractor provides a defective product. In response to cases of tainted imports from China, the United States and China have reached a number of agreements to address health and safety concerns. These agreements were negotiated by U.S. agencies such as the Consumer Product Safety Commission, the National Highway Traffic Safety Administration, and the U.S. Department of Health and Human Services and their counterparts in China. The U.S. Department of Agriculture through its Food Safety and Inspection Service also has developed guidelines for processors, retailers, wholesalers, and logistics providers involved in meat, poultry, and egg product supply chains. In 2004, the U.S. Department of Homeland Security established the National Center for Food Protection and Defense (NCFPD) at the University of Minnesota. The NCFPD is a multidisciplinary and action-oriented research consortium charged with addressing the vulnerability of the nation's food system to attack through intentional contamination with biological or chemical agents. The program takes a comprehensive, farm-to-table view of the food system and examines all aspects of the system from primary production through transportation and food processing to retail and food service. Education and Training The ability of American firms to compete in the global marketplace, depends partly on the availability of skilled workers and managers. Also, rapid advances in science and technology are a continual challenge to the scientific and technical proficiency of the U.S. workforce. For policymakers, the issue centers on (1) whether U.S. public education adequately prepares young people for the realities of the marketplace; (2) whether the system prepares enough students to pursue rigorous programs of study in science and technology; (3) whether U.S. education and other institutions promote innovation sufficiently for the United States to remain at the forefront of scientific and technological advances; (4) whether sufficient opportunity is provided for adults to be retrained and retooled; and (5) the extent to which companies may rely on foreign workers for certain jobs. The analysis of these issues is beyond the purview of this report. Congress has recently addressed some of these issues in the context of the nation's science and technology (S&T) workforce. A premise in promoting a better-trained and equipped S&T workforce is that such workers are essential in generating new ideas and technology that can lead to new business opportunities and jobs for the domestic economy. Another premise is that for high-technology firms to locate operations in the United States, there must be S&T savvy employees to work in the companies. The 110 th Congress passed the America Competes Act ( P.L. 110 - 69 ) to address concerns regarding the science and technology workforce and education. Other issues considered included demographic trends and the future S&T talent pool, the current S&T workforce and changing workforce needs, and the influence of foreign S&T students and workers on the U.S. S&T workforce. Protection of Intellectual Property An important part of the legal, financial, and economic environment in which a company operates is the protection of intellectual property rights (IPR). Intellectual property includes patents, copyrights, trade secrets, trade marks, and geographical indications (use of a geographical name in branding or promoting a distinctive product, an action designed to take advantage of the quality and reputation of a product originating in a certain region). IPR violations are claimed to cost U.S. manufacturers billions of dollars each year in lost sales. There is also concern about the potential health and safety consequences of counterfeit pharmaceutical drugs and other products, as well as the link between terrorist groups and organized crime and traffic in counterfeit and pirated goods. In the 110 th Congress, legislation ( P.L. 110-403 ) was enacted to establish a new structure to coordinate federal IPR enforcement activities. The role of Congress in addressing IPR and trade-related issues stems from the power to regulate international trade in the U.S. Constitution. Section 337 of the Tariff Act of 1930 (19 U.S.C. 1337) is the primary option available to U.S. companies to protect themselves from imports into the United States of goods made by foreign companies that infringe U.S. intellectual property rights . The U.S. International Trade Commission (ITC) administers Section 337 investigations. Since 2001, over 90% of unfair competition acts asserted under Section 337 have involved patent infringement. Global supply chains enable product makers to exert considerably more control over their property rights in companies abroad who are part of their production process when compared with those producers who procure parts or products from completely unrelated suppliers. Still companies face cases of technology leakage, reverse engineering, and counterfeiting of products by parties whether located in domestic or in foreign markets. They also create sensitive strategic issues about technology transfer or how much intellectual property or defense-related technology embedded in equipment can be made available to supply chain partners overseas. Global supply chains can, however, provide a presence in the foreign market for the company with claim to intellectual property at risk. This may provide a segue into the foreign government policymaking structure through the U.S. company with standing there. When a U.S. company is incorporated abroad, it can become a "naturalized" actor in the political process there. Appeals for stricter enforcement of intellectual property by a locally incorporated company often can complement country-to-country negotiations on IPR issues. Problems with IPR protection can be found in many countries of the world, including the United States, but are quite common in China. As China has developed, it has become a focus of U.S. efforts to reduce violations of IPR held by American companies. The Chinese government has undertaken anti-piracy campaigns and there is an increasing number of IPR cases in Chinese courts, but overall piracy and counterfeiting levels there still remained high in 2007. U.S. copyright industries estimate that 80% to 95% of all of their members' copyrighted works sold in China were pirated. Chinese counterfeits include many products, such as pharmaceuticals, electronics, batteries, auto parts, industrial equipment, toys, and many other products, that may be exported and could pose a direct threat to the health and safety of consumers in the United States. Inadequate IPR enforcement is a key factor contributing to these shortcomings. China has high criminal thresholds for prosecution of IPR violations as well as difficulties in initiating cases. This arguably results in limited deterrence. Civil damages are also low. Free trade agreements negotiated by the United States generally have included chapters that contain provisions that strengthen protection for copyrights, patents, and trademarks, as well as rules for enforcement. Recent free trade agreements, including those with Central American countries, Bahrain, Oman, and Peru have resulted in commitments to strengthen IPR protection and enforcement in those countries. The signed (but not yet approved by Congress) agreements with South Korea, Columbia, and Panama also contain IPR provisions. A number of trade and investment framework agreements with countries also have provisions to enhance intellectual property protection and enforcement. Risks In addition to the security, safety, integrity, and currency risks faced by companies with globalized supply chains, a policy risk also exists. A policy risk is the chance that either the home government or a foreign country will enact a change in policy that harms the business operation. U.S. embassies and organizations of U.S. businesses overseas devote considerable effort toward monitoring policy developments of local governments in order to head off adverse policy decisions. These include local content and labor requirements, import and export regulations, and safety provisions. Such policies, frequently pursued for protectionist purposes, often dictate the location of specific global supply chain activities and increase the difficulty of standardizing global supply chain efforts across multiple markets. In a sense, however, global supply chains may have contributed to political stability among countries. They have created interdependencies among nations that provide incentives for governments to maintain stability in international relationships. This has lessened the prospect of political risk arising from international disputes. The growing economic interdependence between Japan and China, for example, is considered to have had a calming effect on relations when disputes have arisen over history and politics. Taiwanese businesses on the mainland also have pressed their government to relax restrictions on Chinese investment in Taiwan and for more direct airline flights between China and Taiwan. China's trade and investment relations with Southeast Asian nations has had a similar effect in reducing political tensions and in seeking peaceful solutions to thorny issues such as territorial claims. U.S.-China economic interaction likewise seems to have contributed to calmer political and security relations. For some risks, such as political upheavals, insurance is available to U.S. businesses. Still, political unrest in countries can severely disrupt supply chain operations. Recent political turmoil and street demonstrations in Thailand, for example, have caused multinational companies to exercise more caution in investing there. As the global financial crisis has demonstrated, multinational firms, particularly in the financial sector may generate risks that domestic regulators either do not recognize or do not address. AIG, the insurance company rescued by the United States in 2008 was brought down primarily by its financial-products unit that marketed credit default swaps. This unit was headquartered in London, not in the United States, and government regulation of such products essentially did not exist. The need for the U.S. government rescue of AIG proved to be a key factor in the spread of what eventually became a global financial crisis and recession. Fiscal, Monetary, and Industrial Policies In the current financial crisis, countries around the world are either contemplating or implementing various stimulus packages to help their economies recover from the global slowdown. One way that supply chains enter the debate is in estimating the impact of fiscal policies—particularly government spending or subsidies—on the domestic economy. If, for example, government policy is to inject funds into the economy, where should they be injected in order to maximize the economic (not political) impact of the policy? Each dollar injected into an economy has what economists call a multiplier effect. This is a rule of thumb that estimates what the final impact of that dollar would be on the total economy after it goes through various rounds of spending. Estimates of the fiscal multiplier vary, but they usually range from about 2 to 4. At the 4-level, each dollar injected into the economy ends up being spent and respent an average of 4 times. The reason the multiplier is not larger is that at each round of spending there is "leakage" from the system. If for example, $1 is given in the form of a tax rebate, the recipient may spend three-fourths of that amount (75¢ in the first round of spending) and may save or is taxed one-fourth of the amount (25¢), by the time all rounds of spending are complete, the eventual effect will be approximately a $4 increase in total spending. As a general rule, therefore, the multiplier effect will be larger the lower the saving and tax rates. These tend to occur in lower income households who tend to save less and are in lower tax brackets. However, lower income households also may purchase more imported goods (lower priced items), so the greater spending by households in the first round may be offset by more leakage because of purchases of imports. If the funds are provided to a business in the form of a loan or subsidy, the business may spend all of it, but the business may purchase some of its products from abroad or invest the funds in overseas operations. Such spending abroad also constitutes a "leakage" from the domestic economy (in the first round). A question for policy, therefore, is which industries in the United States tend to have the least leakage from imports? In industries with Buy American provisions (such as certain rapid transportation, domestic ship transport, and national defense), leakage is kept small by law. Much government procurement falls under Buy American constraints, although signatory countries to the WTO Government Procurement Agreement must implement requirements to buy local according provisions of the agreement. Figure 8 shows exports and imports by U.S. multinational companies in selected sectors in 2005. The sectors are ranked according to those with the largest net exports at the top and those with the largest net imports at the bottom. There were many other sectors with data collected by the U.S. Bureau of Economic Analysis in which multinational companies operated, but those sectors had fewer than three companies reporting, and their data was suppressed to avoid disclosure of amounts for individual companies. The rank order in the figure roughly parallels the rank order for size of the fiscal multipliers for the sectors indicated. Food, computers and electronics, machinery, chemicals, metals, and mining tend to have the higher first round effects (less import leakage and more exports), while motor vehicles, retail and wholesale trade, and petroleum products tend to have lower first-round effects (more leakage abroad). Supply chains have an additional effect that is related to the macroeconomy. If an economy drops into recession or a business contacts, some of the layoffs in a supply chain can occur overseas. Adjusting production by slowing imports has less impact on the U.S. labor force than laying off workers in the United States. The supply chain linkages, however, also imply that a recession in a country as large as the United States may also cause a slowdown in economic activity elsewhere. This coupling of economies in the global marketplace may contribute to the synchronization of recessionary economic conditions and make global recovery even more difficult. At the microeconomic level, as indicated in the policy discussion above, the impact of policy depends partly on the nature of the policy, itself, but it also depends on how and where along a supply chain the policy is applied. In a typical supply chain, policy points arise all along the process from initial research, branding and design to parts procurement, assembly, packaging, shipping and to final sale. The question is whether specific governmental actions intended to accomplish one goal, actually are able to accomplish that goal given the globalized nature of the industry and profit maximizing behavior of businesses. Policy Review Mechanisms In the United States, there are mechanisms in place to review the effect of proposed regulations on U.S. businesses and their ability to compete in the global marketplace. The overall responsibility in the Administration for such review lies with the Office of Management and Budget, but most of the formal analysis of the policies that affect trade and competitiveness are done in the Department of Commerce in the Office of Competition and Economic Analysis. This office provides information on the impact of economic and regulatory policies on the competitiveness of U.S. manufacturing and services industries. It does this by analyzing the effects of both domestic and foreign policy developments on U.S. industries. The U.S. International Trade Commission (USITC) conducts economic analysis at the request of the Congress and President as well as the Commission itself. The Commission's analysis is used to contribute to the development of sound and informed U.S. international trade policy and to the public debate on issues relating to U.S. international trade and competitiveness. USITC analysis attempts to integrate industry, trade and tariff data with industrial and economic expertise to prepare a wide range of official Commission reports and staff developed articles. The USITC conducts analysis of major international trade proposals including all proposed Free Trade Agreements. P.L. 110-69 (Sec. 1006) directed the President to establish a President's Council on Innovation and Competitiveness. This Council is to undertake various activities for promoting innovation and competitiveness in the United States, measure progress in such promotion, and report annually to the President and Congress on such progress. Currently, the U.S. Congress does not have established procedures to evaluate the impact on business supply chains and industrial competitiveness of proposed legislation, although business-related interest groups certainly make their positions known. Within the Congress, the Economic Competitive Caucus (Representative Todd Tiahrt Chairman) focuses on eight areas where it feels the federal government could remove barriers to economic competitiveness for U.S. businesses. The Congressional Budget Office (CBO) conducts budgetary impact analysis for proposed legislation and analyzes specific policy and program issues related to the budget. The agency undertakes such studies at the request of the Congress. CBO analysis does not usually address, however, the effect of proposed legislation on the competitiveness of U.S. based businesses. In the U.S. private sector, the Council on Competitiveness is a group of corporate CEOs, university presidents, and labor leaders. It states that its members are committed to enhanced U.S. competitiveness in the global economy through the creation of high-value economic activity in the United States. As a nonpartisan, nongovernmental organization in Washington, D.C., the Council attempts to shape the debate on competitiveness by bringing together business, labor, academic and government leaders to evaluate economic challenges and opportunities. Much of business input into the impact of U.S. policy on business interests seems to be done through trade associations, labor unions, special interest groups, and various lobbying efforts. The administration also has formal private sector advisory committees, particularly for international trade policy. The United States Trade Representative, for example, has advisory committees dealing with trade policy and negotiations and trade and the environment plus committees representing labor, agriculture, and industry. In Europe, the European Union requires that all major European Commission initiatives contain an Impact Assessment. Such assessments contain an evaluation of the social, economic, and environmental impacts of various policy options associated with a proposal. The EC encourages estimates to be expressed in qualitative, quantitative, and, where appropriate, monetary terms, although in practice, most assessments are based on surveys of business. In Sweden, the Board of Swedish Industry and Commerce for Better Regulation (NNR) is an independent, non-partisan organization funded entirely by its members. The membership consists of the 14 largest Swedish business organizations and trade associations with a combined membership of some 300,000 companies. The principal focus of the NNR is regulatory simplification and a more business-friendly environment, not only in Sweden but also in the European Union. One of its principal tasks is to coordinate the business sector's scrutiny of Impact Assessments by the EU and to negotiate with regulatory agencies during the evaluation of the costs and benefits of a new regulation. Conclusion International business supply chains provide the structure for the new world of globalized business. Much of U.S. international trade is conducted by globalized supply chains. For public policy, supply chains affect the magnitude of impact for fiscal stimulus packages and also the incidence of trade policy. Supply chains also are affected by the range of policies that have an impact on the competitiveness of U.S. business. Whether taxes, environmental regulations, labor policy, or shipping security, business supply chains are directly affected by changes in the business environment, whether in the domestic or foreign markets. In the world of globalized supply chains, a policy aimed at imports, may actually hit U.S. parented supply chains as well as foreign companies and countries. The fracturing of business into core and non-core competencies and into domestic and foreign segments of supply chains implies that what had been purely domestic economic and regulatory policy now may affect the operations of U.S. parented supply chains abroad, and what had been primarily international economic, trade, and investment policy now also has a clear domestic effect. The globalization of supply has added complexity to both the managers of the supply chains and to policymaking. As the 111 th Congress and the Obama Administration consider changes to economic policy, the basic issues raised by global supply chains may come into play, particularly considerations of the incidence of policies. For example, is the goal of a policy to support business to promote the overall efficiency and profitability of U.S. parented supply chains even if significant segments of those chains are located abroad, or is the goal to induce companies to move production or other business activity to the United States even if such action reduces supply chain efficiency and the ability of the U.S.-parented supply chain to compete in the global marketplace? In international trade and investment policies, does the incidence of the policy fall on overseas segments of American parented supply chains? If the policy is to reduce imports into the United States, what effect will that have on global supply chain operations? Is there a balance between trade policies designed to increase U.S. exports (e.g., by reducing tariffs abroad) and those that may induce U.S. companies to move production overseas (e.g., easing foreign country limits on direct investments). As global supply chains attempt to maximize their efficiency and profitability, they face trade-offs between border transaction costs (including tariffs), factor costs (including labor and capital), logistical costs (including shipping), external business costs (ease of doing business, regulations, etc.), and various risks (including security, financial, and political risk). How does government economic policy influence these factors and trade-offs in ways that are in accord with, rather than counter to, U.S. national goals?

In the globalized world of business, production is becoming fragmented into discrete activities and can be spread geographically within and across national borders while remaining integrated organizationally within a multinational company or network of companies. Such globalized production networks are called supply chains or value-added networks. This world of supply chains raises both challenges and opportunities for U.S. policymakers, firms, and workers. The globalization of production networks has raised policy issues and has called into question certain long-held perceptions about the efficacy and effects of policy initiatives. Traditional trade and investment policy is based on national governments, national economies, and country-to-country relations, but much of trade today is between related companies spread across the globe. How does protecting or promoting one domestic industry affect other parts of its or other supply chains? How does the United States ensure the security and integrity of products assembled offshore from components that are procured from a variety of markets around the world? How does policy affect the competitiveness of U.S.-based businesses in the global marketplace? Congressional interest in this issue stems from the essential American interests of economic well-being, security, and the projection of values as well as the constitutional mandate for Congress to regulate commerce with foreign nations. Congress also deals with a variety of policies related to investments and capital flows, market access, currency misalignment, intellectual property rights, product safety, shipping security, labor, and the environment. In a broader sweep, the globalization of business strikes directly at issues related to maintaining the U.S. industrial base, the education and training of the American labor force, immigration, health care, and myriad other factors that determine the well-being of Americans. In international trade, traditional policies aimed at reducing border barriers still tend to increase economic efficiency, but global supply chains may affect the incidence or impact of those policies. Raising import barriers in the United States on products from China, for example, may increase costs for Chinese exporters, but they also have a parallel effect on U.S. multinational companies with manufacturing operations in China that ship to the United States. In fiscal policy, globalized supply chains affect the "multiplier effect" of government policies to stimulate the economy. In shipping security policies, a distinct trade-off exists between greater security and shipping costs. A variety of government policies, both at the national and state level, affect the ability of businesses to compete in the international marketplace and the incentive to locate in the U.S. market. These include tax, labor, environmental, infrastructure, and education policies. A possible test for policy is to ask if the predominant effect is one of trade diversion or trade creation. Does a proposed policy divert production from the U.S. economy to a foreign location, draw production toward a U.S.-based location, or shift production between two foreign locations? Does the proposed policy create more production, or does it discourage productive activity? Does the policy encourage job creation in the United States or does it induce firms to shift jobs overseas? Does the policy disrupt or enhance supply chain operations and decrease or increase overall supply chain efficiency and profitability? And perhaps most fundamentally, how can policy be fashioned to encourage the retention of jobs in the United States while keeping U.S. firms internationally competitive in a complex and globalized world?

Overview Child abuse and neglect is a significant social concern. Children who experience abuse or neglect are more likely to have developmental delays and impaired language or cognitive skills; be identified as "problem" children (with attention difficulties or challenging behaviors); be arrested for delinquency, adult criminality, and violent criminal behavior; experience depression, anxiety, or other mental health problems as adults; engage in more health-risk behaviors as adults; and have poorer health outcomes as adults. Between 1963 and 1967, every state and the District of Columbia enacted some form of child abuse and neglect reporting law to permit individuals to refer cases of suspected child abuse or neglect to a public agency. The rapid adoption of these laws was aided by a model reporting law disseminated by the Children's Bureau, which is housed within the Administration for Children and Families (ACF) at the U.S. Department of Health and Human Services (HHS). In 1974, Congress passed the Child Abuse Prevention and Treatment Act (CAPTA, P.L. 93-247 ) and state reporting laws were modified to conform to the standards it established. In creating CAPTA, Congress sought to increase understanding of child abuse and neglect and improve the response to its occurrence by establishing a single federal focal point on the issue. Since its enactment 35 years ago, the law has been reauthorized and amended numerous times, most recently by the Keeping Children and Families Safe Act of 2003 ( P.L. 108-36 ). Currently, CAPTA authorizes: State Grants : Formula grants to states and territories to help improve their child protective service (CPS) systems, in exchange for which states must comply with various requirements related to the reporting, investigation, and treatment of child maltreatment cases. The FY2009 appropriation was $26.5 million. Discretionary Activities : Federal data collection, dissemination, and technical assistance efforts related to child abuse prevention and treatment, as well as competitive grants to a range of eligible entities for research and demonstration projects or other activities related to the identification, prevention, and treatment of child abuse or neglect. The FY2009 appropriation was $41.8 million (including a $13.5 million set-aside for the ACF home visitation initiative, $500,000 for a feasibility study related to a national child abuse and neglect offender registry, and $2.4 million for other congressional projects designated in the Explanatory Statement accompanying the FY2009 appropriations bill). Community-Based Grants: Formula grants to each state and territory for support of community-based activities and services to prevent child abuse and neglect. The FY2009 appropriation was $41.7 million. Children's Justice Act Grants: Formula grants to states and territories to improve investigation, prosecution, and handling of child maltreatment cases, particularly those cases related to child sexual abuse or exploitation. For FY2009, $20 million was provided out of the federal Crime Victims Fund, including a $3 million set-aside for tribes. Funding authorization for most grants or activities authorized under CAPTA expired with FY2008. However, as shown above, the Omnibus Appropriations Act, 2009 ( P.L. 111-8 ) provided roughly $110 million out of the general treasury for CAPTA grants and activities in FY2009. In addition, as required by the Victims of Crime Act ( P.L. 93-247 , as amended), $20 million was set aside from the Crime Victims Fund for grants to improve the investigation, prosecution, and handling of child abuse and neglect cases (commonly referred to as "Children's Justice Act grants"). FY2010 appropriations legislation ( H.R. 3293 ) pending in Congress would provide roughly the same CAPTA funding for FY2010 and, again, an additional $20 million is expected to be available from the Crime Victims Fund. Issue and Scope Children depend on adults to meet their physical needs, foster their social and emotional development, and, in so doing, nurture their growth into adulthood. For most children, their parents are both capable and committed to providing this necessary care and support. For some, however, this is not true. Any person who knows or suspects that a child is being abused or neglected may contact child protective services (CPS) with this information. Local CPS agencies are called on to screen these referrals, investigate or assess the allegations as warranted, and identify children in need of additional services. In carrying out this job, CPS workers must discern the difference between children whose home situations are safe, those whose homes may be made safe if additional supports and services are provided, and those for whom removal—even if temporary—is necessary for the children's protection. This first part of this report includes a discussion of definitions of child abuse and neglect and a description of how CPS agencies receive and respond to allegations of child abuse and neglect. Tasks done by CPS workers are described, including the manner in which children are ultimately counted as "victims" or "non-victims" of child abuse or neglect. It continues with a look at certain demographic characteristics of children found to be victims and a brief description of services provided to children and their families following a child abuse or neglect investigation. Finally, this part of the report concludes with a short review of some risk factors for poor child outcomes that are seen disproportionately in children whose families are investigated for abuse or neglect, and lists some circumstances prevalent among the families or caregivers of these children that may also put these children at risk for poor outcomes. CPS agencies are sometimes referred to as the "front-end" of the child welfare services continuum. The number of children and families who come to the attention of CPS each year is far greater than the number of children found to be victims of child abuse or neglect and the even smaller number of children who are placed in foster care. Figure 1 shows the scope of children and families who come in contact with the CPS/child welfare agency. Definition of Child Abuse and Neglect Child abuse and neglect is defined in CAPTA as "at a minimum, any recent act or failure to act on the part of a parent or caretaker, which results in death, serious physical or emotional harm, sexual abuse or exploitation, or an act or failure to act which presents an imminent risk of serious harm." States that receive state grant funds under CAPTA must define "child abuse and neglect" to be consistent with this federal definition. All states receive CAPTA state grant funds and many states have developed more detailed definitions of child abuse and neglect, which is sometimes referred to as child maltreatment. Typically, these definitions elaborate on the meaning of different types of maltreatment, including (1) physical abuse, generally involving non-accidental physical injury to the child and, in some states, substantial threat of injury; (2) neglect, including failure to provide necessary food, clothing, shelter, medical care, or supervision and, typically, for reasons other than economic inability to do so; (3) sexual abuse/exploitation; and (4) emotional abuse or mental injury. Some states also incorporate specific language defining other forms of abuse and neglect, including, for example, abandonment, or harming or exposing a child to harm because of substance abuse or the manufacture of a controlled substance. Consistent with the federal definition in CAPTA, many state child abuse and neglect definitions also specify that a finding of child abuse or neglect may only occur if the perpetrator of the maltreatment is a parent or caregiver of the child. In FY2007, 80% of the perpetrators in substantiated abuse or neglect cases were one or both of the child's parents, 5% were other relatives of the child, and 3% were the unmarried partner of the parent. Other types of non-parent caregivers (e.g., foster parents, residential facility staff, and legal guardians) typically represented less than one-half of 1%, each, of the perpetrators of child abuse or neglect. Receiving and Screening Allegations of Child Abuse and Neglect States are required under the CAPTA state grant program to have a statewide law or program in effect that includes procedures for receiving and screening referrals of known or suspected child abuse and neglect, and procedures for investigating them as appropriate. In FY2007, child protective services agencies received 3.2 million allegations of abuse or neglect concerning an estimated 5.8 million children. More than one-third of the allegations (38%) were "screened out" and no investigation followed. However, investigations or assessments were conducted with regard to the majority of allegations received (62%), involving some 3.5 million children. Of these children, an estimated 794,000 were determined to be victims of child abuse or neglect—or roughly 11 children per 1,000 children in the population. (For data on the number of referrals, investigations, and victims of child abuse by state, see Appendix A .) Any person can make a child abuse and neglect allegation to CPS. Most states require certain individuals (e.g., health personnel, teachers, police officers, lawyers, and workers at social service agencies) to report any instance of known or suspected child abuse or neglect. Individuals may make reports of abuse or neglect to local law enforcement or a local CPS agency, and states typically operate a 24-hour hotline to receive this information as well. Under the CAPTA state grant program, states must have procedures for cross-agency cooperation and states have policies (often in statute) regarding how information is to be shared across these entities. States or localities also develop their own rules for when an allegation of child abuse or neglect will be "screened out." For example, these might include—when the allegation received does not meet the state's definition of child abuse or neglect or does not include enough information to permit an investigation or assessment to occur; when the children in the referral were determined to be the responsibility of another agency or jurisdiction (e.g., a military installation or a tribe); or when the alleged victim was older than 18. If an allegation is screened out, there is generally no additional CPS response, although, in a limited number of localities, information on screened-out allegations may be referred to community-based groups for possible follow-up. By contrast, when an allegation is "screened-in," it is called a "report" and a CPS investigation or assessment follows. Among the child abuse and neglect referrals screened in for investigation or assessment in FY2007, 58% were made by professionals—that is, individuals who encountered the alleged child victim as part of their job. These professionals, who, as noted earlier, may be required under state law to report known or suspected abuse or neglect, included education personnel, who were the source of 17% of all reports investigated; legal, law enforcement, or criminal justice personnel (16%); social services personnel (10%); medical personnel (8%); mental health personnel (4%); and foster care or child day care providers (2%). Reports made by non-professionals in FY2007 included those made by anonymous individuals (8% of all reports investigated), relatives (7%), parent(s) (6%), and friends or neighbors of the child (5%). What Is an Investigation? Typically, a single investigation involves more than one child. The number and rate of children who are the subject of a child abuse and neglect investigation trended upward between 1990 and 2004, but has remained relatively flat since that year. Annually, about 3.5 million to 3.6 million children are the subject of CPS investigations or assessments; this translates to a rate of roughly 48 children being the subject of an investigation (or assessment) for every 1,000 in the population. The primary focus of an investigation is a determination concerning the safety of a child. The CPS investigator must assess risk to the child in the home—both whether abuse or neglect has already happened and whether it might occur. In addition to this task, a 2005-2006 national survey of local CPS agencies found that nearly every agency required investigators to make a separate determination of whether any other children in the family were maltreated (98%). A very large majority of these agencies (92%) also required the investigator to make an assessment of service needs of the child during the investigation and, separately, to make a recommendation for court intervention if needed. Finally, in roughly three-fourths of the local CPS agencies surveyed, investigators were required to provide short-term services to the family as necessary (during the investigation) and to refer the family for further (post-investigation) services if needed. In making these determinations and assessments, local CPS agencies commonly instruct investigators to review any prior CPS records relevant to the family; visit the family without making an appointment; discuss the case with other CPS workers; and interview relevant individuals, such as family members other than the caregiver, professionals known to the family, witnesses, and/or the person who made the report of abuse or neglect. Other investigation activities might include conducting a criminal background check on the alleged perpetrator, conducting family group conference meetings, and discussing the case with a multi-disciplinary team. What is Alternative Response? Some states (or localities) have implemented a system of "alternative" or "differential" response. In these places, reports of abuse or neglect where children are deemed (at the screening stage) not at imminent risk of harm or at lower risk may be referred for alternative response rather than investigation. An alternative response focuses primarily on assessing family strengths and needs to ensure children's safety. In many localities, referral to an alternative response precludes a formal determination that abuse or neglect occurred (or didn't occur). A 2005-2006 survey of local CPS agencies found that 39% had implemented some form of "alternative" or "differential" response. That survey found that in the large majority of those agencies, workers providing an alternative response were required to follow standard practices. These included making assessments of the underlying causes of the alleged maltreatment (a standard practice at 84% of the surveyed agencies), the service needs of the family (86%), and the service needs of the child(ren) (86%). Most local CPS agencies (71%) also required the worker providing an alternative response to refer the family for further services if needed. Activities conducted as part of alternative response typically included interviews with caregiver(s) of the child(ren); interviews with (or formal observation of) the child(ren); and discussion of the case with other CPS workers. They might also include a visit to the family by appointment. Who Is Counted as a Victim? In FY2007, HHS estimates that 794,000 children experienced child abuse or neglect, based on reports from state CPS agencies. The annual number of children reported as victims of child abuse and neglect by HHS includes all children for whom a CPS investigator "substantiates" that abuse or neglect occurred, as well as children for whom the investigator determines that the abuse or neglect is "indicated" and those coded by states as an "alternative response victim." All states report on substantiated victims of child abuse and neglect and the very large majority of children who are counted as victims (close to 96% in FY2007) had an investigation finding of "substantiated." A few states (four in FY2007) also report the number of children for whom abuse or neglect was "indicated." In these states, a CPS investigator who suspects that the child may have been maltreated (or is at risk of maltreatment) but is unable to substantiate this under the rules of evidence (see below) or the definition of abuse or neglect in the state may determine that child maltreatment is "indicated." For FY2007, four states reported that 15,000 children had an investigation determination of "indicated." Finally, although provision of alternative response typically precludes an abuse or neglect finding, two states reported in FY2007 that 16,000 children were "alternative response victims." Level of Evidence Required to Substantiate a Child Maltreatment Report In determining whether to "substantiate" a child abuse or neglect report, a CPS investigator must consider how child abuse and neglect is defined in the state, as well as the level of evidence required by the state to make such a determination. In FY2007, 20 states required investigators to make a "reasonable" determination or to have credible evidence that a child had been abused or neglected before formally substantiating a child abuse or neglect report; more states (27) used a somewhat stricter level of evidence, requiring investigators to find that a "preponderance" of evidence supported a determination that a child was a victim of abuse or neglect; and two states required the most rigorous standard of "clear or convincing evidence." States with the least restrictive level of evidence had an average child maltreatment victim rate of more than 13 in FY2007, those using a somewhat more strict level of evidence had a victim rate of just below 10, and those with the most restrictive level of evidence had a victim rate just below 2. Who Is Counted as a Non-victim? Among all children who were the subject of a child abuse and neglect investigation in FY2007, HHS estimates that about 2.7 million were "non-victims." Children are counted as "non-victims" if they are the subject of a CPS investigation and the investigation does not conclude that they were a substantiated, indicated, or alternative response victim of abuse or neglect. For most "non-victims" (72% in FY2007), this means the CPS investigation concluded with a determination that abuse or neglect was "unsubstantiated." This finding category is used by all states but is often not defined. It is commonly understood to mean that there was not sufficient evidence under state law to conclude that the child was maltreated or was at risk of maltreatment. There is a growing body of evidence suggesting that the difference between children for whom an abuse or neglect case is substantiated as opposed to unsubstantiated may be more a matter of degree than absolute difference. As noted above, states that require stronger levels of evidence tend to have lower rates of substantiation. Further, as discussed later, children in families who are investigated for abuse or neglect, in general, exhibit greater developmental and other risk factors than do children in the general population, and many children who are not found to be victims of abuse or neglect receive post-investigation services nonetheless. There are a variety of additional "non-victim" finding categories reported by states. More than 1 in 10 "non-victims" (13% in FY2007) had a finding of "no alleged maltreatment." This may be the result of an increasing number of states in which all children living in the home of a child for whom an abuse or neglect case is reported are viewed as subjects of the investigation. Thus, this group of non-victims is presumed to be siblings of children for whom abuse or neglect was investigated and for whom a victim determination was not made. A smaller percentage of "non-victims" (less than 8% in FY2007) are reported as having been served by an "alternative response" and with no finding of child maltreatment. (Only 11 states reported data in this category in FY2007.) "Non-victims" also include children for whom the case was "closed with no finding." In FY2007, 23 states reported "non-victims" in this category, and they represented less than 2% of "non-victims." Generally, "closed with no finding" means that the agency could not complete the investigation (e.g., because the family could not be located). Finally, in a very small number of instances (less than one-half of 1% of children subject to an investigation), the allegations of abuse or neglect are found to be "intentionally false" by the CPS investigator. Children Found to Be Victims of Abuse or Neglect The number and rate of children who were found to be victims of child maltreatment peaked in the early to mid 1990s when roughly 1 million children were reported to be victims of child abuse or neglect annually. From the later 1990s through FY2006, roughly 900,000 children were reported in each year to be victims of abuse or neglect; this translated to a rate of roughly 12 victims of child maltreatment for every 1,000 children in the population. For FY2007, however, the number of reported child maltreatment victims declined to 794,000—or less than 11 victims for every 1,000 children in the population. HHS attributes the decline in the number of victims reported in FY2007 to (1) an increase in the number of children with the investigation/assessment finding of "other" (these children are not counted as victims); (2) a decrease in the number of children with findings of "substantiated" or "indicated" (these children are counted as victims); and (3) a decrease in the number of children who received an investigation or assessment. The reason for all of these changes is not entirely clear. However, some states reported differences in how they collected and/or reported child maltreatment data for FY2007, and these changes may be largely responsible for the change in the national number of child maltreatment reports and of victims. (For a table showing, on a national basis, the number and rate of children who were the subject of a child abuse or neglect investigation, see Appendix C .) Types of Child Maltreatment Children experience neglect far more than any other type of maltreatment. Among the 794,000 children counted as victims of child abuse or neglect in FY2007, 59% were reported as having experienced neglect only (including medical neglect), about 11% were reported as victims of physical abuse only, and less than 8% were reported as victims of sexual abuse only. In addition, about 13% were found to have experienced two or more types of maltreatment (e.g., the child experienced both neglect and physical abuse). There has been a decline in the reported rates of physical abuse and sexual abuse over roughly the past 15 years. (For a table showing trends in the share of child victims by maltreatment type, see Appendix C .) Age and Race/Ethnicity of Child Maltreatment Victims States report the highest rates of child maltreatment among young children and among children who are African-American, American Indian/Alaska Native, or reported as being of two or more races. Infants and young children are the least able to care for and protect themselves and are more likely to be determined victims of child abuse or neglect than are older children. In FY2007, nearly 22 infants (children under the age of one year) were found to be victims of child maltreatment for every 1,000 infants in the population. By contrast, for FY2007, the child maltreatment rate reported for children ages one or two years was sharply below that of infants, at 13 for every 1,000 children of that age in the population; for three to seven years olds, the comparable rate was just below 12; for eight to 15 year olds, it was roughly nine; and for 16 and 17 year olds, it was five. The 1 st , 2 nd , and 3 rd National Incidence Surveys, which studied the incidence of child abuse and neglect in the general population, found no direct link between race and child maltreatment; however, certain racial groups are disproportionately likely to be counted as victims of child abuse and neglect. Across all race/ethnicities, less than 11 out of every 1,000 children in the population were reported by states as victims of child abuse or neglect in FY2007. However, the comparable rates for African Americans (16.7), American Indian/Alaska Native children (14.2), and children of two or more races (14.0) are higher than this overall rate, while the rates for white (9.1) and Hispanic children (10.3) are somewhat lower, and the rate for Asian children (2.4) is much lower. There are a variety of theories about why some children of color might be overrepresented in the child welfare system more generally, including disproportionate need (data show children of color are more likely to live in poor or single-parent homes, both of which have been associated with higher rates of child abuse or neglect); disproportionate attention (they come into contact with social service or other workers who notice and may be required to report suspected maltreatment); biased decision-making (they are more likely to be referred to CPS by those workers than are other children); and fewer community resources (they live in communities with fewer family support or other needed services). These theories are not necessarily mutually exclusive and, to the extent they are true, might operate differently in different locations. Post-investigation Services As discussed earlier, roughly three-fourths of all CPS agencies nationwide require investigators to provide short-term services to families, as needed, during child abuse and neglect investigations, and also to refer families for post-investigation services if needed. Post-investigation services most often offered to families were parenting classes and substance abuse programs. Less frequently offered services included marital counseling, family system therapy, grief counseling, advocacy services, dental exams, homemaker/chore services, employment services, and financial planning. In recent years, roughly one in five of all children found to be victims of child abuse or neglect were removed from their homes within 90 days of the investigation. During that same time period, about two in five children found to be victims of abuse or neglect received some services while they remained living in their homes, and the remaining two in five identified victims did not receive any additional services following the close of the investigation. A child maltreatment victim may not receive post-investigation services if the child's and family's needs were met during the investigation. Others may not be served because services are not available or the waiting list for them is very long. Finally, children who are not found to be victims of abuse or neglect may nonetheless be determined to be in need of post-investigation services. In recent years, roughly one out of four "non-victims" received some services following an investigation (while they remained in their home) and a small percentage were removed from their homes. (For a table estimating receipt of post-investigation services, nationally, by a child's status as "victim" or "non-victim," see Appendix D .) Risk of Poor Child and Family Outcomes Among Families Where an Investigation of Abuse or Neglect Occurs In recent years, CPS workers have conducted roughly 1.9 to 2.0 million child abuse or neglect investigations (or assessments) annually, typically involving as many as 3.5 or 3.6 million children. Findings from a nationally representative survey of children in families investigated for abuse or neglect show that this population is at risk of poor child and family outcomes, regardless of whether the investigation determines the child to be a victim. Family and Caregiver Risk Factors Many families visited by CPS workers face challenges to their stability, which might limit their ability to nurture and adequately support their children. Caseworkers reported that more than half of the families (54%) included in the nationally representative survey of children in families investigated for abuse or neglect had only one supportive caregiver in the home, close to one-third (31%) were assessed as having low social support, and nearly one-quarter had trouble paying for basic necessities. Caseworkers also identified poor parenting, serious mental health problems, domestic violence, and abuse of alcohol and drugs as issues facing significant numbers of families investigated for abuse or neglect. Notably, many of these families had prior contact with CPS. A little more than half (51%) had been the subject of prior reports of abuse or neglect, one-quarter had a prior incident of substantiated child abuse and neglect, and close to 30% had previously been served by the child welfare agency (not including investigation as a service). The percentages cited here represent the share of risk factors among all families where an investigation occurred. In general, the share of families experiencing these risk factors was higher among those who received services following the investigation and was highest among families where a child was removed from the home following the investigation. (See Appendix B for a table showing the percentage of families/caregivers that experienced these risk factors, as assessed by the CPS investigator, based on level of service subsequently received.) Not surprisingly, high cumulative caregiver/parent risk factors (as assessed by the CPS investigator) predicted placement in out-of-home care or receipt of services while the child remained in the home. (Findings displayed in this report did not show presence of risk factors by whether or not a child was determined to have been a substantiated victim of abuse or neglect.) In addition, investigative caseworkers most often cited two factors, a "reasonable level of caregiver cooperation" and "child's inability to self protect," as critical in their decision-making process. Caregiver cooperation was especially influential in cases where a CPS worker decided the child should remain at home. A child's inability to self protect was most significant in decision-making with regard to younger children. For older children, however, investigative caseworkers cited the importance of the child's special health or other needs. Risk Factors Among Children Children in families investigated for abuse or neglect exhibit a greater risk for developmental delays and behavior problems than do children in the general population. This higher risk appears to exist across the range of children in families investigated for abuse and neglect and is not necessarily limited to those families in which the allegation of abuse or neglect is "substantiated" or to those children who are removed from their homes following an investigation. School-age children who were in families investigated for abuse or neglect were at least twice as likely as children in the general population to be identified (using a standardized checklist) as having clinical or borderline clinical levels of problem behavior. In addition, they scored comparatively lower on reading and (especially) math scores, and social and living skills, and exhibited higher levels of depression. Under CAPTA, states are required to have procedures in place to refer children who are found to be substantiated victims of child abuse or neglect for screening under the Part C, early intervention services, program that is part of the Individuals with Disabilities Education Act (IDEA). Analyzing survey data among the nationally representative sample of children in families investigated for abuse or neglect, researchers determined that as many as 34% of the youngest children in these families (those under age three) had a developmental delay that would qualify them for special education services under the eligibility criteria used in most states for the Part C program. The comparable percentages among the general population for children with developmental delay is 2% to 23%, depending on the study used. The researchers also found that the presence of developmental delay was not limited to young children who were determined to be victims of child abuse and neglect. Rather, they reported: "Children with unsubstantiated reports [of child abuse or neglect] (38%) were significantly more likely than children with substantiated reports (28%) to be in need of Part C services due to developmental delay or an established medical condition." At the same time, they noted that children with unsubstantiated reports of child abuse or neglect were less likely to receive services than children substantiated as victims of abuse or neglect. The degree to which the child welfare agency should play a role in service access for all children it investigates, regardless of substantiation status, is an important area for future research and policy consideration, the researchers stated. (For tables showing prevalence of certain risk factors among children in families investigated for child abuse and neglect, and, separately, family or caregiver risk factors in that population, see Appendix B .) The remainder of this report discusses grants programs and other activities authorized by CAPTA, including the funding provided and authorized for them. CAPTA Grants and Activities The well-being of children is the subject of a range of federal programs that are collectively referred to as "child welfare" programs. The primary goals of federal child welfare programs are to ensure the safety of children; to enable them to be part of strong, permanent families; and, in doing this, to foster the well-being of children and their families. CAPTA is the only federal child welfare program focused solely on preventing child abuse or neglect as well as responding to allegations of abuse or neglect. As such, it is a critical piece of federal child welfare policy related to ensuring children's safety. In addition, efforts to prevent child abuse or neglect or to ensure that children may safely remain in a home where child abuse or neglect has been alleged are critical to the goal of permanence. The remainder of this report discusses activities authorized and required under CAPTA and funds provided. Table 1 provides a snapshot of the programs or activities authorized under CAPTA, including use of funds, requirements, and funding. State Grants Funding for CAPTA state grants ($26.5 million in FY2009) is provided to help states improve their CPS systems and may be used for a range of purposes specified in the law. To be eligible to receive these state grant funds, a state must submit a plan including certain assurances related to how it will operate its CPS system; establish and support citizen review panels; and, to the "maximum extent practicable," annually supply to HHS certain child abuse and neglect data. The statute provides that any funds appropriated for these purposes must be distributed to all eligible states by formula. Allowable Use of Funds CAPTA state grant funds are intended to improve the state CPS system, and the statute provides a variety of areas in which they can be used to make improvements. These are: Receipt and investigation of reports of child abuse and neglect: Educate the public on the role of CPS and the nature and basis for reporting child abuse and neglect; develop and facilitate research-based training protocols for individuals mandated to report child abuse or neglect; improve intake assessment, screening, and investigation of reports; develop, improve, and implement risk and safety assessment tools and protocols; and improve and enhance investigation of child abuse and neglect reports by creating multidisciplinary teams and interagency protocols. Prevention and services : Improve case management, including ongoing case monitoring, and delivery of services and treatment to children and their families; develop and enhance the capacity of community-based programs to prevent and treat child abuse and neglect and to integrate parent and professional leadership strategies to do so; and develop, implement, or operate programs to assist in obtaining or coordinating necessary services for families of disabled infants with life-threatening conditions. Training and workforce recruitment and retention : Develop, strengthen, and facilitate training, including training on research-based strategies to promote collaboration with families, the legal duties (of CPS workers), and personal safety for case workers; and improve the skills, qualifications, and availability of individuals providing services to children and families through the child protection system, and the supervisors of such individuals. Collaboration between agencies : Support and enhance interagency collaboration between the child protection system and the juvenile justice system to improve services and treatment, and provide methods for continuity of treatment plans and services for children moving between the systems; and support and enhance collaboration among public health agencies, CPS agencies, and private community-based programs to provide child abuse and neglect prevention and treatment services (including linkages with education systems) and to address the health needs, including mental health needs, of children identified as abused or neglected, including supporting prompt comprehensive health and developmental evaluations for children who are the subject of substantiated child maltreatment reports. Legal preparation and representation : Improve legal preparation and representation, including procedures for appealing and responding to appeals of substantiated reports of child abuse and neglect and provision for the appointment of an appropriately trained individual to represent the best interests of child victims in judicial proceedings. Data collection : Develop and update technology systems that support the work of the CPS agency, track reports of child abuse and neglect from intake through final disposition, and allow interstate and intrastate information exchange. Requirements for Receipt of State Grant Funds All 50 states, the District of Columbia, Puerto Rico, and other territories receive CAPTA state grants. To receive these funds, states (including the District of Columbia and Puerto Rico) must submit an initial application as well as a renewal application no less often than every five years. Under regulations provided by HHS, the application is to be submitted as part of a broader Child and Family Services Plan (CFSP) that is intended to encourage the integration of several federal programs that provide funds for services to children and their families. The CAPTA state grant application must include a state plan for the CAPTA grant program, which is discussed in more detail below. Description of Use of Funds and Program Coordination In its plan, a state must outline how it intends to spend CAPTA state grant funds, including specifying what areas of its CPS system it will seek to improve, and what child abuse prevention services will be provided (directly or through referral). Further, states must, "to the maximum extent practicable," coordinate the CAPTA state grant program with the federal Stephanie Tubbs Jones Child Welfare Services and Promoting Safe and Stable Families programs. Those programs are authorized under Title IV-B of the Social Security Act and provide formula funding to all states for a range of services to children and families. Accordingly, in their CAPTA state grant plan, states must certify that any activities that are related to preventing, responding to, or treating child abuse or neglect and that are carried out under those Title IV-B programs meet the requirements for CAPTA state grants. The CAPTA state plan must further describe training to be provided for mandatory reporters of child abuse and neglect, as well as training for CPS workers. Finally, states are required to notify HHS annually about any substantive changes in state law that could affect their eligibility for CAPTA state grant funds and any significant changes in how the grant funds will be used. Assurances To receive CAPTA state grant funding, a state must also provide assurances in its state plan that it has in effect a statewide policy or program, or is enforcing a statewide law related to child abuse and neglect in the following areas: R eceiving, screening , and i nvestigating allegations of child abuse and n eglect : A state must have procedures to receive reports of known or suspected child abuse and neglect, and for the immediate screening, risk and safety assessment, and investigation of those reports. These procedures must include a requirement that health care providers who are involved in the delivery or care of an infant who has been affected by prenatal exposure to illegal substances notify CPS of the infant's condition. Further, they must provide that designated individuals at health care facilities promptly notify CPS of suspected medical neglect and that the state CPS have procedures for coordinating and consulting with those individuals on all cases of reported medical neglect. With regard to each investigation (or assessment) of reported child abuse and neglect, the state must require that a CPS worker, at the initial time of contact with the alleged perpetrator, advise that individual of the allegations made against him or her and do this in a manner consistent with laws that protect the rights of the person who made the allegation of abuse or neglect. The state must also have provisions by which individuals who disagree with an official finding of abuse or neglect can appeal this finding. Further, the state must provide, by law and regulation, for the immunity from prosecution of any individual making a good faith report of suspected instances of child abuse or neglect. Ensuring c hildren's s afety and m aking r eferral s to other s ervices : A state must have procedures to refer children not at risk of imminent harm to a community organization or voluntary preventive service. A state must also have procedures to immediately ensure the safety of any child who is abused or neglected, as well as any child who may be at risk of abuse or neglect by the same caretaker, and to ensure children's placement in a safe environment. Special procedures or laws must be in place to respond to (1) child maltreatment victims under three years of age (i.e., the state must have provisions for their referral to early intervention services under Part C of the Individuals with Disabilities Education Act); (2) for infants identified as being affected by prenatal exposure to illegal substances (i.e., the state must have provisions for development of a plan of safe care); and (3) for cases involving medical neglect (i.e., the state must have a law that grants CPS the authority to pursue legal remedies, including those necessary to provide medical care or treatment when necessary). Legal representation of c hildren in abuse and neglect judicial p roceedings : States are required to have provisions for the appointment of an appropriately trained guardian ad litem (an attorney, court-appointed special advocate, or both) to represent each child abuse or neglect victim who is involved in a judicial proceeding. Confidentiality of records: In general, states must maintain the confidentiality of all records and reports related to their child abuse and neglect investigations. At the same time, a state must have procedures to release information from these confidential records to any federal, state, or local government entity, or an agent of these entities, that needs this information to carry out its responsibilities under law to protect children from abuse and neglect. Two of these entities, child fatality review panels and citizen review panels, are specifically named in the statute and must be given access to confidential information needed to perform their work. Further, the state is required to release to the public information concerning a child abuse and neglect case when it resulted in the death or near death of a child. States are permitted to release child abuse and neglect records to (1) individuals who are the subject of a report; (2) a grand jury or court, if the information in the record is necessary to determine an issue before the grand jury or court; and (3) any other entity or class of individuals that is authorized by state law to receive the information for a legitimate state purpose (e.g., researchers, or employers conducting background checks). Finally, a state is also permitted to allow public access to child abuse and neglect court proceedings, provided that it does so in a manner that ensures the safety and well-being of the child, parent, and families. Individuals or entities who receive confidential information from a child abuse and neglect case are bound by the same confidentiality rules as the state and may not re-release the information. In the case of citizen review panel members, a state must have in place civil sanctions for any member of a panel that re-discloses identifying or other information from a CPS case without specific authorization to do so. States must also have procedures to expunge any records made available to the general public or used for purposes of employment or other background checks in cases where the child abuse or neglect allegation is unsubstantiated or found to be false. This requirement, however, does not preclude state CPS agencies from keeping information on unsubstantiated cases in its casework files to assist in future risk and safety assessments. Finally, unless it is ordered to do so by a court, a state is always permitted to refuse to disclose identifying information concerning the person who made a specific allegation of child abuse or neglect. Training , worker r etention , and s upervision: In addition to describing training programs for CPS workers and mandatory reporters in their state plan (see " Description of Use of Funds and Program Coordination "), states are required to have provisions to improve the training of caseworkers, as well as methods for training or informing CPS workers regarding their legal duties ("in order to protect the legal rights and safety of children and families from the initial time of contact during investigation through treatment"). States must also have provisions related to improving retention and supervision of caseworkers. Establishment and s upport of citizen review p anel s : States are required to establish no less than three citizen review panels (or no less than one in less populous states). The panels must be composed of volunteers who are "broadly representative" of the community, including members with expertise in the prevention and treatment of child abuse and neglect, and may include foster care review boards or child fatality panels. Citizen review panels are required to meet at least once every three months and to evaluate the effectiveness of state and local CPS agencies' policies and practices in protecting children. As part of doing this work, they must provide for public outreach and comment on the impact of CPS work. Each panel must provide to the state an annual written report (which also must be made available to the public) that summarizes its activities and recommendations for CPS improvements at the state and local level. Within six months of receiving the report, the state must submit a written response to the citizen review panel and to state and local child protection systems that describes whether or how the state will incorporate the recommendations of the panel. Finally, to permit citizen review panels to carry out their duties, states must grant them access to information on cases that the panels wish to review and must also provide, as requested, staff assistance to help the panels carry out their duties. Termination of parental r ights : Termination of parental rights is a legal process that severs the legal relationship (rights and responsibilities) between a parent and child. As part of ensuring children's safety and permanency, states are required to have provisions for the expedited termination of parental rights in the case of an infant who has been abandoned. States must also have provisions ensuring that no child whose parent has been convicted of a heinous crime against that child or a sibling of that child (e.g., murder, voluntary manslaughter, conspiracy to murder, or felony assault resulting in serious bodily injury to the child or sibling) be required to be reunited with that parent. In addition, once a state has those provisions in place, it must establish by state law that those same crimes against the child (or a sibling of the child) are grounds for termination of parental rights. At the same time, case-by-case determinations of whether to seek termination of parental rights remain, under CAPTA statute, at the sole discretion of the state. Criminal background c hecks : States are required to ensure that criminal background checks are completed for every prospective foster or adoptive parent and for any other adult(s) living in the household. Data Reporting States must, "to the maximum extent practicable," report certain child abuse and neglect data to HHS. Specifically, these data are (1) the number of children who were reported to the state during the year as abused or neglected and, of those children, the number for whom the report was substantiated, unsubstantiated, or determined to be false; (2) the number of children reported as abused or neglect who received services under CAPTA (or an equivalent state program) during the year, the number who did not, and the number who were removed from their families; (3) the number of children reunited with their families, or receiving family preservation services, that within five years were the subject of a subsequent substantiated report of child abuse or neglect (including death); (4) the number of deaths in the state during the year that were the result of child abuse or neglect and the number of those deaths that involved children in foster care; (5) the number of children for whom individuals were appointed by the court to represent the children's best interests and the average number of out-of-court contacts between the appointed representatives and these children; (6) the number of children "under the care of the state child protection system" whose custody is transferred to the state juvenile justice system; (7) the number of families that received preventive services during the year; (8) the number of CPS workers responsible for intake and screening of child abuse and neglect reports, and the number of those same CPS workers, as well as the number of CPS investigators, relative to the number of reports investigated; and (9) the agency response time with respect to initial investigation of child abuse or neglect and the response time with respect to the provision of services to families where an allegation of abuse or neglect has been made. Finally, states must, to the maximum extent practicable, submit to HHS the annual report summarizing the activities of their citizen review panels. Distribution of State Grant Funds HHS awards CAPTA state grants to each of the 50 states, the District of Columbia, Puerto Rico, American Samoa, Guam, the Northern Mariana Islands, and the U.S. Virgin Islands. Each of these 56 jurisdictions receives a base allotment of $50,000, after which the remaining funds are allocated to each jurisdiction based on its relative share of the child (under age 18) population among all of those jurisdictions. No matching funds are required to receive this grant. The statute does not authorize distribution of CAPTA state grants to Indian tribes or tribal organizations. CAPTA state grant amounts among the 50 states, the District of Columbia, and Puerto Rico ranged from a low of $85,000 to a high of just over $3.0 million in FY2009. The median grant among those 52 jurisdictions was $367,000. Table 2 shows CAPTA state grant funding for each of FY2007-FY2009 by state. Reported Use of Funds As part of their FY2008 application to receive these grants, states reported that they planned to spend close to half of their CAPTA state grant funds (48%) on prevention and support services (these might include respite care, early developmental screening of children, services to increase parenting skills, home visiting, and family support or resource centers); a little less than that (44%) for protective services (which, among other things, includes investigations, case management, and service referrals); 5% for training; and the remainder on intensive family preservation or services to expeditiously reunite children removed from their homes with their parents. Funds provided under CAPTA state grants may support improved prevention activities in the state and improvements to the CPS system for receiving and responding to reports of abuse or neglect. Title II of CAPTA exclusively provides funds to support community-based child abuse or neglect prevention activities. No federal program, however, exclusively provides funds for the operation of state CPS systems, although states may, and do, use a variety of federal funding streams to support their CPS systems (including, for example, funding under the Social Services Block Grant (SSBG), Temporary Assistance for Needy Families (TANF) block grant, and the Stephanie Tubbs Jones Child Welfare Services program). Available data, however, suggest that states provide the largest share of CPS funding from non-federal sources (state and local dollars). For FY2007 (most recent data available), states reported spending $270 million through the SSBG funding stream (including TANF funds transferred to that block grant) for "child protective services." However, among the 36 states able to report on total child protective services spending in their state, SSBG spending amounted to less than 8% of all state spending (including state, local, and federal dollars) for child protective services. Community-Based Grants to Prevent Child Abuse and Neglect CAPTA Title II community-based grants—administratively referred to as Community-Based grants for Child Abuse Prevention or CBCAP grants—are one of the few sources of federal child and family services funding that are wholly dedicated to the prevention of child abuse and neglect. The funds are distributed to a state-designated lead entity in each state, and must be redistributed by that lead entity to community-based groups for the support of a continuum of prevention-focused programs and activities designed to strengthen and support families to prevent child abuse and neglect. Programs and activities supported may range from public campaigns to prevent child abuse or neglect to provision of services for families such as home visiting, respite care, and parenting education. Families served with CBCAP funds are typically those that meet some "at risk" definition but—in keeping with the prevention focus—are not in current contact with the child welfare agency. The statute directs that some of the CBCAP funds be set aside for technical assistance and for tribal or migrant programs before distribution to all states. The distribution is based, in part, on each state's relative share of child population as well as its ability to leverage non-federal funds to further support prevention activities and services. Allowable Use of Funds The statute stipulates how the state-designated lead entity must use CBCAP funds and also provides certain complementary requirements for the use of funds by community-based sub-grantees. CBCAP funds are to be used by the state's lead entity for the following purposes. D evelop, operate, expand, and enha nce community-based, prevention- focused programs and activities designed to strengthen and support families to prevent child abuse and neglect. Programs and activities are expected to be accessible, effective, and culturally appropriate, and to (1) offer support to families to increase family stability and improve access to services; (2) promote the development of parenting skills (especially in young parents and parents with young children); (3) demonstrate a commitment to meaningful parent leadership in the planning for and operation of community-based programs; and (4) support the additional needs of families that include children with disabilities (through respite care and other services). Finally, in awarding grants to community-based programs, the lead entity must give priority to effective programs that serve low-income communities, and those that serve young parents or parents with young children, including community-based family resource and support programs. Foster a continuum of prevention services for children and families through state and community-based collaborations and partnerships, both public and private. Finance the start-up and operation of family support and family resource services that respond to identified unmet needs. Unmet needs are to be identified by a regular inventory of community-based services. Maxim ize funding for services to strength en and support families to prevent child abuse and neglect by leveraging and integrating all available public and private funds at the federal, state, and local levels. Finan ce public information campaigns focused on health and positive development of parents and children and on the prevention of child abuse and neglect. Community-based groups receiving funds via the state entity must focus on similar activities at the local level. These are (1) assessing community need and involving parents in planning a continuum of services; (2) developing a strategy to provide, over time, a continuum of services through public and private partnerships; (3) providing core family resource and family support services, including services related to parent education, mutual support, and self help; outreach services; and community and social service referrals; (4) providing, or arranging for provision of, other core services, including voluntary home visiting and all forms of respite care services ; (5) developing leadership roles for meaningful involvement of parents in designing, operating, evaluating, and overseeing these prevention and support programs and services; (6) providing leadership in mobilizing local public and private resources for these services; and (7) participating with other community-based groups and activities to strengthen prevention activities and family resources and supports. Eligibility Requirements To be eligible for funding, a state must designate a lead entity to direct CBCAP funding and efforts; provide certain assurances, including some related to the qualifications and work of that lead entity; submit an application that includes a description of certain planned CBCAP activities, a budget showing that the state will provide not less than 20% in matching program funds, and other assurances; and submit annual program reports to HHS. D esignate a l ead entity to direct the spending of CBCAP funds . The entity selected may be a public, private nonprofit, or quasi-public organization. It must have a demonstrated ability to integrate child abuse and neglect prevention services and activities and to leverage and blend a variety of funds to support these activities. In roughly half of the states (including Puerto Rico), a public agency serves as the lead entity (most commonly the child welfare agency or another agency within the human services department), and in the remaining states (including the District of Columbia), quasi-public or private nonprofit agencies (most commonly the state's Children's Trust Fund) have been designated as the lead entity. Assurances concerning the work of the lead entity . The state must provide assurances that the lead entity will provide, or be responsible for, (1) community-based and prevention-focused programs and activities designed to strengthen and support families and to prevent child abuse and neglect, and that these programs, where appropriate, will be provided through a network; (2) direction through an interdisciplinary and collaborative public-private structure that includes balanced representation from public and private sector members, parents (including parents with disabilities), and nonprofit and public service providers; (3) direction and oversight by identifying goals and objectives; (4) clear lines of communication and accountability; (5) leveraged or combined funding from federal, state, local, and private sources; (6) centralized assessment and planning activities; (7) training and technical assistance; and (8) reporting and evaluation. Further, the state must assure that the lead entity will integrate its efforts with the child abuse and neglect activities of the state and with individuals and organizations experienced in working in partnership with families that have children with disabilities and parents with disabilities. Assurances concerning the qualifications of the lead entity . The state must provide assurances that the lead entity it designates has (1) a demonstrated commitment to involving parents in the development, operation, and oversight of community-based programs that support families to prevent child abuse and neglect; (2) shown its ability to work with state and community-based organizations (both public and private nonprofit groups) to develop a continuum of preventive services and supports for children and families; and (3) the capacity, through interagency funding and interdisciplinary service delivery mechanisms, to provide operational support (financial and programmatic), training, and technical assistance to community-based child abuse prevention and family resource and support programs. Submit an applic ation including descriptions, assurances, and plans related to administration of CBCAP and the role of the lead entity . The state must submit an application to HHS that (1) describes the lead entity that will be responsible for administration of the CBCAP grant and oversight of the community-based programs funded; (2) describes how those community-based programs will operate and how public and private family resource and support services will be integrated into developing a continuum of family-centered, holistic preventive services for children and families; (3) includes a plan for providing operational support, training, and technical assistance to community-based prevention programs to develop, operate, expand, and enhance their activities; (4) provides an inventory of community-based child abuse and neglect prevention and family resource programs operating in the state and current unmet needs; (5) describes the criteria the lead entity will use to develop or to select and fund community-based child abuse and neglect prevention programs; (6) describes how the lead entity will advocate for systemic changes in state policy, practices, procedures, and regulations to improve the delivery of community-based, prevention-focused services to children and families; (7) describes the outreach activities that the lead entity and the community-based child abuse and neglect prevention programs will do to maximize the participation of racial and ethnic minorities, children and adults with disabilities, homeless families and those at risk of homelessness, and members of other underserved or underrepresented groups; and (8) assures that the state can meaningfully involve parents in planning, implementing, and evaluating programs and policy decisions of the lead entity. Submit a program budget . As part of its application, the state must also supply HHS with a CBCAP program budget and it must verify that it will spend in non-federal funds (cash only) an amount not less than 20% of its federal CBCAP funding. Further, the state must assure that federal CBCAP funds will be used to supplement, not supplant, other funds for community-based, prevention-focused programs serving children and families. Provide performance and other reports or information deemed necessary by HHS . The application must describe how the work of the lead entity and of the community-based programs it funds will be evaluated. Further, the state must assure that it will provide HHS with annual reports on the program, including information on "performance measures" that (1) demonstrate that the state lead entity has effectively developed, operated, and expanded community-based programs that meet the requirements of CBCAP; (2) describe services provided by local programs and demonstrate that they have addressed identified unmet needs; (3) describe the number of families served and demonstrate their high level of satisfaction with the services; (4) describe the involvement of diverse families in designing, operating, and evaluating community-based programs to prevent child abuse and neglect and have an implementation plan to ensure continued leadership of parents in program design, operation, and evaluation; (5) demonstrate establishment or continuation of innovative funding mechanisms that blend a variety of resource and interdisciplinary service mechanisms to develop, support, and expand community-based programs to prevent child abuse and neglect; and (6) describe the results of a peer review process conducted under the state program. Distribution of Funds States that properly designate a lead entity, submit an application, and provide necessary reports and assurances are eligible to receive CBCAP funds. For FY2009, $41.7 million was appropriated for this grant program. The statute requires HHS to reserve 1% of the funds annually appropriated for grants to Indian tribes, tribal organizations, and migrant programs. It further permits HHS to set aside "such sums as may be necessary" for certain program support and technical assistance activities. Remaining funds are to be allocated among all states by formula. Tribal and migrant p rograms . The 1% reservation for tribal entities and migrant programs is distributed by HHS on a competitive basis. In FY2009, roughly $417,000 was available under this set-aside and the funds provided a second year of funding to three grantees: the Yakima Valley Farm Workers Clinic, Toppenish, WA; Grand Traverse Band of Ottawa and Chippewa Indians, Suttons Bay, MI; and the Indian Child Welfare Consortium, Temecula, CA. The grants are expected to extend for three years (FY2008-FY2010), and, contingent on the amount of appropriated funding, the annual support for grantees is anticipated to be just under $139,000 in each of those three years. Technical assistance and program s upport. As permitted by statute, the Children's Bureau also reserved some CBCAP funds (just under $1.5 million in FY2009) for ongoing support of the FRIENDS national resource center ( http://www.friendsnrc.org ), which supports CBCAP lead entities and the community-based programs they fund, and to provide additional technical assistance and program support. Funds to states. The remaining funds, approximately $40 million in FY2009, are distributed to all 50 states, the District of Columbia, Puerto Rico, American Samoa, Guam, the Northern Mariana Islands, and the U.S. Virgin Islands (56 jurisdictions) by formula. Seventy percent of the funds (roughly $28 million in FY2009) are allotted to each jurisdiction based on its relative share of the total child (under age 18) population among all eligible jurisdictions. However, no jurisdiction is permitted to receive less than a minimum allotment of $200,000. The remaining 30% of the CBCAP state funding (roughly $12 million in FY2009) is distributed based on the relative share of non-federal funds that a state (meaning the 50 states, the District of Columbia, and Puerto Rico) was able to leverage in support of child abuse and neglect prevention activities and services in the prior fiscal year. A state may claim as leveraged dollars any state, local, or private money used for CBCAP purposes, provided the funds were directed through the state's lead CBCAP entity and were not used as matching funds or to meet maintenance of effort (MOE) requirements for any other federal program. As shown in Table 3 , states leveraged more than $322 million in non-federal funding for child abuse and neglect prevention activities in FY2007, and a state's relative share of that total leveraged sum determined its share of the leverage funding awarded under the CBCAP program for FY2008. Table 3 also shows total CBCAP funds awarded to each state in FY2008, including the amounts of that award attributable to the state's relative share of the national child population (with a minimum allotment of $200,000) and to its share of total leveraged funds. Grant amounts to individual states ranged from about $200,000 on the low end to $3.6 million on the high end. The median grant (excluding the four territories) was $567,000. Research, Demonstration, and Other Activities CAPTA authorizes support for a wide range of research, technical assistance, data collection, demonstration, and other activities related to the identification, prevention, and treatment of child abuse and neglect. Funding provided for these activities is typically awarded by HHS, on a competitive basis, via contract, grant, or cooperative agreement. As discussed in greater detail below, the statute requires HHS to undertake or support certain research, data collection, and technical assistance and it permits HHS to do certain other related activities. CAPTA funding appropriated for these required or permitted purposes is provided under the CAPTA "discretionary activities" account in the annual appropriations act. That account received $41.8 million in the FY2009 appropriations act ( P.L. 111-8 ), of which Congress—as part of the appropriations process—directed HHS to use $16.4 million for the following purposes: $13.5 million to continue support for a home visitation initiative begun in FY2008; $500,000 for a feasibility study on the creation, development, and maintenance of a national registry of substantiated child abuse cases; and $2.4 million for 12 specific projects or programs located in eight states. Required Activities Under CAPTA, HHS is required (directly or through competitive grants, contracts, or agreements) to support certain research and projects and provide technical assistance. These required activities are listed below, including, in some instances, a short discussion of how HHS is meeting or has met the requirement. Establish a national clearinghouse on child abuse after consulting with other relevant federal agencies and their heads and soliciting public comment. HHS currently funds the Child Welfare Information Gateway ( www.childwelfare.gov ), which incorporates the former National Clearinghouse on Child Abuse and Neglect Information. The Child Welfare Information Gateway website offers a wide range of policy and practice resources regarding identifying, reporting, responding to, and treating child abuse and neglect. Collect and disseminate information related to child abuse and neglect identification, prevention, and treatment. Specifically, HHS must maintain, collect, and/or disseminate information on (1) programs related to the prevention, assessment, identification, and treatment of child abuse and neglect that are effective or promising and have the potential for broad implementation; (2) best practices for improving child protective systems; (3) best practices for addressing or making appropriate referrals related to the physical, developmental, and mental health needs of abused and neglected children; (4) the incidence of child abuse and neglect in the United States, including, specifically, among populations determined as underserved and among cases related to alcohol or drug abuse; and (5) training resources available at the state and local level for individuals who engage in preventing, identifying, and treating child abuse and neglect. In addition to the Child Welfare Information Gateway, HHS funds a number of national resource centers and quality improvement centers that respond to these requirements. For example, it currently supports the National Quality Improvement Center on Differential Response in Child Protective Services, and the National Center on Substance Abuse and Child Welfare. Establish a national child abuse and neglect data collection and analysis system . The 1988 CAPTA amendments ( P.L. 100-294 ) that added this requirement specified that the system must, to the extent practicable, coordinate existing federal, state, regional, and local child welfare data systems; include state-reported data on the number of deaths due to child abuse and neglect; and include standardized state-reported information on false, unfounded, unsubstantiated, and substantiated reports of child abuse or neglect. Further, it required HHS to compile and make available the state-reported child abuse and neglect data. HHS has established the National Child Abuse and Neglect Data System (NCANDS) and produces an annual publication ( Child Maltreatment ) that compiles and analyzes child abuse and neglect data reported by states. All states have submitted data to NCANDS on an annual basis, although this reporting is considered voluntary for states. Data collected via NCANDS may also be accessed by researchers for additional study through the HHS-funded National Data Archive on Child Abuse and Neglect housed at Cornell University. Provide te chnical assistance to state and local public and private agencies and community-based organizations , including disability organizations and people who work with children with disabilities. The purpose of the technical assistance is to aid these agencies and organizations in developing, improving, and carrying out programs related to prevention, assessment, identification, and treatment of child abuse and neglect and in replicating successful programs. HHS funds the National Resource Center on Child Protective Services, among other relevant resource centers and projects (including some of those also charged with collecting and disseminating relevant information). Support an ongoing research program designed to provide information on how to better protect children from abuse or neglect and to improve the well-being of abused or neglected children . The research program must be interdisciplinary, and include some field-initiated research projects as well as longitudinal research. HHS must compile, analyze, and publish a summary of the research funded under the program. Further, HHS is required to establish priorities for this research program, solicit public comment on those priorities, and maintain an official record of the comment. HHS makes annual competitive grant announcements for child abuse and neglect related research and has published a notice of research priorities in the Federal Register . The statute includes a list of topics on which HHS may choose to focus its required research topics, including the (1) nature and scope of child abuse and neglect and its causes, prevention, assessment, identification, treatment, cultural and socio-economic distinctions, and consequences; (2) effects of abuse and neglect on a child's development and successful early intervention or other services needed; (3) appropriate, effective, and culturally sensitive investigative, administrative, and judicial systems with respect to child abuse cases (including multi-disciplinary and coordinated decision-making procedures); (4) evaluation and dissemination of best practices to improve child protective services systems; (5) effective interagency collaboration between child protective services and the juvenile justice system to improve delivery and continuity of services; (6) evaluation of redundancies and gaps in services to prevent child abuse and neglect to enable better use of resources; (7) nature, scope, and practice of voluntary relinquishment to foster care or state guardianship for the purpose of receiving health or mental health services for low-income children; and (8) information on the national incidence of child abuse and neglect. Survey the national incidence of child abuse and neglect and report findings to Congress . The Keeping Children and Families Safe Act of 2003 ( P.L. 108-36 ) required HHS to conduct a fourth national incidence survey of child abuse and neglect (NIS-4) and to report back to Congress by July 2007. Specifically, Congress asked HHS to look at and report on the (1) incidence and prevalence of child maltreatment by an array of demographic characteristics (e.g., age, sex, race, family structure, household relationship, school enrollment and education attainment, disability, grandparents as caregivers, labor force status, work status, and income status); (2) any increase or decrease in the number and severity of child abuse cases; (3) incidence of reported child abuse cases that are substantiated and unsubstantiated; (4) number of substantiated cases that result in a judicial finding of child abuse or neglect or related criminal court convictions; (5) extent to which the number of reports of child abuse or neglect that are not substantiated or are false interferes with a state's ability to respond to serious cases of child abuse and neglect; (6) extent to which lack of resources or adequate training for mandatory reporters contribute to a state's inability to respond to serious cases of child abuse or neglect; (7) number of unsubstantiated, false, or unfounded reports that result in a child's out-of-home placement and the length of that placement; (8) extent to which unsubstantiated reports return as more serious cases of child abuse or neglect; (9) incidence and prevalence of physical, sexual, and emotional abuse and physical and emotional neglect in foster care; and (10) incidence and outcomes of abuse allegations reported within the context of divorce, custody, or other family court proceedings, and the interaction between the court and the child protective services system. Survey data were collected from 2005 to 2007, but as of early November 2009, the report to Congress on this research has not yet been made available. Establish a peer review process for awarding certain grants or contracts. The peer review process spelled out in statute is designed to ensure consultation with experts in the field in making grants under the CAPTA research program and to enhance the quality and usefulness of the research. In addition, for certain grants or projects funded via CAPTA, the statute requires evaluations to assess their effectiveness. Permitted Activities Permitted activities for HHS include establishing an Office of Child Abuse and Neglect, establishing an Advisory Board on Child Abuse and Neglect, and supporting research or demonstration projects and programs on specific topics listed in the statute that are related to the prevention of child abuse and neglect. These and other permitted activities are described below. Establish an Office of Child Abuse and Neglect. HHS has established the Office of Child Abuse and Neglect (OCAN) within the Children's Bureau. As stipulated in law, the purposes of the office are to carry out and coordinate the functions and activities of CAPTA, to ensure the necessary expertise and intradepartmental coordination whenever it is necessary to do this, and to ensure regular intradepartmental and interdepartmental consultation with all agencies involved in child abuse and neglect activities. The Federal Interagency Working Group on Child Abuse and Neglect, with representation from more than 40 federal agencies, meets in-person on a quarterly basis, and some members are in more frequent contact by conference call. The purposes of the working group include providing a forum through which staff from relevant federal agencies can communicate and exchange ideas concerning child abuse and neglect related programs and activities and providing a basis for collective action through which funding and resources can be maximized. Appoint a n Advisory Board on Child Abuse and Neglect. HHS is permitted to establish an Advisory Board on Child Abuse and Neglect to make recommendations concerning specific child abuse and neglect related issues to the agency and Congress. The current law stipulates certain necessary characteristics and qualifications for members appointed to this board. Under prior law, HHS was required to appoint an Advisory Board on Child Abuse and Neglect, and during the first half of the 1990s—when the last Board was appointed—it released several reports. Those reports made specific recommendations related to responding to abuse or neglect, preventing abuse and neglect (including through implementation of universal voluntary neonatal home visiting and creation of comprehensive neighborhood-based prevention strategies), and prevention of child abuse and neglect related fatalities (including through increased knowledge of the problem, a primary focus on "safety" in all child and family programs, interdisciplinary and other efforts to improve investigation and prosecution of child abuse and neglect related fatalities, and improved family preservation and family support services). Support a dditional research or fund other activities related to the prevention and treatment of child abuse and n eglect. In addition to the required research program, the statute gives HHS authority to fund a range of research or other activities intended to advance cross-agency and cross-discipline links in ways that are expected to improve how CPS responds to and serves children and families. These include projects that encourage linkages across child welfare, law, education, health, mental health, and law enforcement agencies, as well as across public and private agencies, including faith-based and community-based groups. The act specifically suggests collaboration efforts to improve school-based prevention, identification, and assessment of child abuse and neglect; "triage" procedures in screening and responding to reports of child abuse and neglect; recognition of substance abuse or domestic violence in neglect situations; and better health evaluations and forensic diagnosis of abuse or neglect. Many projects related to improving training or practice for CPS workers and related personnel are listed in the statute. HHS may choose to make grants to, or contracts with, states, public and private agencies or organizations, or a combination of those entities to improve the training of supervisory and non-supervisory child welfare workers, and for training of child protective services workers regarding, specifically, best practices in working with families from initial contact through the completion of an investigation and concerning their legal duties and responsibilities related to protecting the legal rights of children and families. In addition, HHS may provide grants to support development of risk and safety assessment tools for child protective service workers; training for mandated child abuse and neglect reporters; and improvement in the recruitment, selection, and training of volunteers in public or private child, youth, and family service organizations to prevent child abuse and neglect. Finally, HHS is explicitly permitted to make grants or enter into contracts with various entities that provide additional supports to, among other activities, (1) establish and operate safe and family-friendly locations for court-ordered and supervised visitation between children and abusing parents and to facilitate the exchange of children for visits with noncustodial parents in domestic violence cases; (2) develop procedures for safe placement of children with kin; (3) establish or maintain a network of mutual parent support and self-help programs; (4) support respite and crisis nursery programs; (5) provide hospital-based information and referral services to parents of children with disabilities, parents of children who have been abused or neglected, and their children; and (6) support other innovative and promising programs related to preventing and treating child abuse and neglect. The Children's Bureau typically awards grants, contracts, or cooperative agreements for its required and permitted activities near the end of the fiscal year and a list of awardees can be viewed online. Set Asides and Earmarks in the Appropriations Process The CAPTA "discretionary activities" account has frequently been used to fund certain set-asides and/or earmarks as directed by Congress through the appropriations process. Typically, these directives are given in the conference report or other explanatory statement accompanying the final enacted annual appropriations act and may respond to specific Administration or individual lawmaker requests, or to broader congressional concerns. Home Visitation For example, Congress used the appropriations process in FY2008 and FY2009 to respond to a request by the Bush Administration for additional CAPTA discretionary activities funds to support a home visitation initiative. The Bush Administration requested (and received) $10 million for this purpose for FY2008, and used the funding to launch the Supporting Evidence-Based Home Visitation Programs to Prevent Child Abuse and Neglect initiative. For FY2009, Congress provided $13.5 million to continue this initiative. The FY2010 budget request from the Obama Administration seeks continued funding for this initiative as well as funding for a separate and new program of grants to states to support home visitation programs for families with young children and those expecting children. Feasibility of a National Child Abuse Registry Also as part of the FY2009 appropriations process, Congress provided that $500,000 of the CAPTA discretionary activities funding be made available to fund a feasibility study related to a national registry of substantiated child abuse. Congress required such a study in 2006 legislation (the Adam Walsh Child Protection and Safety Act, P.L. 109-248 , Section 633) but had not provided discrete funding for the project before the FY2009 appropriations legislation ( P.L. 111-8 ). Prior to this funding becoming available, HHS used general departmental funds to begin a feasibility study and it issued an interim report in early 2009. That report cited a number of barriers to implementation and had four main conclusions: potential benefits of a national child abuse and neglect registry are largely unknown and no data are available to quantify them; the statute provides for voluntary participation by states, and this could result in a registry that includes little information and fails to fulfill its intent; the statute does not permit inclusion in the registry of sufficient information to accurately identify perpetrators (information is limited to an individual's name, and because many names are common, this would result in many misidentified "perpetrators"); and the intent of the registry needs to be clarified (is it for child abuse and neglect investigative purposes only or may it also be used for background checks related to employment or licensing?). The report also summarizes some issues related to "due process" that the creation of a national registry of substantiated child abuse and neglect would raise. These include differences in the level of evidence used to make decisions to substantiate a report of child abuse or neglect; the strength of hearing or appeal procedures in place locally to challenge those decisions; whether individuals included in the registry must be notified that they are included; and the implications of being included on such a registry. It asserts that "there can be no federal substitute for procedural protections at the state or local level" and, further, that "HHS believes the only feasible way to effectively and efficiently provide due process protections is to require that submitting jurisdictions certify that for cases submitted to the national registry, minimum due process protections were available to the perpetrator." HHS has awarded the $500,000 for the final study to Walter R. McDonald and Associates (and subcontractor ABA Center on Children and the Law) to continue work on this issue, including studying (1) how common it is for perpetrators to be listed in multiple states' child abuse registries; (2) states' interest in and concerns about participating in a national registry; (3) the data systems containing current state registries; and (4) legal issues involved and the adequacy of states' due process procedures. Individual Requests Finally, Congress has also frequently used the CAPTA discretionary activities account to fund specific projects in specific locations at the request of individual lawmakers. For FY2008, it directed $1.8 million to support eight projects in eight states, and for FY2009, it directed $2.4 million to support 12 projects in nine states. Children's Justice Act Grants Grants for states to make improvements to the investigation, prosecution, and overall handling of child abuse and neglect cases are authorized under Section 107 of CAPTA. These grants are commonly referred to as "Children's Justice Act grants" because they were originally enacted as part of a 1986 law, the Children's Justice Act (Title I of P.L. 99-401 ). Funding for the grants is provided as an annual set-aside from the Crime Victims Fund (and is not appropriated out of the general treasury). The maximum annual set-aside for this purpose is $20 million. Of that amount, $17 million was made available for FY2009 for grants to all eligible states, including the District of Columbia, Puerto Rico, and the four territories (Guam, American Samoa, the Northern Mariana Islands, and the U.S. Virgin Islands) and $3 million was reserved for use by tribes. Funding provided to the states and territories is administered by HHS. Funds reserved for the tribes are administered by the Department of Justice . Use of Funds The purposes of these funds are to (1) improve the handling of child abuse and neglect cases, especially those involving child sexual abuse and exploitation, in a manner that limits additional trauma to the child victims; (2) improve the investigation and prosecution of child abuse and neglect cases, especially those involving child sexual abuse and exploitation; and (3) improve the handling of cases of suspected child abuse or neglect related fatalities, as well as those involving child maltreatment victims with disabilities and child maltreatment victims with serious health-related problems. States must use funds received under this grant to establish a multi-disciplinary taskforce to review and evaluate state investigative, administrative, and judicial handling of child abuse and neglect cases. The task force must include professionals with knowledge and experience related to the criminal justice system and issues of child maltreatment, including court personnel (judges, attorneys, children's attorneys, and court-appointed special advocates), representatives of law enforcement, CPS agencies, and parents' groups; health and mental health professionals; parents; and individuals experienced in working with children with disabilities. The taskforce must review and evaluate state investigative, administrative, and civil and criminal judicial handling of cases of child abuse and neglect, and make certain policy and training recommendations to improve those processes. Under HHS guidance, states are not permitted to use Children's Justice Act grants for child abuse prevention programs or treatment services but must use them to support system improvements. In addition to supporting the administration and work of the taskforce, states also use Children's Justice Act grants to hold multi-disciplinary conferences; provide training and cross-training on relevant topics (e.g., forensic interviewing) or for certain individuals (e.g., mandatory reporters of child abuse or neglect, court appointed special advocates, and guardians ad litem); support administration of or provide training related to Children's Advocacy Centers; permit co-location of staff (e.g., a social worker in police station); fund time-limited demonstrations of model initiatives or programs; buy certain equipment (e.g., digital cameras); and build certain facilities (e.g., family-friendly environments for interviewing). Eligibility Requirements To be eligible to apply for Children's Justice Act grants, a state must meet all the eligibility requirements for CAPTA state grants (see " Requirements for Receipt of State Grant Funds "); establish a multi-disciplinary task force to study state administrative, judicial, and investigative practice related to child abuse and neglect cases (as described in " Use of Funds "); receive recommendations from the task force in the initial year grants are funded (and every three years thereafter) and implement those recommendations (or an alternative plan that meets the purpose of the recommendation, as determined by HHS); and annually submit an application and performance report to HHS. Distribution of Funds For FY2009, 49 states, the District of Columbia, and Puerto Rico were expected to receive Children's Justice Act funds (Pennsylvania did not submit an application). In addition, each of the four insular areas were expected to receive funding: American Samoa, Guam, the Northern Mariana Islands, and the U.S. Virgin Islands. The statute authorizes HHS to make grants to states but does not provide a formula or method to do this. HHS distributes the funds to states in the same manner that funds are allocated for CAPTA state grants: all eligible states that apply for the funds receive a base grant of $50,000 and the remaining funds are distributed to each of those states based on their relative share of the child (under age 18) population. Table 4 shows expected FY2009 distribution of funds. Because Pennsylvania did not apply for the grants, funding that would otherwise go to it is reallocated and distributed among those states that did apply. Funding Authorized and Appropriated Under CAPTA The final section of this report discusses funding authorized by CAPTA and includes a table showing a history of funding appropriated under that authority (beginning with FY1992). CAPTA does not include funding authority for the state grants for programs relating to the investigation and prosecution of child abuse and neglect cases. As noted above, these grants, commonly referred to as Children's Justice Act grants, are authorized in Section 107 of CAPTA. However, they are funded under an annual set-aside (maximum of $20 million) from the Crime Victims Fund. This section of the report does not include further discussion of those grants or their funding. Instead, the funding authorization levels and appropriations described below relate only to the grants and other activities for which funding authority is provided in CAPTA and for which funds must be appropriated out of the general treasury. CAPTA contains two separate funding authorizations, one for grants and activities under Title I (i.e., state grants and discretionary activities) and another for grants under Title II (community-based grants). Traditionally, Congress appropriates funding under these two funding authorizations in three separate accounts. As shown in Table 5 , actual appropriations typically fall below the authorized funding level. Title I Funding Authorization Section 112 of CAPTA provides a "general" Title I funding authorization level, which was set at $120 million for FY2004 and at "such sums as may be necessary" for each of FY2005-FY2008. This funding authority is currently expired but Congress appropriated $68.3 million in funds to meet Title I CAPTA purposes for FY2009 ( P.L. 111-8 ), and legislation pending in Congress ( H.R. 3293 ) would appropriate a similar amount for FY2010. Section 112 further adds that out of the total funding provided for Title I (under the general authorization of funding), HHS must make 30% available for "discretionary activities" provided for in Title I of CAPTA. In practice, however, Congress regularly overrides this statutory language by appropriating CAPTA Title I funds in two separate accounts, one for "Child Abuse State Grants" and a separate one for "Child Abuse Discretionary Activities." The latter supports research, technical assistance, and other activities required or authorized under Title I of CAPTA , along with (in most years) some projects that are consistent with CAPTA purposes and are specified during that appropriations process. Funding provided for "discretionary activities" has ranged from roughly 40% to 60% of overall Title I funding. For FY2009, funds appropriated for CAPTA's "discretionary activities" account totaled 61% of the overall Title I funding. Title II Funding Authorization Section 210 of CAPTA authorizes funding for Title II community-based grants to prevent child abuse and neglect. The funding authorization level for these grants was set at $80 million for FY2004 and at such sums as may be necessary for FY2005-FY2008. This funding authority is currently expired but Congress nonetheless appropriated $41.7 million for FY2009 ( P.L. 111-8 ), and FY2010 appropriations legislation pending in Congress ( H.R. 3293 ) would appropriate that same amount for FY2010. Appendix A. Scope of State Child Protective Services Work Data in Table A -1 are provided to suggest the scope of activity by state protective services that is related to the CAPTA directive that states have procedures to receive and respond to allegations of child abuse and neglect. The population data shown are the Census Bureau estimate of the number of children (individuals under age 18) living in each state on July 1, 2007. The FY2007 program data include the number of allegations of child abuse or neglect (referrals) received by CPS, the number of those referrals that were investigated (reports), and the number and rate of children found to be victims of abuse or neglect. The victim rate refers to the number of children who were reported to be victims of child maltreatment for every 1,000 children in the population. Referrals and investigations typically involve more than one child. For example, on a national basis, states received 3.2 million referrals during FY2007 that alleged abuse or neglect related to an estimated 5.8 million children. CPS workers responded with an investigation, or some other assessment of the family, for 1.9 million of the referrals, and the estimated number of children involved in those investigations (or assessments) was approximately 3.5 million. Finally, the table shows the number and rate of children found to be victims in each state. Appendix B. Child, Family, and Caregiver Risk Factors Among Children In Families Investigated for Child Abuse or Neglect The National Survey of Child and Adolescent Well-Being (NSCAW), required by Congress under Section 429 of the Social Security Act, included a nationally representative sample of children in families investigated for abuse or neglect . Table B -1 shows selected developmental and other risk factors among those children compared to children in the general population. Findings refer to children in families investigated for child abuse or neglect, as a whole, and without regard to whether an abuse or neglect finding was substantiated by the CPS investigator. Table B -2 presents NSCAW findings concerning family and caregiver risk factors among the families of all children investigated for abuse and neglect, as well as by the level of services received following the investigation. These findings are based on the initial wave of data collection in the survey which was fielded in 1999-2000. Appendix C. Trends in Reported Child Abuse and Neglect Victims and Types of Abuse or Neglect Experienced Table C -1 shows national estimates of children subject to an investigation for child abuse or neglect and those found to be victims of child abuse or neglect. Although these data were all reported under the National Child Abuse and Neglect Data Systems (NCANDS), the quality and kind of data reported varies significantly by year. In the earlier years, national estimates may necessarily have been derived based on information reported by a limited number of states. In more recent years, the quality of the data reported has improved and nearly all states reported these data. Therefore, estimates for more recent years may be more accurate than those for earlier years. Table C -2 shows trends in the share of child maltreatment victims experiencing certain types of maltreatment. In every year before FY2007, children that experienced more than one type of maltreatment were included in each type of maltreatment. However, data for FY2007 are not comparable to data provided for earlier years because of a change in how this information was reported by HHS. For example, before FY2007, if a child experienced both sexual abuse and physical abuse, he or she would be represented in both maltreatment categories. Beginning with FY2007, HHS reported a category for children experiencing "multiple maltreatments" (two or more types of abuse or neglect) and every other category includes children that were reported as experiencing that type of maltreatment only. Appendix D. Children Who Receive Post-investigation Services Table D -1 uses state reported data to estimate the number of children who received services following an investigation or assessment. Not all states reported these data; the estimates should therefore be treated as rough.

Child abuse and neglect is a significant social concern. Children who experience abuse and/or neglect are more likely to have developmental delays and impaired language or cognitive skills; be identified as "problem" children (with attention difficulties or challenging behaviors); be arrested for delinquency, adult criminality, and violent criminal behavior; experience depression, anxiety, or other mental health problems as adults; engage in more health-risk behaviors as adults; and have poorer health outcomes as adults. Further, data from a nationally representative sample of children in families investigated for abuse or neglect show that as a whole—and without regard to whether a child protective services (CPS) investigator determines that abuse or neglect has occurred—children in families who come into contact with CPS agencies are at higher risk for poor development and behavior outcomes than children in the general population. In addition, that survey shows that these children live in families that often face challenges to their ability to care for and nurture their children, including trouble paying for basic necessities, low social support, and only one supportive caregiver in the family. In FY2007, states reported an estimated 3.5 million children were in families investigated or assessed by CPS workers and some 794,000 were identified as victims of abuse or neglect. In 1974, Congress enacted the Child Abuse Prevention and Treatment Act (CAPTA, P.L. 93-247) to create a single federal focus for preventing and responding to child abuse and neglect. As a condition of receiving state grant funds under that act, states are required to have procedures in place for receiving and responding to allegations of abuse or neglect and for ensuring children's safety. Further, they must define child abuse and neglect in a way that is consistent with CAPTA, which defines the term as " at a minimum, any recent act or failure to act on the part of a parent or caretaker, which results in death, serious physical or emotional harm, sexual abuse or exploitation, or an act or failure to act which presents an imminent risk of serious harm." Since its enactment, CAPTA has been reauthorized numerous times, most recently by the Keeping Children and Families Safe Act of 2003 (P.L. 108-36). Currently, it authorizes formula grants to states to help improve their child protective services; competitive grants and contracts for research, demonstration, and other activities related to better identifying, preventing, and treating child abuse and neglect; and formula grants to states for support of community-based child abuse and neglect prevention services. Funding authorization for these CAPTA programs expired with FY2008. However, Congress appropriated $110 million for CAPTA in FY2009 (P.L. 111-8) and a similar amount has been proposed for FY2010 (H.R. 3293). In addition, CAPTA authorizes grants to improve the prosecution and handling of child abuse and neglect cases. These formula grants to states, commonly referred to as Children's Justice Act grants, are funded via an annual set-aside of up to $20 million from the Crime Victims fund. This report begins with discussion of the issue and scope of child abuse and neglect, followed by a discussion of the manner and scope of the work of the CPS agency in receiving and responding to allegations of child abuse or neglect, and then looks at some identified risk factors for poor child and family outcomes among all children in families investigated for abuse or neglect. Finally, it provides a detailed description of the current programs and activities authorized under CAPTA and discusses funding authorized and provided under CAPTA. This report will be updated as warranted.

Introduction An increase in the federal minimum wage has been one of several alternative policy proposals that have been offered to address poverty. Pending before the 113 th Congress is legislation, S. 1737 (Senator Harkin) and H.R. 1010 (Representative Miller), that would raise the federal minimum wage from its current law $7.25 to, in three steps, $10.10 per hour. If these bills were enacted in 2014, the minimum wage would rise to $10.10 per hour sometime in 2016. The minimum wage would be adjusted for inflation thereafter. An expansion of the Earned Income Tax Credit (EITC) is an often-mentioned alternative to raising the minimum wage. The EITC currently supplements the wages of low-wage workers, mostly low-wage parents with children. Low-wage workers with children may receive additional income supplements through the child tax credit, and might qualify for certain need-tested government benefits such as the Supplemental Nutrition Assistance Program (SNAP, formerly known as food stamps). If Congress sought to pursue an increase in incomes for low-wage earners, there is a debate over whether increases in the minimum wage or expansions of government aid through the tax system or benefit programs are more effective in helping low-income families and addressing poverty. The minimum wage affects workers regardless of their family status; the federal tax system and government benefit programs take into account family circumstances in determining tax liabilities and benefits. Therefore, minimum wage and earnings supplement policies have differing impacts, depending on a worker's family type. Plan of this Report This report focuses on the impact of minimum wage and tax-transfer earnings supplements for workers of different family types. It does so through illustrating how the minimum wage and federal tax-transfer policies affect the income of a minimum wage worker who works full-time, full-year in four different family types: a single childless worker; a worker supporting a married couple; a single mother with two children; and a married couple with one child. These family types are chosen to highlight the different treatment federal tax-transfer policies have on workers of different family types. They were not chosen as representative of most minimum wage workers. The illustrations show the impact of policies on two childless workers—one married, one not. They also show the impact of two workers with children—one married, one not. The report highlights how policies differ between families with children, and families without children. This report supplements these illustrations with some background on policies, as well as some policy considerations that apply generally to debates on the minimum wage and tax-transfer policies. Full-year, full-time work at the minimum wage is not common. In 2012, 32% of workers earning the minimum wage worked full-time. Again, the illustrations were not chosen to be representative of most minimum wage workers. Full-time, full-year work was chosen for illustrative purposes. Additionally, the income produced by full-time, full year work at the minimum wage is an important policy benchmark, as it reflects the federally-determined minimum income for someone with full-time involvement in the labor force. This report describes current law minimum wage and tax-transfer earnings supplement policies; provides the illustrations of gross earnings and net income (after taxes and SNAP benefits) for full-time full-year minimum wage workers at both the current minimum wage ($7.25 per hour) and the proposed $10.10 minimum wage; and discusses some of the policy implications of addressing poverty through both the minimum wage and federally-funded earnings supplements. Taxes and Benefits Not Addressed in this Report This report does not address all potential taxes and benefits for which a minimum wage worker might be eligible. For example, housing assistance and assistance funded through the Temporary Assistance for Needy Families (TANF) were not considered. These programs are not entitlements to individuals and affect a relatively small population. This report also does not consider state taxes and benefits; they vary by state. Further, the report does not consider health care benefits and subsidies, and in particular, this report excludes the health care premium subsidies provided under the Affordable Care Act of 2010. These subsidies further depend on individual circumstances (e.g., if employer-provided health care is available for the family's earner). Consideration of health care premiums and benefits would greatly complicate the analysis. Minimum Wage Policy under the Fair Labor Standards Act The Fair Labor Standards Act (FLSA), enacted in 1938, is the federal legislation that establishes the general minimum wage that must be paid to all covered workers. In general, the FLSA mandates broad minimum wage coverage. It also specifies certain categories of workers who are not covered by FLSA wage standards, such as workers with disabilities or certain youth workers. In 1938, the FLSA established a minimum wage of $0.25 per hour. The minimum wage provisions of the FLSA have been amended numerous times since then, typically for the purpose of expanding coverage or raising the wage rate. Since its establishment, the minimum wage rate has been raised 22 separate times. The most recent change was enacted in 2007 with P.L. 110-28 , which increased the minimum wage from $5.15 per hour to its current rate of $7.25 per hour in three steps. Since the late 1960s, increases in the minimum wage have not kept up with increases in consumer prices. That is, the purchasing power of income earned by a minimum wage worker has declined. For example, the February 1968 minimum wage of $1.60 would be "worth" in 2013 dollars $10.69. The most recent data available indicate that there are approximately 3.6 million workers, or 4.7% of all hourly paid workers, whose wages are at or below the federal minimum wage of $7.25 per hour. Of these 3.6 million workers, approximately 1.6 million earn the federal minimum wage of $7.25 per hour and the other 2 million earn below the federal minimum wage. As the Bureau of Labor Statistics (BLS) notes, the large number of individuals earning less than the statutory minimum wage does not necessarily indicate violations of the FLSA but may reflect exemptions or misreporting. In addition to the FLSA minimum wage, states may also choose to set labor standards that are different from federal statutes. The FLSA establishes that if states enact minimum wage, overtime, or child labor laws more protective of employees than those provided in the FLSA, the state law applies. In the case of minimum wages, this means that if an individual is covered by the FLSA in a state with a higher state minimum wage, the individual is entitled to receive the higher state minimum wage. On the other hand, some states have set minimum wages lower than the FLSA minimum. In those cases, an FLSA-covered worker would receive the FLSA minimum wage and not the lower state minimum wage. As of January 1, 2014, 21 states and the District of Columbia had minimum wage rates above the federal rate of $7.25 per hour. These rates range from $7.40 per hour in Michigan to $9.32 in Washington state. On that date, 20 states had a minimum wage equal to the federal rate of $7.25 per hour. Four states have minimum wage rates below the federal rate and five have no minimum wage requirement. In the states with no minimum wage requirements or wages lower than the federal minimum wage, only individuals who are not covered by the FLSA are subject to those lower rates. Gross Earnings at the Minimum Wage Relative to Poverty, By Family Type A person working full-time (40 hours per week) all year (52 weeks per year) at the current federal minimum wage of $7.25 per hour earns a gross $15,080 for the year. This is before taxes and any government benefits the individual might be entitled to receive. Gross earnings depend on hours worked and the wage rate paid to that individual. However, full-year, full-time work at the minimum wage produces a different standard of living depending on the family circumstances of the worker. Larger families typically "need" more income to cover just the necessities of life (food, clothing, and housing), with a family's poverty status depending on both (1) its income; and (2) number of people in the family. The greater financial need of larger families is reflected in the official federal poverty guidelines. Table 1 shows the 2014 poverty guidelines (the Federal Poverty Level, or FPL) for family sizes of one through six. As shown in the table, a single (1 person) full-year, full-time worker earning the current federal minimum wage has gross earnings ($15,080) above the estimated 2014 poverty guidelines. However, such a worker in a family of two or more people has gross earnings less than the 2014 poverty guidelines. Figure 1 shows how gross earnings from full-time, year-round work relate to poverty-level income. These poverty ratios are shown for four different family types: a single, childless person; a childless couple; a single mother of two children; and a married couple with one child. It shows that gross earnings from full-time, year-round minimum wage work exceed poverty-level income only for the single, childless person. For the three other family types, gross earnings from full-year, full-time minimum wage work fall short of poverty level income. Federal Taxes and SNAP The economic well-being of a family—the amount of goods and services it is able to consume—depends not on gross earnings, but on net income. Net income amounts to those dollars available to a family after taxes have been paid and government benefits have been received. For example, almost all earners pay Social Security taxes which reduce their take-home pay. Federal income taxes also might reduce take-home pay. Under a progressive tax system, like the federal income tax, required tax payments are based on the ability to pay: families at higher level of earnings are taxed at a higher rate. However, more significant for low-income workers under the current federal tax system is whether allowed deductions, exemptions, and credits result in the family owing any federal income tax liability at all. Moreover, two key credits—the EITC and the child tax credit—are refundable. Refundable tax credits provide benefits to families even if they have no regular income tax liability. These benefits are paid through refund checks in the next calendar year. Additionally, need-tested programs are, by definition, paid on the basis of financial need. Families with lower incomes are presumed to have more need than those with higher incomes. Thus, as incomes rise, need-tested benefits—like those from SNAP—decline. The EITC and child tax credit are also need-tested. Above a certain income threshold, their benefits begin to phase-out; that is, decline in value as incomes rise. Federal Payroll Taxes As with gross earnings, payroll tax liabilities do not vary with family circumstance. They are determined by the tax rate and gross earnings (wages times hours worked). In 2014, a worker faces a payroll tax rate of 7.65%. This is the combined tax rate for Social Security and Medicare payroll taxes. A full-time, year-round minimum wage worker would pay $1,154 in payroll taxes in 2014. Federal Income Tax Liability Unlike gross earnings and the payroll tax, federal income tax liabilities are affected by family characteristics—family type, number of dependents, and other factors. The amount of federal tax owed for a full-year, full-time minimum wage worker will depend on any other income he or she has, as well as deductions, exemptions, and credits earned against taxes. For 2014, the personal exemption is $3,950—the taxpayer gets to deduct that amount for himself or herself, as well as any dependents. Taxable income also depends on deductions taken by the taxpayer. For 2014, the standard deduction for a married couple filing a joint return may take a standard deduction of $12,400; a single head of household may take a standard deduction of $9,100; and a single person may take a standard deduction of $6,200. The Earned Income Tax Credit The Earned Income Tax Credit (EITC) was first enacted in 1975 as a temporary measure to offset payroll taxes in the midst of the 1974-1975 economic downturn. The credit was made permanent by the Revenue Act of 1978 ( P.L. 95-600 ). It was significantly expanded in the 1986 tax reform, as well as through tax legislation in 1990 and 1995, and has grown to be the largest form of cash assistance for low-income families with children. The EITC is paid only to families that have earnings over a tax year. Additionally, it is a refundable credit that is paid even when families have no regular tax liability. Table 2 shows some of the features of the EITC. It shows the maximum credit by number of children. For a worker with no children, the maximum EITC in 2014 is $496. It is substantially more for families with children: $3,305 for one child, and up to $6,143 for families with three or more children. It also shows the "phase out" thresholds for the EITC: the income level where the credit begins to be reduced from the maximum ("credit begins to phase out") and the income level at which the credit is entirely phased out and the taxpayer or family no longer receives an EITC. Note that for a single person with no children, the credit is completely phased out at $14,590—an income level that is lower than earnings received by a full-year, full-time worker at the current minimum wage. On the other hand, families with children can receive the credit at much higher income levels. For example, EITC benefits do not completely phase out for a married couple with three children until annual income reaches $52,427. Child Credit The child tax credit was first created by the Taxpayer Relief Act of 1997 ( P.L. 105-34 ). It has since been expanded, and now provides taxpayers with a credit against tax of up to $1,000 per child. Additionally, the credit has been made refundable, so that even taxpayers with no regular federal income tax liability may receive what is termed the "Additional Child Tax Credit." To qualify for the "Additional Child Tax Credit," a taxpayer must have earnings of at least $3,000, with the credit equal to 15% of earnings above $3,000 up to a maximum of $1,000 per child. SNAP The Supplemental Nutrition Assistance Program (SNAP, formerly known as the Food Stamp Program) provides benefits to increase the ability of low-income households to purchase food. SNAP policy is generally predicated on households using 30% of their net income (after deductions for allowable expenses) for food. The SNAP benefits make up any deficit between what is needed to purchase a low-cost but nutritionally adequate diet and 30% of net income. SNAP is administered by state and local welfare offices, but benefits are fully financed through federal funds. SNAP serves all types of households—those with elderly and disabled members, households with children, and non-aged, nondisabled adults without children. There are some restrictions for SNAP benefits for able-bodied adults without children, whose benefits are time limited (generally 3 months in a 36-month period) unless they either work or participate in employment activities for at least 20 hours per week. (This time limit may be waived in periods and places of high unemployment, and states have limited exemptions that can be provided to waive this limit for individual households.) SNAP maximum benefits are uniform for the 48 states and District of Columbia, with higher maximums for Alaska and Hawaii. Benefits are based generally on federal rules for counting income and allowing deductions for certain expenses. Net Income at the Minimum Wage Relative to Poverty, By Family Type The net income of persons working at the minimum wage reflects the effect not only of minimum wage policy, but also of tax and benefit policies. This section illustrates the effect of the federal minimum wage, federal taxes, and Supplemental Nutrition Assistance Program (SNAP) benefits on the net income of families, and relates that net income to the official federal poverty guidelines by family type. It does so by illustrating the net income produced by full-time, full-year work at the federal minimum wage for the four types of families discussed in this report's introduction: a single person, married couple, single parent with two children, and a married couple with a child. Depicted families' net incomes are calculated based on their earnings, any federal income tax liabilities, and SNAP benefits. Because both federal taxes and SNAP benefits received by actual families depend on their individual circumstances, assumptions are made to compute taxes and benefits. Net Income of Minimum Wage Workers, By Family Type, in 2014 Table 3 shows the gross earnings, tax liabilities, tax credits, and SNAP benefits for the full-year, full-time workers at the current minimum wage of $7.25 per hour, by family type. As shown in the table, the $15,080 in gross earnings produce very different net incomes once tax and government policies based on family circumstances are considered. The main distinction is the presence of children in the family. Families with children receive far larger earnings supplements from the federal income tax system than do families without children. Of the hypothetical full-time, year-round minimum wage workers shown in the table: The single person with no children has net income below gross earnings. In terms of need-tested benefits, this person qualifies only for a small SNAP benefit. This person is a net taxpayer. The worker supporting a childless couple receives a relatively small EITC and SNAP benefit—bringing its net income slightly ($320 over the year) above gross earnings. The single mother with two children has a net income considerably above gross earnings. Available tax credits and SNAP provide an almost $9,000 earnings supplement for this family, raising its net income to $24,096. The worker supporting a spouse and one child also receives earnings supplements from tax credits and SNAP. However, because the tax credits (earnings supplement) depend on the number of children in the family, this family's net income is less than that of the single mother with two children. Figure 2 shows how net income of full-year, full-time workers relates to poverty level income, by family type. Federal taxes and SNAP mitigate some of the differences in net income relative to poverty among different family types (compared to this measure as shown in Figure 1 . However, there remain differences. Net income to poverty ratios for the single mother with two children are the highest among the families shown in the figure, higher than that for the married couple with one child. Both of these are 3-person families; however, both the EITC and the child tax credits for a family with two children are larger than the credits for a family with one child. The full-year, full-time, minimum wage worker supporting the childless couple, while qualifying for a SNAP benefit and owing no federal income tax liability, still has net income slightly below poverty. Raising the Minimum Wage in 2016 The pending legislation would raise the minimum wage to $10.10 per hour in several steps. Should either S. 1737 or H.R. 1010 be enacted in 2014, the minimum wage would rise to $10.10 per hour in 2016. This section examines the impact on gross and net income of such a minimum wage increase in 2016. It compares gross and net incomes at the current law minimum wage of $7.25 per hour with that resulting from a $10.10 per hour minimum wage for the same four hypothetical family types discussed earlier in this report. The illustrations in this section are made based on the Congressional Budget Office's (CBO's) February 2014 economic forecast. Under the forecast, consumer prices are expected to increase 1.8% in 2014 and 2.1% in 2015. These price increases would mean that the purchasing power of a dollar will be less in 2016 than in 2014. This means the purchasing power of income earned at the current $7.25 per hour minimum wage will decline between 2014 and 2016. Additionally, the purchasing power of income earned at the proposed $10.10 per hour minimum wage would be lower in 2016 compared to what it would be if the minimum wage were raised to that level in 2014. Inflation would also affect the taxes and benefits that minimum wage workers could receive in 2016 compared with 2014. Federal income tax personal exemptions, standard deductions, tax brackets, and the EITC are adjusted for inflation each year, so that inflation does not increase tax burdens or reduce the purchasing power of the EITC. Additionally, SNAP income eligibility and benefit amounts also are adjusted each year for changes in the cost-of-living. Projected Gross and Net Income in 2016 Under Current Law Table 4 shows gross earnings and projected net income for a full-year, full-time minimum wage worker by family type, under the current law $7.25 minimum wage in 2016. The table shows patterns very much like those shown in Table 3 for 2014, though there are some subtle differences. The families would have the same nominal earnings and payroll tax liabilities, but would tend to benefit more from both the EITC and SNAP than they would in 2014. The single person with no children would fall just under the projected income cutoff for the EITC in 2016, and receive a very small EITC benefit. His or her SNAP benefit would also increase. The EITC benefits for families with children would also increase, as they are adjusted annually for inflation. Though nominal gross earnings remain the same, and nominal net income even rises for these families between 2014 and 2016, inflation as forecasted by CBO would erode the purchasing power of both gross earnings and net income. Table 5 illustrates gross earnings and net income at the current minimum wage relative to the federal poverty guidelines in both 2014 and 2016. The poverty guidelines measure a standard of living consistent over time, and are thus adjusted for inflation. The table shows that gross earnings decline relative to poverty between 2014 and 2016 (for example, by 0.051 percentage points for a single person with no child). For each family type, net income also declines, though by less than gross earnings. Thus, even though the federal income tax system and SNAP benefits mitigate some of the loss in value of the minimum wage, all these workers would still see a loss in the purchasing power of their net incomes. Projected Gross Earnings and Net Income in 2016 Under a Minimum Wage of $10.10 per Hour A minimum wage of $10.10 per hour would produce gross annual earnings of $21,008 for a full-year, full-time worker. Table 6 shows the gross earnings and net income for a full-year, full-time minimum wage worker by family type in 2016. At the higher level of gross earnings, eligibility for and benefit amounts from the federal tax system and SNAP would change. Table 7 shows the increases in both gross earnings and net income from an increase in the minimum wage from $7.25 per hour to $10.10 per hour. On an annual basis, such an increase would boost gross earnings by $5,928. Net income would also rise. However, as shown in the table, net income increases by an amount less than gross earnings. Tax liabilities rise with incomes. Additionally, a rise in income either reduces SNAP benefits or can make a household ineligible for SNAP. In the table, negative numbers for tax liabilities represent an increase in tax payments. Negative numbers for EITC and SNAP benefits represent a reduction in benefits from the tax credit and the program. The degree to which an increase in the minimum wage increases net incomes varies by family type. Specifically: Federal income tax liabilities rise for the hypothetical workers without children. Those with children would continue to be in families that owe no federal income taxes. The EITC is ended for the childless families, and reduced for the single mother with two children. The married couple with one child would remain eligible for the maximum EITC for 2016. The child credit is increased for the single mother with two children, as she can now claim the maximum child credit of $2,000 ($1,000 for each child). As discussed, an increase in the minimum wage would increase the net incomes of all family types, but by less than the full dollar value of the increase in gross earnings. This is quantified in the table as the ratio of the increase in net income to gross earnings. For a rise in the minimum wage from $7.25 per hour to $10.10 per hour, this measure differs by family type. The ratio of the increase in net income to gross earnings for a single, childless person is 0.78; for a single mother with two children the ratio of the increase in net earnings is 0.63. The difference is attributable to the dollar value of benefits from the tax system and SNAP going to the different family types. The single person without a child receives the least in such benefits; thus there is less need-tested benefits to reduce when income increases for such a person. Thus, the single worker gets to keep a greater share of his or her earning increases than do workers in other family types. On the other hand, the single mother with two children receives the most in benefits from the tax system and SNAP. There is more need-tested aid to reduce for her, and thus her net income increases by less than that of the single person without a child. However, she still would receive the most in government aid of the family types examined in the table. She would also still have the highest net income of all the family types examined in the table. Another way to examine the relationship between increases in gross earnings and increases in net income is to examine the implicit "tax rate" on an earnings increase. The single mother with two children "keeps," in terms of net income, 63% of the earnings increase. She loses, or is implicitly "taxed" through increases in taxes and reductions in benefits, the remaining 37%. This is a higher "tax rate" than faced by many higher income families who receive no benefits. The implicit tax rates faced by lower-income workers are discussed in " Work Incentives and Disincentives " and the Appendix . Increase in the Minimum Wage and Poverty Figure 3 shows how an increase in the minimum wage from $7.25 per hour to $10.10 per hour would affect net incomes of full-year, full-time minimum wage workers relative to poverty-level income. This is projected for 2016. Under current policies, all workers except the one supporting a married couple with no children would have net incomes above the poverty threshold. The minimum wage increase to $10.10 per hour would boost all family types shown on the figure to have incomes above the poverty level. It would also change the relationship of the different family types relative to the poverty line. Under the current federal minimum wage, the net income of the single mother working full-time, full-year at the minimum wage with two children was the greatest relative to poverty of all family types shown. Under the proposed $10.10 minimum wage, the net income of the single worker with no children working full-time, full year at the minimum wage would be the greatest relative to poverty of the family types shown. Table 8 provides a comparison of net income relative to poverty in 2014 at the current minimum wage and in 2016 at both the current minimum wage and a $10.10 per hour minimum wage. It shows that the proposed minimum wage hike would boost income-to-poverty ratios both relative to what they would be under current law in 2016, and also what they would be for such a worker in 2014. That is, the increase in the minimum wage would raise real incomes in 2016 compared with what they are in 2014 for full-year, full-time minimum wage workers. Considerations Related to Raising the Minimum Wage Minimum wage and federal tax-transfer policies affect different family types in different ways. Under current law, a single person without a child who earns the minimum wage and works full-time all year, has both gross earnings and net (after-tax) income above the poverty line in 2014. For families with children, the earnings of one worker at the minimum wage working full-time, year round is insufficient to lift his or her family above poverty. However, the federal tax system and the SNAP program supplement earnings for these family types, raising net income above poverty. Of the family types illustrated in this report, only the minimum wage worker supporting a spouse and no children has net income below poverty if working full-year, full-time under current law in 2014. However, over time, the purchasing power of a set minimum wage (currently $7.25 per hour) declines. With that decline in value, the net income of families earning the minimum wage also declines, even considering government benefits that partially offset the loss in purchasing power of minimum wage earnings. An increase in the federal minimum wage is one option if Congress wishes to attempt to increase the incomes of these workers. It is also an option that might reduce reliance on federal taxes and benefit programs. The above illustrations show that a rise in the minimum wage from current law to $10.10 per hour would boost the incomes of those working full-time, year round at the minimum wage, even after considering increased tax liabilities and reduced refundable tax credits and SNAP benefits. The reduced refundable tax credits and SNAP benefits also mean that an increase in the minimum wage could reduce government support to these families—meaning that these families would have higher incomes, at lower government cost. Congress faces certain considerations in the debate over raising the minimum wage. In particular are concerns about the effect of raising the minimum wage on employment, and whether a minimum wage policy would be targeted to those most in need. Employment Effects A minimum wage increase would improve the well-being of workers—regardless of their family type—only if they remain employed. Implicit in the discussion of the effects of minimum wage increases on earnings is that any potential disemployment effects will not erode the earnings increases. That is, if increases in the minimum wage lead to lower levels of employment, through job loss or reduced work hours, then the benefits of an increase would not be realized. In the broad range of economic literature on the effects of the minimum wage, there is vigorous debate among economists about the effects of the minimum wage. Rigorous and valid literature exists to support conflicting views on the impact of the minimum wage. The divergent findings of the minimum wage literature may be organized by categorizing the labor market models underpinning the various studies. In broad terms, the competitive model of the labor market suggests that minimum wage increases will lead to reduced employment. Firms in a competitive market determine the number of people they employ based on wage rates, and the prices their products command. These firms cannot set the prices for their products and earn profits needed just to stay economically competitive. Under this model, the only avenue these firms have to respond to a change in the wage rate from an increase in the minimum wage is to change (reduce) the level of employment. On the other hand, if some of the assumptions of the competitive model are relaxed, or the labor market is analyzed using non-competitive models , theory might predict negligible or positive employment effects. These models are premised on the notion that one or more of the conditions of the strict competitive model, described above, do not hold for firms. These firms might be able to charge a higher price for their products, or otherwise offset increases in wage rates through channels of adjustment other than employment (e.g., profit, operational efficiencies). In the late 1970s, Congress created the Minimum Wage Study Commission (MWSC) to review the literature and assist Congress in understanding the costs and benefits of the federal minimum wage. The research up until the time of this review typically consisted of time-series analysis on national level data. The MWSC released its review findings in 1981 and a widely reported finding was that a 10% increase in the minimum wage was typically associated with a 1% to 3% reduction in teenage employment. There was not a similar consensus on the effects of minimum wage increases on adult employment. These conclusions were typically considered the "consensus" view of the effects of the minimum wage on employment: small employment effects for teenage workers and an indeterminate effect on adult employment. By the early 1990s, with the implementation of some state level minimum wage rates above the federal rate, researchers turned to "natural experiments" and case studies to test the effects of minimum wage increases. Perhaps best known in this area is work by economists David Card and Alan Krueger, who, taking advantage of a minimum wage increase in New Jersey in the early 1990s, compared the employment effects in the fast-food industry in that state and in neighboring Pennsylvania. The findings from the Pennsylvania-New Jersey case study, as well as from analyses using controls for regional variation in wage costs, suggested little or no employment effects of minimum wage increases. In their earlier review of the minimum wage literature, Card and Krueger noted "a new body of evidence showing that recent minimum wage increases have not had the negative employment effects predicted by the textbook [competitive] model." Following the research in the 1990s and early 2000s, a few reviews and "meta studies" came out in the 2000s that attempted to examine the voluminous research on the minimum wage: In an extensive review of minimum wage studies, economists David Neumark and William Wascher in 2007 noted that there is a "lack of consensus about the overall effects on low-wage employment of an increase in the minimum wage" but "a sizable majority of the studies surveyed … give a relatively consistent (although not always statistically significant) indication of negative employment effects of minimum wages." Neumark and Wascher's own work on the minimum wage consistently supports the negative and statistically significant employment effects of minimum wage increases. The empirical findings of Neumark and Wascher, and the other studies that find negative effects of the minimum wage, tend to support the standard competitive model of the labor market, which suggests that increases in the minimum wage will have negative measurable employment effects. In a meta-study of studies published between 1972 and 2007, Doucouliagos and Stanley reviewed 1,474 empirical estimates of the minimum-wage elasticity of employment contained in 64 studies and find that the evidence corroborates the Card-Krueger "overall finding of an insignificant employment effect (both practically and statistically) from minimum-wage raises." The empirical findings of Card and Krueger, and the other studies that find negligible or positive employment effects of the minimum wage, tend to support alternative models of the labor market. For example, in reviewing these studies, Flinn concluded that, "these recent studies have been particularly useful in indicating that the 'textbook' competitive model of the labor market, which has been used as an interpretive framework for the bulk of empirical work … may have serious deficiencies in accounting for minimum wage effects on labor market outcomes." Finally, at least two recent studies have attempted to further refine the methodological approaches to estimate the effects of minimum wage increases by exploiting the growing number of divergent state minimum wage rates. Taken together, this line of research suggests that once heterogeneity in employment growth (i.e., different employment performance across states and over time) is considered, any negative effects of minimum wage laws become insignificant. That is, according to these recent studies, disemployment effects often attributed to changes in minimum wage rates disappear once the estimation models account for regional and local differences in employment trends. Overall, the authors conclude that the estimates "suggest no detectable employment losses from the kind of minimum wage increases we have seen in the United States." In a February 2014 report, the Congressional Budget Office (CBO) assessed a $10.10 per hour increase in the minimum wage. It estimated that, once fully implemented in the second half of 2016, the proposed increase in the minimum wage would reduce employment by 500,000 workers, or 0.3%. CBO also noted there was "considerable uncertainty" around this estimate, and the employment impact could range from very slight reductions to 1.0 million workers. They also assessed an increase in the minimum wage to $9.00 per hour. CBO estimated that an increase to $9.00 per hour would have smaller effects (reduced employment by an estimated 100,000 workers). CBO, in its report, noted that the proposed increase in the minimum wage from $7.25 per hour to $10.10 per hour is larger than most increases studied in the research, and CBO assumed that the responses by employers would be greater the larger the increase in the minimum wage. In sum, as this brief review suggested, the literature on the effects of the minimum wage is voluminous and the findings are often contradictory. As this body of research has developed over time and as additional data and estimation techniques have become available, it is reasonably clear that the previous consensus finding of negative employment effects of minimum wage increases (particularly for teenagers) no longer holds for minimum wage increases of the size that had been typically considered in the United States. In recent years, there have been numerous studies suggesting little or no disemployment effects of minimum wage increases. Given the contradictory findings of the research, the debate over the effects of proposed minimum wage increases is likely to continue. Targeting Those Most In-Need The minimum wage has been called a "blunt instrument" for reducing poverty. A minimum wage increase would raise the earnings of those who support families and have greater need, as well as those who do not. The illustrations in this report tend to support that argument. The greatest impact relative to poverty of a minimum wage increase to $10.10 per hour would be for the single person without a child, the type of worker whose earnings already exceed the federal poverty guidelines. The illustrations in this report also show how federal tax and benefit policies—designed to reflect family circumstances and hence "need"—supplement incomes to "even out" the relationship between net incomes and poverty among different family types. Thus, federal tax and transfer policies can be designed to target need, while minimum wage policies do not. In its February 2014 report, CBO said an increase in the minimum wage to $10.10 per hour would increase the earnings of 16.5 million low-wage workers in 2016, resulting in an aggregate increase in earnings of $31 billion. However, CBO also estimated that of the $31 billion in increased earnings, 19% of the increase would go to families with incomes below the poverty level. CBO also estimated that the increase in the minimum wage would reduce the number of people in poverty in 2016 by 900,000, reducing by 2% the number of people who would be in poverty under current law in 2016. Other Impacts An increase in the minimum wage might have effects on the economy in addition to any impacts on employment. Depending on conditions in its labor and product markets, a business might react to an increase in the minimum wage in a number of alternative ways. For example, to the degree businesses can pass along the increased cost of the minimum wage to consumers, a minimum wage increase can increase prices. It could also reduce profits. Businesses might cut back on labor costs other than those mandated by the minimum wage (e.g., training costs). Under the proposals to raise the minimum wage to $10.10 per hour, many of these other impacts would not affect most minimum wage workers or poverty. For example, the proposal would shield minimum wage workers from price hikes through annual adjustment of the minimum wage for inflation. Considerations Related to Alternatives to Raising the Minimum Wage A common alternative to raising the minimum wage to address poverty among the working poor is to increase earnings supplements, most commonly through the tax code with the EITC, but also through transfer programs such as SNAP. Federal policy has increasingly relied on increases in refundable tax credits and SNAP to assist the working poor, particularly those in families with children. Expansions of the earned income tax credit and reducing the income tax burden have garnered bi-partisan support during the period since the 1980s. President Reagan, upon signing the 1986 Tax Reform Act, said the following: Millions of the working poor will be dropped from the tax rolls altogether, and families will get a long-overdue break with lower rates and almost doubled personal exemption. We're going to make it economical to raise children again. President Clinton made the following remarks as the 1993 tax bill, with its further expansion of the EITC, was being considered in Congress: But the most important thing of all to reward work is that this will be the first time in the history of our country when we'll be able to say that if you work 40 hours a week and you have children in your home, you will be lifted out of poverty. It is an elemental, powerful, and profound principle. It is not liberal or conservative. It should belong to no party. It ought to become part of the American creed. Expansions of the EITC have been seen as both substitutes for raising the minimum wage, as well as a means to reduce welfare dependency by making work pay. The increase in income from the EITC—and the addition of the refundable portion of the child tax credit—significantly reduces poverty among children and their families. This is shown not only in the illustrations of this report, but also based on a Congressional Research Service (CRS) analysis of household and family income data. In 2010, three tax credits—the EITC, the child credit, and a temporary "make work pay" tax credit in effect in that year—reduced the child poverty rate by about 30%. However, there are a number of considerations that could be raised: (1) the federal budget cost of earnings supplements, and their potential increases; (2) potential work incentives and disincentives; (3) the annual nature of EITC benefits compared to ongoing income support through wages; and (4) potential effects on the wages and returns to work for those who do not receive earnings supplements. The Budget Costs of Earnings Supplements Recently, there has been increased attention to the federal budget costs of low-income aid. The Heritage Foundation has highlighted the increased costs of "welfare." (It uses an expansive definition of "welfare" to cover all need-tested benefit programs, including SNAP.) New rules adopted by the House of Representatives in January 2013 required the Congressional budget resolutions considered in the House to include information on spending for "direct means-tested programs." For families receiving assistance apart from the aged or disabled, a large share of federal and state spending is for families with earnings. Table 9 shows program spending for selected low-income cash and food assistance programs for the nonelderly and nondisabled in FY2011. Overall, $103 billion of the $142 billion in assistance provided by these selected programs went to families with earnings. The two refundable tax credits are conditioned on earnings, so 100% of their benefits went to families with earnings. SNAP and TANF pay benefits to families with and without earnings. For SNAP, 43.5% of all benefit payments to households without an elderly or disabled member went to households with earnings. Even with TANF—the program most associated with the term "welfare"—16.3% of benefits went to families with earnings. As shown in this report, an increase in the minimum wage would reduce the benefits paid to certain low-income households. However, the potential cost savings of these reduced benefits would be offset if the wage hike resulted in job loss and associated new spending on benefits. The CBO in its February 2014 report analyzing an increase in the federal minimum wage to $10.10 per hour said that budget deficits would likely be lower in the first decade after the increase in the minimum wage, with slightly higher budget deficits in the decades thereafter. Work Incentives and Disincentives Need-tested benefits tend to be reduced as a family's other income increases. Families also pay payroll and (at some level of income), income taxes. Thus, a family's total income does not rise by $1 for each $1 in increased earnings. The EITC and the child credit are different from other forms of need-tested benefits, in that at lower levels of earnings, the amounts of these credits increase. That is, they provide an "earnings bonus" or earnings supplement. For those out of the labor market who could benefit from this credit (mostly families with children) as well as very low earners, the EITC and the child credit act as work incentives. It is only at higher levels of earnings that the EITC is phased out, and at even higher earnings that the child credit is phased out. However, the fact that these benefits phase out creates concern about work disincentives. Families that receive benefits from multiple programs, such as the EITC and SNAP, can sometimes have benefits from more than one program being reduced at the same time. This leads to concern that some families face high implicit marginal tax rates that produce disincentives to increasing hours of work or seeking higher paying jobs. Moreover, the EITC and SNAP paid to those already working might also have an "income effect," providing an incentive for workers in benefitting households to reduce their hours. Recent research on the economic effects of earnings supplements divides a potential worker's decision into two parts: (1) whether or not to participate in the labor force; and (2) once in the labor force, how many hours to work. The research generally finds that earnings supplements increase participation in the labor force. This was found in a series of welfare reform experiments in the 1990s, as well as research on the economic effects of the EITC. Less attention has focused on potential disincentives of earnings supplements to either increasing hours of work or reducing hours for those already working. Studies that examine whether the EITC reduces hours of those working found little or no effect. However, there is some evidence from the welfare reform experiments in the early 1990s that earnings supplements can reduce hours of those who were already working. For more information on implicit marginal tax rates, see the Appendix . Ongoing Income Support Versus Tax Refunds Wages provide income on an ongoing basis: weekly, bi-weekly, or monthly depending on how frequently a minimum wage worker is paid. On the other hand, earnings supplements through the tax code—such as the EITC and child credit—boost income only once a year, when the tax refund check is sent to the worker. The large share of net income for families with children comprised by the annual EITC and child credit refunds likely has consequences for a family's well-being. Research has found that income from the EITC is spent somewhat differently than is income received on a more regular basis. Surveys find that the recipients of the EITC say they will use it to pay bills and reduce debt. Research has also found that the EITC is more likely to result in spending on large items: durable goods and vehicles. Potential Impact on Wages and Income One of the oft-cited advantages of EITC expansions compared with increases in the minimum wage is that EITC expansions have not been found to reduce employment. On the contrary, EITC expansions have been found to increase the work effort of those who benefit from them, particularly single mothers. That is, the EITC has been found to induce more people into the labor force (as noted in the discussion on " Work Incentives and Disincentives "). However, if EITC increases the number of people in the labor force, it could also affect wage rates through the operation of supply and demand. By increasing the number of people available to work, employers might be able to lower the wages they offer their employees. This would reduce their labor costs. Thus, workers and firms share the benefits of the earnings supplement, rather than all the benefit accruing to the worker. A further potential consequence of the impact of earnings supplements on wage rates is that they can operate to actually reduce net incomes of some workers, albeit not those at the minimum wage. As the illustrations in this report show, not all workers benefit from the EITC. Childless workers are eligible for only a small earned income tax credit (7.65% to a maximum credit of $496 per year); the single, full-year full-time minimum wage earner illustrated in this report would receive no benefit from the EITC in 2014. Thus, if the EITC reduces wages, workers who receive no or only small earnings supplements from the EITC could be made worse off by an expansion of the EITC. President Obama's FY2015 budget proposes to increase the EITC for childless workers. Senator Murray has also introduced legislation ( S. 2162 ) that would, among other things, expand the EITC for childless workers. Concluding Thoughts Since 1981, the minimum wage has been raised through legislation enacted in 1990, 1996, and 2007. These increases have been insufficient to compensate for price increases, with the real value of the minimum wage declining over that period. However, government earnings subsidies, particularly credits through the tax code that benefit mostly families with children, have been expanded over this period. The expansion of earnings subsidies was an important component of the "welfare reforms" of the 1990s and is credited with part of the increase in single mothers' work that was a goal of those reforms. However, this has come at a budget cost, and has not benefitted all groups, particularly those without children. The pending minimum wage legislation raises issues of whether government should intervene to address poverty among low wage workers, and if so, the best means to address it. In the past, minimum wages and earnings supplements have been viewed as alternative policies to address these issues. Both types of policies would raise incomes, but both types of policies also have potential drawbacks. Both types of policies also affect workers in different types of families differently. The recent literature not only discusses a weighing of the pros- and cons- of each approach, but suggest that policymakers consider how minimum wage and earnings-supplement policies interact with one another. This could also lead to a consideration of whether minimum wage and earnings supplements are alternative policies, or can be crafted as complementary policies, to address poverty. Appendix. Implicit Marginal Tax Rates Lower-income workers may not only face explicit taxes, such as FICA payroll taxes, but implicit taxes as well, if they are receiving need-tested assistance. Cumulative explicit and implicit taxes associated with work are commonly seen as potentially creating work disincentives. Moreover, receipt of assistance from multiple need-tested programs may exacerbate potential work disincentives, as a result of program interactions. Implicit Marginal and Average Tax Rates Workers incur payroll taxes beginning with the first dollar earned. The Federal Insurance Contribution Act (FICA) imposes a mandatory contribution of 6.2% of earnings towards Social Security Old Age Survivor and Disability Insurance (OASDI) trust fund, and an additional 1.45% Health Insurance (HI) contribution towards Medicare trust fund. Together, these taxes amount to a 7.65% explicit tax on earnings. In addition to explicit taxes, need-tested assistance programs may effectively impose an implicit tax on working individuals. The structure of traditional need-tested assistance reflects a varying balance between social provision of a minimum level of income adequacy and reinforcing personal responsibility among society's members. Need-tested programs provide conditional assistance to households, families, and individuals, based on need and circumstance. Under traditionally structured need-tested assistance, households, families, or individuals with minimal income and resources may qualify for a maximum benefit, which in turn is reduced as earnings or other "countable income" increases. The reduction of benefits associated with increased earnings or other "countable income," often referred to as the benefit reduction rate (BRR), is commonly seen as an "implicit" tax, as earnings (or other countable income) increases. As such, a family's total income does not rise by $1 for each $1 in increased earnings, as a portion of other assistance they might have received is reduced at the program's BRR. For example, after income and certain expense disregards, SNAP benefits are reduced by 24 cents on every dollar earned, which can be viewed as an implicit 24% tax on earned income. Combined with FICA payroll taxes, an individual worker receiving SNAP might face a combined 31.65% marginal tax on earnings. The EITC is structured differently than traditional need-tested assistance, in that it provides an "earnings bonus" to specified workers over lower-earnings ranges, up to a specified earnings level and maximum credit amount, before it begins to phase-out at higher earnings levels. (See Figure A-1 . ) Over the lowest earnings ranges, in which the EITC is phasing in, it provides an earnings subsidy, amounting from 7.65% for certain adult childless workers, to 34% for families with one child, 40% for families with two children, and 45.0% for families with three or more children, until reaching a maximum credit amount ( "EITC Plateau" ). Over the credit's phase-in range, the credit represents what some refer to as a " negative income tax ," in the sense that those eligible for the credit receive money back from the government, either as a refund in excess of any regular federal income tax liability, or as a reduction in federal income taxes that would otherwise be owed. Figure A-2 shows the structure of benefits, tax credits, and explicit taxes relative to earnings. Earnings are expressed in terms of multiples of full-time full-year work at the current $7.25 minimum wage, and range up to three-times (3.00 times) that level (the equivalent of $21.75 per hour). The benefits shown include SNAP, and two refundable tax credits—the EITC and Additional Child Tax Credit (ACTC). The ACTC is the refundable portion of the portion of Child Tax Credit (CTC), which is also shown in the figure. Explicit taxes include FICA payroll taxes, and any regular federal tax liability the depicted family might incur (before credits). Several reference points along the horizontal (hourly earnings equivalent) axis are highlighted, with corresponding vertical markers on each income source/definition: full-time full-year work at the current federal minimum wage ($7.25/hour), shown at 1.00; full-time full-year work at $8.16 per hour (about 1.13 times the current federal minimum wage), which marks the point at which the depicted worker would begin to incur a regular federal income tax liability (before credits); full-time full-year work at $8.57 per hour (about 1.18 times the current federal minimum wage), which marks the point at which the depicted worker would begin to incur his or her EITC begin to phase-out; full-time full-year work at $8.37 per hour (about 1.29 times the current federal minimum wage), which marks the point at which the depicted worker would lose food assistance under SNAP, due his or her gross earnings reaching the program's gross income limit, set at 130% of the Federal Poverty Level; full-time full-year work at $12.66 per hour (about 1.75 times the current federal minimum wage), which marks the point at which the depicted worker would begin to incur a positive net tax liability (i.e., combined FICA taxes and regular federal tax liability begin to exceed combined EITC and CTC benefits); and full-time full-year work at $18.51 per hour (about 2.55 times the current federal minimum wage), which marks the point at which the depicted worker would no longer be eligible for the EITC. Figure A-3 depicts annual net and gross income for a single parent with one child, as well as the Federal Poverty Level (right vertical axis), relative to full-time full-year work at the current $7.25 per hour minimum wage level. Besides the $7.25 per hour wage rate, marked at 1.00 on the figure, the $12.66 per hour wage rate, marked at about 175% of current minimum wage level, several wage rates between the aforementioned wage rates are highlighted Figure A-2 and Figure A-3 , above, provide a "behind the scenes view" that sets the stage for examining the effects of benefits and taxes on implicit tax rates , shown in Figure A-4 and Figure A-5 , below, which depict net "marginal" implicit tax rates, and net "average" implicit tax rates , respectively. Implicit marginal tax rates, shown in Figure A-4 , highlight the effects on net income resulting from a gain or loss in gross earnings over a specified range, or margin. They provide some indication of the possible incentives or disincentives to work and earn more, or to work or earn less, at specific earnings levels. For example, over broad ranges, sustained high implicit marginal tax rates may discourage individuals from working more hours, or working harder in hopes of securing a wage increase. In contrast, over broad ranges, low or even negative marginal tax rates, may help to encourage work. For example, at lower earnings ranges, the nominal EITC benefit increases with increased earnings, resulting in a net implicit marginal gain in net income that exceeds the marginal gain in gross earnings, which contribute to negative marginal implicit tax rates over a specified range. At higher income ranges, the nominal EITC is reduced as gross earnings increase, resulting in net income increasing to a lesser extent than an increase in gross earnings over a specified range, and thereby contributing to positive implicit marginal tax rates on earnings. It should be noted that marginal tax rates would differ from those shown if a different margin were used. 34 Average implicit tax rates, shown in Figure A-5 , represent the gain in net income resulting from moving from a state of non-work (i.e., zero earnings) to work, at a specified level of gross earnings (expressed as multiples of full-time full-year work at the current law $7.25 per hour wage rate). In this sense, average implicit tax rates have theoretical bearing on individuals' choices to work, or to not work, affecting labor market entry and exit. In contrast, marginal implicit tax rates theoretically have bearing on individuals' choices relating to hours or weeks of work. However, in that many (if not most) workers face work schedules with fixed hours, workers may have little flexibility vis-a-vis employers to adjust their hours, on margin, according to their preferences.

Pending before Congress is legislation (S. 1737 and H.R. 1010) that would raise the federal minimum wage from its current $7.25 per hour to, ultimately, $10.10 per hour. The minimum wage would be adjusted for inflation thereafter. Whether the minimum wage or alternative policies, namely government-funded earnings supplements such as the Earned Income Tax Credit (EITC), are more effective in addressing poverty has been long debated. The minimum wage affects workers regardless of their family status. A full-time, year-round worker at the current minimum wage would gross $15,080 in the year. A worker's poverty status, however, depends on family circumstance, specifically family size. A single full-year, full-time worker earning the current federal minimum wage would have gross earnings above the 2014 poverty guidelines, but the same worker in a family of two or more people would have gross earnings that fall below these guidelines. The federal tax system and government benefit programs take into account family circumstances in determining tax liabilities and benefits. Therefore, minimum wage and earnings supplement policies have differing impacts, depending on a worker's family type. The main distinction is the presence of children in the family. Low-wage workers heading families with children receive considerable benefits from federal income tax credits and Supplemental Nutrition Assistance Program (SNAP) food assistance. Childless singles do not benefit from refundable tax credits as do households with children. The effect of federal tax and SNAP benefits is to partially mitigate differences in net incomes relative to poverty among the family types. An increase in the minimum wage would boost gross earnings and increase the net incomes of families with a worker employed full-time, all year earning the minimum wage. However, because the federal tax system is progressive and need-tested benefits pay more to families with less income, the income boost would be less than $1.00 for each $1.00 increase in gross earnings, as workers pay more taxes and lose some benefits. The degree to which workers would gain net income because of a minimum wage increase also differs by family type. The impact of an increase in the minimum wage on the well-being of minimum wage workers depends in great part on whether the wage increase would cause a loss in employment. Some economic studies have found that increases in minimum wages cause job loss; other economic studies have found no such job loss. A previous consensus that increasing the minimum wage reduces employment, at least among teenagers, has been challenged by numerous recent studies suggesting little or no dis-employment effects of minimum wage increases. However, the debate over the employment effects of the minimum wage is likely to continue. There are also some considerations to expanding government-funded earnings supplements, such as the EITC, child tax credit, and SNAP. Expanding these earnings supplements would result in costs to the federal budget. In addition, these programs too might affect the labor market, albeit in ways different from a minimum wage increase. Research has provided evidence that the EITC has increased the number of workers in the labor market. Through the operation of supply and demand, this could suppress wage rates. Since all workers do not qualify for earnings supplements through the EITC, the child tax credit, or SNAP, lower-wage workers who do not receive them might be harmed economically. There has been some recent attention to considering minimum wage policies and earnings supplements as complementary, rather than alternative, policies.

Most Recent Developments On December 8, 2004, the President signed P.L. 108-447 , a consolidated appropriations actfor FY2005. The act includes a provision amending charter school-related language included in theDistrict of Columbia Appropriations Act for FY2005, P.L. 108-335 , which was signed by thePresident on October 18, 2004. P.L. 108-335 includes $560 million in special federalpayments and approves the District's $6.3 billion operating budget for FY2005. On October 6, 2004,by unanimous consent the Senate approved the conference committee version of H.R. 4850 , the District of Columbia Appropriations Act for FY2005. The House passed the act by a voteof 377 to 36 on the same day. On September 22, 2004, the full Senate passed by voice vote theSenate version of H.R. 4850 after substituting the language of S. 2826 . OnJuly 20, 2004, the House approved H.R. 4850 by a vote of 371-54. On September 7, 2004,the President transmitted to Congress the District of Columbia budget request for FY2005, whichwas approved on May 14, 2004, by the District of Columbia City Council following extensivenegotiations with the mayor over proposed budget cuts. Table 1. Status of District of Columbia Appropriations, FY2005, P.L. 108-335 Budget Request FY2005: The President's Budget Request On February 2, 2004, the Bush Administration released its FY2005 budgetrecommendations. The Administration's proposed budget includes $560.4 millionin federal payments to the District of Columbia. (1) A majorportion of the President's proposed federal payments and assistance to the Districtinvolves the courts and criminal justice system. This includes $187.5 million for theCourt Services 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 requests $228.1 million in support of court operations,and $41.5 million for Defender Services. These three functions (court operations,defender services, and offender supervision) represent $457.1 million, or 81.6%, ofthe President's proposed $560.4 million in federal payments to the District ofColumbia (see Table 2 ). FY2005: District's Budget Request On May 14, 2004, the District's city council unanimously approved the city's$8.2 billion budget for FY2005, (2) and forwarded it to the President for review,approval, and transmittal to the Congress. (3) The proposed budget includes a request for $1.03billion in special federal payments. The city's proposed operating budget of $6.2billion includes a $50 million cash reserve fund. In addition, the District's proposedbudget would increase local funding for public education by $82.6 million, whileseeking $60.05 million in special federal payments for public schools ($13 million),charter schools ($13 million), school vouchers ($14 million), public school safety andsecurity ($15 million) and public school enhancement ($5.05 million) activities. Theproposed budget would also increase funding for general government support by$132.4 million and human support services by $172.8 million. The District has also requested $23 million for the District's college tuitionassistance program, a proposed increase of $5 million above the federal government'sFY2004 commitment. (4) In addition, the District requested $165 million forthe Washington Metropolitan Area Transit Authority's capital fund. This is $162million more than appropriated in FY2004. The District has also requested $102million in special federal payments to support emergency preparedness activities,including $80 million for bioterrorism preparedness, $15 million for emergencyplanning and security, and $7 million for the unified communication center forregional emergencies. FY2005: Section 302(b) Suballocation Section 302(a) of the Congressional Budget Act requires that the House andSenate 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. The House AppropriationsCommittee approved a Section 302(b) suballocation of $560 million in budgetauthority for FY2005 for the District of Columbia -- 54% of the amount requestedby the District. The Senate Appropriations Committee has also allocated $560million in budget authority for the District of Columbia. It published its revised Section 302(b) suballocations on September 14, 2004 ( S.Rept. 108-338 ). Congressional Action on the Budget Congress not only appropriates federal payments to the District to fundcertain activities but also reviews the District's entire budget, including theexpenditure of local funds. The House and Senate Appropriations Committees mustapprove -- and may modify -- the District's budget. House and Senate versions of theDistrict budget are reconciled in a joint conference committee and must be agreed toby the House and the Senate. After this final action, the District's budget isforwarded to the President, who can sign it into law or veto it. House Version of H.R.4850. On July 7, 2004, the House AppropriationsSubcommittee on the District of Columbia conducted a markup of the District ofColumbia Appropriations Act for FY2005 and forwarded the bill to the fullAppropriations Committee for its consideration. On July 14, 2004, the HouseAppropriations Committee ordered reported the unnumbered draft bill, whichincluded $560 million in special federal payments for the District of Columbia. Thebill was brought to the House floor for consideration and passage on July 20, 2004,and was designated H.R. 4850 . As passed by the House, H.R.4850 recommended $25.6 million for the city college tuition assistanceprogram, an $8.6 million increase above the program's FY2004 funding level and$2.6 million more than originally sought by the District. The increase was sought inorder to cover rising tuition cost and program expansion. The bill does not includefunding for inauguration expenses, but does recommend $40 million for publicschools, charter schools, and school vouchers. In addition, the bill includes $6million for public school libraries. House Bill General Provisions. The House version of the bill includes several provisions that District officials wantto eliminate or modify, including those related to medical marijuana, abortion, andneedle exchange. In previous years, during consideration of past District ofColumbia appropriation acts, city officials have asked Congress to eliminate theprovision banning the use of medical marijuana. They have also sought to wincongressional approval for the lifting of the prohibition on the use of District fundsfor abortion services, and they have sought to eliminate the provision prohibiting theuse of federal or District funds in support of a needle exchange program. Congresshas maintained the restrictions and prohibitions on the use of federal and Districtfunds for medical marijuana, abortion, and needle exchange. At the urging of the chairman of the District Appropriations Subcommittee,Representative Frelinghuysen, the draft legislation, which was approved by theHouse Appropriations Committee on July 14, 2004, did not include any new riders. During the appropriations committee markup of the bill, Representative Fattahintroduced, then withdrew, an amendment that would have transferred to publiccharter schools the unused portion of the $14 million Congress appropriated inFY2004 for the school voucher program, which provides up to $7,500 in scholarshipsto low-income students in underperforming public schools to assist them in coveringthe cost of private elementary and secondary schools. In addition, RepresentativeMoran of Virginia asked that language be included in the report accompanying thebill urging the court system to ensure prompt payment of court-appointed attorneys. During consideration of the bill, Representative Moran noted that at least $1.5million is owed to approximately 30 court-appointed attorneys. He also noted thatdelayed payments to court-appointed attorneys had been an issue that Congress hadaddressed during consideration and passage of District appropriation acts forprevious years. (5) The Committee did approve an amendment to thereport accompanying the bill praising the DC Streets Partnership. The reportlanguage, which was offered by Representative Culberson, noted the successful useof performance-based contracting in the management of the 75 miles of the NationalHighway System in the District of Columbia by a private contractor. (6) On July 20, 2004, the House considered and approved the District ofColumbia Appropriations Act for FY2005, H.R. 4850 . Beforeapproving the bill and its accompanying report ( H.Rept. 108-610 ), the Houseconsidered two amendments to the bill. Representative Tancredo introduced, thenwithdrew, an amendment prohibiting non-citizens from voting in District elections. The amendment was withdrawn after Representative Tancredo received assurancesfrom Representative Davis that any action by District officials allowing non-citizensto vote in District elections would be blocked by the House Committee onGovernment Reform, a committee he chairs. A second amendment was offered byRepresentative Hefley. The amendment, which was defeated, called for a 1% ($5.6million) cut in the District's FY2005 appropriations as part of a deficit reductionstrategy. For a detailed review of the general provisions included in the House bill,H.R. 4850, see CRS Report RL32510(pdf) , District of Columbia AppropriationsAct for FY2005: Comparison of the General Provisions of P.L. 108-199and H.R. 4850 , by [author name scrubbed]. Senate Version of H.R. 4850 (FormerlyS. 2826). On September 21, 2004, the SenateAppropriations Committee reported S. 2826 , the District of ColumbiaAppropriations Act for FY2005. One day later, the full Senate unanimously approvedthe bill by voice vote after striking the language of House version of H.R. 4850 and substituting the language of S. 2826. TheSenate bill, which was accompanied by S.Rept. 108-354 , would have appropriated$560 million in special federal payments to the District in support of a number ofactivities and policies. As passed by the Senate, the bill recommended $21.1 millionfor the city college tuition assistance program, a $4.1 million increase above theprogram's FY2004 funding level, and $4.5 million less than approved by the House. The increase was sought in order to cover rising tuition cost and program expansion. However, during committee consideration of the bill, Senator Durbin noted that theprogram has $9 million in unspent funds from FY2004. He argued that the cityshould provide a $1 match in local funds for every $2 in federal assistance. According to Delegate Norton, the District retained the $9 million to ensure thatfunds were available for the fall and winter semesters. Like its House counterpart, the bill did not include funding for inaugurationexpenses, but did recommend $40 million for public schools, charter schools, andschool vouchers. The Senate bill, unlike the House bill, sets aside a pool of fundsfor high-performing public ($5 million) and charter ($2 million) schools. In addition,the bill would have appropriated $195 million for court operations. This is $7.1million less than recommended by the House and $33 million less than requested bythe city and the Administration. The bill would also have appropriated $32.5 millionto the District's Chief Financial Office, acting as a pass-through agent, for allocationto various education, security, economic development, and health initiatives. Thisis $13.5 million more than recommended by the House. In past appropriationsmeasures funds allocated to the CFO have been earmarked for allocation to specificentities and activities. Neither the House nor the Senate bill identifies amounts to beawarded to specific activities or entities. The report accompanying the Senate billdoes note its intent that some portion of the amount to be awarded to the CFO beallocated to Children's National Medical Center for new pediatric intensive care andneonatal intensive care units. Senate Bill General Provision. The Senate bill (formerly S. 2826 ), as reported to and passed by theSenate, would maintain the restrictions and prohibitions on the use of federal andDistrict funds for medical marijuana and abortion, but lifts the previous prohibitionon the use of District funds for a needle exchange program. The bill would also haveallowed District funds to be used to administer the District's domestic partners healthcare benefits program. It would have continued to cap attorney's fees in casesbrought against the District's public school system under the Individuals withDisabilities Education Act (IDEA). In addition, the Senate version of H.R. 4850 would have removed several prohibitions on the use ofDistrict funds for lobbying and advocacy activities related to statehood and votingrepresentation in Congress for residents of the District of Columbia. Conference Version of H.R. 4850, P.L.108-335. On October 5, 2004, House and Senateconferees reached agreement on H.R. 4850 and its accompanyingconference report ( H.Rept. 108-734 ). The conference committee agreed to $560million in federal special payments to the city and approved the city's $8.2 billionbudget for FY2005. The $560 million in special federal payments is $19 millionmore than appropriated in FY2004. Included in the $560 million in special federalpayments was $25.6 million for a college tuition assistance plan. This is $8.7 millionmore than appropriated in FY2004. The majority (73.3%) of the $560 million is tobe allocated to criminal justice activities including $190 million for court operations,$38.5 million for defender services, $180 million for court services and offendersupervision activities, and $1.3 million in support of the Criminal JusticeCoordinating Committee. In FY2004, these activities accounted for 68.6% of the$541 million in special federal payments awarded to the city. In addition, $40 million in special federal payments are allocated to publicschools ($13 million), public charter schools ($13 million), and a school choiceprogram ($14 million) that provides up to $7,500 in vouchers to low-income studentsto cover tuition and related cost for private elementary and secondary schools. Congress also earmarked an additional $10.6 million, made available through theOffice of the Chief Financial Officer of the District of Columbia (CFO), in supportof education and cultural enrichment programs for the District's school-age children. It also provided $25.6 million in special federal payments for the city's college tuitionassistance program. These combined sums total $76.2 million in special federalpayments for elementary, secondary, and higher education programs and activitiesincluding teacher training, tuition assistance, tutoring, mentoring, and culturalenrichment programs. Conference General Provisions. The conference version of H.R. 4850 , as reported and passed by theHouse maintains the restrictions and prohibitions on the use of federal and Districtfunds for medical marijuana, abortion, and a needle exchange program. The actallows District, but not federal, funds to be used to administer the District's domesticpartners health care benefits program. It continues the $4,000 cap on attorney's feesin cases brought against the District's public school system under the Individuals withDisabilities Education Act (IDEA). In addition, the conference version of H.R.4850 would retain several provisions included in the House version of theact and the District's FY2004 appropriations act prohibiting the use of District andfederal funds for lobbying and advocacy activities related to statehood and votingrepresentation in Congress for residents of the District of Columbia with oneexception. The conference version of H.R. 4850 would allow District, butnot federal, funds to be used for salaries, expenses, or other costs related to statehoodlobbying efforts associated with the offices of United States Senator or United StatesRepresentative under section 4(d) of the District of Columbia StatehoodConstitutional Convention Initiatives of 1979 (D.C. Law 3-171; D.C. Official Code,sec. 1-123). The conference version of H.R. 4850 also includes severalcharter school-related provisions previously included in Senate version of the act. The provisions: Allow the Office of Public Charter School Financing andSupport to use federal credit enhancement or direct loan funds to provide leaseguarantees for charter schools; Amend the DC School Reform Act of 1995 to encourage publicschools and independent schools to convert to charter schools; Allow for a one-year transition period for public schoolteachers whose schools are converted to charter schools; Allow public schools that covert to charter schools to retainoccupancy of the facility after converting to a charter school; Give charter schools preference in the acquisition of surplusschool facilities; Allow for a 25-year lease period for city-owned property leasedto charter schools; Require the city charter schools chartering authority to includean annual report to Congress; Call for a biennial evaluation by GAO of charter schools,identifying nine evaluation criteria, with the first interim report due to be submittedto Congress, the mayor, the council and the CFO by May 1, 2005;and Require the Charter School Board to maintain its accountsaccording to Generally Accepted Accounting Principles for Not-for-ProfitOrganizations; the board must contract for an audit of its financial statement by anindependent certified public accountant. General Provision Amendments Included in P.L.108-447. On December 8, 2004, the President signed a consolidatedappropriations act, P.L. 108-447 . The act includes a provision, Section 103, TitleI, Division I, amending the District's capital budget and several charter school-relatedgeneral provisions included in P.L. 108-335 . The act would amend the followinggeneral provisions: Section 340. Public Charter School Financing. The proposedprovision is a technical amendment that clarifies the language of the original Section340(a) of P.L. 108-335 . It amends Section 603(e)(3)(E) of the Student LoanMarketing Association Reorganization Act (20 U.S.C. 1155(e)(3)(E)) by adding anew subclause (IV) allowing public charter schools to obtain lease guarantees inaccordance with rules developed by the District of Columbia Office of Public CharterSchool Financing. Section 342. Repeal of Section 342 and Restoration ofPrevious Provisions. This provision restores the language of the affected sectionsas if they had not been amended by Section 342 of P.L. 108-335 . Eliminatingsubsection (a) restores the requirement that petitions seeking the conversion of apublic school to a public charter school submit to the authorizing board the signaturesof two-thirds of the parents of minors attending the public school, two-thirds of theadults attending a public school (the provision does not provide a definition of adultschool, but it is assumed to be students 18-years or older), and two-thirds of theteachers of the public school in support such a conversion. Eliminating subsection(b) repeals the provision governing the retention of teachers at converted charterschools and brings such teachers under an existing provision that allows all publicschool teachers to take a two-year leave of absence without pay to teach at publiccharter schools. The two-year leave of absence can be indefinitely extended fortwo-year periods. Eliminating subsection (c) gives public charter schools the rightof first offer, but not first preference, in leasing or purchasing former and currentschools facilities. It keeps in place a provision that former public school facilitiesmay only be conveyed for conversion to public charter schools if doing so does notresult in significant revenue loss to the city that would have been obtained from otherdispositions or uses of the facility or property. Section 347. Charter School Board Operations. AmendsDistrict of Columbia School Reform Act of 1995 (D.C. Code 38-1802.14). Subsection (f) requires the Charter School Board to maintain its accounts accordingto Generally Accepted Accounting Principles for Not-for-Profit Organizations. Theboard must contract for an audit of its financial statement by an independent certifiedpublic accountant. Findings are to be forwarded to the CFO, the mayor, the council,and appropriate congressional committees. Subsection (h) grants the Public CharterSchool Board authority to solicit, award, and execute contracts independently of theOffice of Contracting and Procurement and the Chief Procurement Officer. Nothingunder Chapter 3 of Title 2 of the District Code governing Procurement Practices forthe District government shall affect the authority of the Board under subsection(h). Table 2. District of Columbia Special Federal Payments Funds: FY2005 Appropriations (in millions of dollars) Table 3. District of Columbia GeneralFunds (in millions of dollars) Key Policy Issues Needle Exchange Whether to continue a needle exchange program funded with federal or Districtfunds was one of several key policy issues that Congress considered in reviewing theDistrict's appropriations for FY2005. The controversy surrounding funding a needleexchange program touches 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 the government sanctioningillegal drugs by supplying drug-addicted persons with the tools to use them. Inaddition, they contend that public health concerns raised about the spread of AIDSand HIV through shared contaminated needles should be addressed through drugtreatment and rehabilitation programs. Another view in the debate focuses on theissue of home rule and the city's ability to use local funds to institute such programsfree from congressional actions. The prohibition on the use of federal and District funds for a needle exchangeprogram 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; it also restricted the location ofprivately funded needle exchange activities. Section 150 of the District of ColumbiaAppropriations Act for FY2001 made 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. The provision was deleted during congressional consideration and passageof the District of Columbia Appropriations Act of FY2002, P.L. 107-96 . The act alsoincluded a provision that allows the use of private funds for a needle exchangeprogram, but it prohibits the use of both District and federal funds for such activities. At present, one entity, Prevention Works, a private nonprofit AIDS awareness andeducation program, operates a privately funded needle exchange program. TheFY2002 District of Columbia Appropriations Act requires such entities to track andaccount for the use of public and private funds. During consideration of the FY2004 District of Columbia Appropriations Act, District officials unsuccessfully sought to lift the prohibition on the use of Districtfunds for needle exchange programs. A Senate provision, which was not adopted, proposed prohibiting only the use of federal funds for a needle exchange programand allowing the use of District funds. The House and final conference versions ofthe FY2004 allowed the use of private funds for needle exchange programs andrequired private and public entities that receive federal or District funds in supportof other activities or programs to account for the needle exchange funds separately. The President's budget proposal for FY2005 included a provision that wouldcontinue to prohibit the use of District and federal funds in support of a needleexchange program. The House version of the District of Columbia AppropriationsAct for FY2005, H.R. 4850 , included a provision that would retain thecurrent law prohibiting the use of federal and District funds for a needle exchangeprogram. The Senate version of the bill would have allowed District, but not federal,funds to be used for such a program. The conference version of the act prohibits theuse of District and federal funds for a needle exchange program. Medical Marijuana The city's medical marijuana initiative is another issue that engenderscontroversy. The District of Columbia Appropriations Act for FY1999, P.L.105-277 , included a provision that prohibited the city from counting ballots of avoter-approved initiative that would have allowed the medical use of marijuana toassist persons suffering debilitating health conditions and diseases, including cancerand HIV infection. Congress's power to prohibit the counting of a medical marijuana ballot initiativewas challenged in a suit filed by the D.C. Chapter of the American Civil LibertiesUnion (ACLU). On September 17, 1999, District Court Judge Richard Roberts ruledthat Congress, despite its legislative responsibility for the District under Article I,Section 8, of the Constitution, did not possess the power to stifle or prevent politicalspeech, which included the ballot initiative. (7) 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 thatsuch congressional actions undercut the concept of home rule. The District of Columbia Appropriations Act for FY2002, P.L. 107-96 , includeda provision that continued to prohibit the District government from implementing theinitiative. Congress's power to block the implementation of the initiative was againchallenged in the courts. On December 18, 2001, two groups, the Marijuana PolicyProject and Medical Marijuana Initiative Committee, filed suit in U.S. District Court,seeking injunctive relief in an effort to put another medical marijuana initiative onthe November 2002 ballot. The District's Board of Elections and Ethics ruled thata congressional rider that has been included in the general provisions of each Districtappropriations act since 1998 prohibits it from using public funds to do preliminarywork that would put the initiative on the ballot. On March 28, 2002, a U.S. district court judge ruled that the congressional banon the use of public funds to put such a ballot initiative before the voters wasunconstitutional. (8) The judge stated that the effect of the amendmentwas to restrict the plaintiff's First Amendment rights to engage in political speech. The decision was appealed by the Justice Department and on September 19, 2002,the U.S. Court of Appeals for the District of Columbia Circuit reversed the ruling ofthe lower court without comment. The appeals court issued its ruling on September19, 2002, which was the deadline for printing ballots of the November 2002 generalelection. The President's budget proposal for FY2005 would have continued to prohibitthe implementation of the medical marijuana ballot initiative, while the Districtbudget for FY2005 does not include language related to the implementation of theinitiative. The House, Senate, and conference versions of the District of ColumbiaAppropriations Act for FY2005, H.R. 4850 , included a provision thatcontinues to prohibit the implementation of the medical marijuana ballot initiativeand the decriminalization of marijuana possession for medical use. Abortion Provision The public funding of abortion services for District of Columbia residents is aperennial issue debated by Congress during its annual deliberations on District ofColumbia appropriations. District officials cite the prohibition on the use of Districtfunds as another example of congressional intrusion into local matters. The Districtof Columbia Appropriations Act for FY2002, P.L. 107-96 , included a provisionprohibiting the use of federal or District funds for abortion services, except in caseswhere the life of the mother is endangered, or the pregnancy is the result of rape orincest. This prohibition has been in place since 1995, when Congress approved theDistrict of Columbia Appropriations Act for FY1996, P.L. 104-134 . Since 1979, with the passage of the District of Columbia Appropriations Act of1980, 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 abortion servicesto cases where the mother's life would be endangered if the pregnancy were taken toterm. The inclusion of District funds, and the elimination of rape or incest asqualifying 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. (9) In 1989, President Bush twice vetoed the District'sFY1990 appropriations act over the abortion issue. He signed P.L. 101-168 afterinsisting that Congress include language prohibiting the use of District revenues topay for abortion services except in cases where the mother's life wasendangered. (10) The District successfully sought the removal of the provision limiting Districtfunding of abortion services when Congress considered and passed the District ofColumbia Appropriations Act for FY1994, P.L. 103-127 . The FY1994 act alsoreinstated rape and incest as qualifying circumstances allowing for the public fundingof abortion services. The District's success was short-lived, however, 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 final version of the FY2004appropriations for the District of Columbia included a provision that continued to restrict the use of District and federal funds for abortion services except in cases ofrape or incest, or when the life of the mother is endangered. The District's FY2005 appropriation bill, as approved by the House, the Senate,and the conference committee, continues to prohibit the use of both District andfederal funds for abortion services, except in instances of rape, incest, or whenpregnancy endangers the health of the mother. Health Care Benefits Expansion Act (Domestic PartnersProgram) P.L. 107-96 includes a provision lifting the congressional prohibition on the useof District funds to implement its Health Care Benefits Expansion Act. (11) Theprovision permits unmarried heterosexual and homosexual couples to register asdomestic partners. Under the Health Care Benefits Expansion Act, which wasapproved by the city's elected leadership in 1992, an unmarried person who registersas a domestic partner of a District employee hired after 1987 may be added to theDistrict employee's health care policy for an additional charge. The act had not beenimplemented until 2002 because of a congressional prohibition first included in thegeneral provisions of District of Columbia Appropriations Act for FY1994. The city's Health Care Benefits Expansion Act allows two cohabiting,unmarried, and unrelated individuals to register as domestic partners with the Districtfor the purpose of securing certain health and family related benefits, includinghospital visiting rights. Under the law, District government employees enrolled inthe District of Columbia Employees Health Benefits Program are allowed to purchasefamily health insurance coverage that would cover the employee's family members,including domestic partners. In addition, a District employee registered as a domesticpartner may assume the additional cost of the family health insurance coverage forfamily members, which would include the employee's domestic partner. Opponents of the act maintain that it devalues the institution of marriage, andthat 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 health care benefits for domestic partners note that as of2003, 10 states, 175 local governments, and more than 7,000 companies, colleges,and universities offered health insurance benefits to domestic partners. (12) The House, Senate, and final conference versions of H.R. 4850 ,consistent with the provision first included in the District's FY2002 AppropriationsAct, include a general provision that allows the use of District funds to administer theprogram. There has been some speculation in the press that the issue of gay marriagewould find its way into consideration of the city's FY2005 appropriations. (13) At leastone bill, H.R. 4773 , would define marriage in the District of Columbiaas a union between a man and a woman. Gun Control Repeal During the 108th Congress, legislation was introduced in the House( H.R. 3193 ) and the Senate ( S. 1414 ) that would haverepealed a number of long-standing gun control measures passed by the District ofColumbia's city council. The House and Senate bills would have prohibited theDistrict government from passing any laws or regulations that exceed federal guncontrol measures or that would discourage, restrict, or prohibit private ownership anduse of firearms. Both bills would also have repealed District laws that: ban the sale and possession of handguns and semiautomaticweapons; prohibit the sale or possession of firearms except for threespecific types of the firearms (sawed-off shotguns, machine guns, and short-barreledrifles); limit the possession of handgun ammunition; and require all firearm registrants, except law enforcementpersonnel, to keep any firearm unloaded and disassembled or bound by a trigger lockor similar device unless the firearm is kept at the registrant's place of business, or isbeing used for lawful recreational purposes within the District ofColumbia. In addition, the bills would have repealed provisions governing the registration offirearms in the District, including those requiring gun registration applicants to bephotographed and fingerprinted and to meet certain age thresholds. The bills wouldhave also repealed District laws prohibiting the possession of a firearm by personswho have been judged to be mentally or physically unfit, persons who have beenconvicted or are under indictment for the commission of a violent crime, and personsconvicted of drug dealing. The bills were referred to the House Committee on Government Reform and theSenate Government Affairs Committee. Neither the House nor the Senatecommittees of jurisdiction held hearings or took any action on the respective bills. According to press reports, it was anticipated that Senator Craig would include thelanguage of S. 1414 , which was introduced by Senator Hatch, in theDistrict's FY2005 appropriations measure. (14) SenatorCraig noted that he would have offered his amendment only if he had sufficient votesin committee to secure its passage. The bill, which was reported by the SenateAppropriations Committee on September 21, 2004 and approved by the Senate onSeptember 22, 2004, did not include any language repealing the city's gun controllaws. Representative Souder's bill ( H.R. 3193 ), with 228 cosponsors,was brought to the House floor for a vote on September 29, 2004. The bill passedthe House by a vote of 250 to 171. (15) The bill was forwarded to the Senate forconsideration, but no action was taken. The District's mayor and its congressional delegate have voiced opposition to therepeal of the city's gun control measures, characterizing the bills as an "assault onhome rule" and warning that repealing the city's gun control measures wouldjeopardize public safety by increasing the availability of weapons. Supporters of therepeal of the city's gun control measures counter that the bill is intended not as anintrusion on home rule, but rather as an effort to restore to District residents theconstitutionally guaranteed right to keep and bear arms. In addition, supporters ofthe bills note that the District's gun control measures have been ineffective instemming the city's crime rate.

On February 2, 2004, the Bush Administration released its FY2005 budget recommendations. The Administration's proposed budget includes $560.4 million in federal payments to the Districtof Columbia. A major portion of the President's proposed federal payments and assistance to theDistrict involves the courts and criminal justice system. This includes funding for the Court Servicesand Offender Supervision Agency for the District of Columbia, Defender Services, and the courts. These three functions (court operations, defender services, and offender supervision) represent$457.1 million, or 81.6%, of the President's proposed $560.4 million in federal payments to theDistrict of Columbia. On May 14, 2004, the District's city council approved the city's $8.2 billion budget forFY2005. The city's proposed budget includes $2 billion for enterprise funds and $6.2 billion ingeneral fund operating expenses. The proposed budget also included a request for $1.03 billion inspecial federal payments, which is substantially higher than the $560 million proposed by thePresident. The District budget request also includes $165 million for the Washington Metropolitan AreaTransit Authority's capital fund, a $162 million increase above the amount appropriated in FY2004,and $102 million in special federal payments in support of emergency preparedness activities --including $80 million for bioterrorism preparedness, $15 million for emergency planning andsecurity, and $7 million for a unified communications center for regional emergencies. On July 7, 2004, the House Appropriations Subcommittee on the District of Columbiaconducted a markup of the District of Columbia Appropriations Act for FY2005 and forwarded theunnumbered draft bill to the House Appropriations Committee. One week later, on July 14, 2004,the House Appropriations Committee completed its markup of the bill, which includes $560 millionin special federal payments for the District of Columbia. On July 20, 2004, the House considered and passed H.R. 4850 , the District ofColumbia Appropriations Act for FY2005. The measure was accompanied by H.Rept. 108-610 . OnSeptember 21, the Senate Appropriations Committee reported S. 2826 , its version ofthe District of Columbia Appropriations Act for FY2005. The measure was accompanied by S.Rept.108-354 , and includes $560 million in special federal payments to the city. On October 6, 2004, theHouse and Senate passed the conference committee version of H.R. 4850. On October 18, 2004, the President signed P.L. 108-335 , the District of ColumbiaAppropriations Act for FY2005. The act includes $560 million in special federal payments andapproves the District's $6.3 billion operating budget for FY2005. On December 8, 2004, thePresident signed P. L. 108-447, a consolidated appropriations act for FY2005, which includes aprovision amending charter school-related language included in P.L. 108-335 . This report will beupdated as events warrant.

Introduction The Court Improvement Program (CIP) (Section 438 of the Social Security Act), first authorized in 1993 ( P.L. 103-66 ), provides grants to highest state courts intended to improve their handling of child welfare cases. As authorized for FY2006, these grants are for three purposes: to assess handling of child abuse and neglect cases and make needed improvements (FY2006 funding—$12.9 million); to train judges, legal personnel, and attorneys in handling of child welfare cases (FY2006 funding—$10 million); and to improve timeliness of decisions regarding safety, permanence, and well-being of children (FY2006 funding—$10 million). The latter two grants were first authorized and funded by the Deficit Reduction Act of 2005 ( P.L. 109-171 ), which authorized and funded them through FY2010. Funding under the CIP grant for assessing and improving court handling of child welfare cases was first made available in FY1995, and is provided as a set-aside from appropriations made for services to children and families under Title IV-B, Subpart 2 of the Social Security Act (now called the Promoting Safe and Stable Families program); that funding is set to expire with FY2006. The 109 th Congress may consider whether to extend funding for this initial CIP grant, whether to add to the relatively limited instructions provided in the Deficit Reduction Act regarding purposes of the two newest grants, and whether additional court-related measures intended to improve court performance on behalf of children in child abuse and neglect cases are needed. Legislative History As first enacted in 1993 ( P.L. 103-66 ), Court Improvement Program grants were made to permit state highest courts to assess their "role, responsibilities, and effectiveness" in carrying out required court processes in federal and state child welfare law (including regarding determinations about foster care placement, termination of parental rights, and placement for adoption or another permanent living arrangement), and implement changes deemed necessary from that assessment. Funding was provided (as a set-aside from Title IV-B, Subpart 2) at $5 million for FY1995 and $10 million for each of FY1996-FY1998. Eligible state highest courts with an approved application for a CIP grant were entitled to receive $75,000 (rising to $85,000 in FY1996 and each subsequent year), plus a share of the remaining CIP set-aside based on their state's relative share of the population under age 21. The Adoption and Safe Families Act (ASFA, P.L. 105-89 ) continued the set-aside funding for the Court Improvement Program at $10 million annually through FY2001. The Promoting Safe and Stable Families Amendments of 2001 ( P.L. 107-133 ) extended CIP through FY2006, made clear that the funds could be used to implement improvements made necessary by ASFA, as well as any made necessary by a "corrective action plan" required of a state child welfare agency following a federal Child and Family Services Review (CFSR). Finally, that law authorized up to $16.6 million in annual set-aside funding from what is now called the Promoting Safe and Stable Families (PSSF) program. (This amount is the sum of the previous $10 million set-aside from the mandatory PSSF program funding plus 3.3% of any funds appropriated under the new $200 million annual PSSF discretionary funding authorization. Congress has never provided the full discretionary funding authorized for the PSSF, and the discretionary set-aside for the CIP has never been more than $3.3 million.) See Table 1 for program funding history. The Deficit Reduction Act of 2005 ( P.L. 109-171 ) expanded the CIP and provided new, independently appropriated funds for the program. The law appropriates $20 million in each of FY2006-FY2010 (a total of $100 million over five years) for two new kinds of CIP grants: to ensure that the safety, permanence, and well-being needs of children are met in a timely and complete manner, and to provide for the training of judges, attorneys and other legal personnel in child welfare cases. These grants are in addition to the previously authorized CIP grant (currently authorized through FY2006 and funded via a set-aside from the Promoting Safe and Stable Families program). Current Program Structure In FY2006. state highest courts may apply for one or more of the three grants now authorized under the Court Improvement Program. Courts must submit a separate application for each grant and must meet certain requirements. Applications P.L. 109-171 provides that an application for any of the three grant programs must demonstrate "meaningful and ongoing collaboration" between the courts, the state child welfare agency (or any other agency under contract with the state child welfare agency to administer child welfare programs authorized under the Social Security Act), and Indian tribes (where applicable). In an application for funds related to the newly authorized grant for improving timely and complete actions on behalf of children, a state highest court must include a description of how it and the child welfare agencies (on the local and state levels) jointly plan for the collection and sharing of all relevant data and information. In an application for training funds under the CIP, a state highest court must demonstrate that at least part of the grant will be used for cross-training initiatives jointly planned and carried out with the state child welfare agency (or an agency under contract with the state agency). Finally, as was previously required for receipt of CIP funds, in each of the grant applications, a state highest court would need to supply any additional information or assurances that the Department of Health and Human Services (HHS) might require. Formula and Entitlement P.L. 109-171 followed the formula established in prior law for the CIP grant: each state highest court with an approved application is entitled to receive a minimum grant of $85,000 and a portion of any of the remaining set-aside funds that is equal to its state's share of individuals under 21 years of age (compared to all states with an approved application for the grant). This same formula is applied to each of the new grant programs. Thus, if a state highest court successfully applies for all three grants, it will receive three minimum allotments of $85,000 (total of $255,000) and a share of the remaining funds for each grant program based on the size of its state's population under 21 years of age (relative to all states whose highest court has an approved application for each of the grants). Program Funding Table 1 shows total funds authorized and appropriated for the Court Improvement Program for FY1995 (first year of funding authority) through FY2006. Table 2 shows funds authorized and appropriated for the Court Improvement Program for FY2006-FY2010 (by the grant purpose). For FY1995 to FY2005 all of the funding authority and funds appropriated were for a single grant purpose and were provided as a set-aside of funds out of the appropriation for the Promoting Safe an Stable Families program (Title IV-B, Subpart 2 of the Social Security Act). Unless Congress acts to extend funding authority for the PSSF and to continue the set-aside for the CIP, funding authority will expire with FY2006. However in the Deficit Reduction Act of 2005 ( P.L. 109-171 ), Congress separately and independently appropriated a total of $100 million ($20 million for each of fiscal years FY2006-FY2010) for two separate grant purposes under the Court Improvement Program. Context for Recent Changes to the Court Improvement Program In May 2004, after a little more than one year of study and deliberation, the Pew Commission on Children in Foster Care released its recommendations related to federal financing of child welfare services and improving court oversight of child welfare proceedings. The court-related suggestions made by the Commission were largely incorporated in legislation introduced earlier in the 109 th Congress: in the Senate ( S. 1679 by Senators DeWine and Rockefeller) and in the House ( H.R. 3758 by Representative Schiff) and many of the recommendations were incorporated in the Deficit Reduction Act. The Commission noted that in order for states to ensure "children's rights to safety, permanence and well-being are met in a timely and complete manner" courts must be able to track children's progress, identify which children need attention and identify sources of delay in court proceedings. To address this issue they recommended states adopt performance measures for their activities on behalf of children, that judges and judicial leadership use performance data collected to ensure accountability and inform decisions about resource allocation and finally, that Congress appropriate $10 million in the first years (additional sums as necessary) to help states build the capacity to track and analyze their caseload. Second, the Commission urged that child welfare agencies and courts be required to demonstrate effective collaboration on behalf of children. The commission recommended that HHS require collaboration as part of developing a variety of service and program improvement plans and in collecting and sharing relevant data between the child welfare agencies and courts. Further, it asked that Congress appropriate $10 million to train court personnel and that a portion of this funding should be designated for joint training of court personnel and child welfare agency staff, and others involved in protecting and caring for children. It also called on HHS to require states to establish broad-based state commissions on children in foster care that would be led by the state's child welfare agency director and the state chief justice. Substantial parts of these first two sets of recommendations are included in the Deficit Reduction Act. For instance, while state highest courts are not required to develop performance measures, they may apply for their allotment of an annual $10 million fund (for each of FY2006-FY2010) intended to help improve their timely and complete decision making on behalf of children. State highest courts may also apply for funds (out of a separate $10 million grant for each of FY2006-FY2010) to improve training of court personnel. As noted earlier, to receive a CIP grant for any purpose, courts must be able to demonstrate "meaningful and ongoing collaboration" between themselves and child welfare agencies. In addition, to receive CIP funding to improve timely decision-making on behalf of children, courts must describe how they will collaborate with child welfare agencies to collect and share relevant data; finally, to receive training funds courts must assure that a part of the grant will be used to provide cross-training of court personnel and child welfare agency workers. Further, the Deficit Reduction Act also requires state child welfare agencies (as a condition of certain federal funding) to involve the courts in information gathering, program planning and program improvement efforts. The Pew Commission proposed a third set of recommendations intended to ensure that children's best interests are represented and that the voices of children and their parents are heard in dependency court proceedings. These provisions are not included in the Deficit Reduction Act. They include an additional $5 million in federal funds to expand the Court Appointed Special Advocates (CASA) program; adoption of standards of practice, preparation, education, and compensation for attorneys practicing child dependency law; and funds for loan forgiveness or other demonstration programs intended to attract and retain dependency court attorneys. Finally the commission urged law schools, bar associations and law firms to help build the pool of qualified attorneys available to practice in dependency courts. There are a number of proposals in Congress that would fund a student loan forgiveness program for child welfare attorneys ( S. 1431 , Senator DeWine; S. 1679 , Senators DeWine and Rockefeller; and H.R. 3758 , Representative Schiff), but none of these have been acted on. In addition Congress recently reauthorized the CASA program ( P.L. 109-162 ) but did not raise the program funding authorization (nor its actual funding) above the $12 million annually authorized in prior law. With regard to ensuring sound standards of practice and qualified attorneys acting on behalf of children in abuse and neglect courts, the National Association for Counsel of Children (using grant money provided by HHS, September 2002-September 2005) has developed a national certification for child welfare lawyers. The American Bar Association (ABA) has granted approval of this certification process and of the National Association for Counsel of Children as a certifying agency. A certification exam was piloted in 2005 and attorneys in a limited number of states may now apply for this certification. (National dissemination of the certification is also planned.) Finally, S. 1679 , as introduced in July 2005, would require states to "develop and encourage the implementation of practice standards for all attorneys representing the State or local agency administering the program under this part [Title IV-E of the Social Security Act], including standards regarding the interaction of such attorneys with other attorneys who practice before an abuse and neglect court." The fourth and last set of recommendations are directed to chief justices and state court leadership and urge them to act as champions of children in their court systems and leaders of reform. Legislative History of Court Role in Federal Child Welfare Policy Court Improvement Program funds recognize the integral role courts must play if states are to achieve the federal goals of keeping children safe and finding them permanent homes. State laws—related to determinations of safety and the need to remove a child from the home (e.g. what is child abuse and neglect), termination of parental rights, and placement for adoption—are key operating contexts for the state child welfare agency; state courts implement (or ratify agency decisions) based on these state laws. Federal child welfare policy both affects these state laws and assumes active involvement of the court with child welfare agencies in achieving the primary goals of safety, permanence and well-being for children. However, federal child welfare funding is to a very large extent directed toward state child welfare agencies and these agencies are held accountable for adhering to and achieving a range of court-related procedures and outcomes. Courts have played an explicit role in federal child welfare policy at least since 1961, when the first federally authorized reimbursement of state foster care costs was conditioned, in part, on a court finding that remaining in the home would be "contrary to the welfare" of the child ( P.L. 97-31 ). The Adoption and Child Welfare Assistance Act of 1980 ( P.L. 96-272 ), which largely established the framework for current federal child welfare policies and programs, extended and expanded the significance of courts in federal child welfare policy. In addition to "contrary to the welfare" findings, federal foster care funding to state child welfare agencies was further conditioned on a court finding that "reasonable efforts" had been made both to preserve a child's family (in order to prevent removal), and, once a child had been removed, that reasonable efforts had been made to enable the child and his/her family to be reunited. Further, to receive full foster care and child welfare funding, P.L. 96-272 required state child welfare agencies to establish a case review system for children in foster care that ensured each foster child a court hearing within 18 months of his/her entry into foster care and "periodically" thereafter. At each of these "dispositional" hearings, P.L. 96-272 stated that the court was to consider the "future status of the child (including, but not limited to, whether the child should be returned to the parent, should be continued in foster care for a specified period, should be placed for adoption, or should, (because of the child's special needs or circumstances) be continued in foster care on a permanent or long-term basis)." In 1997 the Adoption and Safe Families Act (ASFA. P.L. 105-89 ) revised federal child welfare policy in ways that give special urgency to timeliness of court actions in child welfare proceedings and that also emphasize safety as a key determining factor in all of its decisions. ASFA changed the name of the "dispositional hearing" to a "permanency hearing," insisted that such a hearing must be held no later than 12 months after a child enters foster care (and every 12 months thereafter). At this hearing the court must determine the plan for the child's permanent placement (reunification, adoption, legal guardianship, placement with a "fit and willing" relative or, if none of these plans would be in the child's best interest, placement in "another planned permanent living arrangement"). In keeping with its emphasis on safety, ASFA amended the statute to provide that "reasonable efforts" to preserve or reunite a family are not needed in cases where a child is determined (under state law) to be an abandoned infant, been subjected to state-defined "aggravated circumstances" or where the child's parent has committed certain, specified egregious crimes (e.g., murder of another of the parent's children). At the same time, it required the child welfare agency to initiate court proceedings necessary to terminate the parental rights of any such abandoned infant or child whose parent had committed a specified egregious crime. Further state agencies were required to initiate the same termination of parental rights proceedings on behalf of any child who has been in foster care for the last 15 out of 22 months (unless specified situations are met, or a child welfare agency can document to a court why this would not be in a child's best interest). Like the earlier court-related requirements, all of the new ASFA requirements were also made as conditions of federal funding to child welfare agencies. Other Court-related Child Welfare Funding At various times and somewhat in sync with this legislative history, Congress has acted to authorize projects intended to improve court handling of child welfare cases. However, funding to support these projects has not always been appropriated and, even before the recent amendments and expanded program funding provided by the Deficit Reduction Act ( P.L. 109-171 ), the Court Improvement Program represented the largest single source of funding and program authority related to court performance in child welfare proceedings. Victims of Child Abuse Act Citing both an increase in abuse and neglect cases attributed to drug-related maltreatment of children and the new requirements placed on juvenile and family courts by the Adoption Assistance and Child Welfare Act of 1980 ( P.L. 96-272 ), the Victims of Child Abuse Act of 1990 (Title II, P.L. 101-647 ) required the Department of Justice's Office of Juvenile Justice and Delinquency Prevention (OJJDP) to "provide expanded technical assistance and training to judicial personnel and attorneys ... to improve the judicial system's handling of child abuse and neglect cases with specific emphasis on the role of the courts in addressing reasonable efforts that can safely avoid unnecessary and unnecessarily prolonged foster care placement." The statute authorized grants for these purposes to be made to 1) national organizations to develop model technical assistance and training programs; and 2) juvenile and family courts. Congress has never appropriated separate funds under this authority for grants to state courts. However funding to develop model technical assistance and training programs has been provided to the National Council of Juvenile and Family Court Judges in every year beginning with FY1992. Over that time funding has risen gradually from $500,000 to just over $2 million. The National Council has primarily used this funding to develop its Model Courts Initiative, through which it provides training, technical assistance and other resources intended to permit courts to test new ways to continually improve their handling of child welfare cases. There are some 31 Model Courts (located in 23 states and the District of Columbia), currently a part of this initiative, and with this funding the National Council has developed publications, and provides technical assistance and training programs to improve handling of child abuse and neglect cases. Strengthening Abuse and Neglect Courts Act In 2000, the Strengthening Abuse and Neglect Courts Act (SANCA, P.L. 106-314 ) cited the increased demands on courts expected to flow from ASFA when it authorized several grant programs intended to improve the efficiency with which courts handled child abuse and neglect related cases. These included— a $10 million authorization for FY2001 and FY2002 for grants to state and local courts to reduce backlogs in handling of child abuse and neglect related cases (to be administered by the Department of Justice in consultation with HHS); and $10 million for FY2001 through FY2005 for grants to state and local courts to develop, implement or enhance computer data collection and case-tracking systems (to be administered by the Department of Justice). Congress made one appropriation of funds ($2 million in FY2002) to support the purposes of SANCA. (Funding authority for SANCA has since expired.) Although the appropriation did not specify which grant program was to be funded, the Department of Justice, Office of Juvenile Justice and Delinquency Prevention awarded grants to local or state courts in six states (Colorado, Georgia, Idaho, Florida, New Jersey and Virginia) to develop, improve or enhance their automated case tracking grant program.

The Court Improvement Program (CIP) was enacted in 1993 ( P.L. 103-66 ) to provide funds to eligible state highest courts to assess and make improvements to their handling of child welfare proceedings. Funding for the CIP was provided via a statutory set-aside from funding provided to state child welfare agencies for family preservation and family support services to children and families (Title IV-B, Subpart 2 of the Social Security Act). That set-aside, which totals $12.9 million for FY2006, will expire with FY2006. The Deficit Reduction Act of 2005 ( P.L. 109-171 ) requires and encourages collaboration between courts and public child welfare agencies, authorizes two new grants under the Court Improvement Program, and provides a total of $100 million for those grants. This mandatory funding is available for courts to improve their training of judges, legal personnel, and attorneys handling child abuse and neglect cases ($10 million for each of FY2006-FY2010), and to assist courts in improving the timeliness of their efforts on behalf of children in foster care ($10 million for each of FY2006-FY2010). Federal child welfare policy has long assumed that courts and child welfare agencies must work in tandem to make timely decisions regarding the safety, permanency, and well-being of children. At the same time, almost all federal child welfare-related funding and requirements have applied to state child welfare agencies. Over the course of several decades, Congress has periodically authorized funds to courts to improve their efforts on behalf of children, and a May 2004 report from the Pew Commission on Children in Foster Care, which made numerous recommendations to improve court performance on children's behalf, renewed attention to this issue. The changes made by the Deficit Reduction Act of 2005 ( P.L. 109-171 ) were a part of the recommendations made by the Pew Commission and were also included in legislation introduced in the Senate ( S. 1679 —Senators DeWine and Rockefeller) and the House ( H.R. 3758 —Representative Schiff). For various reasons, additional legislative activity related to the Court Improvement Program may occur in the 109 th Congress (likely as a part of the expected reauthorization debate for the child welfare program authorized under Title IV-B, Subpart 2 of the Social Security Act, now called the Promoting Safe and Stable Families (PSSF) program). Funding for the original CIP grant program (for improving and assessing court handling of child welfare proceedings) is statutorily reserved from total PSSF funding, and that funding is set to expire with FY2006. Congress may consider whether this funding set-aside for CIP should be extended, and if so, whether the authorization language for this grant meets the current program needs. In addition, Congress may want to review the adequacy of the authorizing language provided for the two new grant programs (related to timely decisions on behalf of children and training judges and other court/legal personnel), which was added during conference negotiations on the Deficit Reduction Act ( P.L. 109-171 ) and was not previously debated by Congress. Third, while the new grant programs, and several other changes made by P.L. 109-171 meet a number of court-related recommendations provided by the Pew Commission on Children in Foster Care, there are additional court-related child welfare issues that Congress may choose to address. This report will be updated as needed.

Introduction Banks play a central role in the financial system by connecting borrowers to savers and allocating capital across the economy. As a result, banking is vital to the health and growth of the U.S. economy. In addition, banking is an inherently risky activity involving extending credit and taking on liabilities. Therefore, banking can generate tremendous societal and economic benefits, but banking panics and failures can create devastating losses. Over time, a regulatory system designed to foster the benefits of banking while limiting risks has developed, and both banks and regulation have coevolved as market conditions have changed and different risks have emerged. For these reasons, Congress often considers policies related to the banking industry. Recent years have been a particularly transformative period for banking. The 2008-2009 financial crisis threatened the total collapse of the financial system and the real economy. Many assert only huge and unprecedented government interventions staved off this collapse. Others argue that government interventions were unnecessary or potentially exacerbated the crisis. In addition, many argue the crisis revealed that the financial system was excessively risky and the regulatory system had serious weaknesses. Many regulatory changes were made in response to perceived weaknesses in the financial regulatory system, including to bank regulation. Congress enacted the Dodd-Frank Wall Street Reform and Consumer Protection Act ( P.L. 111-203 ; Dodd-Frank Act) in 2010 with the intention of strengthening regulation and addressing risks. In addition, U.S. and international bank regulators agreed to the Basel III Accords—an international framework for bank regulation—which called for making certain bank regulations more stringent. In the ensuing years, some observers have raised concerns that the potential benefits of the regulatory changes (better-managed risks, increased consumer protection, greater systemic stability, etc.) are outweighed by the potential costs (e.g., reduced credit availability for consumers and businesses, and slower economic growth). Meanwhile, market forces and economic conditions continue to affect the banking industry coincident with the implementation of new regulation. This report provides a broad overview of selected banking-related issues, including prudential regulation, consumer protection, "too big to fail" (TBTF) banks, community banking, regulatory agency structures and independence, and recent market and economic trends. It is not an exhaustive look at all bank policy issues, nor is it a detailed examination of any one issue. Rather, it provides concise background and analyses of certain prominent issues that have been the subject of recent discussion and debate. In addition, this report provides a list of Congressional Research Service reports that examine specific bills—including the Financial CHOICE Act ( H.R. 10 ) and the Economic Growth, Regulatory Relief, and Consumer Protection Act ( S. 2155 ). Prudential Regulation Bank failures can inflict large losses on stakeholders, including taxpayers via government "safety nets" such as deposit insurance and Federal Reserve lending facilities. Furthermore, some argue that in the presence of deposit insurance, commercial banks may be subject to moral hazard —a willingness to take on excessive risk because of external protection against losses. In addition, failures can cause systemic stress and sharp contraction in economic activity if they are large or widespread. To make such failures less likely—and to reduce losses when they do occur—regulators utilize prudential regulation. These "safety and soundness" regulations are designed to ensure banks are safely profitable and to reduce the risk of failure. This section provides background on these regulations and analyzes selected issues related to them, including regulatory requirements related to capital ratios, including leverage ratios and risk-weighted capital ratios; and restrictions on permissible activities, such as the Volcker Rule (which restricts proprietary trading). Background A bank's balance sheet is divided into assets, liabilities, and capital. Assets are largely the value of loans owed to the bank and securities owned by the bank. To make loans and buy securities, a bank secures funding by either issuing liabilities or raising capital. A bank's liabilities are largely the value of deposits and borrowings the bank owes savers and creditors. Capital is raised through various methods, including issuing equity to shareholders or issuing special types of bonds that can be converted into equity. Capital—unlike liabilities—does not require repayment of a specified amount of money, and so its value can fluctuate. Banks profit in part because many of their assets are generally riskier, longer-term, and more illiquid than their liabilities, which allows the banks to earn more interest on their assets than they pay on their liabilities. The practice is usually profitable, but does expose banks to risks that can potentially lead to failure. While the value of bank assets can decrease, liabilities generally cannot. Capital, though, gives the bank the ability to absorb losses. When asset value declines, capital value does as well, allowing the bank to meet its rigid liability obligations and avoid failure. Based on these balance sheet characteristics, failures can be reduced if (1) banks are better able to absorb losses or (2) they are less likely to experience unsustainably large losses. To increase the ability to absorb losses, regulators can require banks to hold a minimum level of capital, liquidity, or stable funding. These levels are expressed as ratios between items on bank balance sheets and are called regulatory ratio requirements . To reduce the likelihood and size of potential losses, regulators prohibit banks from activities that could create excessive risks, implementing permissible activity restrictions . Banks have been subject to ratio requirements for decades. U.S. bank regulators first established explicit numerical ratio requirements in 1981. In 1988, they adopted the Basel Capital Accords proposed by the Basel Committee on Banking Supervision (BCBS)—an international group of bank regulators that sets international standards—which were the precursor to the ratio requirement regime used in the United States today. Those requirements—now known as "Basel I"—were revised in 2004, establishing the "Basel II" requirements that were in effect at the onset of the crisis in 2008. In 2010, the BCBS agreed to the "Basel III" standards. Pursuant to this agreement, U.S. regulators finalized new capital requirements in 2013, with full implementation expected by 2019; finalized a liquidity requirement for large banks in 2014, with full implementation expected in 2017; and proposed a funding ratio for large banks in 2016. Restrictions on permissible activities have also evolved over time and generally were made more stringent following the crisis to address potential weaknesses. Historical examples of such restrictions are found in Sections 16, 20, 21, and 32 of the Banking Act of 1933 (P.L. 73-66)—commonly referred to as the Glass-Steagall Act. Glass-Steagall generally prohibited certain deposit-taking banks from engaging in certain securities markets activities associated with investment banks, such as speculative investment in equity securities. Over time, regulators became more permissive in their interpretation of Glass-Steagall, allowing banks to participate in more securities market activities, directly or through affiliations. In 1999, the Gramm-Leach-Bliley Act repealed two provisions of Glass-Steagall, further expanding permissible activities for certain banks. The financial crisis elevated the debate over what activities banks should be allowed to engage in. Certain provisions in Dodd-Frank placed restrictions on permissible activities to reduce banks' riskiness. Section 619 of Dodd-Frank—often referred to as the "Volcker Rule"—differs from Glass-Steagall provisions in important ways. However, it was generally designed to achieve a similar goal of separating proprietary trading —owning and trading securities for the bank's own portfolio with the aim of profiting from price changes—from depository banking. Regulatory Ratio Requirements14 Banks are required to satisfy several different regulatory ratio requirements. A detailed examination of how these ratios are calculated is beyond the scope of this report. This examination of the policy issue only requires noting that capital ratios fall into one of two main types—a leverage ratio or a risk-weighted ratio. A leverage ratio treats all assets the same, requiring banks to hold the same amount of capital against the asset regardless of how risky each asset is. A risk-weighted ratio assigns a risk weight—a number based on the riskiness of the asset that the asset value is multiplied by—to account for the fact that some assets are more likely to lose value than others. Riskier assets receive a higher risk weight, which requires banks to hold more capital—to better enable them to absorb losses—to meet the ratio requirement. In regard to the simple leverage ratio, most banks are required to meet a 4% leverage ratio. The required risk-weighted ratios depend on bank size and capital quality (some types of capital are considered to be less effective at absorbing losses than other types, and thus considered lower quality). Most banks are required to meet a 4.5% risk-weighted ratio for the highest-quality capital and a ratio of between 6% and 8% for lower-quality capital. Banks are then required to have an additional 2.5% of high-quality capital on top of those levels as part of the "capital conservation buffer." The largest banks are required to hold more capital than smaller, less complex banks. These ratios for large banks will be covered in the " Enhanced Prudential Regulation " section below. Some observers argue that it is important to have both a risk-weighted ratio and a leverage ratio because the two complement each other. Riskier assets generally offer a greater rate of return to compensate the investor for bearing more risk. Without risk weighting, banks would have an incentive to hold riskier assets because the same amount of capital must be held against risky and safe assets. Therefore, a leverage ratio alone may not fully account for a bank's riskiness because a bank with a high concentration of very risky assets could have a similar ratio to a bank with a high concentration of very safe assets. However, others assert the use of risk-weighted ratios should be limited. Risk weights assigned to particular classes of assets could potentially be an inaccurate estimation of some assets' true risk, especially since they cannot be adjusted as quickly as asset risk might change. Banks may have an incentive to overly invest in assets with risk weights that are set too low (they would receive the high potential rate of return of a risky asset, but have to hold only enough capital to protect against losses of a safe asset), or inversely to underinvest in assets with risk weights that are set too high. Some observers believe that the risk weights in place prior to the financial crisis were poorly calibrated and "encouraged financial firms to crowd into" risky assets, exacerbating the downturn. For example, banks held highly rated mortgage-backed securities (MBSs) before the crisis, in part because those assets offered a higher rate of return than other assets with the same risk weight. MBSs then suffered unexpectedly large losses during the crisis. Another criticism is that the risk-weighted system involves "needless complexity" and is an example of regulator micromanagement. The complexity could benefit the largest banks that have the resources to absorb the added regulatory cost compared to small banks that could find compliance costs more burdensome. Community bank compliance issues will be covered in more detail in the " Regulatory Burden on Community Banks " section later in the report. In addition to the specific issue of whether to use both leverage and risk-weighted ratios or just a leverage ratio, the role regulatory ratios in general play in bank regulation is a broader issue. Prudential regulation involves requirements besides capital ratios, such as liquidity requirements, asset concentration guidelines, and counterparty limits. Some argue that capital is essential to absorbing losses and, as long as sufficient capital is in place, banks should not be subject to some of these additional regulatory restrictions. However, others believe that the different components of prudential regulation each play an important role in ensuring the safety and soundness of financial institutions and are essential complements to bank capital. Finally, whether the benefits of prudential regulation—such as the increase in bank safety and the increase in financial system stability—are outweighed by the potential costs of reduced credit availability and economic growth is an issue subject to much debate. Capital is typically a more expensive source of funding for banks than liabilities. Thus, requiring banks to hold higher levels of capital may make funding more expensive, and so banks may choose to reduce the amount of credit available. Some studies indicate this could slow economic growth. However, no economic consensus exists on this issue, because a more stable banking system with fewer crises and failures may lead to higher long-run economic growth. In addition, estimating the value of regulatory costs and benefits is subject to considerable uncertainty, due to difficulties and assumptions involved in complex economic modeling and estimation. Therefore, this issue is unlikely to be conclusively resolved quickly or easily. Legislative Alternatives If Congress decides to reduce regulatory reliance on risk-weighted ratios, it could provide a statutory exemption for banks that otherwise demonstrate they are operating in a safe manner from being subject to risk-weighted ratios. These banks' regulatory burden could be further reduced by exempting them from other prudential regulation, such as liquidity requirements, stress-testing, and dividend limitations. Exempted banks could include those that satisfy a higher simple leverage ratio, or receive a high safety and soundness rating from the bank's prudential regulator. Another possible set of changes would be to change the risk weights assigned to specific asset classes. For example, in the case that an asset type was assigned a risk weight that was too high and would likely cause unwanted market distortions, Congress could mandate that asset type be assigned a lower weight. Volcker Rule29 The Volcker Rule generally prohibits depository banks from engaging in proprietary trading or sponsoring a hedge fund or private equity fund. Proponents argue that proprietary trading would add further risk to the inherently risky business of commercial banking. Furthermore, because other types of institutions are very active in proprietary trading and better suited for it, bank involvement is unnecessary for the financial system. Finally, proponents assert moral hazard is problematic for banks in these risky activities. Because deposits—an important source of bank funding—are insured by the government, a bank could potentially take on excessive risk without concern about losing this funding. Thus, support for the Volcker Rule has often been posed as preventing banks from "gambling" in securities markets with taxpayer-backed deposits. Some observers doubt the necessity of the Volcker Rule. They assert that proprietary trading at commercial banks did not play a role in the financial crisis, noting that issues that played a direct role in the crisis—including failures of large investment banks and insurers and losses on loans held by commercial banks—would not have been prevented by the rule. The effectiveness of the Volcker Rule in reducing bank risk is also disputed. While the activities prohibited under the Volcker Rule pose risks, it is not clear whether they pose greater risks to bank solvency and financial stability than "traditional" banking activities, such as mortgage lending. Furthermore, taking on additional risks in different markets might diversify a bank's risk profile, making it less likely to fail. Some suggest that restricting certain activities only at depository bank subsidiaries and allowing them at completely separate nonbank subsidiaries may appropriately protect deposits while allowing diversification in the larger organization. Some contend that the Volcker Rule imposes a regulatory burden that could affect banks' involvement in beneficial trading activities and reduce financial market efficiency. The rule includes exceptions for when bank trading is deemed appropriate—such as when a bank is hedging against risks and market-making. This poses practical supervisory problems. For example, how can regulators determine whether a broker-dealer is holding a security for market-making, as a hedge against another risk, or as a speculative investment? Differentiating among these motives creates regulatory complexity and compliance costs that could affect bank trading behavior. In addition, whether relatively small banks should be exempt from the rule is a debated issue. Some observers contend that the vast majority of community banks do not face compliance obligations under the rule and do not face an excessive burden by being subject to it. They argue that community banks subject to compliance requirements, those with traditional hedging activities, can comply simply by having clear policies and procedures in place that can be reviewed during the normal examination process. In addition, they assert the community banks that are engaged in complex trading should have the expertise to comply with the Volcker Rule. Others argue that the act of evaluating the Volcker Rule to ensure banks' compliance is burdensome in and of itself. They support a community bank exemption so that community banks and supervisors would not have to dedicate resources to complying with and enforcing a regulation whose rationale is unlikely to apply to smaller banks. Legislative Alternatives Several different approaches are available if Congress decided to amend the prohibitions mandated by the Volcker Rule. If it is determined that any ban on proprietary trading by commercial banks is unnecessary, unduly burdensome, or too difficult to enforce, then Congress could repeal the rule and not replace it with different prohibitions. If instead the issue is that the rule as currently formulated is problematic, then Congress could repeal the rule and replace it with different provisions, perhaps similar to those in the Glass-Steagall Act. Finally, if it is only the rule's applicability to small banks that is problematic, Congress could enact an exemption for a certain class of banks. Consumer Protection Financial products can be complex and potentially difficult for consumers to fully understand. Also, consumers seeking loans or financial services could be vulnerable to deceptive or unfair practices. To reduce the occurrence of bad outcomes, laws and regulations have been put in place to protect consumers. This section provides background on consumer protection and analyzes issues related to it, including the degree to which the Consumer Financial Protection Bureau's (CFPB's) authorities, structure, regulations, and enforcement actions have struck the appropriate balance between protecting consumers and the availability of credit; and whether certain mortgage lending rules have struck the appropriate balance between protecting consumers and the availability of credit. Background Financial transactions are subject to various state and federal laws designed to protect consumers and ensure that lenders use fair lending practices. Federal laws and regulations take a variety of approaches and address different areas of concern. Disclosure requirements are intended to ensure consumers adequately understand the costs and other features and terms of financial products. Unfair, deceptive, or abusive acts and practices are prohibited. Fair lending laws prohibit discrimination in credit transactions based upon certain borrower characteristics, including sex, race, religion, or age, among others. In addition, banks are subject to consumer compliance regulation, intended to ensure that banks are in compliance with relevant consumer-protection and fair-lending laws. For many observers, the onset of the financial crisis revealed weaknesses in the regulatory system as it related to consumer protection. In particular, many observers assert mortgages that were made using weak underwriting standards and arguably deceptive practices precipitated the crisis when the borrowers defaulted at increasingly high rates. In response, the Dodd-Frank Act established the CFPB—a new regulatory agency focused on consumer protection in financial transactions with wide-reaching authorities to regulate consumer financial products such as mortgages. In addition, other Dodd-Frank provisions directed agencies—including banking regulators and the CFPB—to implement new mortgage lending rules and amend existing ones. CFPB Regulation45 Prior to the Dodd-Frank Act, federal banking regulators—the Federal Reserve Board, the Office of the Comptroller of the Currency, and the Federal Deposit Insurance Corporation—were charged with the two-pronged mandate of regulating for both safety and soundness (prudential regulation, discussed in previous sections) as well as consumer compliance. The CFPB was established with the single mandate to implement and enforce federal consumer financial law while ensuring consumers can access financial products and services. The CFPB also works to ensure the markets for consumer financial services and products are fair, transparent, and competitive. To achieve these outcomes, the CFPB was granted certain regulatory authorities over banks, as well as certain other nonbank providers of consumer products and services. Those powers vary based on whether a bank holds more or less than $10 billion in assets. Regulatory authorities related to consumer compliance fall into three broad categories: supervisory , which includes the power to examine and impose reporting requirements on financial institutions; enforcement of various consumer-protection laws and regulations; and rulemaking , which includes the power to prescribe regulations pursuant to federal consumer-protection laws that govern a broad and diverse set of consumer financial activities and services. For banks with more than $10 billion in assets, the CFPB is the primary regulator for consumer compliance, whereas safety and soundness regulation continues to be performed by the prudential regulator. As a regulator of larger banks, the CFPB has rulemaking, supervisory, and enforcement authorities. A large bank, therefore, has different regulators for consumer protection and safety and soundness. For banks with $10 billion or less in assets, the rulemaking, supervisory, and enforcement authorities for consumer protection are divided between the CFPB and a prudential regulator. The CFPB may issue rules that apply to smaller banks, but the prudential regulators maintain primary supervisory and enforcement authority for consumer protection. The CFPB has limited supervisory and enforcement powers over small banks. It can participate in examinations performed by the prudential regulator on a sampling basis. Also, the CFPB may refer potential enforcement actions against small banks to the banks' prudential regulators, but the prudential regulators are not bound to take any substantive steps beyond responding to the referral. The CFPB has been a controversial product of the Dodd-Frank Act. Some observers question if the CFPB as an institution is structured appropriately to achieve the correct balance between independence on the one hand and transparency and accountability on the other. The CFPB is led by a director rather than a board and is funded by the Federal Reserve rather than the traditional appropriations process. Some argue that a single director leads to a lack of diversity of viewpoints, and that funding outside the traditional appropriations process could result in a lack of accountability at an agency. The CFPB's relatively narrow mandate and the "for cause" removal protection for its director are also contentious issues. However, supporters of the CFPB argue other aspects of its structure provide sufficient transparency and accountability, including the director's biannual testimony before Congress and the cap on CFPB funding. They further argue it is important to ensure the CFPB is somewhat insulated from political pressures and can focus on the technical aspect of policymaking. This issue as it relates to all financial regulators is further examined in the section entitled " Regulatory Agency Design and Independence " found later in this report. Another policy issue is whether the CFPB's rulemaking and enforcement have struck an appropriate balance between protecting consumers and ensuring that consumers have access to financial products. The CFPB has implemented rules mandated by the Dodd-Frank Act, but regulations it has promulgated under its general authorities—such as oversight of auto lending and a rule that extends credit card-like protections to prepaid cards—are at the center of this debate. Some observers assert lenders have been subject to unduly burdensome regulations and overzealous enforcement by the CFPB in recent years, resulting in costs that outweigh the benefits. They argue that CFPB regulation increases the cost of providing certain financial products to the point that institutions reduce the availability of needed credit sources. However, the CFPB came under new leadership on November 27, 2017, and has indicated it will review aspects of its regulation and enforcement. Some observers have since asserted that certain alterations in CFPB regulation and enforcement since the leadership change have made the agency too lenient toward certain financial service providers and unduly weakened consumer protections. Other observers believe the CFPB has struck an appropriate balance in its rulemaking between protecting consumers and ensuring that credit availability is not restricted due to overly burdensome regulations on financial institutions. Analysis of whether or the degree to which recent rulemakings have restricted the availability of credit is complicated by the concurrent effects of economic conditions and the financial crisis on credit conditions. Also, many significant CFPB rulemakings have been in effect only since early 2014 or later, and the lack of a track record and data is an additional barrier to conclusive examination of the issue. A third issue is whether the $10 billion asset threshold at which the CFPB becomes a bank's primary regulator for consumer compliance is set at an appropriate level. Many think having two separate agencies handle supervision for prudential regulation and consumer protection compliance would be unnecessarily burdensome for small banks. However, there is disagreement over the size at which that becomes the case. Supporters of raising the threshold argue it would appropriately reduce the regulatory burden on banks that are still relatively small, and "would still be examined by their primary regulators who are required by law to enforce the CFPB rules and regulations," and the change would only mean banks "wouldn't have to go through yet another exam with the CFPB in addition to the ones they already have to go through with their primary regulators." Critics of raising the threshold argue it exempts large institutions that warrant closer supervision. They note that banks that were "some of the worst violators of consumer protections" in the housing bubble were fairly close to that threshold, with IndyMac at approximately $30 billion in assets being a highlighted example. Legislative Alternatives Broadly, if Congress decided to restrict the CFPB's regulatory authority in financial markets, it could alter its mandate, structure, or authorities. If it is determined that the CFPB is overly focused on consumer protection to the extent that it is restricting credit availability, the agency's mandate could be expanded to a dual mandate that includes the goal of expanding consumer credit availability. Agency accountability could be increased by bringing it into the appropriations process or altering features of its leadership (e.g., by removing the director's "for cause" protections or replacing the directorship with a commission or board). In addition, CFPB rulemaking, supervisory, or enforcement authorities could be altered or removed. Mortgage Lending Rules61 During the early 2000s, housing prices and sales—and the origination of home mortgages to finance the sales—increased rapidly. However, the housing boom subsequently was revealed to be a "bubble"—the real economic forces that should underpin the housing market did not warrant the rapid expansion. In 2007, home prices began falling resulting in reduced household wealth, which in turn resulted in a surge in mortgage defaults, delinquencies, and foreclosures. Ultimately, the bursting of the bubble would play a significant role in the cascade of events that culminated in the financial crisis. Many factors contributed to the housing bubble and its collapse, and there is significant debate about the underlying causes even a decade later. Many observers, however, point to relaxed mortgage underwriting standards, an expansion of nontraditional mortgage products, and misaligned incentives among various participants as underlying causes. These features arguably led to too many mortgages being made imprudently by lenders to borrowers who would not repay them. Mortgage lending has long been subject to regulations intended to protect homeowners and to prevent risky loans, but the issues evident in the financial crisis spurred calls for reform. The Dodd-Frank Act made a number of changes to the mortgage system. For example, the law required lenders to use certain documented and verified information to determine whether a prospective borrower had the ability to repay the loan and increased the amount of data lenders would have to report under the Home Mortgage Disclosure Act ( P.L. 94-200 ). A long-standing issue in the regulation of mortgages and other consumer financial services is the perceived trade-off between protecting consumers and the availability of credit. Providers of financial goods and services may incur costs to ensure they are complying with all applicable laws and regulations. If regulation intended to protect consumers increases the cost of providing a financial product, a company may—depending on market factors and business considerations—reduce how much of that product it is willing to provide, and may provide it more selectively. Those who still receive the product may benefit from the enhanced disclosure or added legal protections of the regulation, but that benefit may result in a higher price for the product. Some policymakers generally believe that the postcrisis mortgage rules have struck the appropriate balance between protecting consumers and ensuring that credit availability is not restricted due to overly burdensome regulations. They contend that the regulations are intended to prevent those unable to repay their loans from receiving credit and have been appropriately tailored to ensure that those who can repay are able to receive credit. Critics counter that some rules have imposed compliance costs on lenders of all sizes, resulting in less credit available to consumers and restricting the types of products available to them. Some assert this is especially true for certain types of mortgages, such as mortgages for homes in rural areas or for manufactured housing. They further argue that the rules for certain types of lenders, usually small lenders, are unduly burdensome. No consensus exists on whether or to what degree mortgage rules have unduly restricted the availability of mortgages, in part because it is difficult to isolate the effects of rules and the effects of broader economic and market forces. A variety of experts and organizations attempt to measure the availability of mortgage credit, and although their methods vary, it is generally agreed that mortgage credit is tighter than it was in the years prior to the housing bubble and subsequent housing market turmoil. However, whether this should be interpreted as a desirable correction to precrisis excesses or an unnecessary restriction on credit availability is subject to debate. Legislative Alternatives If Congress finds that certain mortgage lending rules limit mortgage availability more than is justified by the realized benefits of consumer protection, it could amend certain provisions in Dodd-Frank that mandate those rules or otherwise direct regulators to relax certain rules. "Too Big to Fail" Banks69 Some bank holding companies (BHCs) have hundreds of billions or trillions of dollars in assets and are deeply interconnected with other financial institutions. A bank may be so large that the leadership of the bank and market participants may believe that the government would save it if it became distressed. This belief could arise from the determination that the institution is so important to the country's financial system—and that its failure would be so costly to the economy and society—that the government would feel compelled to avoid that outcome. An institution of this size and complexity is said to be "too big to fail" (TBTF). TBTF institutions may have incentives to be excessively risky, gain unfair advantages in the market for funding, and expose taxpayers to losses. This section provides background on TBTF institutions and analyzes some prominent issues related to them, including enhanced prudential regulation for large banks, including enhanced cap i tal requirements , liquidity requirements , living wills , and stress-testing ; and measures taken to reduce market expectation of government support for failing institutions, such as the Orderly Liquidation Authority (OLA). Background Several market forces likely drive banks and other financial institutions to grow in size and complexity, thereby potentially increasing efficiency and improving financial and economic outcomes. For example, marginal costs can be reduced through economies of scale; consumers could be offered convenient "one-stop shopping" for a variety of financial products and services; and bank risk can be diversified by spreading exposures over multiple business lines and geographic markets. These market forces—along with the relaxation of certain regulations—likely drove some banks to become very large and complex in the years preceding the crisis. At the end of 1997, two insured depository institutions held more than $250 billion in assets, and together accounted for about 9.3% of total industry assets. By the end of 2007, six banks held 40.9% of industry assets. The trend has generally continued, and at the end of 2016, nine banks held more than $250 billion in assets, accounting for 50.3% of industry assets. However, many observers assert that when a financial institution exceeds a certain size, complexity, or interconnectedness, the institution—as well as its creditors and investors—may be incented to take on excessive risk. Companies in a market economy are generally restrained in their risk-taking by market discipline —market forces create incentives to carefully assess and appropriately manage potential losses. Shareholders and creditors want the likelihood of loss to be appropriately balanced with potential returns. However, banks of a certain size or complexity may create moral hazard —a situation in which a person or company is willing to take on outsized risks, because it believes it can profit from the potential gains while being protected from the potential losses. In the case of large banks, this perceived protection against loss comes from a belief that a large bank will receive government support in the event it becomes distressed. Very large institutions may be deeply interconnected with other financial institutions, and stress at one institution could quickly spread throughout the financial system. The resultant contagion effects could potentially cause devastating economic and social outcomes. If a TBTF bank believed government would intervene in such an event, the TBTF bank may take on excessive risks. Also, a TBTF institution could enjoy lower funding costs than competitors, as investors and creditors also may have expectations of government support for the institution. Many assert that certain events of the financial crisis of 2008-2009 were a demonstration of TBTF-related problems. Large institutions had taken on large risks, and when they resulted in large losses, the institutions came under threat of failure. In some cases, the U.S. government took actions to stabilize the financial system and individual institutions. Large bank-related actions included capital injections to nine of the largest banks conducted by the Treasury under the Troubled Asset Relief Program, and the government-assisted acquisition of Wachovia by Wells Fargo. In general, two approaches have been used through Dodd-Frank provisions and the Basel III Accords to reduce or eliminate the problem of TBTF. One is to reduce potentially excessive risk-taking at large, complex, and interconnected financial institutions—including banks—through enhanced prudential regulation . Another is to reduce the need for and market expectations of government support in the event such an institution were failing. Aspects of both of these measures are subject to policy debate. Enhanced Prudential Regulation79 Enhanced prudential regulation is intended to reduce the likelihood of large bank failure through measures that include higher capital ratios, enhanced liquidity standards, and Federal Reserve stress-testing for the nation's largest banks. As explained in the " Regulatory Ratio Requirements " section, capital ratios are a measure of a bank's ability to absorb losses. Generally, U.S. banks and BHCs holding more than $50 billion in assets are required to hold more capital than other banks. Enhanced liquidity standards require certain large BHCs to maintain enough liquid assets—assets that can be easily converted into cash at low cost—sufficient to cover net cash outflows that might occur during a 30-day period during a time of financial stress. Federal Reserve stress-testing involves the Federal Reserve evaluating the ability of large banks to remain adequately capitalized during hypothetical economic and financial downturns. Living will requirements involve periodically preparing resolution plans for review by the Federal Reserve and the Federal Deposit Insurance Corporation (FDIC). Enhanced prudential regulation is a rules-based approach to addressing TBTF problems. One's assessment of the efficacy and efficiency of a rules-based approach is likely to largely depend on one's assessment of whether rules-based or market-discipline-based risk assessments—to whatever degree they may or may not be distorted by TBTF incentives—can more accurately identify risk and incent firms to appropriately react to and manage those risks. Proponents of enhanced prudential regulation note that market forces failed to restrain large institutions from taking risks leading up to the financial crisis that would ultimately result in the institutions facing failure. Furthermore, proponents argue that even if market participants are better able to identify risk accurately than are 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 of large, complex, and potentially opaque firms. Finally, proponents assert that the practices required by the enhanced prudential regulation are "best practices" that any sophisticated, well-managed bank should follow to prudently manage risk. Opponents argue that regulators are not effective in curtailing risk-taking, and point to several potential shortcomings. They cite regulator inability or unwillingness to prevent excessive risk-taking at certain firms leading up to the crisis. In addition, they argue that regulators may have adapted to weaknesses raised by the last crisis, whereas the next crisis is likely to pose a novel set of problems. Some argue 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. This has implications for whether simple or complex rules would be more effective. 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 its financial stability. Furthermore, critics argue that creating a special prudential regulatory regime is counterproductive. They contend that placing a bank in the regime is signaling to market participants that the bank has a protected status and would not be allowed to fail. Thus, the government is in effect making TBTF status explicit, which potentially exacerbates the moral hazard problem. 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 (because, in effect, these firms would enjoy a lower risk of default). Even if an enhanced prudential regime worked at reducing large bank risk-taking as planned, from a systemic risk perspective it could partly backfire in other ways. If financial intermediation and risky financial activities are pushed out of banks that are regulated for safety and soundness, the activity may simply migrate to more lightly regulated institutions and markets. The result could be a less regulated, less systemically stable financial system. This issue is discussed in more detail in the " Potential Migration to Shadow Banking " section. Enhanced prudential regulation of large banks may face similar questions concerning cost and benefit trade-offs covered in the " Regulatory Ratio Requirements " section: the benefits of safer banks and a more stable system may come at the cost of credit availability and economic growth. The issue is further complicated in relation to TBTF banks because if their funding costs are too low in the absence of enhanced regulation, then increasing costs for these institutions may correct a TBTF market distortion. Finally, observers debate what the appropriate thresholds that trigger enhanced regulation should be. Critics of the $50 billion asset threshold argue that many banks above that range are not systemically important. In particular, critics distinguish between regional banks (which tend to be at the lower end of the asset range and, it is claimed, have a traditional banking business model comparable to community banks) and Wall Street banks (a term applied to the largest, most complex organizations that tend to have significant nonbank financial activities). Others dispute this characterization, arguing that some regional banks are involved in sophisticated activities, such as being swap dealers, and have large off-balance-sheet exposures. If critics are correct that some banks that are currently subject to enhanced prudential regulation are not systemically important, then there may be little societal benefit from subjecting them to enhanced regulation, making that regulation unduly burdensome to them. Legislative Alternatives Opponents of enhanced prudential regulation for large banks offer a variety of alternative policy approaches. Congress could create exemptions from certain enhanced prudential regulations to reduce regulatory burden and increase reliance on market discipline. Some have proposed breaking up big banks, either by establishing asset limits or imposing capital requirements so stringent on banks that reach a certain size that they would have a strong incentive to break up into separate businesses. Another proposed alternative is to impose restrictions on mixing commercial banking and certain investment activities—perhaps similar to those previously required under the Glass-Steagall Act—and so limit how complex an institution can become. Other proposals are based on the assessment that the enhanced regulation is not problematic per se; rather, that it has been applied too broadly and includes institutions that are not large or complex enough to be considered TBTF. If so, Congress could raise the threshold above $50 billion or switch to a designation process in which banks of a certain size had an opportunity to be assessed more on a case-by-case basis. In addition, some think the regulations as currently formulated are more burdensome than is necessary, in which case Congress could alter certain regulations to provide regulatory relief, such as by reducing the frequency with which banks are subject to stress tests or must submit living wills—plans to resolve the bank—to the Federal Reserve. Addressing TBTF Failures The TBTF problem can also be addressed by credibly reducing or eliminating the possibility that government will save a failing institution, and ensuring that losses resulting from a failure would be borne by shareholders and creditors. Other industries generally resolve failing firms through bankruptcy. However, some observers assert that part of what makes some financial firms too big to fail is that the bankruptcy process is not amenable to resolving a large financial institution without disrupting the financial system. They argue a firm that dominates important financial market segments cannot be liquidated without disrupting the availability of credit, and the deliberate pace of the bankruptcy process is not equipped to avoid the runs and contagion inherent in the failure of a financial firm. Also, the effects on systemic risk are not taken into account when decisions are made in the bankruptcy process. Government commitments to let financial firms fail may not be credible if that failure is likely to be disruptive and destabilizing to the financial system and the economy. Another Dodd-Frank reform was the creation of an alternative resolution regime for certain financial firms outside of bankruptcy. An example of such a regime existed prior to the crisis in which the FDIC had the authority to resolve deposit-taking institutions that failed. However, the pre-Dodd-Frank Act authority may not be sufficient to resolve very large banking organizations due to their complex nature. Many of the largest financial institutions are organized as bank-holding companies (BHCs)—parent companies that own many (sometimes thousands) of subsidiary companies that include at least one deposit-taking commercial bank as well as other subsidiaries, such as broker-dealers, asset managers, and investment advisors. A BHC could possibly become distressed at the holding-company level, or distress at a nondeposit-taking subsidiary could spread to the holding-company level. In these cases, it is not clear if the authority to resolve deposit-taking subsidiaries could prevent a chaotic, disruptive failure with systemic implications. The Orderly Liquidation Authority (OLA) created by the Dodd-Frank Act gives the FDIC authority to resolve large BHCs, as well as certain nonbank financial institutions. Proponents argue that such a resolution regime offers an alternative to propping up a failing BHC with government assistance or suffering the systemic consequences of a protracted and messy bankruptcy. They point to the similarities between the OLA and the FDIC's resolution regime, and note the successes of the FDIC's resolution process of large depositories—such as Wachovia and Washington Mutual—during the crisis. Those failures arguably were less disruptive to the financial system than the failure of Lehman Brothers—a nondepository that went through the bankruptcy process—even though Wachovia and Lehman Brothers were similar in size. Neither FDIC resolution involved government assistance. Losses were imposed on stockholders and unsecured creditors in the resolution of Washington Mutual. In the case of Wachovia, the FDIC arranged for Wells Fargo to acquire the failing bank. Critics argue that the resolution of a depository—even a large one—is substantially different from the resolution of a very large, very complex BHC and its affiliated subsidiaries, and voice doubts that the OLA could be used to smoothly resolve such an institution. In addition, critics assert that the OLA 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 statutory requirements of least-cost resolution and prompt corrective action, but some expect that a resolution regime for TBTF firms would at times be required to subordinate a least-cost principle to systemic risk considerations. Therefore, a resolution could be more beneficial to creditors than the bankruptcy process. As an alternative to a special resolution regime, some observers 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 addressed in the bankruptcy code. But unlike Title II, the bankruptcy process cannot—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. Until a TBTF firm fails, it is an open question as to whether a special resolution regime could successfully achieve what it is intended to do—shut down a failing firm without triggering systemic disruption or exposing taxpayers to losses. Given the size of the firms involved and the unanticipated transmission of systemic risk, it is not clear if the government could impose losses on creditors via OLA without triggering contagion. Acting as receiver in a future failure, the FDIC could face the same short-term incentives to limit creditor losses in order to contain systemic risk that caused policymakers to rescue firms in the recent crisis. If those short-term incentives spur the receiver to avoid creditor losses, the only difference between a resolution regime and a "bailout" might be that shareholder equity is wiped out, which may not generate enough savings to avoid costs to the government. The Federal Reserve imposes a "total loss absorbing capacity" (TLAC) requirement—a minimum level of capital and long-term debt—on certain large banks in part to create the expectation that shareholders and creditors will bear the losses in a failure. In addition, a mandatory funding mechanism exists in Title II to recoup losses to taxpayers. However, because that mechanism is not "prefunded," there could be at least temporary taxpayer losses. Legislative Alternatives Opponents to the OLA assert that large BHCs should be resolved through bankruptcies to instill market discipline in TBTF banks and protect the taxpayers from potential losses, especially if weaknesses related to large BHCs in the bankruptcy process are addressed. If Congress decides to take this approach, it could repeal the FDIC's OLA authorities and amend the Bankruptcy Code. Community Banks111 While some banks hold a very large amount of assets, are complex, and operate on a national or international scale, the vast majority of U.S. banks are relatively small, have simple business models, and operate within a local area. This section provides background on these smaller, simpler banks—often called community bank s —and analyzes issues related to them, including regulatory relief for community banks, and the long-term decline in the number of community banks. Background Banks are often classified as community banks based on their total asset size—the value of the loans, securities, and other assets they hold. However, many have observed that most small banks are generally different from large banks in a variety of ways besides asset size. Smaller institutions often are more concentrated in core bank businesses of making loans and taking deposits and less involved in other, more complex activities and products more typically performed by large banks. Small banks also tend to operate within a smaller geographic area. In addition, small banks are generally more likely to practice relationship lending wherein loan officers and other bank employees have a longer-standing and perhaps more personal relationship with borrowers. Due in part to these characteristics, proponents of community banks assert that these banks are particularly important credit sources to local communities and otherwise underserved groups, as big banks may be unwilling to fulfill the credit needs of a small market of which they have little knowledge. Finally, relative to large banks, small banks are likely to have fewer employees, to have less resources to dedicate to regulatory compliance, and to individually pose less of a systemic risk to the broader financial system. There is no standard, commonly accepted definition or asset size threshold of what constitutes a small bank or a community bank. Statutes and regulations identify exempted banks by various asset size thresholds, such as those with under $10 billion or $50 billion in assets. The Federal Reserve defines community banks as those banks with less than $10 billion in assets. The Office of the Comptroller of the Currency (OCC) defines community banks as generally having $1 billion or less in assets. Others define community banks by combining size with a focus on relationship-based services, such as lending, with the local community. The FDIC has a research definition of community banking organizations, which it defines as (1) banks with less than $1 billion in assets as long as the bank makes loans and takes deposits, does not hold a large share of foreign assets, and is not a specialty bank; or (2) banks with more than $1 billion in assets that meet certain criteria, such as having more than one-third of their assets in loans, core deposits equal to at least half of their assets, and a limited geographic presence. By this definition, not all community banks are small banks, although the two are closely related. Because there is no widely accepted definition, this report uses the terms "small bank" and "community bank" interchangeably, generally referring to relatively small banks focused on serving the credit needs of people and businesses within a particular area using simple financial products. Regulatory Burden on Community Banks A central question about the regulation of banks in general is whether an appropriate trade-off has been struck between the benefits and costs of regulation. The costs associated with government regulation and its implementation are referred to as regulatory burden . A regulation could be a net positive for society if the benefits of the regulation exceed the cost. In contrast, regulation could be a net negative if costs exceed benefits—sometimes referred to as unduly burdensome regulation. Critics of recent regulation assert that when applied to community banks, certain realized benefits (such as increased systemic stability) are likely to be relatively small, whereas certain realized costs (such as compliance expenses for banks with limited resources and reduced credit for certain communities) are likely to be relatively large. Other observers assert that the regulatory burden facing small banks is appropriate, and note that small banks are given special regulatory consideration to minimize their regulatory burden. Many regulations, including some regulations resulting from Dodd-Frank, include an exemption for small banks or are tailored to reduce the cost for small banks to comply. In addition, during the rulemaking process, bank regulators are required to consider the effect of rules on small banks under the Regulatory Flexibility Act (RFA) of 1980 ( P.L. 96-354 ) and the Riegle Community Development and Regulatory Improvement Act ( P.L. 103-325 ). Supervision is also structured to pose less of a burden on small banks than larger banks, such as by requiring less-frequent bank examinations for certain small banks. One argument for easing the regulatory burden for community banks is that regulation intended to increase systemic stability need not be applied to community banks. Due to the role of large institutions in the crisis, policymakers have been particularly focused on the systemic risk posed by large banks and ensuring that they are not "too big to fail." As previously noted, the Dodd-Frank Act attempted to address this problem by imposing heightened prudential regulatory standards on the largest banks relative to small and medium-sized banks. Sometimes the argument is extended to assert that because small banks did not cause the crisis and pose less systemic risk, they need not be subject to new regulations. Opponents of these arguments note that systemic risk is only one of the goals of regulation, along with prudential regulation and consumer protection. They contend that precrisis prudential regulation for small banks was not stringent enough, as hundreds of small banks failed during and after the crisis. Another potential rationale for easing regulations on small banks would be if there are economies of scale to regulatory compliance costs. While regulatory compliance costs are likely to rise with size, those costs as a percentage of overall costs or revenues are likely to fall. In particular, as regulatory complexity increases, compliance may become relatively more costly for small firms. To give a simplified example, imagine a bank with $100 million in assets and 25 employees and a bank with $10 billion in assets and 1,250 employees each determine they must hire an extra employee to ensure compliance with new regulations. The relative burden is larger on the small institution that expands its workforce by 4% than on the large bank that expands by less than 0.1%. From a cost-benefit perspective, if regulatory compliance costs are subject to economies of scale, then the balance of costs and benefits of a particular regulation will differ depending on the size of the bank. For the same regulatory proposal, economies of scale could potentially result in costs outweighing benefits for smaller banks. Empirical evidence on whether compliance costs are subject to economies of scale is mixed. Some argue for reducing the regulatory burden on small banks on the grounds that they provide greater access to credit or offer credit at lower prices than large banks for certain groups of borrowers. These arguments tend to emphasize potential market niches small banks occupy that larger banks may be unwilling to fill, such as low-income or rural communities and other underserved markets. Empirical evidence is also mixed. Data that support these arguments include the fact that community banks held 71% of total deposits in rural counties in 2011, compared with 19% of overall deposits nationwide. Similarly, it is argued that small banks are better situated to engage in types of transactions that depend on "relationship banking" (i.e., personalized knowledge of risks), and that rigid regulations with standardized criteria are not well suited for the relationship banking model. Due to a lack of a clear, consensus definition, setting exemption thresholds and criteria is an issue of calibration. Should they be set so that regulations apply only to the very largest, most complex banks, as well as internationally active banks with substantial nonbank subsidiaries? Should the thresholds be set relatively low, so that only very small banks are exempt? Often at issue in this debate are the so-called regional banks —banks that are larger and operate across a greater geographic market than the community banks that have less than $10 billion or $1 billion in assets, but also smaller and less complex than the largest, most complex organizations with hundreds of billions or trillions of dollars in assets. Legislative Alternatives If Congress decides that additional regulatory relief should be provided for small banks, it could continue to be provided under the current system of ad hoc exemptions. As new laws and regulations are adopted, policymakers can decide to use size-based exemptions or tailoring more often and at higher size thresholds. In addition, exemptions can be retroactively added, or thresholds of existing exemptions could be raised. An alternative to the current system would be a single, consistent exemption based on size or other criteria set by statute. Another would be setting criteria that automatically exempt certain institutions, and granting regulators discretion to exempt any other institutions they deem appropriate. Reduced Number of Community Banks Small banks, under almost any common definition, have seen their numbers decline and their collective share of banking industry assets fall in the United States in recent decades. Overall, the number of FDIC-insured institutions fell from a peak of 18,083 in the first quarter of 1986 to 5,913 in 2016. The number of institutions with less than $1 billion in assets fell from 18,045 to 5,799 in that time period, and the share of industry assets held by those banks fell from 72% to 18%. Meanwhile, the number of banks with more than $10 billion in assets rose from 36 to 114 from 1986 to 2016, and the share of total banking industry assets held by those banks increased from 28% to 82%. The decrease in the number of banks occurred through three main methods. Most of the decline in the number of institutions in the last 30 years was due to mergers, which averaged over 400 a year from 1990 to 2016. Failures were minimal from 1999 to 2007, but played a larger role in the decline during the financial crisis and recession. As economic conditions have improved more recently, failures have declined, but the number of n ew r eporters —new chartered institutions providing information to the FDIC for the first time—has been extraordinarily small in recent years and was zero in 2016. Observers have cited several possible causes for this industry consolidation. As covered in more detail in the previous section, " Regulatory Burden on Community Banks ," some argue it indicates that the regulatory burden on small banks is too onerous, driving smaller banks to merge to create or join larger institutions. However, mergers—the largest factor in consolidation—could occur for a variety of reasons. For example, a bank that is struggling financially may look to merge with a stronger bank in order to stay in business. Alternatively, a small bank that has been outperforming its peers may be bought by a larger bank that wants to benefit from its success. In addition, other fundamental changes besides regulatory burden in the banking system could be driving consolidation, making it difficult to isolate the effects of regulation. Through much of the 20 th century, federal and state laws restricted banks' ability to open new branches and banking across state lines was restricted; branching and banking across state lines was not substantially deregulated at the federal level until 1997 through the Riegle-Neal Interstate Banking and Branching Efficiency Act of 1994 ( P.L. 103-328 ). These restrictions meant many individual, small banks were needed to serve every community. When these restrictions were relaxed, it became easier for small banks to consolidate or for mid-size and large banks to spread operations to other markets. In addition, there may be economies of scale (cost advantages due to size or volume of output) to banking, and they may be growing over time, which would also drive industry consolidation. For example, information technology has become more important in banking (e.g., cybersecurity and mobile banking), and certain information technology systems may be subject to economies of scale. Finally, the slow growth coming out of the most recent recession, and macroeconomic conditions more generally (such as low interest rates), may make it less appealing for new firms to enter the banking market. Legislative Alternatives To the degree that regulatory burden is causing consolidation in the bank industry, regulatory relief for community bank policies such as those discussed in " Legislative Alternatives " found in the section above could potentially address the decline in the number of community banks. Regulatory Agency Design and Independence Financial regulatory agencies are invested with the authority to regulate, and most of them are referred to as independent regulatory agencies , allowing them to operate with a relatively high degree of independence from the President and Congress. This raises the issue of how they should be held accountable for the regulations they implement and the actions they take. This section provides background on the issue of agency independence and issues related to creating an appropriate degree of accountability, including whether the agency is self-funding or funded through appropriations; whether the agency is led by an individual or a bipartisan commission; what regulatory analysis requirements the agency faces in the rulemaking process; and to what extent agency rulemaking is subject to congressional review. Background Financial regulators conduct rulemaking, supervision, and enforcement to implement law and supervise financial institutions. A list of federal financial regulators is provided in Table 1 . These agencies—along with certain other regulatory agencies—have been given certain characteristics that generally make them more independent from the President and Congress than most executive agencies. Their independence results from characteristics including their leadership structure, ability to self-fund outside the appropriations process, and rulemaking requirements. While this independence allows technical rules to be designed by experts who are to some degree insulated from political considerations, it also results in rules being implemented by individuals who arguably are not directly accountable to the electorate. Whether an appropriate balance between independence and accountability of these agencies has been achieved is a matter of debate. Some observers argue that better regulatory outcomes would be achieved if agencies were more accountable. Others feel that independence is necessary for agencies to effectively regulate and should not be reduced. Self-Funding Versus Appropriations136 Self-funding is one characteristic that provides certain financial regulators with a relatively high degree of independence. The annual appropriations process and periodic reauthorization legislation provide Congress with opportunities to influence the size, scope, priorities, and activities of an agency. However, most federal bank regulators generate income from other sources, such as the collection of fees or assessments from the entities that they oversee, and are not subject to the appropriations process. Those who believe financial regulator independence has become excessive often assert that ending self-funding and bringing financial regulators into the appropriations and authorization processes would result in a more appropriate level of accountability. Doing so would provide Congress with regular opportunities to evaluate an agency's performance. During these processes, Congress also might influence the activities of these agencies by legislating provisions that reallocate resources or place limitations on the use of appropriated funds to better reflect congressional priorities. Through line-item funding, bill text, or accompanying committee report text, Congress could encourage, discourage, require, or forbid specific activities at the agency, including rulemaking. Alternatively, Congress could adjust an agency's overall funding level if Congress is supportive or unsupportive of the agency's mission or conduct. Thus, congressional control over an agency's funding reduces its independence from (and increases its accountability to) Congress. However, opponents argue that reduced independence would produce worse regulatory outcomes, because—as mentioned previously—it may politicize regulators' policymaking at the expense of allowing experts to write technical rules. Legislative Alternatives Congress could end financial regulatory agency self-funding or bring the regulators into the appropriations and authorization processes if it seeks to reduce agency independence and increase accountability to Congress. Leadership Structure139 Each bank regulatory agency was created at a different time and in a different policy context, and so each agency's leadership has different structural features, as shown in Table 2 . Currently, some regulatory agencies are led by a single leader and some are led by multimember boards. In each case where there is a board structure, the board has a chairman, whose powers vis-à-vis other members vary by agency. Different arguments are made in favor of which leadership structure would be most appropriate for the various agencies. Vesting power in a board arguably encourages a diversity of views to be represented, which may lead to more durable policy decisions. On the other hand, vesting power in one individual arguably could create stronger, more unified leadership and a single point of accountability, perhaps leading to faster and more numerous decisions. Different leadership structures also raise issues related to the independence versus accountability trade-off. Where an agency is headed by a single individual, the appointee's views are more likely to reflect the views of the appointing President and his or her party; the leadership is unitary and no consensus is necessary. In contrast, the collegial structure is thought to increase the independence of an agency from the President. Therefore, observers who believe agencies should have more independence from the President are often proponents of replacing the leadership structure at agencies headed by a director with multimember commissions. Other characteristics of leadership positions may enhance independence from Congress and the President. For example, independence is thought to increase when leadership term length exceeds the length of a presidential term and is staggered and nonrenewable; when nominees are required to have issue expertise; and when agency heads can be removed only "for cause." The leadership of financial regulatory agencies generally has such features, although notably the Comptroller of the Currency does not have "for cause" removal protections. Legislative Alternatives Congress could change financial regulatory agencies' structures in various ways to alter the balance between agency independence and accountability. For example, Congress could make agencies headed by a director more accountable by eliminating "for cause" removal protections or replacing the director with a multimember board or commission. Cost-Benefit Analysis Requirements144 One method of maintaining accountability is statutorily requiring agencies to perform a cost-benefit analysis (CBA) —a systematic examination, estimation, and comparison of the economic costs and benefits potentially resulting from the implementation of a proposed new rule—as part of the rulemaking process. In this way, the agency demonstrates that it has given reasoned consideration to the necessity and efficacy of a rule and the effects it will have on society. However, a fully quantified and monetized analysis with results that have a high degree of precision is not always feasible. Predicting future outcomes requires making assumptions that are subject to a degree of uncertainty. Accounting for human behavioral responses to a regulation poses challenges. Some effects are difficult to quantify and monetize. Relevant data are not always available and accurate. This raises questions about the appropriate scope, level of detail, and degree of quantification that should be required of analyses performed in the rulemaking process. Overly lenient requirements could risk overly burdensome regulation with limited benefit being implemented by an unaccountable agency without due consideration of consequences. On the other hand, overly onerous analytic requirements could risk impeding the implementation of necessary, beneficial regulation because performing the analysis would be too time-consuming, too costly, or simply not possible. Debate over appropriate CBA requirements for financial regulators involves an additional complication. Currently, most financial regulators, as independent regulatory agencies, are not subject to certain executive orders, such as E.O. 12866, which directs the CBA performed by most executive departments and agencies. This exemption generally gives financial regulators a relatively high degree of discretion in the parameters of the CBAs they perform. However, experts disagree over whether greater discretion for financial regulators is appropriate. Some observers assert financial regulators should not be subject to a rigid legal structure when performing CBA. They claim that attempts to quantify the effects of financial regulation are imprecise and unreliable. These attempts entail making causal assumptions that are contestable and uncertain, and often face issues concerning data availability and accuracy. Also, financial regulation intends to induce behavioral, microeconomic, and macroeconomic responses, and these effects may be harder to quantify than regulations in other industries that lead to more measurable effects. Others assert that financial regulators should be subject to stricter CBA requirements than they are now. They argue that requisite, quantitative CBA—when it might yield a wide range of estimates or disagreements over accuracy between technical experts—is necessary because it disciplines agencies in regard to what rules they implement, and allows for an objective assessment of whether a regulation is likely to achieve its goals and at what cost. Some claim that the challenges of performing CBA for financial regulations are not greater than for regulations for other industries, arguing that estimations of benefits and costs—although challenging—are possible. Legislative Alternatives Congress has several alternatives available if it decided to change CBA requirements for financial regulators. Congress could require that certain effects—such as those on financial product cost or national employment—be examined as part of the analyses. Similarly, Congress could require a certain degree of quantification be part of the analysis. In addition, certain findings in these CBAs could trigger a requirement to get a waiver from Congress before the rule can go forward. Another alternative would be to authorize the President to extend executive orders related to CBA to independent regulatory agencies, including subjecting the CBAs to review by the Office of Information and Regulatory Affairs. Congressional Review154 The Congressional Review Act (CRA) provides a mechanism to increase banking regulatory agencies' accountability. CRA is an oversight tool that Congress can use to invalidate a final rule issued by a federal agency. It was enacted in response to concerns expressed by Members of both parties about Congress's ability to control what many viewed as a rapidly growing body of administrative rules. Many felt that as Congress delegated more power to agencies to implement law, the traditional oversight tools Congress possessed were not adequate. The CRA requires agencies to report to Congress on their rulemaking activities and provides Congress with a special set of expedited parliamentary procedures that can be used to consider legislation striking down agency rules it opposes. These "fast track" parliamentary procedures, which are available primarily in the Senate, limit debate and amendment on a joint resolution disapproving a rule and ensure that a simple majority can reach a final up-or-down vote on the measure. Members of Congress have specified time periods in which to submit and act on a joint resolution of disapproval invalidating the rule. If both houses agree to such a joint resolution, it is sent to the President for his signature or veto. If a CRA joint resolution of disapproval is enacted, either by being signed by the President or by being enacted over his veto, the agency final rule in question "shall not take effect (or continue)." The act also provides that if a joint resolution of disapproval is enacted, a new rule may not be issued in "substantially the same form" as the disapproved rule unless the rule is specifically authorized by a subsequent law. The CRA prohibits judicial review of any "determination, finding, action, or omission under" the act. Observers have argued that the structure of the CRA disapproval process often renders the CRA largely unworkable as an oversight mechanism. A President is most likely to veto a joint resolution that attempts to strike down a final rule proposed by his or her own Administration or by a like-minded independent agency, and a supermajority is necessary to override a presidential veto—something that has been historically rare. Therefor e, Congress typically has the opportunity to successfully block rules from taking effect only in period s between the start of a new Admin i stration —and only when the new Administration's regulatory policy positions are more aligned with those of the sitting Congress than those of the previous A dministration—and the expiration of the specified time period Congress has to act on a CRA resolution. The beginning of the 115 th Congress generally meets those criteria, and 14 disapproval resolutions had been enacted as of May 18th, 2017, but only one disapproval resolution had been enacted in the preceding 20 years. Legislative Alternatives If Congress decided to alter the CRA disapproval mechanism, it could change it from a resolution of disapproval to a resolution of approval . Such a change would mean that instead of rules automatically going into force unless Congress enacted a measure stopping them, some or all rules would become effective only upon the enactment of a law approving them. This mechanism would increase congressional oversight of which regulations would go into effect, but may politicize or unduly slow the promulgation of technical rules that would, on net, benefit society. Market and Economic Trends In addition to issues related to regulation, banking is also continually affected by market and economic conditions and trends. This section analyzes certain issues related to trends that may concern banks, including migration of financial activity from banks into nonbanks or the "shadow banking" system; increasing capabilities and market presence of financial technology ("fintech"); increasing interest rates in the future; and competitive and regulatory issues related to institutions with different charters but similar business models—such as banks, thrifts, and credit unions. Because these issues involve the interactions between several broad market forces, specific legislative alternatives will not be examined in this section. Potential Migration to Shadow Banking Credit intermediation is a core banking activity and involves transforming short-term, liquid, safe liabilities into relatively long-term, illiquid, higher-risk assets. In the context of traditional banking, credit intermediation is done by taking deposits from savers and using them to fund loans to borrowers. Because bank assets are illiquid, an otherwise-solvent bank might experience difficulty meeting short-term obligations without having to sell assets, possibly at "fire sale" prices. Also, if depositors begin to feel their deposits are not safe, many of them may choose to withdraw their funds at the same time. Such a "run" on a bank could cause it to fail. Long-established government programs mitigate liquidity- and run-risk. The Federal Reserve is authorized to act as a "lender of last resort" for a bank experiencing liquidity problems, and the FDIC insures depositors against losses. Banks are also subject to prudential regulation—as discussed in the " Prudential Regulation " section—to ensure that risks are well managed and kept at reasonable levels. However, certain financial markets and instruments allow nonbank institutions to also perform similar credit intermediation to banks. Some observers are concerned that this nonbank credit intermediation—sometimes called shadow banking —poses significant risks, because it can be performed without the government "safety nets" available to banks or the prudential regulation required of them. The lack of an explicit government safety net in shadow banking means that taxpayers are less explicitly or directly exposed to risk, but also means that shadow banking may be more vulnerable to a panic that could trigger a financial crisis. Furthermore, some argue that the increased regulatory burden placed on banks in response to the financial crisis—such as the changes in bank regulation mandated by Dodd-Frank or agreed to in Basel III—could result in a decreasing role for banks in credit intermediation and an increased role for relatively lightly regulated nonbanks. Many contend the financial crisis demonstrated how these risks in the shadow banking sector can create or exacerbate systemic distress. Money market mutual funds are deposit-like instruments that are managed with the goal of never losing principal and that investors can convert to cash on demand. Institutions can also access deposit-like funding by borrowing through short-term funding markets—such as by issuing commercial paper and entering repurchase agreements. These instruments can be continually rolled over as long as funding providers have confidence in the solvency of the borrowers. During the crisis, all these instruments—which investors had previously viewed as safe and unlikely to suffer losses—experienced run-like events as funding providers withdrew from markets. Also, nonbanks can take on exposure to long-term loans through investing in mortgage-backed securities (MBS) or other asset-backed securities (ABS). During the crisis as firms faced liquidity problems, the value of these assets decreased quickly, possibly in part as a result of fire sales. Since the crisis, many regulatory changes have been made related to certain money market, commercial paper, and repurchase agreement markets and practices. However, some observers are still concerned that shadow banking poses risks. Furthermore, because banks now face more stringent prudential regulation, certain credit intermediation activities may "migrate" to nonbanks and the shadow banking system, where institutions are less burdened by regulation. Financial Technology, or "Fintech"165 Fintech usually refers to technologies with the potential to alter the way certain financial services are performed. Banks are affected by technological developments in two ways: (1) they face choices over how much to invest in emerging technologies and to what extent they want to alter their business models in adopting technologies, and (2) they potentially face new competition from new technology-focused companies. Such technologies include online marketplace lending, crowdfunding, blockchain and distributed ledgers, and robo-advising, among many others. Certain financial innovations may create opportunities to improve social and economic outcomes, but there is also potential to create risks or unexpected financial losses. Potential benefits from fintech are greater efficiency in financial markets that creates lower prices and increased customer and small business access to financial services. These can be achieved as innovative technology replaces traditional processes that have become outdated. For example, automation may be able to replace employees, and digital technology can replace physical systems and infrastructure. Cost savings from removing inefficiencies may lead to reduced prices, making certain services affordable to new customers. Some customers that previously did not have access to services—due to such things as lack of information about creditworthiness, or geographic remoteness—could also potentially gain access. Increased accessibility may be especially beneficial to traditionally underserved groups, such as low-income, minority, and rural populations. Fintech could also create or increase risks. Many fintech products have only a brief history of operation, so it can be difficult to predict outcomes and assess risk. It is possible certain technologies may not in the end function as efficiently and accurately as intended. Also, the stated aim of a new technology is often to bring a product directly to consumers and eliminate a "middle-man." However, that middle-man could be an experienced financial institution or professional that can advise consumers on financial products and their risks. In these ways, fintech could increase the likelihood that consumers engage in a financial activity and take on risks that they do not fully understand. Certain innovations can likely be integrated into the financial system with little regulatory or policy action. Technology in finance largely involves reducing the cost of producing existing products and services, and the existing regulatory structure was developed to address risks from these financial activities. Existing regulation may be able to accommodate new technologies while adequately protecting against risks. However, there are two other possibilities. One is that some regulations may be stifling beneficial innovation. Another is that existing regulation does not adequately address risks created by new technologies. Some observers argue that regulation could potentially impede the development and introduction of beneficial innovation. Companies incur costs to comply with regulations. In addition, companies are sometimes unsure how regulators will treat the innovation once it is brought to market. A potential solution being used in other countries is to establish a regulatory "sandbox" or "greenhouse" wherein companies that meet certain requirements work with regulators as products are brought to market. Some are concerned that existing regulations may not adequately address certain risks posed by new technologies. Regulatory arbitrage—conducting business in a way that circumvents unfavorable regulations—may be a concern in this area. Fintech potentially could provide an opportunity for companies to claim they are not subject to certain regulations because of a superficial difference between how they operate compared to traditional companies. Another group of issues posed by fintech relates to cybersecurity. As activity increasingly utilizes digital technology, sensitive data are generated. Data can be used to accurately assess risks and ensure customers receive the best products and services. However, data can be stolen and used inappropriately, and there are concerns over privacy issues. This raises questions over ownership and control of the data—including the rights of consumers and the responsibilities of companies in accessing and using data—and whether companies that use and collect data face appropriate cybersecurity requirements. Rising Interest Rate Environment The Federal Reserve's monetary policy response to the financial crisis, the ensuing recession, and subsequent slow economic growth was to keep interest rates unusually low for an extraordinarily long time. It accomplished this in part using unprecedented monetary policy tools such as quantitative easing —large-scale asset purchases that significantly increased the size of the Federal Reserve's balance sheet. Recently, as economic conditions have improved, the Federal Reserve has begun to raise its target rate, and increased attention has been given to how and when the Federal Reserve will normalize monetary policy. A rising interest rate environment—especially following an extended period of unusually low rates achieved with unprecedented monetary policy tools—is an issue for banks because they are exposed to interest rate risk . A portion of bank assets have fixed interest rates with long terms until maturity, such as mortgages, and the rates of return on these assets do not increase as current market rates do. However, many bank liabilities are short-term, such as deposits, and can be repriced quickly. So although certain interest revenue being collected by banks is slow to rise, the interest costs paid out by banks can rise quickly. In addition to putting stress on net income, rising interest rates can cause the market value of fixed-rate assets to fall. Finally, banks incur an opportunity cost when resources are tied up in long-term assets with low interest rates rather than being used to make new loans at higher interest rates. The magnitude of interest rate risks should not be overstated, as rising rates can increase bank profitability if they result in a greater difference between long-term rates banks receive and short-term rates they pay—referred to as net interest margin . Nonetheless, banks and regulators recognize the importance of managing interest rate risk, carefully examine the composition of bank balance sheets, and plan for different interest rate change scenarios. While banks are well practiced at interest rate risk management through normal economic and monetary policy cycles, managing bank risk through the next period of interest rate growth could be more challenging because rates have been so low for so long and achieved through unprecedented monetary policy tools. Because rates have been low for so long, many loans made in different interest rate environments that preceded the crisis have matured. Meanwhile, all new loans made in the last eight years have been made in a low interest rate environment. This presents challenges to getting a mix of loans with different rates. In addition, because the Federal Reserve has used new monetary policy tools and grown its balance sheet to unprecedented levels, accurately controlling the pace of interest rate growth may be challenging. Charters and Competition An institution that makes loans and takes deposits—the core activities of traditional commercial banking—can have one of several types of charters, including a national bank charter, a state bank charter, a federal savings association (also called a "thrift") charter, or a credit union charter. Each charter type determines what activities are permissible for the institution, what activities are restricted, and which agency will be the institution's primary regulator (see Table 3 ). A rationale for this system is that it gives institutions with different business models and ownership arrangements the ability to choose a regulatory regime appropriately suited to the institution's business needs and risks. The differences between institution business models and the attendant regulations are numerous, varied, and beyond the scope of this report. This examination of the issue only requires noting that (1) under each charter, an institution is subject to regulatory treatment and restrictions that differ from other charter types in certain ways and (2) these various institutions are to some degree in competition with each other for business, because although the business models may vary, all involve taking deposits and making loans. As a result, each type of institution has a stake in proposed changes to regulation related to all charter types. Institutions may assert some regulation that they are subject to puts them at a competitive disadvantage, whereas the other types of institutions oppose these assertions. Often, an effort by institutions of one type to relax their regulations will be resisted by institutions of other types. The friction between credit unions and community banks is an illustrative example. The two types of institutions are similar in certain ways—notably, they typically serve a small group of customers and engage in relationship banking, which involves familiarity with customers and local market conditions. However, there are key differences. For example, credit unions are not-for-profit cooperatives with the purpose of serving the financial needs of members. Banks provide services to the general public for profit. On the basis of the differences, regulation of credit unions and banks differs. For example, credit unions face limits on the amount of member business lending they can do, whereas banks have no equivalent limitation. Meanwhile, banks are subject to regulatory evaluation under the Community Reinvestment Act ( P.L. 95-128 ) to determine how well they are meeting the credit needs of the community in which they operate. When credit unions advocate for easing business lending restrictions, banks object, arguing that it would allow credit unions to engage in activity beyond their mandate and expand into a business line more appropriate to banks. When banks argue that the Community Reinvestment Act should be extended to other types of institutions, credit unions object, arguing they already serve the credit needs of the community. These regulatory differences between these institutions are just two of many examples of institutions with different charter types disagreeing on what appropriate regulation should be. A broader and long-standing issue underlying these debates is to what degree the government should offer different charters—with different benefits and responsibilities—for businesses that engage in similar activities and whether the difference between the charters should be narrowed. The banking regulators try to minimize their regulatory differences through joint rulemaking and coordination through the Federal Financial Institutions Examinations Council—an interagency body that prescribes uniform principles, standards, and report forms—and commercial banks and thrifts no longer have separate regulators. However, differences remain between their regulations that Congress has considered addressing. CRS Legislative Resources A comprehensive listing and analysis of all proposed legislation related to bank issues is beyond the scope of this report. However, such information can be found in other CRS products, including the following: CRS Report R44839, The Financial CHOICE Act in the 115th Congress: Selected Policy Issues , by [author name scrubbed] et al. This report examines H.R. 10 introduced in the 115 th Congress. H.R. 10 proposes wide-ranging changes to the financial regulatory system, and it contains provisions related to banking issues, including provisions found in Titles I, III, V, VI, VII, and IX. Many of these provisions are similar to those found in other bills. CRS Report R45073, Economic Growth, Regulatory Relief, and Consumer Protection Act (S. 2155) and Selected Policy Issues , coordinated by [author name scrubbed]. This report examines S. 2155 , which was reported by the Committee on Banking, Housing, and Urban Affairs on December 18, 2017. S. 2155 proposes wide-ranging changes to the financial regulatory system, and it contains provisions related to banking issues, including provisions found in Titles I, II, and IV. Many of these provisions are similar to those found in other bills. CRS Report R44035, "Regulatory Relief" for Banking: Selected Legislation in the 114th Congress , coordinated by [author name scrubbed]. This report examines numerous bills related to regulatory relief for banks introduced in the 114 th Congress. CRS Report R41350, The Dodd-Frank Wall Street Reform and Consumer Protection Act: Background and Summary , coordinated by [author name scrubbed]. This report examines provisions enacted into law in the Dodd-Frank Act, and it provides background and analysis of these reforms to the financial regulatory system that are in place today. Provisions related to banking are found in Title I, II, III, VI, X, and XIV.

The financial crisis and the ensuing legislative and regulatory responses greatly affected the banking industry. Many new regulations—mandated or authorized by the Dodd-Frank Wall Street Reform and Consumer Protection Act (P.L. 111-203) or promulgated under the authority of bank regulators—have been implemented in recent years. In addition, economic and technological trends continue to affect banks. As a result, Congress is faced with many issues related to the bank industry, including issues concerning prudential regulation, consumer protection, "too big to fail" (TBTF) banks, community banks, regulatory agency design and independence, and market and economic trends. For example, the Financial CHOICE Act (H.R. 10) and the Economic Growth, Regulatory Relief, and Consumer Protection Act (S. 2155) propose wide-ranging changes to the financial regulatory system, and include provisions related to many of these banking issues. Prudential Regulation. This type of regulation is designed to ensure banks are safely profitable and unlikely to fail. Regulatory ratio requirements agreed to in the international agreement known as the Basel III Accords and the Volcker Rule are examples. Ratio requirements require banks to hold a certain amount of capital on their balance sheets to better enable them to avoid failure. The Volcker Rule prohibits certain trading activities and affiliations at banks. Proponents argue the rules appropriately balance the need for safety and soundness with regulatory burden. Opponents argue that current rules are overly complex, unduly burdensome, and difficult to enforce. Consumer Protection. Certain laws and regulations protect consumers from unfair, deceptive, or abusive acts and practices. Regulations promulgated by the Consumer Financial Protection Bureau (CFPB) and certain mortgage lending rules are contentious issues in this area. Observers disagree over whether CFPB authorities, structure, regulations, and enforcement actions appropriately balance the benefit of protecting consumers and the potential costs of unnecessarily burdening banks and restricting credit availability. A similar debate is about whether mortgage rules appropriately protect consumers and effectively align certain market incentives or unnecessarily reduce the availability of mortgages. "Too Big To Fail" Banks. Regulators also regulate for systemic risks, such as those associated with TBTF financial institutions that may contribute to systemic instability. Dodd-Frank Act provisions include enhanced prudential regulation for TBTF banks and changes to resolution processes in the event one failed. Proponents of these changes assert they will eliminate or reduce excessive risk-taking at, and bailouts for, these large banks. Opponents assert that market forces and bankruptcy law are more effective and less distortionary than the new regulations and resolution authorities. Community Banks. The number of relatively small banks has declined substantially in recent decades. Some analysts assert market forces and removal of regulatory barriers to interstate branching and banking are having a large effect, given that small banks are exempt from many recent regulations and have been consolidating for decades. Others assert small institutions have limited resources and are being unnecessarily burdened by regulation, especially because such banks are unlikely to contribute to systemic risk. Regulatory Agency Design and Independence. How regulatory agencies are structured and promulgate rules are also issues. Some assert that financial agencies' relatively high degree of independence from the President and Congress results in too little accountability in rulemaking; thus, their leadership structures, funding, and rulemaking procedures should be altered. Opponents of such measures maintain that financial regulator independence should be maintained because it allows regulations to be promulgated by technical experts with some insulation from political considerations. Recent Market and Economic Trends. Changing economic forces may also pose issues to the banking industry. Increases in regulation could drive certain financial activities into a relatively lightly regulated "shadow banking" sector. Innovative financial technology may alter the way certain financial services are delivered. Interest rates are likely to begin rising soon after a long period of low rates, which could present risks to banks. Competition and regulatory differences between banks and nonbanks with different charter types is an ongoing issue.

Most Recent Developments The Bush Administration's FY2006 budget request was released in February 2005. After the budget was submitted, both the House and the Senate Appropriations Committees voted to reorganize the subcommittee structure, and with it the programs included in specific appropriations bills. Under the reorganization, the Energy and Water Development appropriations bill acquired Department of Energy (DOE) programs that previously had been included in the appropriations bill for Interior and Related Agencies. Including these programs, the requested amount for FY2006 Energy and Water Development totaled $29.75 billion. For FY2005, $30.17 billion was appropriated for comparable programs (including emergency supplemental appropriations for the Corps of Engineers). The House Appropriations Energy and Water Development Subcommittee marked up its bill on May 11, 2005, and the full committee reported out H.R. 2419 on May 18 ( H.Rept. 109-86 ). The House passed the bill May 24. H.R. 2419 would have appropriated $29.75 billion for FY2006 for energy and water development programs, including those formerly included in the Interior and Related Agencies bill. The Senate Appropriations Committee reported out its version of H.R. 2419 on June 16 ( S.Rept. 109-84 ). The bill totaled $31.245 billion. The Senate approved the bill June 30 by a vote of 92-3. On November 7, 2005, the House-Senate conference on H.R. 2419 agreed to a bill funding these programs at $30.49 billion. The House approved the conference report ( H.Rept. 109-275 ) on November 9; the Senate approved it on November 14. President Bush signed the bill on November 19 ( P.L. 109-103 ). Status Overview The Energy and Water Development bill has historically included funding for civil works projects of the U.S. Army Corps of Engineers (Corps), the Department of the Interior's Bureau of Reclamation (BOR), most of DOE, and a number of independent agencies, including the Nuclear Regulatory Commission (NRC) and the Appalachian Regional Commission (ARC). With the reorganization of the appropriations subcommittees, DOE programs that had been funded in the Interior and Related Agencies bill were transferred to the Energy and Water Development bill. The Bush Administration's request was $29.747 billion for all of the programs now included in the Energy and Water bill for FY2006, compared with $30.169 billion appropriated for FY2005. The House bill, H.R. 2419 , as reported out by the House Appropriations Committee May 18 and passed by the House May 24, would have appropriated $29.746 billion for energy and water development programs for FY2006. The Senate version of H.R. 2419, as reported out by the Senate Appropriations Committee June 16 and passed by the Senate June 30, would have appropriated $31.245 billion. The conference report on H.R. 2419 ( H.Rept. 109-275 ) funded FY2006 programs at $30.488 billion. The major actions by the conference committee were to raise funding for the Corps of Engineers by $749 million over the requested amount, in the wake of the Katrina and Rita disasters, and to resolve a difference in the House and Senate bills regarding reprogramming of funding and contracts for Corps projects. (See " Title I: Corps of Engineers .") The conference also reduced funding for the Yucca Mountain nuclear waste disposal project. (See " Title III: Department of Energy ," " Nuclear Waste Disposal .") Table 2 includes budget totals for energy and water development appropriations enacted for FY1999 to FY2006. Table 3 lists totals for each of the four titles. The table also lists several "scorekeeping" adjustments of accounts within the four titles, reflecting various expenditures or sources of revenue besides appropriated funds. These adjustments affect the total amount appropriated in the bill but are not included in the totals of the individual titles. Amounts listed in this report are derived from the report of the conference committee on H.R. 2419 ( H.Rept. 109-275 ). For the Corps in FY2006, the Administration requested $4.32 billion, a decrease of $1.044 billion from the enacted appropriation for FY2005. It asked for $951 million for FY2006 for the Department of the Interior (DOI) programs included in the Energy and Water Development bill: the Bureau of Reclamation and the Central Utah Project. This would have been a decrease of $66 million from the FY2005 funding level. The House bill would have funded the Corps at $4.746 billion, and the DOI programs at $1.011 billion. The Senate bill would have appropriated $5.298 billion for the Corps and $1.081 billion for the Interior programs. The conference bill provided $5.383 billion for the Corps and $1.065 billion for the DOI programs. The FY2006 request for DOE programs was $24.213 billion, about $200 million less than the previous year. The House bill would have appropriated $24.318 billion, and the Senate bill $25.077 billion. The major activities in the DOE budget are energy research and development, general science, environmental cleanup, and nuclear weapons programs. Also included in the DOE total is funding of DOE's programs for fossil fuels, energy efficiency, and energy statistics, which had historically been included in the Interior and Related Agencies appropriations bill. The conference bill funded all DOE programs at $24.290 billion. The FY2006 request for funding the independent agencies in Title IV of the bill was $234 million, compared with $289 million appropriated for FY2005. The House bill reduced the funding to $207 million. The Senate bill would have appropriated $307 million. The conference bill appropriated $271 million. 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 FY2005-FY2006. Title I: Corps of Engineers The Energy and Water Development appropriations bill approved by the House, H.R. 2419 , included $4.746 billion for the Corps' FY2006 budget, $414 million more than requested. In its version of H.R. 2419, the Senate Appropriations Committee included $552 million more than was included in the House version. The conference report for H.R. 2419 provided $5.383 billion for the agency (see Table 4 ), increasing the agency's funding by $749 million more than the amount requested by the Administration. Key Policy Issues—Corps of Engineers Financial Management: Reprogramming and Contracting The conference report included compromise language between the House and Senate Appropriations Committees, which had expressed in their respective reports different levels of dissatisfaction with the Corps' financial management, particularly the reprogramming of funds across projects and the use of multiyear continuing contracts for projects. Language in H.R. 2419 after conference would change the Corps' ability to reprogram, to use continuing contracts, and to allocate project funds on a quarterly rather than an annual basis. Corps Budget and the Agency's Backlog of Projects The Corps civil works program has been criticized by some observers as an agglomeration of projects with no underlying design. These observers see the Corps backlog of authorized activities as one example of this lack of focus. Estimates of the backlog's size vary from $11 billion to more than $50 billion depending on which projects are included. Although some observers view the backlog as nothing more than a "to do" list for the Corps, others are concerned that projects are facing construction delays and related cost overruns because of the spread of available appropriations across an increasing portfolio of projects. The conferees requested from the Corps a list of its 10 priority flood damage reduction and navigation projects following Hurricanes Katrina and Rita, based on the agency's professional engineering judgment. However, according to the conference report, "the conferees have largely provided the budget request for individual water resources projects" because of the agency's inability to provide Congress with the requested priority-setting information. Many Corps policy proposals in the President's FY2006 budget request were aimed at reducing the construction backlog, while making progress on Corps projects within current fiscal constraints and national priorities. The request attempted this largely by starting no new projects and distributing funds across projects based on performance measures. Although the House bill adopted some of the changes proposed by the Administration, the House Appropriations Committee expressed a view of how to structure the Corps portfolio that would go beyond the changes proposed by the Administration. H.Rept. 109-86 stated, "the Civil Works program needs to be managed as a program and not as a collection of individual projects" to respond to what the committee sees as "little or no systematic approach to the Nation's water and coastal infrastructure underlying the selection of which projects received funding." The House Appropriations Committee reiterated in its report the value of a five-year plan and strategic vision to guide budget requests. The report by the Senate Appropriations Committee approached the Corps' budget from a perspective distinct from that of the House and the Administration. The Senate report referred to the benefits of the previous "big tent" budgeting approach where all aspects of water resources were jointly developed and discussed. The Senate report, however, was critical of the "lack of leadership" at the agency. Performance-Based Budgeting The FY2006 request tackled the Corps construction backlog on a number of fronts. One way the FY2006 request tried to address the Corps backlog of projects was to develop the budget request using a performance-based budgeting approach for determining which projects to fund for construction (and to a lesser extent maintenance); the performance measures were based on their economic and environmental returns. The construction projects selected for funding were chosen largely on their having either a high ratio of remaining benefits to remaining costs, or, for environmental projects, a high cost-effectiveness. The House Appropriations Committee noted in its report that it "supports the concept of focusing limited resources on completing high-value projects already under construction, and the Committee recommendation is based in large part on the Administration's performance-based approach." In its report, the Senate Appropriations Committee, in contrast, largely rejected the Administration's performance-based budgeting and suggested that the agency seriously reexamine its budget model. The report argues that the approach used in the FY2006 budget request "promotes discord among various water resources interests," "led to a skewed set of results with a few strong winners and many losers," and is "very unbalanced among planning, construction, and maintenance." The Senate report includes funds for numerous projects funded in neither the House bill nor the Administration's requests. The conference report acknowledged the Administration's efforts but recognized the limitations of the Administration's metrics. Accordingly, the conference report directs the Corps to contract with the National Academy of Public Administration to study and recommend metrics for allocating Corps construction appropriations across projects. Priorities and New Starts To address the budget backlog, the Administration's request limited the number of new activities started to only one construction project and three planning activities. The President's request would fund construction projects that could be completed in FY2006 and projects considered by the Administration to be priorities, similar to the President's FY2005 request. The nine national priority projects for FY2006 included the New York and New Jersey Harbor Deepening project, restoration projects in the Florida Everglades and the Upper Mississippi River system, and projects to meet environmental requirements in the Columbia River Basin and the Missouri River basin. H.Rept. 109-86 for the most part adopts the "no new starts" of the President's request; however, not all of the President's priority projects receive the full amount requested and some appropriations were added to some ongoing construction projects. S.Rept. 109-84 rejected the "decimated" planning program, commented on the importance of planning for the agency, and would fund a much larger set of projects than the Administration's request and the House-passed bill. The Senate and conference reports did not comment on new construction starts. Project Suspensions Using the performance-based budgeting criteria, the Administration identified 35 active construction projects to be studied for possible suspension (i.e., to buy out current construction contracts, rather than to complete them). The FY2006 request would provide an $80 million fund with which to cancel contacts for these projects. Most of the projects proposed for suspension were included in the FY2005 request and have local project sponsors that have made investments and raised funds for their share of construction costs. The House chose not to restore funding for about half of the projects on the suspension list; rather than funding a suspension account, the committee requested more information on the cost of suspending these projects. The Senate and conference bills restored funding for more than two-thirds of the projects proposed for suspension. Ecosystem Restoration A significant addition to the Corps' mission in recent years is a role in large environmental restoration programs, raising concerns that funding for these programs could displace funding for other traditional water resources activities. Many large-scale ecosystem restorations are in the planning phases or are awaiting congressional authorization; these will require additional funds as they move into the more cost-intensive construction and implementation phases. Other restoration activities are taking place in the context of addressing the environmental and species impacts of previously constructed projects. The FY2006 request would provide $510 million for aquatic ecosystem restoration. Coastal Louisiana The conference report provides $10 million for coastal Louisiana ecosystem restoration studies, which is less than the $20 million requested by the Administration. The conference report provides $8 million for a comprehensive coastal hurricane protection study, which had not been included in the President's request. Funding for the investments needed to restore hurricane storm damage protection to coastal Louisiana for the 2006 hurricane season is being pursued through reallocation of $1.6 billion of the $62.3 billion in supplemental appropriations provided by Congress for emergency hurricane response; $250 million of the $1.6 billion would be for Gulf coastal ecosystem projects that help reduce storm damage risk. For more information on appropriations for the Corps work related to Hurricanes Katrina and Rita, see CRS Report RS22239, Emergency Supplemental Appropriations for Hurricane Katrina Relief , by [author name scrubbed] and [author name scrubbed]. Everglades The Corps plays a significant coordination role in the restoration of the Central and Southern Florida ecosystem. The President's request for FY2006 includes $137 million for the Corps' construction projects in the region, up from $130 million in the FY2005 request and $121.25 in the enacted FY2004 appropriations in P.L. 108-447 . The FY2006 budget request supports the state of Florida's efforts to accelerate work on certain projects. The House Appropriations Committee has provided $137 million for the South Florida Ecosystem Everglades Restoration program. The $137 million in the House-passed bill would fund Everglades activities that were previously budgeted separately—the Central and Southern Florida Project, the Kissimmee River Restoration Project, and the Everglades and South Florida Restoration Projects—and the Modified Water Deliveries Project ($35 million in Corps appropriations for FY2006). The addition of the Modified Water Deliveries Project followed the President's budget proposal that the project no longer be funded solely through Department of Interior appropriations. The budget request called for the Corps to broaden its role in the project, by having the agency jointly fund it with the Department of the Interior. The Administration's position is that the Corps should pay for $124 million of the remaining $191 million required to complete the project during FY2006 through FY2009. This proposal has raised a question: Is the Corps authorized to receive appropriations to work on the project? According to the H.Rept. 109-86 the Corps has sufficient authority to receive and expend funds to proceed with project construction. But according to S.Rept. 109-84 , the Senate Appropriations Committee did not fund the Modified Waters Project because it "does not believe sufficient current authorization exists for the Corps to fund the work." The Senate bill also rejects the consolidation of the Everglades projects together in one line-item; instead, it provides $77 million for the Central and Southern Florida project, $13 million for the Kissimmee River project, and $12 million for the Everglades and South Florida project. It also provides $3 million for a Florida Keys Water Quality Improvement project. These projects total $105 million. The conference report also rejects the consolidation of the Everglades projects into one line-item; instead, it provides $77 million for the Central and Southern Florida project, $13 million for the Kissimmee River project, and $12 million for the Everglades and South Florida project. It also provides $2 million for a Florida Keys Water Quality Improvement project. The bill also provides $35 million for the Modified Water Deliveries Projects. These projects total $139 million. In addition to funding for Corps activities through Energy and Water Development appropriations, federal activities in the Everglades are funded through Department of the Interior appropriations bills. For more information on Everglades funding for Interior agencies, see CRS Report RL32893, Interior, Environment, and Related Agencies: FY2006 Appropriations , by [author name scrubbed] et al. Title II: Department of the Interior For the Department of the Interior, the Energy and Water Development bill provides funding for the Central Utah Project Completion Account and the Bureau of Reclamation (BOR). Central Utah Project and Bureau of Reclamation: Budget In Brief The Administration requested $34.4 million for the Central Utah Project (CUP) Completion Account for FY2006, a decrease of $13.6 million (28%) from the FY2005 request and appropriation of roughly $48.0 million. The FY2006 request for the Bureau of Reclamation (BOR) totals $946.7 million in gross current budget authority. This amount is $23.2 million less than enacted for FY2005. The FY2006 request includes a $43.9 million "offset" for the Central Valley Project (CVP) Restoration Fund, and a Hydropower Direct Financing offset of $30.0 million (transferred from the Western Area Power Administration (WAPA) account in Title III), yielding a "net" current authority of $872.8 million for BOR—$51.2 million less than enacted for FY2005. The House and Senate bills, and the conference bill ( P.L. 109-103 ), provided $34.4 million for the CUP Completion Account, the same amount requested. The House bill provided a total of $977.14 million in gross current budget authority for FY2006 for BOR. This amount is $7.22 million more than enacted (gross current budget authority) for FY2005, and $60.4 million more than requested (assuming the $43.9 million is not treated as an offset, as is done by the House). The Senate bill provided a total of $1,046.7 million in gross current budget authority for FY2006 for BOR; the final bill provided $1,030.6 million. BOR'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 Administration requested $801.6 million for the Water and Related Resources Account for FY2006. This amount is $51 million (nearly 6%) less than enacted for FY2005. The decreases appear to be fairly evenly spread among smaller projects, with more significant decreases for some larger projects, such as the Central Arizona Project and the Miscellaneous Project Programs of the Central Valley Project. The House provided $832 million for the Water and Related Resources Account; the Senate $899.1 million. The Senate bill provides more funding for certain rural water supply projects, the Title 16 program, and several projects in southwestern states. The conference bill provided $833.5 million. 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, the Bureau of Reclamation (BOR). Whereas the Army Corps of Engineers built hundreds of flood control and navigation projects, BOR's mission was to develop water supplies, primarily for irrigation to reclaim arid lands in the West. Today, BOR 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. BOR is the largest wholesale supplier of water in the 17 western states and the second-largest hydroelectric power producer in the nation. BOR facilities also provide substantial flood control, recreation, and fish and wildlife benefits. At the same time, operations of BOR facilities are often controversial, particularly for their effect on sensitive fish and wildlife species and conflicts among competing water users. CALFED The Administration requested $35 million for the California Bay-Delta Restoration Account (Bay-Delta, or CALFED) for FY2006. According to BOR, the requested funds will be used for implementation of Stage 1 activities, including the Environmental Water Account, water use efficiency, conveyance, ecosystem restoration, storage studies, and program administration. The House approved $35 million for the CALFED Account and included a breakdown of project funding within the accompanying House Report ( H.Rept. 109-86 ). The Senate bill included $37 million for the CALFED Account; however, the Senate Appropriations Committee Report ( S.Rept. 109-84 ) did not include a breakdown of CALFED project funding. The final bill also included $37 million for CALFED. (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].) Security The Administration requested $50 million for site security for FY2006. This amount is roughly $18 million more than enacted for FY2005. The bulk of the request is for facility operations/security. Funding covers such activities as administration of the security program (e.g. surveillance and law enforcement), anti-terrorism 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].) Beginning in FY2005 and continuing for FY2006, BOR has planned to assign a portion of site security costs to water users for repayment based on existing project cost allocations for operations and maintenance activities. The House Appropriations Committee for FY2006 acknowledged the long-held practice of assigning annual O&M costs to project beneficiaries and estimated the collection of $10 million in site security reimbursement payments. It provided $40 million for site security, which together with the $10 million in expected collections equals the Administration's budget request. The Senate Appropriations Committee provided $50 million for site security, but directed BOR to provide a report to the committee by May 2007 detailing planned reimbursable and nonreimbursable costs. The committee further directed the Commissioner not to begin the reimbursement process until Congress directs him to do so. The conference bill adopted the House position, including $10 million in security reimbursements, but the conferees directed BOR to report on planned reimbursements within 60 days after enactment. Other Issues The final bill also included language (Section 205) authorizing BOR to enter into grants, cooperative agreements, etc., for improvements that will conserve water, increase water use efficiency, or enhance water management through measurement or automation at existing projects. The language essentially authorizes the Bureau's Water 2025 program, a grant-making program for water conservation and innovative water management activities. The General Provisions also include sections directing $95 million to be spent for water flow and restoration efforts related to the Walker River Basin in Nevada (Section 208), and a study authorization for updating benefit, cost, and design information related to Auburn Dam in California (Section 209). Title III: Department of Energy Until this year, the Energy and Water Development bill has included funding for most, but not all, of DOE's programs; some other DOE programs were funded in the Interior and Related Agencies bill. 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. The subcommittee reorganization of the appropriations committees transferred DOE's programs for fossil fuels, energy efficiency, the Strategic Petroleum Reserve, and energy statistics, formerly included in the Interior and Related Agencies appropriations bill, to the Energy and Water Development bill. Including the transferred programs, the total request for Title III for FY2006 was $24.213 billion, compared to $24.419 billion appropriated for FY2005 (excluding the adjustments noted in Table 3 ). The House Appropriations Committee recommended $24.318 billion, and the House approved that amount in passing H.R. 2419 . The Senate version of H.R. 2419 would have appropriated $25.077 billion. The conference bill, P.L. 109-103 , appropriated $24.290 billion. In reporting out H.R. 2419 , the House Appropriations Committee listed the transferred programs in Title III so as to integrate them with the existing programs. In particular, the energy efficiency programs transferred from the Interior bill were combined with the renewable energy programs in the Energy and Water bill into a single account, Energy Efficiency and Renewable Energy Supply R&D. The Senate and the conference followed the same order. In Table 7 below, the Title III programs are listed in the order presented in the House report. Key Policy Issues—Department of Energy DOE is the home of a wide variety of programs with different functions and missions. In the following pages, the programs are described, and major issues identified, in approximately the order in which they appear in the budget tables as listed in Table 7 . Energy Efficiency and Renewable Energy The FY2006 budget request noted that the "Administration's energy efficiency and renewable energy programs have the potential to produce substantial benefits for the nation—both now and in the future—in terms of economic growth, increased energy security and a cleaner environment." In particular, the request aimed to "accelerate" the development of hydrogen-powered fuel cell vehicles. The Hydrogen program aims to facilitate industry commercialization of infrastructure for those vehicles by 2015. Goals for other energy end-use and production technologies generally seek to improve energy efficiency and performance while reducing costs. The Administration's FY2006 request sought $1,200.4 million for DOE's Energy Efficiency and Renewable Energy (EERE) programs, which was $48.5 million, or 4%, less than the FY2005 appropriation. The main increases were for Fuel Cells ($8.7 million), Hydrogen ($5.1 million), and Facilities ($4.9 million). The main cuts were for Industrial programs (-$18.3 million), Biomass (-$16.0 million), Advanced Combustion Vehicles (-$8.6 million), Buildings (-$7.5 million), Small Hydro (-$4.4 million), Clean Cities (-$4.1 million), International Renewables (-$3.4 million), State Energy Program (-$3.2 million), and Tribal Energy (-$1.5 million). Further, at least $75.9 million in congressional earmarks were to be reprogrammed or eliminated, including Hydrogen (-$37.6 million), Biomass (-$35.3), and Intergovernmental (-$3.0 million). See Table 8 below. For FY2006, the House approved $1,236.8 million for EERE programs. This is $36.4 million, or 3%, more than the FY2006 request. Subsequently, the Senate bill included $1,253.8 million, which is $17.0 million more than the House. This included increases of $32 million for Vehicle Technologies, $6 million for Biomass, and $5 million for Weatherization. Also, it included decreases of $15 million for Program Direction, $10 million for Wind, $2.4 million for Industrial Technologies, and $1 million for International Renewables. Compared with the FY2005 appropriation, the Senate approved $4.9 million, or 0.4%, more for EERE programs. This included $7.5 million, or 0.8%, less for R&D and $12.5 million more for grants. Both the House and Senate reports showed about $57 million in congressionally directed projects (CDPs, or "earmarks") for EERE projects. For FY2006, the conference committee approved $1,185.7 million for EERE programs. This is $63.2 million (or 5%) less than the FY2005 appropriation. R&D is reduced by $70.3 million, of which the transfer of Distributed Energy Resources to the new Office of Electricity Delivery and Energy Reliability (OE) accounts for $60.6 million. Other changes in R&D include increases of $17.0 million for Vehicles, $14.9 million for Facilities, and $2.8 million for Buildings; and decreases of $17.9 million for Industrial Programs, $13.5 million for Hydrogen, and $4.5 million for Small Hydro. Also, Weatherization grants increase by $15.3 million, whereas State Energy Grants fall by $8.2 million and Gateway Deployment drops by $9.3 million. Many EERE programs contain a sizable amount of funding for congressionally directed projects. The total amount of EERE earmarks nearly doubles from $85.9 million in FY2005 to $165.6 million in FY2006 (see Table 9 ). Electricity Delivery and Energy Reliability The request included $95.6 million for the former Office of Electricity Transmission and Distribution; the House approved $99.8 million, which was $4.2 million more than the request. Meanwhile, the new Office of Electricity Delivery and Energy Reliability (OE) was formed by merging the former OETD and the Office of Energy Assurance. For OE, the Senate bill would have appropriated $178.1 million, including $60.6 million for the Distributed Energy Program, which is transferred from EERE to OE. Policy Directions in Congressional Reports The FY2006 House Appropriations Committee's report noted that DOE "delayed in meeting legal deadlines for issuing approximately twenty new and updated" appliance efficiency standards. Thus the Committee "strongly urges the Secretary to expedite the process, and requests that the Secretary report to the Committee by December 1, 2005, on plans to accelerate standards rulemakings, including: A timeline for work on issuing the three highest priority standards, with an explanation for the additional delays announced in December 2004; A plan for addressing the backlog of standards rulemakings that have missed legal or internal deadlines, including a list of the affected products and deadlines, timelines for action on each product, and funding requirements to complete each rulemaking; and A description of how the Department will meet the time-frame goals of the 'Process Improvement' rule, or of how the process should be changed so that the Department can meet the goals." Additionally, the FY2006 Senate Appropriations Committee's report gave four administrative directions. First, the committee noted its support for the National Academy of Science's recommendations for hydrogen programs and "requests that the Department integrate their recommendations into the program." Second, the committee "recommends that the Department not expend any funds to support offshore wind energy research until the Federal rules and permitting requirements are implemented through legislation." Third, the committee directed that the Energy Secretary "consider transferring" certain demand-side management activities from the Building Technologies program to the Office of Electricity Delivery and Energy Reliability (OE). At minimum, the committee calls for a report to show that activities under the two programs do not duplicate each other. Fourth, the committee "directs that the six Regional Offices be consolidated into two locations, the Golden Field Office and the National Energy Technology Laboratory," by June 1, 2006. The Conference Committee's report language contains three key policy directives. First, the report contains a list (pp. 143-145, summarized in Table 9 below) of congressionally directed projects and specifies that if these project totals exceed 20% of a subaccount, DOE is given discretion to "fund these projects within other Energy Supply and Conservation subaccounts"(p. 138). The rapid growth in earmarks has raised concerns about staffing at national laboratories, impacts on certain programs, and the possible need to scale back Government Performance and Results Act (GPRA) performance targets for some R&D programs. Second, the report says that full funding is provided for DOE's six regional offices, but acknowledging that the Administration does not plan to request funding for these offices in FY2007, it "directs that the regional offices be consolidated into the Project Management Center at the Golden (Colorado) Field Office and the National Energy Technology Laboratory (West Virginia) not later than September 30, 2006." Third, the report calls for a "report on appliance efficiency standards as directed in the House report." (For more information, see CRS Issue Brief IB10020, Energy Efficiency: Budget, Oil Conservation, and Electricity Conservation Issues ; and CRS Issue Brief IB10041, Renewable Energy: Tax Credit, Budget, and Electricity Production Issues , both by [author name scrubbed].) See also the DOE website at http://www.eere.energy.gov/ . Nuclear Energy For nuclear energy research and development—including advanced reactors, fuel cycle technology, nuclear hydrogen production, and infrastructure support— P.L. 109-103 provides $557.6 million, $57.6 million above the FY2005 appropriation. Of that funding, $137.4 million would come from the Other Defense Activities and Naval Reactors appropriations accounts, reducing the nuclear energy program's net appropriation in the Energy Supply and Conservation account to $420.2 million. The Administration had requested $513.8 million for FY2006, of which $123.9 million was from Other Defense Activities. The House raised the Administration's total request slightly to $515.1 million, $5.2 million above the FY2005 appropriation. An additional reimbursement of $13.5 million from the Naval Reactors account would have left a net appropriation of $377.7 million under Energy Supply and Conservation. Much of the defense and naval reactors reimbursement covers defense-related management and security at the Idaho National Laboratory (INL), which has been transferred to the nuclear energy program from DOE's environmental management program. The nuclear energy program is run by DOE's Office of Nuclear Energy, Science, and Technology. The House shifted an $18.7 million uranium disposal program from the nuclear energy office to the National Nuclear Security Administration, a move agreed to by the conferees. An amendment adopted at the House Appropriations Committee markup transferred $10 million from the "Nuclear Power 2010" program (discussed below) to the "weatherization" assistance program. The Senate bill included a $60 million boost from the Administration request, to a total of $573.8 million. The panel approved the proposed $123.9 million under Other Defense Activities, leaving $449.9 million for Nuclear Energy under Energy Supply and Conservation. The final appropriation of $557.6 million includes $10 million in the Advanced Fuel Cycle Initiative to accelerate design work on an engineering-scale demonstration of spent nuclear fuel reprocessing technology. "The benefits of nuclear power as an emissions free, reliable, and affordable source of energy are an essential element in the Nation's energy and environmental future," according to DOE's budget justification. 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. Nuclear Power 2010 President Bush's specific mention of "safe, clean nuclear energy" in his 2005 State of the Union Address indicated the 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 are 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 program is intended to provide assistance for advanced versions of existing commercial nuclear plants that could be ordered within the next few years. The Nuclear Power 2010 Program is helping three utilities seek NRC approval for potential nuclear reactor sites in Illinois, Mississippi, and Virginia. In addition, three industry consortia in 2004 applied for a total of $650 million over the next several years to design and license new nuclear power plants and conduct a feasibility study. DOE awarded an initial $13 million to the consortia in 2004. The FY2006 budget request included $56.0 million for the program, a 12.9% boost over FY2005. After the $10 million transfer adopted during Committee markup, the House approved $46.0 million for Nuclear Power 2010. The Senate bill includes a $20 million increase from the budget request, to $76.0 million. The conference agreement provides $66.0 million. The nuclear license applications under the Nuclear Power 2010 program would test the "one step" licensing process established by the Energy Policy Act of 1992 ( P.L. 102-486 ). Even if the licenses are granted by the Nuclear Regulatory Commission (NRC), the industry consortia funded by DOE have not committed to building new reactors. Loan guarantees and tax credits to encourage construction of new reactors are included in the Energy Policy Act of 2005 ( P.L. 109-58 ). 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 $45.0 million was requested for FY2006, about 12.5% above FY2005. The House approved the same amount, and the Senate bill included a $15.0 million increase from the request, to $60 million. The conference agreement provides $55 million, of which $40 million is for the Next Generation Nuclear Plant discussed below. The Generation IV program is focusing on six advanced designs that could be commercially available around 2020-2030: two gas-cooled, one water-cooled, two liquid-metal-cooled, and one molten-salt concept. Some of these reactors would use plutonium recovered through reprocessing of spent nuclear fuel. The Administration's May 2001 National Energy Policy report contends that plutonium recovery could reduce the long-term environmental impact of nuclear waste disposal and increase domestic energy supplies. However, opponents contend that the separation of plutonium from spent fuel poses unacceptable environmental risks and, because of plutonium's potential use in nuclear bombs, undermines U.S. policy on nuclear weapons proliferation. Advanced Fuel Cycle Initiative The development of plutonium-fueled reactors in the Generation IV program is closely related to the nuclear energy program's Advanced Fuel Cycle Initiative (AFCI), for which the Administration requested $70.0 million—3.8% above the FY2005 level. According to the budget justification, AFCI will 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 re-use in a nuclear reactor or for transmutation in a particle accelerator. The program includes longstanding DOE work on electrometallurgical treatment of spent fuel from the Experimental Breeder Reactor II (EBR-II) at INL. The House added $5.5 million to the AFCI budget request "to accelerate the development and selection of a separations technology no later than the end of FY2007 that can address the current inventories of commercial spent nuclear fuel, and prepare an integrated spent nuclear fuel recycling plan," according to the Appropriations Committee report. The Senate voted to add $15 million to the budget request, with $10 million for design of an Engineering Scale Demonstration of Uranium Extraction Technology (UREX) being developed by DOE's Savannah River Technology Center. The conference agreement provides $80 million for AFCI, including $10 million for the engineering-scale demonstration project. DOE is directed to submit a "spent nuclear fuel recycling technology plan" to the appropriations committees by next March 1 and select a preferred reprocessing technology by the end of FY2007. Nuclear Hydrogen Initiative In support of President Bush's program to develop hydrogen-fueled vehicles, DOE requested $20.0 million in FY2006 for the Nuclear Hydrogen Initiative, an increase of 124% from the FY2005 level. The House approved the same amount, and the Senate Appropriations Committee recommended $30.0 million. The conferees approved $25.0 million. According to DOE's FY2005 budget justification, "preliminary estimates ... indicate that hydrogen produced using nuclear-driven thermochemical or high-temperature electrolysis processes would be only slightly more expensive than gasoline" and result in far less air pollution. An advanced reactor that would demonstrate co-production of hydrogen and electricity—the Next Generation Nuclear Plant (NGNP)—was allocated $25.0 million from DOE's Generation IV program by the FY2005 omnibus appropriations conference report. The Senate bill directed that $40 million of the FY2006 Generation IV allocation be used for the NGNP program. In particular, the Senate Appropriations Committee urged that DOE complete a design competition for the NGNP by the end of FY2006 so that the reactor could begin operating at INL by 2017. As noted above, the conferees agreed with the Senate's $40 million allotment for NGNP from the Generation IV program. Other Reactor Research DOE again requested no new funding specifically for the Nuclear Energy Research Initiative (NERI), which provides grants for research on innovative nuclear energy technologies. According to the DOE budget justification, NERI projects will instead be pursued at the discretion of individual nuclear R&D programs. NERI received an appropriation of $2.5 million for FY2005. New funding also was not requested for the Nuclear Energy Plant Optimization program (NEPO), which received $2.5 million in FY2005. NEPO supports cost-shared research by the nuclear power industry on ways to improve the productivity of existing nuclear plants. The House agreed to eliminate the funding for both programs. The Senate bill also provided no separate funding for NERI and NEPO, but it allocated specific funding for NERI projects within other nuclear energy programs. The programs are not specifically mentioned in the conference report. Fossil Energy Research, Development, and Demonstration The Bush Administration's FY2006 budget request of $491.5 million for fossil energy research and development was 14.1% less than the amount enacted for FY2005 ($571.9 million) and 25.4% less than the enacted amount for FY2004 ($659 million). Major funding categories and amounts included Coal and Other Power Systems ($351.0 million), Natural Gas Technologies ($10.0 million), Oil Technology ($10.0 million), and Program Direction and Management Support ($98.0 million). The conference agreement supported funding Fossil Energy programs at $598 million, 4.5% greater than FY2005 and 22% more than the Administration's request. Funding was higher in all major funding categories: Coal and Other Power systems, $380 million; Natural Gas Technologies, $33 million; Oil Technology, $32 million; and Program Direction and Management Support, $107 million. The use of prior-year balances ($20 million) in the House and Senate reports was rescinded by the conference agreement. DOE proposed to terminate both the Natural Gas and Oil Technology programs based on a Program Assessment Rating Tool review which rated both programs ineffective. Congressional support of Natural Gas and Oil Technology programs has been significantly higher than the Bush Administration's request in previous years. The House would direct the Administration to report to the House and Senate appropriation committees on a strategic plan that will better articulate its investment strategy and the successes of the natural gas and petroleum technology programs. The conference agreement does not support the termination of either program. The Administration requested $68 million for its Clean Coal Power Initiative (CCPI), which included $18 million for FutureGen, a project to demonstrate co-production of electricity and hydrogen from coal with no emissions. According to DOE's budget justification, CCPI is a "cost-shared program between the government and industry to rapidly demonstrate emerging technologies in coal-based power generation and to accelerate their commercialization." Nearly $400 million has been appropriated since FY2002. CCPI is along the lines of the Clean Coal Technology Program (CCTP), which began in the late 1980s. It has completed most of its projects and has been subject to rescissions and deferrals since the mid-1990s. CCTP eventually is to be phased out. The conference supported funding CCPI and FutureGen at the levels requested by the Administration. However, while both agree that there is an unused previously appropriated balance of $257 million from the Clean Coal Technology Program, the Administration requested to rescind the money and incorporate the funds into the fossil fuel account for FutureGen activities as an advanced appropriation to be used in FY2007 and beyond. Instead, the conference agreement supports deferring the $257 million, while acknowledging that the funds will be used for the FutureGen program in fiscal years 2007 and beyond (see FutureGen funding schedule in Table 10 below). The conference report also acknowledges that the Administration's request for CCPI was "woefully short" of its stated $200 million annual commitment. The Senate version would have supported $100 million for CCPI Programs in FY2006. The Administration's goal was to increase Coal R&D, other than CCPI and FutureGen, by 5.9% to $218 million, whereas nearly all other fossil fuel programs were slated to be cut. Within the Coal R&D, the Administration requested $56.4 million for gasification research in FY2006. The conference funded Coal R&D (other than CCPI and Future Gen) at $250 million and supported the Administration's request for gasification research. This level of increase indicates a greater commitment by the Administration and Congress to the integrated gasification combined cycle (IGCC) technology aimed at commercialization. There is sustained investment in IGCC because of its potential benefits from reduced NOx, SOx, mercury, and fine particulate matter emissions. Moreover, lower CO2 emissions through greater plant efficiencies and/or potential sequestration could be substantial. Funding for DOE's Carbon Sequestration program will increase significantly, from $45.4 million in FY2005 to $67 million in FY2006—nearly the same level as the Administration's request. The House would have funded the Carbon Sequestration program at $50 million, whereas the Senate bill supported the Carbon Sequestration Program at $74 million. The Senate bill included spending for Plant and Equipment ($23 million, primarily for infrastructure improvements at the National Energy Technology Lab) and Congressionally Directed Projects ($25.1 million), neither included in the House-passed bill or the Administration request. The conference agreement supported $20 million for Plant and Equipment. In its report on the FY2005 funding bill, the House Appropriations Committee expressed disappointment with the emphasis of the Administration's request on funding new, long-term energy research efforts, such as FutureGen, at the expense of ongoing energy programs that could yield energy savings and emissions reductions over the next decade. The Committee recommended restoring many of the proposed reductions for research to improve fossil energy technologies, contending that it would be "fiscally irresponsible" to discontinue research in which major investments have been made before that research is concluded. Strategic Petroleum Reserve The Strategic Petroleum Reserve (SPR), authorized by the Energy Policy and Conservation Act ( P.L. 94-163 ) in late 1975, consists of caverns formed out of naturally occurring salt domes in Louisiana and Texas in which roughly 685 million barrels of crude oil are stored. The purpose of the SPR is to provide an emergency source of crude oil which 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. NHOR houses 2 million barrels of home heating oil in above-ground facilities in Connecticut, New Jersey, and Rhode Island. In mid-November 2001, President Bush ordered that the SPR be filled to capacity (then 700 million barrels) using royalty-in-kind (RIK) oil. This is oil turned over to the federal government as payment for production from federal leases. Acquiring oil for the SPR by RIK avoids the necessity for Congress to make outlays to finance direct purchase of oil; however, it also means a loss of revenues to the Treasury in so far as the royalties are paid in wet barrels rather than in cash. Deliveries of RIK oil began in the spring of 2002 and ended in August 2005 when the SPR reached 700 million barrels. Some policymakers objected to RIK fill, arguing that this oil should have instead be released to tight markets. The Administration argued that the volumes involved, varying between 65,000-200,000 barrels per day of deliveries to the SPR, were too small to have any discernible effect on crude and product prices. The current program costs for the SPR are almost exclusively dedicated to maintaining SPR facilities and keeping the SPR in readiness should it be needed. Congress agreed to a funding level of $174.6 million for the program in FY2005, including $4.9 million for the NHOR. The Administration request for FY2006 for the SPR was $166.0 million, a reduction of nearly $4 million from the FY2005 appropriation. No new money was requested for the NHOR in FY2006, owing to the use of prior-year balances of $5.3 million. Both the House and Senate bills funded the SPR at the requested level, and this level was adopted by the conferees in their final bill. For more information, see CRS Report RL33341, The Strategic Petroleum Reserve: History, Perspectives, and Issues , by [author name scrubbed]. Science The DOE Office of Science conducts basic research in six program areas: basic energy sciences, high-energy physics, biological and environmental research, nuclear physics, 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. For FY2006, DOE requested $3.463 billion for Science, a decrease of 4% from the FY2005 appropriation of $3.600 billion. The House provided $3.666 billion; the Senate, $3.703 billion; and the final bill, $3.633 billion. The final figure is $170 million more than the request and an increase of 1% from FY2005. The requested funding for the largest program, basic energy sciences, was $1.146 billion, a 4% increase above FY2005. Construction of the Spallation Neutron Source is expected to be completed in the third quarter of FY2006, so the request for this facility included less funding for construction but for the first time included the cost of operations. Operations will also begin at four of the five new Nanoscale Science Research Centers. (The fifth is still under construction and is expected to begin operations in FY2008.) Some have expressed concern that operations funding for these facilities will result in reduced grant funding for other research in the basic energy sciences program. The House provided an increase of $27 million more than the request, and the Senate provided an increase of $95 million, but the final bill provided the requested amount. The request for fusion energy sciences was $291 million, a 6% increase. In 2003, the United States rejoined negotiations on construction of the International Thermonuclear Experimental Reactor (ITER), a fusion facility whose other participants include China, the European Union, Japan, Russia, and South Korea. The requested FY2006 budget for fusion energy sciences included $50 million related to ITER and estimated that the total U.S. share of the project will be $1.1 billion through FY2013. When the FY2006 budget was released, the international partners remained split on where ITER should be located, a decision that was originally expected in November 2003. Agreement on a site in France was officially announced on June 28, 2005, which was after the House passed H.R. 2419 and after the Senate committee reported it, but three days before the bill was passed by the Senate. The House provided an increase of $6 million over the request, and directed that this $6 million plus $29 million of the funding requested for ITER should be devoted to U.S.-based fusion research. As in previous years, the House report directed DOE to fund ITER out of additional resources, not through reductions in the domestic program, and expressed its preparedness to eliminate future U.S. funding for ITER if this is not done. A floor amendment by Representative Boehlert, chairman of the House Science Committee, added a provision (Sec. 504) that would have delayed an international agreement on U.S. funding for ITER until March 1, 2006. The Senate bill included the requested amount for fusion energy sciences, but reduced ITER funding by $28 million to pay for increased facility operating time (see below). The conference agreement provided the requested amount, included language similar to that of the House report regarding funding ITER out of additional resources, and called for a study of the program by the Government Accountability Office, but it did not include the language of the Boehlert amendment. During House debate on the conference report, Representative Boehlert stated, "I will do everything in my power to kill the ITER project if there is not an agreement by March that the domestic fusion program has to be scaled back to pay for ITER." All four of the other Office of Science programs were reduced in the FY2006 request. The request for high-energy physics was $714 million, down 3%; biological and environmental research was $456 million, down 22%; nuclear physics was $371 million, down 8%; advanced scientific computing research was $207 million, down 11%. Most of the decrease for biological and environmental research corresponded to the completion of congressionally directed one-time projects. The House restored high-energy physics to its FY2005 level of $736 million; increased biological and environmental research by $70 million, including $35 million for "congressionally directed university and hospital earmarks"; restored nuclear physics to $408 million, slightly above the FY2005 level; and increased advanced scientific computing research by $39 million to support development of a leadership-class supercomputer. The Senate bill increased high-energy physics and nuclear physics by $3 million and $49 million respectively to increase facility operating time (see below); increased biological and environmental research by $48 million, mostly to accelerate the Genomes to Life program (a total of $51 million for 48 congressionally directed projects would come from within available funds); and provided the requested amount for advanced scientific computing research. The conference agreement provided $724 million for high-energy physics; $586 million for biological and environmental research, including $130 million for 161 congressionally directed projects (which superseded the ones in the House and Senate reports); $371 million for nuclear physics; and $237 million for advanced scientific computing research. The FY2005 appropriations conference report ( H.Rept. 108-792 ) encouraged DOE "to request sufficient funds for the Office of Science in FY2006 to operate user facilities for as much time as possible." For the facilities funded by four of the six Science programs, the FY2006 budget request included "a reduction in operating hours due to funding limitations." The major facilities of the basic energy sciences program will be capable of operating for users for a total of 32,200 hours in FY2006, but the budget request stated that only a total of 28,800 hours are scheduled. The Tevatron complex at Fermilab, funded by the high-energy physics program, will be capable of operating for 4,800 hours, but is scheduled for only 4,560. The four facilities of the nuclear physics program will be capable of operating for a total of 22,765 hours, but are scheduled for only a total of 14,695. The three fusion energy sciences facilities will be capable of operating for a total of 3,000 hours, but are scheduled for only 680. In each of these cases, the difference between optimal hours and scheduled hours was less in FY2005 than was requested in the FY2006 budget. The House increases for basic energy sciences, fusion energy sciences, and nuclear physics included $20 million, $14 million, and $32 million respectively for maintaining facility operating time at FY2005 levels. The Senate bill provided a total of $100 million to restore operating time to optimal levels: $20 million in basic energy sciences, $28 million in fusion energy sciences, $49 million in nuclear physics, and $3 million in high-energy physics. The conference agreement did not mention the operating time issue. 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. OCRWM's funding comes from two appropriations accounts: the Nuclear Waste Disposal account, for which DOE requested $300 million, and Defense Nuclear Waste Disposal, with a request of $351.4 million. Appropriations under the Nuclear Waste Disposal account come from the Nuclear Waste Fund, which holds disposal fees paid by nuclear utilities. OCRWM's total budget request of $651.4 million was about 14% above the FY2005 level but only about half the amount that the FY2005 budget justification said would have been needed to open the Yucca Mountain repository by DOE's previous goal of 2010. Upon releasing the budget request, program officials announced that the repository's opening would be delayed at least two years and that a Yucca Mountain license application to the Nuclear Regulatory Commission (NRC) would be delayed as well. Because of those delays, the House raised the waste program's funding by $10 million, to $661.4 million, so that OCRWM could begin moving spent fuel from nuclear reactor sites to "centralized interim storage at one or more DOE sites within FY2006," according to the House Appropriations Committee report. Possible sites named by the committee include Hanford, WA; Idaho National Laboratory; and Savannah River, SC. Members from states named as potential nuclear waste storage sites raised concerns about the report language during the floor debate. Representative Hobson, chairman of the Subcommittee on Energy and Water Development, assured Representative Otter that the report language would not affect a DOE agreement with the State of Idaho prohibiting commercial spent fuel storage at Idaho National Laboratory. The Chairman also entered into a colloquy with Representative Spratt to clarify that the report language would not modify provisions in the Nuclear Waste Policy Act that limit DOE interim storage facilities. The Senate bill provided $300 million under Nuclear Waste Disposal and $277 million under Defense Nuclear Waste Disposal, for a total of $577 million—nearly the same as the previous two fiscal years. The Senate panel's report did not include any language on interim storage of spent fuel, and several Senators reportedly criticized the House report language during committee markup. The conference agreement provides $500 million for nuclear waste disposal—$150 million from the Nuclear Waste Fund and $350 million from the Defense Nuclear Waste Disposal Account. Of the defense waste funding, $50 million is provided for DOE to develop a spent nuclear fuel recycling plan, in conjunction with the technology development plan required under the Advanced Fuel Cycle Initiative. The detailed program plan is to be submitted by March 31, 2006, and a "site selection competition" for an integrated reprocessing facility is to begin by June 30, 2006. A reprocessing site is to be selected in FY2007 and construction to begin in FY2010. "The site competition should not be limited to DOE sites, but should be open to a wide range of other possible federal and nonfederal sites on a strictly voluntary basis," according to the conference report. Applicants for a reprocessing facility can receive up to $5 million per site, up to a total of $20 million, to prepare detailed proposals. For FY2005, the Administration's budget request for the nuclear waste program had assumed that Congress would enact legislation to offset most of the program's spending with revenue from the waste fees paid by nuclear power plants. As a result, the FY2005 net appropriation request was only $131 million, significantly less than the previous year's appropriation. However, Congress did not approve the funding offset proposal, and congressional appropriators then had to work to find additional appropriations for the nuclear waste program to prevent a large budget cut. For FY2006, the Administration again proposed that nuclear waste funding be offset by fees, but the budget request did not assume the proposal would be enacted and therefore included full funding through appropriations. The Nuclear Waste Policy Act of 1982 (NWPA, P.L. 97-425 ), as amended, names Yucca Mountain as the sole candidate site for a national geologic repository. Congress passed an approval resolution in July 2000 ( H.J.Res. 87 , P.L. 107-200 ) that authorized the Yucca Mountain project to proceed to the licensing phase. If the repository opened in 2012 (which currently appears unlikely), DOE would begin taking waste from plant sites nearly 15 years later than the Nuclear Waste Policy Act deadline of January 31, 1998. Nuclear utilities and state utility regulators, upset over DOE's failure to meet the 1998 disposal 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. The nation's largest nuclear utility, Exelon Corporation, reached a breach-of-contract settlement with the federal government in August 2004 that may total $600 million if DOE does not begin taking spent fuel before 2015. Further delays in the Yucca Mountain program could result from a July 2004 court decision that overturned a key aspect of the Environmental Protection Agency's (EPA's) regulations for the repository. A three-judge panel of the U.S. Court of Appeals for the District of Columbia Circuit ruled that EPA's 10,000-year compliance period was too short, but it rejected several other challenges to the standards. More controversy erupted in March 2005 with the release of e-mail messages from Yucca Mountain scientists that indicated that some of their data and documentation may have been fabricated. The House Appropriations Committee report cited all those problems as reasons for establishing a DOE interim storage program. (For more information, see CRS Report RL33461, Civilian Nuclear Waste Disposal , by [author name scrubbed].) 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. The three main elements of stockpile stewardship, described next, are Directed Stockpile Work (DSW), Campaigns, and Readiness in Technical Base and Facilities (RTBF). Table 11 presents funding for these elements. 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 FY2006 request includes data from NNSA's Future Years Nuclear Security Program (FYNSP), which projects the budget and components through FY2010 (see Table 12 ). 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. The FY2006 DSW request would support life extension programs for three nuclear warheads: B61 (gravity bomb), W76 (for Trident I and II submarine-launched ballistic missiles), and W80 (for cruise missiles). It would fund surveillance and maintenance for nine warhead types, some work on retired warheads, and some management and technology work not linked to a specific warhead. The FY2005 Consolidated Appropriations Act reduced DSW to $1,346.1 million, from $1,406.4 million requested. Probably the most noticed provisions were elimination of the $27.6 million request for the Robust Nuclear Earth Penetrator (RNEP), and transfer of the $9.0 million request for the Advanced Concepts Initiative (ACI) to a new program, Reliable Replacement Warhead. Congress debated RNEP and ACI in the FY2004 and FY2005 budget cycles; in addition, the Senate debated RNEP in the FY2006 budget cycle. RNEP is a study of the cost and feasibility of modifying existing nuclear bombs to enable them to penetrate into the ground before detonating, thereby magnifying their effect on a buried target. (See CRS Report RL32130, Nuclear Weapon Initiatives: Low-Yield R&D, Advanced Concepts, Earth Penetrators, Test Readiness , by Jonathan Medalia, and CRS Report RL32347, " Bunker Busters " : Robust Nuclear Earth Penetrator Issues, FY2005-FY2007 , by Jonathan Medalia.) RNEP's supporters argue that it is needed to attack hard and deeply buried targets (such as leadership bunkers or chemical weapons production facilities) in countries of concern, thereby deterring or defeating such nations; critics reply that RNEP would lower the threshold for use of nuclear weapons and prompt other nations to develop nuclear weapons to deter U.S. attack. Congressional concern about RNEP arose in part because the FY2005 NNSA request projected $484.7 million for the program for FY2005-FY2009. While RNEP was a study, this figure was provided in response to a congressional requirement that five-year costs be included in the budget request. The figure represented a projection based on experience with other programs, DOE indicated. It was not possible to provide a more precise number until the cost and feasibility study was completed. Further, the figure projected the cost based as if the program were to progress beyond a study into development, although moving the program beyond the study stage would have required an Administration decision and congressional approval. For FY2006, NNSA requests $4.0 million for the RNEP study, projects another $14.0 million for FY2007, and then projects no further funds. (The Department of Defense (DOD) budget includes an additional $4.5 million for RNEP for FY2006, mainly for linking RNEP to the B-2 bomber. The Energy and Water bill does not deal with DOD programs, so it does not address DOD's RNEP request.) NNSA funds would be used to complete the study. H.R. 2419 as passed by the House deletes all NNSA funds for RNEP. The bill as reported by the Senate Appropriations Committee recommends $4.0 million. On June 30, the Senate rejected an amendment by Senator Feinstein to delete all RNEP funds from the Energy and Water bill, 43-53, and subsequently passed the bill, 92-3. In late October, while the energy and water conference was underway, NNSA dropped its request for RNEP funding. In response, the conference report provides no funds for that program. ACI was controversial in the FY2005 budget cycle. Critics claimed that its purpose was to develop a low-yield "mini-nuke" that would make nuclear weapons more usable; supporters responded that NNSA was not working on a mini-nuke and that ACI would help develop and maintain weapons design expertise. The Administration requested $9.0 million for ACI for FY2005. The omnibus bill provided no funds for ACI; instead, the conference report stated that "the same amount is made available for the Reliable Replacement Warhead [RRW] program to improve the reliability, longevity, and certifiability of existing weapons and their components." The Administration requested no funds for ACI for FY2006. NNSA requested $9.4 million for RRW for FY2006. It stated that the program "is to demonstrate the feasibility of developing reliable replacement components that are producible and certifiable for the existing stockpile" and to initially provide replacement pits (first-stage cores) "that can be certified without Underground Tests." It projected these amounts: FY2007, $14.8 million; FY2008, $14.4 million; FY2009, $29.6 million; and FY2010, $29.0 million. The out-year figures simply transfer the funds planned for ACI to RRW; the short time, less than two months, between enactment of the FY2005 Consolidated Appropriations Act and the submission of the FY2006 budget request did not allow preparation of a detailed five-year budget for RRW. H.R. 2419 as passed by the House included $25.0 million for RRW; the bill as passed by the Senate included $25.4 million. The conference bill provides $25.0 million. (See CRS Report RL32929, The Reliable Replacement Warhead Program: Background and Current Developments , by Jonathan Medalia.) Although RRW is a small program in relation to the total NNSA budget, the House Appropriations Committee, in its report, views it as enabling many large changes: transitioning the nuclear weapons complex "from a large, expensive Cold War relic into a smaller, more efficient modern complex;" allowing "long-term savings by phasing out the multiple redundant Cold War warhead designs that require maintaining multiple obsolete production technologies;" "obviat[ing] any reason to move to a provocative 18-month test readiness posture" by increasing warhead reliability and reducing the need to test; permitting a reduction in Advanced Simulation and Computing funds by redirecting them to current warhead maintenance programs pending initiation of RRW; and supporting other changes and budget decisions as well. The Senate Appropriations Committee's report ( S.Rept. 109-84 ) states that the recommended funding increase for RRW is "to accelerate the planning, development and design for a comprehensive RRW strategy that improves the reliability, longevity and certifiability of existing weapons and their components." The conference report emphasizes that RRW design work "must stay within the military requirements of the existing deployed stockpile" and any design "must stay within the design parameters validated by past nuclear tests." Other goals that the conference report sets for RRW are improving manufacturing practices, reducing cost, and increasing performance margins to support a reduction in stockpile size. In other actions on DSW, H.R. 2419 as passed by the House includes a Sustainable Stockpile Initiative that would include an RRW implementation plan, nuclear weapons complex reconfiguration, consolidation of fissile material that might be used in weapons, and accelerated warhead dismantlement. The bill raises funding for dismantlement by $75.0 million, to $110.3 million. The bill as passed by the Senate provides $15.0 million for dismantlement. The conference bill provides $60.0 million for dismantlement under DSW. 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." For FY2006, there are six campaigns, each of which has multiple components: Science; Engineering; Inertial Confinement Fusion and High Yield; Advanced Simulation and Computing; Pit Manufacturing and Certification; and Readiness. The FY2005 omnibus bill contained $2,304.8 million for Campaigns, vs. $2,393.8 million requested. Conferees expressed concern over a slip in the target date, from 2010 to 2014, for achieving ignition with the National Ignition Facility (NIF; see below), and directed several studies on this topic. Conferees also focused on the Pit Manufacturing and Certification Campaign, which is working to produce "pits" (the fissile core of the primary stage of nuclear weapons) and to certify them for use in the stockpile. Congress provided $130.9 million, vs. $132.0 million requested, for W88 pit manufacturing. Congress reduced funds for the Modern Pit Facility (MPF), a proposed manufacturing facility to become operational around 2021, from $29.8 million requested to $6.9 million, and barred use of funds to select a construction site for MPF in FY2005. For FY2006, NNSA requested $2,080.4 million for Campaigns, vs. $2,304.8 million appropriated for FY2005. Many items within Campaigns have significance for policy decisions. As one example, the Science Campaign's goals include improving the ability to assess warhead performance without nuclear testing, improving readiness to conduct tests should the need arise, and maintaining the scientific infrastructure of the nuclear weapons laboratories. H.R. 2419 as passed by the House reduces funds for Campaigns; the bill as passed by the Senate provides a slight net increase. The conference bill contains $2,144.6 million. H.R. 2419 as passed by the House eliminates MPF funds until "capacity requirements tied to the long-term stockpile size are determined" and "until the long-term strategy for the physical infrastructure of the weapons complex has incorporated the Reliable Replacement Warhead strategy." The bill as passed by the Senate provides the amount requested for MPF, $7.7 million. The conference bill provides no funds for MPF. Conferees directed NNSA to focus on improving manufacturing capability at a facility (TA-55) at Los Alamos National Laboratory, currently used to produce pits on a small scale. The test readiness posture—the time between a presidential order to resume testing and the conduct of the test—has been controversial. In FY2004, the defense authorization conference report called for a posture of at most 18 months, while the energy and water conference report called for NNSA "to focus on restoring a rigorous test readiness program that is capable of meeting the current 24-month requirement before requesting significant additional funds to pursue a more aggressive goal of an 18-month readiness posture." The FY2005 omnibus conference report did not address the topic, and for FY2006 NNSA requested $25.0 million for Test Readiness, part of the Science Campaign, "to continue improving the state of readiness to reach an 18-month test-readiness posture in FY2006." H.R. 2419 as passed by the House reduces Test Readiness from $25.0 million to $15.0 million. The committee continues to oppose the 18-month readiness posture and added RRW to its rationale for that position. The bill as passed by the Senate provides $25.0 million for test readiness. The conference bill provides $20.0 million for test readiness, a reduction of $5.0 million; at the same time, it increases by $5.0 million the funds for subcritical experiments (experiments using high explosives and fissile material configured so as not to support a nuclear chain reaction), which are held only at Nevada Test Site. The Engineering Campaign includes the Enhanced Surveillance Program (ESP), for which NNSA requests $96.2 million for FY2006. This program seeks to develop "predictive capabilities for early identification and assessment of stockpile aging concerns ... to give NNSA a firm basis for determining when systems must be refurbished." It is of interest to Congress because it is conducting experiments to determine the service life of pits based on plutonium aging characteristics; the result will bear on a decision to build MPF. H.R. 2419 as passed by the House reduces ESP to $76.0 million. The bill as passed by the Senate provides $111.2 million for ESP. "Funding increases will enable the development and implementation of these new [surveillance] techniques, and improving their readiness for RRW and the sustainable stockpile." The conference bill provides $100.2 million for ESP. According to NNSA, the Inertial Confinement Fusion and High Yield Campaign "is to develop laboratory capabilities to create and measure extreme conditions ... approaching those in a nuclear explosion, and conduct weapons-related research in these environments." A key part of this campaign is the National Ignition Facility (NIF), a partly completed facility at Lawrence Livermore National Laboratory that is already the world's most powerful laser. For FY2006, NNSA requests $141.9 million for NIF construction, and H.R. 2419 as passed by the House contains that sum. The Senate Appropriations Committee notes that the planned five-year budget projection for Weapons Activities in the FY2006 request is reduced by $3.0 billion compared to the FY2005 request, and directs that no funds be expended on NIF construction "in order to focus on supporting a comprehensive stewardship program." The conference bill provides the requested amount for NIF construction. Readiness in Technical Base and Facilities (RTBF) This program provides infrastructure and operations at the nuclear weapons complex sites. The FY2005 omnibus bill provided $1,657.1 million for RTBF, vs. $1,474.5 million requested. RTBF has six subprograms. By far the largest is Operations of Facilities ($1,112.6 million appropriated for FY2005, $1,160.8 million requested for FY2006). Others include Program Readiness, which supports activities occurring at multiple sites or in multiple programs ($105.4 million appropriated for FY2005, $105.7 million requested for FY2006), and Material Recycle and Recovery, which recovers plutonium, enriched uranium, and tritium from weapons production and disassembly ($86.3 million appropriated for FY2005, $72.7 million requested for FY2006). Construction is a separate category within RTBF; the FY2005 appropriation was $275.1 million, and the FY2006 request is $243.0 million. H.R. 2419 as passed by the House reduces RTBF to $1,610.9 million from an FY2006 request of $1,631.4 million. It increases Operations of Facilities by $44.0 million, adding funds to maintain the Y-12 and Pantex Plants. The bill funds most other RTBF elements at the level requested. A key exception was eliminating $55.0 million requested for a Chemistry and Metallurgy Research Facility Replacement (CMRR) at Los Alamos to delay construction until DOE "determines the long-term plan for developing the responsive infrastructure required to maintain the nation's existing nuclear stockpile and support replacement production anticipated for the RRW initiative." The bill as passed by the Senate provides $1,696.3 million for RTBF. The largest change is an increase of $39.7 million in Operations of Facilities. The Senate bill provides $65.0 million for CMRR. The conference bill provides $1,647.9 million for RTBF, including $55.0 million for CMRR. Other Programs Weapons Activities includes four smaller programs in addition to DSW, Campaigns, and RTBF. Secure Transportation Asset provides for the transport of nuclear weapons, components, and materials safely and securely. It includes special vehicles used for this purpose, communications and other supporting infrastructure, and threat response. The FY2005 appropriation was $199.7 million, and the FY2006 request is $212.1 million. H.R. 2419 as passed by the House and by the Senate provides the amount requested, as does the conference bill. Nuclear Weapons Incident Response provides for use of DOE assets to manage and respond to a nuclear or radiological emergency within DOE, in the United States, or abroad. The FY2005 appropriation was $98.4 million, and the FY2006 request is $118.8 million. H.R. 2419 as passed by the House and by the Senate provides the amount requested, as does the conference bill. Facilities and Infrastructure Recapitalization Program provides for deferred maintenance and infrastructure improvements for the nuclear weapons complex. In contrast, RTBF "ensure[s] that facilities necessary for immediate programmatic workload activities are maintained sufficiently," according to NNSA. The FY2005 appropriation was $313.7 million, and the FY2006 request is $283.5 million. H.R. 2419 as passed by the House provides $250.5 million. The bill as passed by the Senate provides $261.8 million. The conference bill provides $150.9 million, with no explanation of the reduction. Safeguards and Security provides operations and maintenance funds for physical and cyber security, and related construction, to protect NNSA personnel and assets from terrorist and other threats. Safeguards and Security is a major concern for NNSA. Ambassador Linton Brooks, Administrator of NNSA, stated to the Senate Armed Services Committee on April 4, 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." The FY2005 appropriation was $751.6 million. The FY2006 request was $740.5 million. H.R. 2419 as passed by the House provided $825.5 million, the bill as passed by the Senate provided the requested amount, and the conference bill provides $805.5 million. 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 FY2005 was $1.422 billion. For FY2006, the Administration requested $1.637 billion. H.R. 2419 as passed by the House contained $1.501 billion. The Senate version of H.R. 2419 would have appropriated $1.729 billion. P.L. 109-103 appropriated $1.631 billion. In May 2004, DOE consolidated a number of programs—those aimed at repatriating fresh and spent fuel containing highly enriched uranium (HEU) from research reactors around the world supplied by the United States and Russia, and converting reactors that use HEU fuel to operate on low-enriched uranium—into a single Global Threat Reduction Initiative (GTRI) within the Defense Nuclear Nonproliferation Program. Most of the funding for GTRI was redirected from Nonproliferation programs, but some came from Defense Environmental Management programs. DOE said that the target for completion of the program was 2010, and that it would be funded at about $450 million. Funding for GTRI in FY2005 was calculated by DOE at $93.8 million. The request for FY2006 was $98.0 million. H.R. 2419 as passed by the House would have funded the program at $112.0 million; the Senate bill, $109.0 million. P.L. 109-103 appropriated $98.0 million. The Nonproliferation and Verification R&D program, which received $224 million for FY2005, would have been funded at $272.2 million in the Administration's FY2006 request. The House-passed H.R. 2419 raised the level to $335.2 million. The Senate bill included $310.2 million. The final bill appropriated $327.0 million. Nonproliferation and International Security programs would have received $80.2 million in the request, compared with $91.3 million in FY2005. The House bill included $75.8 million, the Senate bill $90.0 million. The final bill appropriated $75.0 million. These programs include international safeguards, export controls, and treaties and agreements. A major part of funding for the new GTRI came from the Nonproliferation and International Security programs. International Materials Protection, Control and Accounting (MPC&A), which is concerned with reducing the threat posed by unsecured Russian weapons and weapons-usable material, would have received $343.4 million under the President's request, compared to $294.7 million appropriated for FY2005. H.R. 2419 as passed by the House included $428.4 million. The Senate bill would have appropriated $343.4 million. P.L. 109-103 funds MPC&A at $422.0 million. Two programs in the former Soviet Union, Initiatives for Proliferation Prevention (IPP) and the Nuclear Cities Initiatives (NCI), were combined for FY2005 into a single program called "Russian Transition Initiative," aimed at finding nonweapons employment for roughly 35,000 underemployed nuclear scientists from the former Soviet weapons complex. The FY2005 appropriation for the program was $40.7 million. For FY2006, $37.9 million was requested; DOE renamed the program "Global Initiatives for Proliferation Prevention," to reflect expansion of the work to include retraining and redirection of scientists and technicians from other than the former Soviet Union. The House Appropriations Committee did not agree with the name change and reduced funding to $30.3 million. The Senate Appropriations Committee went along with the name change, raised funding to $50.9 million, and urged DOE to continue the program in Russia and expand it beyond the former Soviet Union. The conference bill appropriated $40.0 million and retained the former name. Requested funding for the Fissile Materials Disposition program for FY2006 was $653.1 million, compared with $613.1 million in appropriated for FY2005. The program's goal 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 reactor fuel at Savannah River, SC, and a similar program in Russia. The House Appropriations Committee cut funding for the Savannah River facility sharply, citing delays in agreement with Russia over the program. Total funding for fissile materials disposition in H.R. 2419 as passed by the House would have been $301.7 million. The Senate version of the bill would have funded the program at the requested $653.1 million level. P.L. 109-103 appropriated $473.5 million. Environmental Management and Cleanup The Environmental Management program is the largest single function within DOE in terms of funding, representing approximately one-third of the Department's total budget. The primary purpose of the program is to manage radioactive and hazardous wastes, and to remediate contamination from such wastes, at former nuclear weapons sites across the country. The program also addresses waste management and remediation at sites where the federal government conducted civilian nuclear energy research. As such, DOE's Environmental Management program is the largest waste management and environmental cleanup program throughout the federal government, with an annual budget of around $7 billion in recent years. In comparison, annual funding for the cleanup of contamination at Department of Defense sites has been less than $2 billion in recent years, and annual funding for the Environmental Protection Agency's cleanup of the nation's most hazardous private sector sites under the Superfund program has been around $1.25 billion. As signed into law, the conference agreement on H.R. 2419 provides a total of $6.66 billion in FY2006 for DOE's Environmental Management program. The FY2006 appropriation is $627 million less than the $7.28 billion enacted for FY2005. Although funding is reduced relative to FY2005, the conference amount is $151 million more than the Administration's request of $6.51 billion. Defense sites have traditionally received most of the funding within the Environmental Management program. Of the amount provided for FY2006, $6.19 billion is allocated to a new Defense Environmental Cleanup account, $353 million to a new Non-Defense Environmental Cleanup account, and $562 million to the existing Uranium Enrichment Decontamination and Decommissioning (D&D) Fund. Although the total appropriation for these three accounts is $7.11 billion, this amount is offset by $451 million from the federal contribution to the Uranium Enrichment D&D Fund provided within the Defense Environmental Cleanup account, yielding a total FY2006 program appropriation of $6.66 billion. See the table below for appropriations by account. As proposed by the House and the Senate, the conference agreement merges certain accounts that fund the Environmental Management program to form the new defense and nondefense accounts noted above. The accounts for Defense Site Acceleration Completion and Defense Environmental Services are merged into one Defense Environmental Cleanup account to provide a single source of funding for cleanup at former nuclear weapons sites. Most of the $627 million reduction relative to FY2005 is within this new account, discussed below. The accounts for Non-Defense Site Acceleration Completion and Non-Defense Environmental Services are merged into one Non-Defense Environmental Cleanup account to provide a single source of funding for the cleanup of civilian nuclear energy research sites. As in past years, the conference agreement continues a separate account for the Uranium Enrichment D&D Fund, which supports the cleanup of uranium enrichment plants and uranium and thorium processing sites. The Administration had requested funding for FY2006 under the existing account structure, and did not propose any accounting changes similar to that in the conference agreement. Most of the $627 million reduction below the FY2005 appropriation is within the Defense Environmental Cleanup account. As noted in the table below, overall funding for cleanup at four major sites is reduced, including the Savannah River site in South Carolina, the Idaho National Laboratory, and the Hanford site in the State of Washington. The decline in funding for sites scheduled for closure in 2006 is mostly due to the completion of "physical" cleanup at Rocky Flats. The conference report indicates that a portion of the reduction at the Savannah River site is because of "unresolved seismic issues" that have delayed construction of a salt waste processing facility to treat high-level radioactive waste removed from underground storage tanks. The conference report also reduces prior year balances for this project by $20 million because of these construction delays. The conference report attributes a portion of the decrease at the Hanford site to delays in construction of the Waste Treatment Plant (WTP). The purpose of this facility is to "vitrify" high-level radioactive waste removed from underground storage tanks. Vitrification involves the solidification of this waste and encasing it in glass logs for permanent storage in a geologic repository, such as Yucca Mountain. Although FY2006 funding for the WTP is less than appropriated for FY2005, as noted in the table above, the conference report indicates that $98 million remains available from FY2005 that could be used in FY2006. In reference to construction delays, the conferees commented that DOE "needs better control and oversight of the scope, cost and schedule of this project," and directed DOE to report to the Appropriations Committees by December 1, 2005, on the "actions taken to rectify the management failures of this project" and to report quarterly on the status of this project beginning in 2006. Regarding Hanford, the conferees also noted their concern about DOE's efforts to prevent contaminants from migrating through groundwater into the Columbia River, which is a source for drinking water and agricultural irrigation across the Pacific Northwest. DOE reports that more than 270 billion gallons of groundwater covering an underground area of over 80 square miles at Hanford is contaminated at levels that exceed federal drinking water standards. Members of Congress, states, and communities have expressed ongoing concern regarding the risk to human health and the environment posed by the migration of this contamination into the river. The conferees noted that current technology used in "several remedies is not performing satisfactorily, and there is lack of new technologies to address contamination issues." In response to this concern, the conference agreement provides $10 million for assessing the migration of groundwater contamination into the Columbia River and for introducing new technologies to protect water quality. The conferees did not approve DOE's proposed transfer of seven sites within the Environmental Management program to the National Nuclear Security Administration (NNSA). Instead, the conferees increased funding above the request to continue support for these responsibilities within the existing programmatic structure. However, as the Administration proposed, the conference agreement does not provide funding within the Environmental Management program for the continued disposal of waste at Lawrence Livermore National Laboratory in California and at the Y-12 site in Tennessee, which is newly generated as a result of activities conducted by the NNSA. Rather, funding for the disposal of newly generated waste at these two sites is provided in the NNSA's accounts. Cleanup Status In addition to debate over annual appropriations, there have been many longstanding issues associated with DOE's Environmental Management program. Much attention has focused on the resources and time needed to clean up environmental contamination, and to manage and dispose of radioactive and other hazardous wastes. To date, there are 114 geographic sites within the Environmental Management program (including the seven sites that DOE proposed for transfer to the NNSA), which were contaminated from nuclear weapons production or civilian nuclear energy research. According to DOE, all response actions were complete at 76 of these sites as of the end of FY2003. Congress had appropriated approximately $70 billion through FY2003 for cleanup and site closure since the Environmental Management program was established in FY1989. DOE expects cleanup to be complete at three additional sites by the end of FY2005, and at seven additional sites by the end of CY2006, yielding a total of 86 of the 114 sites with cleanup complete. Efforts to Accelerate Cleanup Although cleanup is projected to be complete at many of the remaining sites within a decade, cleanup at the most contaminated sites is not expected to be complete until 2035. DOE's most recent estimate of future costs to complete its planned waste disposal and cleanup activities is $95 billion from FY2004 through final site closure in 2035. This is a substantially lower estimate than in past years, as a result of cost and time savings DOE expects from its cleanup reform initiative. DOE launched this initiative in FY2003 and signed letters of intent with the Environmental Protection Agency and the states to accelerate cleanup at its major sites. DOE also prepared Performance Management Plans for many of its sites, which outlined how cleanup would be accelerated and costs reduced. In developing its plans to accelerate cleanup, DOE established baselines for the completion of its planned waste disposal and remedial actions, reflecting defined scope, costs, and schedules. According to DOE, its goals of faster and less costly cleanup are being accomplished through awarding competitive contracts, renegotiating existing contracts with performance-based incentives, working with regulators on more efficient technical and regulatory approaches, deploying innovative technologies, and coordinating with stakeholders and regulators to better define "end states" (i.e., the intended condition or use of each site once cleanup is complete). However, the reductions in costs and time frames resulting from DOE's planned acceleration of cleanup are merely estimates. Actual costs and time frames could differ depending on numerous factors, such as the regulatory approval of actions that DOE wishes to take in the future and the adequacy of these actions to protect human health and the environment over the long term. Questions have been raised as to how DOE would accomplish its goals of faster and less costly cleanup without weakening environmental protection. Some have contended that more contamination may be left on site rather than removed. Because of the substantial amount of time required for certain types of radioactivity to decay, arguments have been raised that contamination left in place may migrate in unexpected ways over the long term, and result in pathways of exposure that could not have been predicted when the remedy was originally selected. Others counter that completely removing radioactive contamination from all sites to permit unrestricted future land use, and eliminate all future pathways of exposure, would not be economically feasible, and in some cases would be beyond the capabilities of current cleanup technologies. The conferees noted their continued interest in DOE's cleanup acceleration efforts, specifically whether DOE is meeting its cleanup goals at sites scheduled for completion by 2006, 2012, and 2035, respectively. The conferees requested that DOE submit a "milestone" report twice a year to the House and Senate Appropriations Committees by March 1 and September 1 of each year. Milestones typically are individual cleanup actions to be completed by a specific date, which DOE, EPA, and the states have agreed would fulfill applicable regulatory requirements. As described by the conferees, this new report would track accelerated cleanup milestones at individual sites, indicate whether milestones are being met, and include estimates of annual funding needs and total "life-cycle" costs to complete cleanup. The House Appropriations Committee had requested a similar milestone report in its report on H.R. 2419 . The Senate Appropriations Committee did not request such a report but commented that DOE has "succeeded in making significant progress" in accelerating cleanup and encouraged DOE "to continue [to] keep the remaining sites on track." In addition to language in committee reports on the FY2006 appropriations bills, Members also expressed concern about cleanup progress at a hearing held by the Senate Energy and Natural Resources Committee on November 15, 2005. Although Members complimented DOE for its efforts to accelerate cleanup at certain sites, such as Rocky Flats, they also commented that improvements could be made in increasing the pace of cleanup and lowering costs at other sites, such as Hanford. Disposal of Tank Wastes One of the more controversial issues regarding DOE's cleanup acceleration initiative has been how to dispose of radioactive and chemical wastes stored in underground tanks at the Hanford site, the Savannah River site, and the Idaho National Laboratory. For FY2005, DOE requested $350 million for a "High-Level Waste Proposal" account to prepare for the classification and treatment of some of the tank wastes as "incidental to reprocessing" and to eventually dispose of it as low-level waste or transuranic waste. Of the $350 million request, $249 million would have been for "operating expenses" mostly associated with removal of the liquid tank waste. The remaining $101 million would have been for the construction of three facilities to treat the liquid waste that would be removed from the storage tanks and to process it to separate out the high-level waste for permanent storage. The most contentious element of DOE's proposal was to leave some of the waste in the tanks, and to dispose of it as low-level waste by mixing and immobilizing it with a cement-like "grout" to seal it in place. Some Members of Congress, states, environmental organizations, and communities opposed DOE's proposal, arguing that none of the tank wastes should be allowed to remain in place. Among the chief concerns was the possibility that the grout might not mix thoroughly with the residual waste to contain it safely and prevent leaks. However, others asserted that there would be limited environmental and public health risk benefit to be gained by removing all of the waste from the tanks. There also were concerns that removal of all of the waste would be technically difficult, pose a significant health and safety risk to the workers, and be very costly. After considerable debate, the 108 th Congress included authority in the Ronald W. Reagan National Defense Authorization Act for FY2005 ( P.L. 108-375 ) for DOE to classify some of the tank wastes at the Savannah River site and the Idaho National Laboratory as other than high-level waste, and to dispose of some of the tank waste by grouting it in place if certain conditions are met. However, the authority was not extended to Washington State, where most of the tank waste is located at the Hanford site. (For further discussion, see CRS Report RS21988, Radioactive Tank Waste from the Past Production of Nuclear Weapons: Background and Issues for Congress , by [author name scrubbed] and [author name scrubbed].) Congress did not create a separate account for DOE's High-Level Waste Proposal in FY2005. However, with the above authority, Congress appropriated $292 million out of the former Defense Site Acceleration Completion account for activities needed to reclassify and treat tank wastes at the Savannah River site and the Idaho National Laboratory in preparation of grouting the residual wastes in place. Congress did not allocate any of this funding for tank waste reclassification at Hanford, as the above authority was not extended to Washington State. Instead, other funds were allocated for ongoing tank waste activities at Hanford. The Administration's FY2006 request did not include a line-item for a High-Level Waste Proposal account, as it did for FY2005. Although DOE planned to close one tank at the Idaho National Laboratory in FY2006 with the new waste reclassification authority, the Administration's request did not specify the amount of funding for the closure of this tank. It also did not specify the amount of waste in the tank that may be reclassified and grouted in place. The conference agreement did not specify the amount of funding for the closure of this tank either. The FY2006 request did specify nearly $84 million for the construction of three waste treatment facilities at the Idaho National Laboratory and the Savannah River site, which were included in DOE's original request for the High-Level Waste Proposal account in FY2005. These facilities would be necessary for DOE to process the waste removed from the tanks prior to grouting any residual waste that may remain upon closure. The conference agreement provides $45 million for these three construction projects, including $9.2 million for project engineering and design for the Sodium Bearing Waste Treatment Facility at the Idaho National Laboratory, the same as the Administration requested; $35.3 million for project engineering and design for the Salt Waste Processing Facility at the Savannah River site, $31 million more than the Administration's request of $4.3 million; and $500,000 for construction of the Salt Waste Processing Facility at the Savannah River Site, $69.5 million less than the Administration's request of $70 million. As noted earlier, the significant reduction in funding is due to construction delays as a result of "unresolved seismic issues." Office of Legacy Management Related to the Environmental Management program, the conference agreement provides almost $79 million for DOE's Office of Legacy Management, about the same as requested, and slightly more than the enacted FY2005 amount of $77 million. Of the FY2006 appropriation, $45 million is allocated to former defense sites and related activities, and nearly $34 million is allocated to nondefense sites. Congress provided the funding for DOE to establish this office in the Energy and Water Development Appropriations Act for FY2004 ( P.L. 108-137 ). The primary functions of the Office of Legacy Management are to monitor and maintain remedial actions over the long-term once cleanup is complete, to ensure protection of human health and the environment, and to manage the pensions and benefits of former contractor personnel who performed the cleanup. DOE previously administered these responsibilities under multiple elements of its Environmental Management program. 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 in response to the construction of dams and multi-purpose water projects 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. However, these facilities often generated electricity to meet project needs; PMAs were established to market the excess power. Priority for PMA power is extended to "preference customers," which include municipal utilities, co-ops 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. Their rates are the focus of considerable discussion, and the FY2006 Administration request included a recommendation that Congress raise PMA rates to "market rates." The House rejected this proposal in its Energy and Water appropriations bill. It is not mentioned in the conference report, and no related legislation has been introduced in the 109 th Congress. (For more information see CRS Report RL32798, Power Marketing Administrations: Proposals for Market-Based Rates , by [author name scrubbed] (pdf).) The FY2006 Administration request for the PMAs ($57.1 million) was sharply down from FY2005 levels ($208.8 million)—a reduction of 72.6%. This reflects a reduction of $117.8 million for WAPA and $26.0 million for Southwestern. Net appropriations for Southeastern, budgeted at roughly $5.2 million in FY2005, would be eliminated altogether. However, the Administration's request offset these reductions by allowing SEPA, SWPA, and WAPA to credit a portion of their revenues to their appropriation accounts as offsetting collections for program and operating expenses. The House and Senate both rejected this proposal and instead provide appropriations for these activities. The House-passed bill included $265.5 million for PMAs—a $56.7 million increase from FY2005 appropriations. This appropriation includes $5.6 million for SEPA, $30.2 for SWPA, and $227.0 million for WAPA. The Senate bill included $279.2 million for PMAs—$11.1 million more than the House. This appropriation includes $5.6 million for SEPA, $30.2 million for SWPA, and $240.8 million for WAPA. P.L. 109-103 appropriated $5.6 million for SEPA, $30.2 million for SWPA, $234.0 million for WAPA, and $2.7 million for Falcon and Amisted, for a total PMA appropriation of $272.5 million. (For more information see CRS Report RS22080, Power Marketing Administrations; Offsetting Collections in the President ' s FY2006 Budget Proposal , by [author name scrubbed].) BPA receives no annual appropriation, but 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 did not request additional borrowing authority in FY2006, and none was provided by the House, Senate, and conference report. BPA intends to use $487 million of its borrowing authority in FY2006, up from $432 million in FY2005, for generation and transmission services, conservation, energy efficiency, fish and wildlife, and capital equipment programs. As recommended by the Senate, the conference report prohibits further BPA funding for the Fish Passage Center, which collects and analyzes data on fish movements in the Columbia and Snake rivers and requires that its functions be transferred to other existing entities. 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 a total budget of $701.7 million for FY2006, including $8.3 million for the NRC inspector general's office. The enacted bill provides a total of $742.7 million, about 11.7% above the FY2005 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 approved a $21 million increase over the NRC budget request, to $722.7 million, for additional regulation of the security of spent fuel at nuclear reactor sites. The House Appropriations Committee report cited spent fuel security risks found by a 2004 study by the National Academy of Sciences and expressed dissatisfaction with NRC's response so far. The additional funding was intended "for the NRC to perform the necessary technical analyses and award the contracts to respond to the NAS safety and security recommendations." The Senate Appropriations Committee agreed with the House's $21 million increase for spent fuel pool security and provided an additional $20 million for licensing of new nuclear power plants, for a total of $742.7 million. The Committee called for NRC to get ready to process three to five applications for new commercial reactors during the next two years. The conferees agreed with the proposed $41 million in additional spending. For all homeland security activities, NRC's FY2006 budget request included $61.0 million, a 2% increase over FY2005. NRC oversees force-on-force security exercises at nuclear plants and is requiring revised security plans to reflect increased baseline threats. (For more information on protecting licensed nuclear facilities, see CRS Report RS21131, Nuclear Power Plants: Vulnerability to Terrorist Attack , by [author name scrubbed] and [author name scrubbed].) To begin reviewing an anticipated DOE license application for a national nuclear waste repository at Yucca Mountain, Nevada, NRC requested $69.1 million—a slight increase over FY2005 but more than double the FY2004 level. The budget request also included safety testing of full-scale casks for transporting nuclear waste by rail and by truck. Because funding was cut for the DOE repository program, the conferees reduced NRC's repository licensing request to $46.1 million. 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 is the $46.1 million from the Nuclear Waste Fund to pay for waste repository licensing and another $2 million for DOE defense waste oversight. That amount plus 10% of the remaining $695 million leaves a net appropriation of $118.0 million. Denali Commission The main difference between the FY2006 request for Title IV programs and the amount appropriated for FY2005 is a sharp reduction in funding for the Denali Commission, a regional economic development agency established in 1998. The Administration's proposed reduction is typical. FY2004 funding for the commission was $54.7 million; for FY2005 the Administration requested $2.5 million, and the House bill, H.R. 4614 (108 th Congress) did not fund it at all, but the omnibus appropriations act, P.L. 108-447 , appropriated $66.5 million. For FY2006, the House-passed H.R. 2419 included the requested $2.6 million. The Senate bill would have appropriated $67 million. P.L. 109-103 appropriated $50 million. For Additional Reading CRS Issue Briefs CRS Issue Brief IB10041. Renewable Energy: Tax Credit, Budget, and Electricity Production Issues , by [author name scrubbed]. CRS Issue Brief IB10020. Energy Efficiency: Budget, Oil Conservation, and Electricity Conservation Issues , by [author name scrubbed]. CRS Issue Brief IB88090. Nuclear Energy Policy , by [author name scrubbed] and Carl Behrens. CRS Reports CRS Report RL33461, Civilian Nuclear Waste Disposal , by [author name scrubbed]. CRS Report RS20702, South Florida Ecosystem Restoration and the Comprehensive Everglades Restoration Plan , by [author name scrubbed] and [author name scrubbed]. CRS Report RS20569, Water Resource Issues in the 110 th Congress , 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 RL30478, Federally Supported Water Supply and Wastewater Treatment Programs , coordinated by [author name scrubbed]. CRS Report RL32189, Terrorism and Security Issues Facing the Water Infrastructure Sector , by [author name scrubbed]. 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 RL31975, CALFED Bay-Delta Program: Overview of Institutional and Water Use Issues , by [author name scrubbed] and [author name scrubbed]. CRS Report RL32130, Nuclear Weapon Initiatives: Low-Yield R&D, Advanced Concepts, Earth Penetrators, Test Readiness , by Jonathan Medalia. CRS Report RL32347, " Bunker Busters " : Robust Nuclear Earth Penetrator Issues, FY2005-FY2007 , by Jonathan Medalia. CRS Report RL31993, Nuclear Warhead " Pit " Production: Background and Issues for Congress , by Jonathan Medalia. CRS Report RL32163, Radioactive Waste Streams: Waste Classification for Disposal , by [author name scrubbed] (pdf). CRS Report RS21131, Nuclear Power Plants: Vulnerability to Terrorist Attack , 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 RL32543, Energy Savings Performance Contracts: Reauthorization Issues , by [author name scrubbed]. CRS Report RS22080. Power Marketing Administrations: Offsetting Collections in the President ' s FY2006 Budget Proposal, by [author name scrubbed].

The Energy and Water Development appropriations bill in the past included funding for civil works projects of the Army Corps of Engineers (Corps), the Department of the Interior's Bureau of Reclamation (BOR), most of the Department of Energy (DOE), and a number of independent agencies. After the budget request for FY2006 was submitted in February 2005, both the House and the Senate Appropriations Committees reorganized their subcommittee structure and with it the content of the various appropriations bills to be introduced. In the case of Energy and Water Development, the only changes were the consolidation of DOE programs that had previously been funded by the Interior and Related Agencies bill. When these programs are included, the requested amount for FY2006 Energy and Water Development totals $29.75 billion. For FY2005, $30.17 billion was appropriated for comparable programs. On May 18, 2005, the House Appropriations Committee reported out H.R. 2419 (H.Rept. 109-86), with a total appropriation of $29.75 billion, including the programs formerly funded in the Interior and Related Agencies bill. The House passed the bill May 24. The Senate Appropriations Committee reported out its version of H.R. 2419 on June 16 (S.Rept. 109-84), and the Senate passed it June 30. The Senate bill totaled $31.245 billion. On November 7, 2005, the House-Senate Conference on H.R. 2419 agreed to a bill funding Energy and Water Development programs at $30.49 billion (H.Rept. 109-275). The House approved the conference report November 9, and the Senate November 14. President Bush signed the bill November 19 (P.L. 109-103). Key budgetary issues involving these programs include: — the effects of performance-based budgeting and Hurricanes Katrina and Rita on Army Corps of Engineers priorities, and limiting the reprogramming of funds from one Corps project to another and restricting the use of multiyear contracts (Title I); — support of major ecosystem restoration initiatives, such as Florida Everglades (Title I) and California "Bay-Delta" (CALFED) (Title II); — funding for the proposed national nuclear waste repository at Yucca Mountain, Nevada (Title III: Nuclear Waste Disposal); — funding for developing nuclear warheads, in light of congressional action last year to cut funding for the Robust Nuclear Earth Penetrator and for a "Modern Pit Facility" to build nuclear weapons components (Title III: Nuclear Weapons Stockpile Stewardship); and — plans to reduce the time necessary to prepare the Nevada Test Site to resume nuclear weapons testing (Title III: Nuclear Weapons Stockpile Stewardship). This report will be updated as events warrant.

FDA Approval of Prescription Drugs and the Challenges of Opioids In 1938, Congress passed the FD&C Act in an effort to bolster federal protection of public health and safety by creating new requirements designed to keep impure or dangerous products out of interstate commerce. FDA is the primary federal agency responsible for the administration and enforcement of the FD&C Act. With respect to prescription drugs, the FD&C Act establishes a comprehensive federal system of premarket approval for such drugs. The Act generally prohibits introducing or delivering new drugs in interstate commerce unless the drug is approved by FDA. Under current law, in order to market a new brand-name drug, a manufacturer must file a new drug application (NDA) with FDA, which must include, among other things, "full reports of investigations which have been made to show whether or not such drug is safe for use and whether such drug is effective in use." FDA may approve an NDA only if the sponsor of the application (e.g., a drug manufacturer or marketer) demonstrates, among other things, that the drug is safe and effective under the conditions prescribed, recommended, or suggested in the product's labeling. The FD&C Act generally authorizes FDA to refuse to approve an NDA if the agency finds the labeling is false or misleading in any particular way. Additionally, many drugs—including a majority of opioid products approved in recent decades—are reformulations of existing products . Reformulated drugs may also be approved through an NDA under the FD&C Act, and drug sponsors may rely on safety and efficacy data of previously approved products as part of their applications. In addition to premarket authority, FDA also possesses postmarket authority to monitor drugs that have entered interstate commerce and ensure that the benefits of a drug continue to overbalance the risks. For example, FDA may require postmarket drug labeling changes if the agency becomes aware of certain new information that the Secretary of Health and Human Services (HHS Secretary) believes should be included in the labeling of the drug, as well as postapproval studies, clinical trials, and risk evaluation mitigation strategies (REMS) under certain circumstances. Additionally, the agency may also monitor safety data related to approved drugs through an active postmarket risk assessment system. In general, FDA has broad authority with respect to the implementation of the FD&C Act. The agency is empowered to promulgate regulations to efficiently enforce the Act's broad mandates and develop guidance documents that set forth the agency's interpretation of the Act or accompanying regulations. The FD&C Act also authorizes FDA to "conduct examinations and investigations" to administer the Act and to disseminate information about regulated products involving "imminent danger to health" or "gross deception to the consumer." While new opioids are generally subject to the same approval requirements as most other drugs, FDA's task to ensure the safety and efficacy of opioids is particularly difficult. Throughout recorded history , societies have struggled with balancing the medicinal use of opioids in pain management with the concomitant euphoric effects that have induced the substance's abuse. Sixty years ago, the head of surgery at the University of Illinois noted, "we must appreciate that severe constant pain will destroy the morale of the sturdiest individual. . . [b]ut. . . we are often loathe to give liberal amounts of narcotics because the drug addiction itself may become a hideous spectacle." As a result of these difficulties, for nearly a century , opioid pain medications were used in the United States primarily to treat acute and cancer-related pain. However, studies from the 1970s revealing inadequate management of chronic pain, followed by influential articles published in the 1980s reporting a low incidence of addictive behavior in small groups of cancer and noncancer patients, led to a trend toward more liberal prescribing of opioids within the medical community. The shifting views on the safety and efficacy of opioids culminated in FDA's 1995 approval of Purdue Pharma's controlled-release opioid pain medication, OxyContin, the product some point to as the catalyst for the current opioid epidemic. Between 2000 and 2009 , the medical community established new standards for pain management, which included pain as a new vital sign , and prescriptions for opioids increased. By 2016, an estimated 11.5 million Americans were abusing prescription painkillers. FDA's legal authorities and recent actions taken in response to the opioid epidemic may be considered against the backdrop of challenging legal and policy questions about the role FDA can or should play with respect to regulation of products that have public health consequences. As part of these questions, FDA officials have discussed the importance of striking the right balance between taking aggressive action to fight opioid misuse and addiction, while simultaneously protecting patients who experience severe pain. Additionally, given that the agency's approach to evaluating and approving drugs is based on "the conditions prescribed, recommended, or suggested" in FDA-approved labeling, questions may arise about the extent to which the agency has legal authority to consider drug misuse in carrying out its regulatory actions. Under a number of FD&C Act provisions, FDA has considerable discretion in determining the information that is relevant to its regulatory decisions. The following sections of this report illustrate how FDA has exercised its discretion, particularly in its response to prescription opioid abuse and addiction. FDA Authority and Recent Agency Action Related to the Opioid Epidemic FDA is taking a multifaceted approach in its response to the opioid epidemic. FDA officials have indicated that the agency focuses its efforts in four areas: 1. decreasing exposure and preventing new addiction; 2. supporting the treatment of those with opioid use disorder; 3. fostering the development of novel pain treatment therapies; and 4. improving enforcement and assessing benefit risk. Using these four categories as a framework, the following sections highlight some of FDA's recent strategies for addressing the opioid epidemic and the agency's existing authority to pursue such strategies. Decreasing Exposure and Preventing New Addiction FDA Commissioner Scott Gottlieb has stated that the agency is concentrating on ways to lower overall exposure to opioid drugs and, consequently, reduce the number of new cases of addiction. The Commissioner has also averred that one contributing factor to the opioid epidemic is inappropriate prescribing practices, in which clinicians write unnecessary prescriptions for opioid products or prescribe a dose that is beyond the patient's needs. FDA has recently explored various measures to influence health care provider behavior, particularly through its Risk Evaluation and Mitigation Strategy (REMS) authorities. FDA may only approve drugs for marketing if there is sufficient evidence to demonstrate that the medication is safe and effective for its intended use. As FDA has stated, the agency's approval of a drug does not indicate an absence of risk, but rather that the drug has an "appropriate benefit-risk balance." For most drugs, such a balance is achieved through proper labeling and other postmarket surveillance measures. However, in order to mitigate potentially serious risks for certain drugs, FDA has authority to require certain additional safety controls. Such controls may be implemented through a risk evaluation mitigation strategy, or REMS. The FD&C Act generally allows FDA to require submission of, and compliance with, a proposed REMS if the agency determines that this strategy is necessary to ensure that the benefits of a drug outweigh its risks. A REMS is essentially a mandatory risk management plan for "responsible persons" (commonly drug manufacturers) that is subject to FDA approval. For example, as part of a REMS, drug manufacturers may be required to provide certain information to patients and/or health care providers (such as a medication guide or patient package insert) or impose limitations on a product's distribution. In general, FDA may require a REMS as a condition of a product's approval, or the agency may impose a REMS on a product it has already approved when new information arises. FDA officials, various industry stakeholders, and others have recently discussed REMS requirements in the context of opioid prescriber education, including the possibility of requiring some form of mandatory health care provider training on proper opioid prescribing and other issues related to opioid use. Questions may be raised about the scope of FDA's authority under the FD&C Act to compel physicians and other drug prescribers, through a REMS, to obtain certain training or education in order to prescribe opioid drug products. Such questions may arise in light of the fact that the regulation of health care providers and their prescribing practices has traditionally been a state function. As part of a REMS, FDA may require that it contain additional, potentially more restrictive safety precautions, referred to as "elements to assure safe use" (ETASU), because of a drug's "inherent toxicity or potential harmfulness." In order to require ETASU, FDA must determine that the drug has been shown to be effective, but is associated with a "serious adverse drug experience" and can be only marketed if (1) such elements are required as part of the REMS, and (2) other components of the REMS are not sufficient to mitigate the risk. The ETASUs must include one or more goals to mitigate a risk listed on the drug's label, and may require, among other things, that health care providers who prescribe the drug have particular training or experience, or are specially certified (the opportunity to obtain such training or certification with respect to the drug shall be available to any willing provider from a frontier area in a widely available training or certification method (including an on-line course or via mail) as approved by the [HHS] Secretary at reasonable cost to the provider)... Accordingly, assuming FDA has made the requisite determinations concerning the need for a REMS and the need for it to contain elements to assure safe use, then it appears that the agency may potentially compel a drug manufacturer and other responsible persons, through a REMS, to require that a health care provider obtain certain training in order to prescribe a particular drug. While the FD&C Act does not expressly provide details on how a prescriber training requirement must be implemented, the responsible person is generally obligated to carry out the requirements of the REMS and must provide assessments as to whether each element of the approved REMS is meeting the goals of the strategy. In 2012, FDA approved a REMS for extended-release and long-acting (ER/LA) opioid analgesics. As part of this REMS, drug manufacturers had to make voluntary training available at low or no cost to health care providers who prescribe these drugs, but the REMS contained no requirement that prescribers receive this training as a precondition to dispensing applicable drugs to patients. In September 2018, FDA approved an expanded version of the opioid analgesic REMS. This newly modified REMS covers not only ER/LA opioid analgesics, but also more commonly prescribed immediate-release opioids used in the outpatient setting. Pursuant to the recently amended REMS, opioid analgesics manufacturers must provide educational programs for opioid prescribers, as well as nurses, pharmacists, and other health care providers who treat and monitor patients with pain. Training provided through the modified REMS must be based on an FDA-developed blueprint, which outlines core components of the educational programs. While the modified Opioid Analgesic REMS does not compel health care providers to take this training in order to prescribe opioids, FDA officials continue to examine whether the REMS should include some type of mandatory educational training, and, if so, under what circumstances. Supporting the Treatment of Those with Opioid Use Disorder In responding to the opioid epidemic, FDA is also focusing on measures that would better assist individuals struggling with opioid addiction. These efforts include promoting broader access to opioid antagonists that can stop or reverse an overdose, including the drug naloxone. Naloxone is a medication that generally treats an overdose by quickly blocking the effects that opioids have on the brain, and it is commonly viewed as an effective and frequently life-saving intervention. One perceived legal barrier to more widespread naloxone access is its current classification as a prescription drug. Under the FD&C Act, certain drugs—because of their toxicity, potential for harm, method or measures necessary for use, or a requirement of a drug's NDA—can only be dispensed upon a prescription of a licensed practitioner. Similar to prescription drugs, the FD&C Act governs, among other things, the safety and efficacy of over-the-counter (OTC) medications, including the approval, manufacture, and distribution of such drugs. In general, OTC drugs, unlike prescription drugs, are those that can be adequately labeled so that they do not pose a risk of misuse or abuse and can be safely and effectively used without the supervision of a health care provider. Thus, OTC drugs are publicly available for consumers to purchase for treatment of a variety of conditions. Currently, there are more than 300,000 marketed OTC drug products that fall into over 80 therapeutic categories (such as analgesics or antacids). There are two main regulatory mechanisms through which a drug like naloxone may be switched from prescription to OTC status. First, FDA is authorized to implement a switch through rulemaking. The FD&C Act specifies that FDA may remove drugs from the prescription requirements by regulation when such requirements "are not necessary for the protection of the public health." Under current regulations, a proposal to exempt a drug from the prescription requirements may be initiated by the FDA Commissioner or any interested person. The second mechanism is through the drug sponsor's submission of an NDA or a supplemental NDA, under which the sponsor, typically the manufacturer, requests that FDA approve the switch. The latter approach is the more common pathway for drugs to switch to OTC status, and FDA officials have stated that it is, among other things, a much more expeditious process (as compared to FDA's notice-and-comment rulemaking). With respect to both approaches, FDA takes a "fresh look" at all the safety and efficacy data used in the prescription drug's NDA. Additionally, a central element necessary for FDA's determination that a product is safe for OTC use is the establishment of a label that conveys key messages about the product to a lay consumer, as well as adequate testing to ensure that consumers comprehend the label and can use the product correctly and safely in an OTC setting. FDA officials have frequently expressed support for giving naloxone OTC status. The agency has also noted ways in which it is taking steps to assist naloxone manufacturers in submitting an application and pursuing approval of an OTC product. For example, in 2016, FDA officials announced that the agency had developed a consumer-friendly model Drug Facts Label (DFL), a required label for OTC products, which is intended to convey the information a consumer would need to administer naloxone in the event of an emergency overdose. FDA also arranged for scientific testing of this model labeling. Despite the fact that FDA has not approved naloxone for OTC use, states have taken action to make naloxone more accessible. Although FDA has exclusive authority to approve prescription drugs, states maintain authority with respect to who may prescribe these medications and the required format for valid prescriptions. Many states, for example, permit third-party prescriptions—issued to a friend, family member, or other third party who is not at risk of overdose—for use on someone else. These laws provide an exception to the typical state law requirement that prescriptions be written only for the person who will actually take the medication. Additionally, some states permit medical practitioners to prescribe naloxone through standing orders, through which the drug may be dispensed by a pharmacy or other entity based on certain criteria, without the prescriber's examination of a particular patient. Notwithstanding these state laws, some entities still argue a need for FDA to give naloxone OTC status. Fostering the Development of Novel Pain Treatment Therapies FDA has stated that it is working with industry and other government entities to spur the development and marketing of new pain treatments that have less potential for abuse, including generic abuse-deterrent formulations (ADFs) of opioid products. ADF technologies are those intended to make abusing a drug more difficult or less rewarding, and the benefits of these technologies have been the subject of debate. To date, FDA has approved 10 opioid analgesics with these characteristics. However, currently, opioids with ADFs are only available as brand-name products, and there are no generic opioids with FDA-approved abuse-deterrent labeling on the market. FDA Commissioner Scott Gottlieb has noted that because opioids with ADFs are only available as brand-name products, they are fundamentally more expensive than available generic versions of non-ADF opioids. In order to provide a quicker route for the approval of generic drugs, Congress passed the Drug Price Competition and Patent Term Restoration Act of 1984, commonly known as the Hatch-Waxman Act, which created the abbreviated new drug application (ANDA) process. Under this act, a generic drug may be approved for marketing without the same clinical studies and safety and effectiveness evidence required for brand-name drug approval if the generic drug mimics the approved brand-name drug in certain key ways. For example, an ANDA generally must contain information demonstrating that the route of administration, the dosage form, and the strength of the new generic are the same as those of its brand-name analog. In addition, ANDA applications must contain "information to show that the labeling proposed for the new drug is the same as the labeling approved for the [brand-name] drug," subject to certain specified exceptions. In November 2017, as directed by Congress as part of the Comprehensive Addiction and Recovery Act of 2016, FDA issued a nonbinding guidance document for industry, which contains recommendations about what studies a potential ANDA applicant should conduct and submit to FDA to demonstrate that the generic drug's abuse deterrent properties are on par with its prescription counterpart. Additionally, in July 2018, FDA issued additional draft guidance documents that are intended to assist drug developers in bringing generic ADF opioid products to market. Improving Enforcement and Assessing Benefit Risk As part of its response to the opioid epidemic, FDA officials have expressed a desire to better leverage the agency's enforcement capabilities. The FD&C Act contains a number of enforcement mechanisms, both civil and criminal in nature, which may apply to the marketing of diverted opioids, as well as drugs not approved by FDA. Persons who violate the requirements of the Act may be subject to a variety of sanctions, including civil monetary penalties, injunctions, seizures, fines, and imprisonment, depending on the particular misconduct at issue. Commonly, FDA may issue a warning letter to encourage voluntary compliance with the FD&C Act before initiating further enforcement action. Under one example of recent opioid-related enforcement, in May 2018, FDA issued a number of warning letters to marketers and distributors of kratom products. According to FDA, these products were sold with unproven claims that the products could treat opioid addiction and withdrawal. In the warning letters, the agency states, among other things, that the products are not generally recognized as safe and effective for the referenced uses and are therefore considered unapproved new drugs sold in violation of the FD&C Act. The letters request the parties take immediate corrective action, and include notice of FDA's intention to take further enforcement actions if the recipients fail to comply. Additionally, with respect to the assessment of the benefits and risks of a particular drug, one question that may be raised is whether FDA can withdraw approval for certain opioid medications when it is determined that the benefits of treating pain are outweighed by the potential for abuse. The FD&C Act authorizes FDA to withdraw approval of an approved NDA when, among other things, there is new clinical evidence showing that the product is unsafe for its approved use. FDA must first provide the manufacturer with notice that the agency is proposing to withdraw approval and an opportunity for a hearing on the merits. However, the agency may suspend new drug approval immediately if it is determined that the product poses an immediate hazard to the public health. Although it is not a common occurrence, it has been estimated that FDA has withdrawn approval of approximately 600 new drug and abbreviated new drug applications. FDA has signaled its willingness to withdraw approval of products with serious potential for abuse. In June 2017, FDA requested that Endo Pharmaceuticals recall from market Opana ER—a potent painkiller reformulated to make it difficult to crush and snort. Although the product was intended to curb opioid abuse, it reportedly led to the largest HIV outbreak in Indiana history when addicts resorted to liquidizing and injecting the drug with shared needles. Ultimately, the company announced in July 2017 that it would comply with FDA's request. SUPPORT for Patients and Communities Act and FDA In October 2018, Congress passed the Substance Use-Disorder Prevention that Promotes Opioid Recovery and Treatment for Patients and Communities Act (SUPPORT Act), P.L. 115-271 , comprehensive legislation primarily aimed at opioid misuse and abuse. Title III, subtitle A of the SUPPORT Act contains provisions that amend the FD&C Act in various ways to address the opioid epidemic, including the following: FDA's REMS Authority and Drug Packaging/Disposal Features To promote appropriate prescribing practices and decrease exposure to opioids, the SUPPORT Act bolsters FDA's REMS authority, expressly permitting the agency to compel a REMS if there is a serious risk of overdose or drug abuse. Further, under specified circumstances, FDA may compel manufacturers through this REMS to make drugs available with certain packaging systems (such as packaging that provides a set treatment duration) or safe disposal features to render the drugs irretrievable for illicit uses. FDA Postmarket Authorities and Drug Effectiveness FDA has authority to monitor drugs that are on the market. For instance, FDA may require postmarket labeling changes if the agency becomes aware of certain information about a drug, and postapproval studies or clinical trials under certain circumstances. According to the FDA Commissioner, despite widespread use of opioid analgesics to treat chronic pain, limited data exists on the long-term efficacy and impacts of these products, and further research is warranted. However, prior to enactment of the SUPPORT Act, FDA Commissioner Scott Gottlieb and some Members of Congress indicated that while FDA had authority to request postmarket studies based on drug safety concerns, the agency lacked explicit authority to require studies solely to examine drug efficacy. The SUPPORT Act generally amends the FD&C Act to clarify FDA's authority to require postmarket studies and trials for certain drugs that may have reduced effectiveness over time. The Act also expressly authorizes FDA to compel drug manufacturers or others to make drug labeling changes based on new information related to reduced effectiveness. Finally, the SUPPORT Act calls on FDA to issue guidance on its new authority. Agency Guidance to Promote Development and Use of Nonaddictive and Nonopioid Analgesics To encourage development of new, nonaddictive therapies that treat chronic pain or opioid addiction, the SUPPORT Act directs FDA to hold at least one public meeting and subsequently to issue nonbinding guidance to assist industry stakeholders and health care providers. The meetings and guidance may address, among other things, (1) circumstances under which the agency considers misuse and abuse of controlled substances in reviewing a new drug or device; (2) use of novel clinical trial designs and real-world evidence and patient experience data to develop nonaddictive medical products; (3) standards for, and development of, opioid-sparing data to include on medical product labeling; and (4) application of breakthrough therapy designation for nonaddictive medical products intended to treat pain or addiction. Additional FDA Enforcement Capabilities The SUPPORT Act provides the HHS Secretary with additional enforcement tools to address the opioid epidemic. For instance, under new Section 5569D of the FD&C Act, if the Secretary determines that there is a "reasonable probability that a controlled substance would cause serious health consequences or death," the agency may order manufacturers, importers, distributors, or pharmacists to immediately cease distributing these drugs. Parties subject to the order must have an opportunity to consult with FDA prior to issuance of the order and an informal hearing. Following this hearing, the Secretary may (1) vacate the order based on inadequate evidence to support the order; (2) continue the order ceasing distribution of the drug until a specified date; or (3) amend the order to require a recall. However, if the Secretary determines that recalling a controlled substance presents a greater health risk than not recalling it, the order may not include a recall or a cessation of distribution. The SUPPORT Act addresses the agency's enforcement role with respect to drug importation as well. In collaboration with U.S. Customs and Border Protection, FDA is authorized to inspect, detain, and refuse entry to imported drugs, devices, food, and other products under its jurisdiction. Recently, FDA Commissioner Scott Gottlieb and others have highlighted challenges associated with diverted opioids or illegal drugs that enter the United States through international mail facilities, including inspecting the high volume of items passing through these facilities and procedural difficulties relating to whether a particular product violates the FD&C Act and may be refused entry or destroyed. The SUPPORT Act is intended to streamline the process of refusing entry to diverted or illegal drug products. Among other things, the Act directs the Secretary (acting through the FDA Commissioner) to coordinate with the Secretary of Homeland Security on customs and border protection activities relating to illegal controlled substances and drug imports, including at international mail facilities. The Act also requires the HHS Secretary to work with the Homeland Security Secretary and the Postmaster General of the U.S. Postal Service to provide that import facilities, in which FDA operates, have certain facility and technology upgrades.

According to the Centers for Disease Control and Prevention (CDC), the annual number of drug overdose deaths in the United States involving opioids has more than quadrupled since 1999. CDC estimates that in 2016, more than 63,000 people died from a drug overdose, and approximately 42,000 of these deaths involved an opioid. In combating the opioid epidemic, one central challenge for state and federal regulators is striking a balance between taking aggressive action to fight opioid misuse and addiction, while simultaneously protecting access to medication for patients who experience severe pain. The Food and Drug Administration (FDA)—the executive agency tasked with protecting the public health by ensuring the nation's drug supply is safe and effective—has a pivotal role in addressing these issues. This report focuses on FDA's role as a key player in federal efforts to curb the opioid epidemic. The report provides an overview of FDA's role in approving new prescription drugs, including certain challenges presented by the approval and regulation of opioid products. Next, the report addresses FDA's multifaceted approach in its response to the opioid epidemic, the agency's use of its existing legal authorities under the Federal Food, Drug, and Cosmetic Act (FD&C Act or Act), and recent agency action taken to target the misuse of opioid medications. The report concludes with a discussion of selected provisions of the recently enacted Substance Use-Disorder Prevention that Promotes Opioid Recovery and Treatment for Patients and Communities Act (SUPPORT Act), which amends the FD&C Act and provides FDA with new tools to combat opioid abuse.

Introduction Policymakers at all levels of government are debating a wide range of options for addressing the nation's faltering economic conditions. One option that is receiving attention is accelerated investments in the nation's public infrastructure—that is, highways, mass transit, airports, water supply and wastewater, dams, locks, canals, passenger rail, and other facilities—in order to create jobs while also promoting long-term economic growth. This report presents policy issues associated with using infrastructure as a mechanism for economic stimulus. It begins with two contextual aspects of this discussion, what is the current economic condition and how to define infrastructure. The report then reviews the role of infrastructure investment in economic growth generally and in contributing to stimulating a faltering economy. It discusses key issues, such as setting priorities, resource and governance, and the possible role of "green" infrastructure as part of economic stimulus. Finally, it includes an Appendix with descriptions of a number of infrastructure categories that have recently been mentioned for inclusion in economic stimulus legislation in the 111 th Congress. The Context: Current Economic Conditions Interest in government spending to stimulate economic recovery has intensified recently in response to economic indicators showing significant and continuing deterioration of the national economy. In the third quarter of 2008, real gross domestic product (GDP, the economy's total output of goods and services) fell by 0.5%, and the December 2008 Blue Chip Economic Indicators consensus forecast was for real GDP to decline by 1.1% for all of 2009 and for the unemployment rate to reach 8.1% by the end of 2009. In November, the unemployment rate stood at a 15-year high of 6.7%. Further, on December 1, the nonpartisan National Bureau of Economic Research officially declared that the U.S. economy has been in recession since December 2007; a recession is defined as a broad contraction of the economy not confined to one sector. The economy reportedly lost jobs every month in 2008 for a total of 1.9 million for the year. Fiscal problems are affecting all levels of government. In December, the National Association of State Budget Officers and the National Governors Association reported significant weakening of fiscal conditions in nearly every state and budget gaps for the current fiscal year of approximately $30 billion, in addition to more than $12 billion that has already been cut from state budgets. States face growing expenditure pressures as the economy deteriorates, including increased funding of public assistance programs such as Medicaid. States also face long-term issues such as funding pensions and maintaining and repairing infrastructure. Local governments also are dealing with fiscal pressures. A September survey by the National League of Cities found that city finance officers expect revenue from property, sales, and income taxes to decrease by 4.3% in 2008. The survey also found that 79% of cities expect their finances to worsen in 2009, because of a lag between current economic conditions and effects on city revenue. Consequently, cities are laying off workers, raising fees, closing municipal facilities such as libraries, and cancelling or postponing projects. Much of the public responsibility to build, operate, and maintain infrastructure resides with localities. Cities and states that normally rely on the bond market to finance long-term projects recently have found that market less accessible, as a fallout from financial turmoil on Wall Street, meaning that it is more difficult to borrow money. Municipal bonds, if they can be sold, are lately commanding higher interest rate yields, making it more costly for states and cities to borrow. These higher rates are causing officials to scale back, delay, or cancel projects. As a result of these conditions, states, which under their constitutions are not permitted to operate in deficit, and cities are increasingly looking to the federal government for assistance on a range of policies and projects. Organizations representing states and municipalities have issued agenda documents with both policy and short-term and long-term assistance recommendations for Congress and the Administration, including infrastructure, health care reform, housing, benefit programs for individuals, budget relief and help in accessing capital, and governance. The concept of countering the effect of recessions with legislation to spur job creation through increased spending on public works infrastructure is not new. In recent decades, Congress has done so on several occasions. For example, in 1983 ( P.L. 98-8 ) and 1993 ( P.L. 103-50 ), Congress appropriated funds to a number of existing federal infrastructure and public works programs in hopes that projects and job creation would be stimulated quickly. At least two factors are new this time. One is the severity of the economic downturn (reportedly the worst in 50 years ) which is widely expected to be of long duration, not short. Another is the fact that the current debate about a job-creating stimulus program is merging with discussion among infrastructure advocates that has been ongoing for years about the need for investment to address problems of aging and deteriorating public works. These infrastructure problems have been increasingly recognized by policymakers and the public at large. It is argued that the U.S. investments in public infrastructure have declined significantly in recent decades, to the point that this country is underinvesting in its critical assets, and is failing to construct new facilities or adequately maintain existing systems. The perception that current investment levels are inadequate is in part supported by data which show that, relative to GDP, infrastructure spending has declined about 20%, from 3.06% in 1959 to 2.40% of GDP in 2004. During this same period, spending has shifted from predominantly on capital (63% in 1959, compared with 46% in 2004) to operation and maintenance (37% in 1959, compared with 54% in 2004). In a growing economy, infrastructure should hold its own, but other data show that spending by government at all levels has declined from a high of $1.37 per capita in 1960 to $0.94 per capita in 2004 (in 2006 dollars). During the presidential campaign, candidate Barack Obama pledged to invest in rebuilding the nation's infrastructure, especially transportation systems, in order to create jobs. Since November, President-elect Obama has highlighted immediate investments in infrastructure projects as a key element of his plans to revitalize the economy: The Obama-Biden emergency plan would make $25 billion immediately available in a Jobs and Growth Fund to help ensure that in-progress and fast-tracked infrastructure projects are not sidelined, and to ensure that schools can meet their energy costs and undertake key repairs starting this fall. This increased investment is necessary to stem growing budget pressures on infrastructure projects. In addition, in an environment where we may face elevated unemployment levels well into 2009, making an aggressive investment in urgent, high-priority infrastructure will serve as a triple win: generating capital deployment and job creation to boost our economy in the near-term, enhancing U.S. competitiveness in the longer term, and improving the environment by adopting energy efficient school and infrastructure repairs. In total, Obama and Biden's $25 billion investment will result in 1 million jobs created or saved, while helping to turn our economy around. For now, details of the new Administration's economic stimulus plan, including how much of the total will be devoted to infrastructure and to which infrastructure sectors, are unclear. Defining Infrastructure in Today's Context Most people probably think about roads, airports, or water supply when they refer to infrastructure, having in mind the types of systems or facilities that are publicly provided and are important to the productive capacity of the nation's economy. But some analysts argue that such a conception is too narrow. Accordingly, the term might be defined more broadly to also include spending by the private sector, such as by private utilities that provide electricity or natural gas. In addition, other types of public investment, such as public buildings, may not add directly to the productive capacity of the economy but do represent assets in the nation's capital stock. The current discussion includes no single definition of infrastructure or list of categories or types of infrastructure that might receive assistance as part of economic stimulus, and ultimately it will be defined by those who are responsible for crafting the legislation. The lack of a definition is not unlike infrastructure discussions that have occurred in the past (see the box "What is Infrastructure?" below). Today, policymakers and stakeholder groups appear inclined to define the term broadly to include facilities and categories that vary considerably in the degree of historic federal investment in building or rebuilding physical structures (e.g., highways compared with public schools) and systems that have a long history of combined public and private ownership (water resource projects as well as electric transmission systems, some of which are federally owned, for example). See Table A-1 in the Appendix for information on the level(s) of government or the private sector that typically are responsible for infrastructure. Indeed, today there is considerable blurring between public and private infrastructure, raising more frequent questions about what should be the role of government, including the federal government, in providing infrastructure services. In part, this is due to increasing reliance on the private sectors—through contract operations, full ownership and other arrangements—to provide functions and services that typically are thought of as public. Examples include prisons, passenger rail, and postal services and mail delivery. A relatively new dimension in today's context is the notion of coupling public works with investments in environmentally friendly systems that incorporate renewable technologies or energy efficiency—called "green infrastructure" (see discussion below). The Appendix to this report provides descriptions of a number of infrastructure categories that have recently been mentioned for inclusion in economic stimulus legislation in the 111 th Congress. The descriptions include information on conditions, performance, and funding needs; discussion of investment in each category as a mechanism for economic stimulus; and longer term issues. Infrastructure and the Economy Academics, economists, and policymakers debate two key issues concerning the contribution of infrastructure investment to the economy. One is the general issue of the effects of infrastructure spending and investment on productivity and growth. The second related issue is the role of infrastructure spending, including short-term job creation, as a countercyclical tool in stimulating a faltering economy. Productivity and Output The question of whether or how the availability of public infrastructure, and investments in public infrastructure, influence productivity and growth has long interested academics. One economist describes the issue as follows: The argument is simple. Infrastructure is a public good that produces positive externalities for production. The provision of adequate infrastructure is a necessary condition for private firms to be productive. Even if infrastructure is also provided for its amenity value (i.e. for its direct utility value to individuals) it is obvious that it plays a central role in generating external effects that fundamentally alter the capacity of the economy to produce goods and services. Just imagine an economy without roads or telephones to think about the impact that infrastructure has on productivity. Few would argue that infrastructure isn't important to economic activity. But, important in what precise ways, and to what degree (e.g., new construction or maintenance of existing systems), are questions that have interested researchers. Thus, public roads are important, but by themselves, they don't produce anything. Yet they are linked in complex ways to economic growth. Economically, what is important are the services that roads provide in transporting goods and people, mitigating congestion, etc. Academic interest in the issue of economic payoff associated with public infrastructure spending was motivated in part by recognition of declines in public investment in the early 1970s and declines in economic productivity growth at about the same time. The question for researchers was whether there was linkage, or causality, between public investments and economic productivity and, consequently, whether underinvestment in infrastructure helped to explain the slowdown in productivity growth. Research reported in the late 1980s found that there are very large returns on investment from infrastructure spending and, by implication, argued that part of the U.S. productivity slump in the 1970s and 1980s was due to a shortfall of investing in infrastructure. Some of this early work found that a 10% rise in the public capital stock would raise multifactor productivity (meaning, changes in economic output resulting from the combination of labor, capital, materials, fuels, and purchased services) by almost 4%. This was a very high estimate and, as such, was very controversial. Subsequent investigations by others found that the initial results were highly sensitive to numerous factors, such as minor changes in data, or time period, or sectors of the economy that were analyzed. During the 1990s, further research on this issue modified the methodology used to analyze the economic effects of investing in public infrastructure and either affirmed or challenged the findings of the initial work. Although not all subsequent studies found a growth-enhancing effect of public capital, a general consensus has developed over time that there are positive returns on investment in public infrastructure, but that the impact is less than was first reported. Some of this research suggests that investments in energy infrastructure have the greatest impact on long-term private employment and investment, followed by mass transit, and water and sewer. Another important conclusion of more recent research is that both the average return and range of return to the economy vary, based on the type of infrastructure and the amount of infrastructure already in place. In other words, the larger the existing stock and the better its efficient use and current quality, the lower will be the impact of new infrastructure. Also, the effect of new public investment will crucially depend on the extent to which spending aims to alleviate bottlenecks in the existing network of infrastructure systems and facilities. Infrastructure Job Creation One of the ways in which Congress has tried to spur job growth and stem job losses to mitigate the impact of economic downturns is by directly raising demand for (i.e. increasing spending on) goods and services. That is to say, Congress has substituted increased federal spending for decreased consumer purchases. Most often in the postwar period, Congress has focused its efforts at direct job creation by increasing federal expenditures on public works. When Congress has considered raising spending on infrastructure to help stimulate a flagging economy, "how many jobs will be created" is a commonly asked question. Although all spending increases labor demand through direct and multiplier effects, the nature and number of jobs varies in the first round. Job creation estimates often are based on input-output (I-O) models of the economy. These models show, for example, the dollar value of concrete produced by the nonmetallic mineral product manufacturing industry and the dollar value of steel produced by the primary metal manufacturing industry that are used by the construction industry to produce its various final outputs (e.g., bridges, roads). The output requirements from each intermediate and final goods industry must then be converted to employment requirements. Thus, job creation estimates reflect employment directly and indirectly dependent on/supported by demand for an industry's products. Induced jobs, that is, the number of jobs that result from purchases of goods and services made by those in direct and indirect jobs, may be included as well. Estimates of induced jobs are considered tenuous, however. Job creation estimates vary from one source to another depending in part on industry definition, data sources, and time period. The Federal Highway Administration ( FHWA) is the source of the most widely cited estimate of jobs supported by federal highway investments. According to the FHWA's latest update, in 2007, an expenditure of $1 billion on highway construction (without a state match of $250 million) could support 27,822 direct, indirect, and induced jobs. The FHWA analysis is careful to observe that it addresses jobs supported by highway investments, not jobs created Alternatively, an employment requirements table that the U.S. Bureau of Labor Statistics (BLS) makes publicly available for use by researchers, which differs from that used by the FHWA (and does not include induced jobs), suggests that, in 2007, 13,860 jobs were directly and indirectly dependent on $1 billion of spending in the construction industry (i.e., construction of buildings, heavy and civil engineering construction including highways, and specialty trade contractors). The 13,860 direct and indirect jobs per $1 billion of total construction expenditures in 2007 is somewhat more than the 11,768 direct and indirect jobs estimate of the FHWA for each $1 billion of highway expenditures in 2006. Another example of an infrastructure job creation estimate is provided by a CRS analysis based on the U.S. Bureau of Economic Analysis' Regional Input-Output Modeling System (RIMS II) and the BLS' employment requirements table described above. It suggests that between 8.1217 and 12.6231 direct and indirect jobs might be created for each $1 million spent on water reuse activities such as Title XVI projects carried out by the Department of the Interior, which provide supplemental water supplies by reclaiming and reusing wastewater and naturally impaired ground and surface water. Within the utility sector, the "water, sewage and other systems industry" is the proxy in this analysis for water reuse infrastructure activities. Unlike the BLS and FHWA models, RIMS II provides state estimates of job creation. (See Table 1 .) Through its use of regional data, RIMS II addresses one of the caveats mentioned by the FHWA, namely, the reliance of national models on average data which may differ from combinations of construction materials and labor inputs in the specific geographic areas where projects are undertaken. The Contribution of Infrastructure to Economic Stimulus Since mid-2008, there have been increasing calls for Congress and the Administration to address the nation's significant economic difficulties through a variety of policy approaches. On the one hand, some argue that economic stabilization can best be achieved through monetary policy (i.e., the Federal Reserve's ability to adjust interest rates), coupled with automatic fiscal stabilizers. Others support a fiscal stimulus, and policymakers are debating a range of options for doing so. In February 2008, Congress and the Administration agreed to legislation ( P.L. 110-185 ) that prominently included tax rebates for individuals as a means of stimulating the ailing economy. Effects of that legislation on the economy are not yet fully known. Under discussion now is a second stimulus package, and in that connection, many others now advocate using direct fiscal stimulus through a combination of short-term infrastructure investments, state fiscal relief, and expanded unemployment insurance and food stamps. A wide range of experts—including economists who generally differ in their economic policy views, such as Martin Feldstein and Paul Krugman —contend that, because neither consumers nor businesses are spending, a massive infusion of government spending is needed quickly to energize economic activity. Infrastructure investment, it is argued, will be an important source of stimulating labor demand, which is lacking in the current labor market, and enhancing U.S. productivity through long-neglected investments in roads, bridges, water systems, etc. Somewhat ironically, the nation's economic downturn presents an opportunity, according to this view, to stimulate the economy by spending on projects to address unmet infrastructure needs. These needs are presented in the finding of the American Society of Civil Engineers (ASCE) that the condition of the nation's infrastructure merits a letter grade of "D" and that U.S. funding needs total $1.6 trillion. ASCE reported the condition of a dozen categories of infrastructure, including roads ("Americans' personal and commercial highway travel continues to increase at a faster rate than highway capacity, and our highways cannot sufficiently support our current or projected travel needs"), dams ("the number of dams identified as unsafe is increasing at a faster rate than those being repaired"), wastewater ("the physical condition of many of the nation's 16,000 wastewater treatment systems is poor, due to a lack of investment in plant, equipment and other capital improvements over the years"), and schools ("The Federal government has not assessed the condition of America's schools since 1999, when it estimated that $127 billion was needed to bring facilities to good condition. Other sources have since reported a need as high as $268 billion"). While there is growing momentum for more infrastructure investment, some analysts are cautious about the effectiveness of this type of fiscal stimulus because of one key issue: timing. This concern was described in testimony by the Director of the Congressional Budget Office. The timing of fiscal stimulus is critical. If the policies do not generate additional spending when the economy is in a phase of very slow growth or a recession, they will provide little help to the economy when it is needed.... Poorly timed policies may do harm by aggravating inflationary pressures and needlessly increasing federal debt if they stimulate the economy after it has already started to recover. **** For federal purchases [of goods and services, such as infrastructure spending], the primary issue in targeting the spending is that of timing ... because many infrastructure projects may take years to complete, spending on those projects cannot easily be timed to provide stimulus during recessions, which are typically relatively short lived. By definition, the goal of stimulus spending is to get money into the economy swiftly. But that objective conflicts with the reality of building infrastructure projects that typically are multiyear efforts with slow initial spendout. CBO notes that public works projects are likely to involve expenditures that take a long time to get underway and also are spread out over a long time. Even those that are "on the shelf" generally take time to inject money into the economy. For major infrastructure, such as highway construction and water resource projects, the initial rate of spending can be 25% or less of the funding provided in a given year. Based on CBO information, the National Governors Association reported spendout rates for several infrastructure categories: About 68% of highway and 45% of transit obligations spend out over the first two years of a project. About 19% of airport obligations spend out in the first year and another 42% in year two. About 24% of drinking water and wastewater obligations are expended over two years, and 54% over three years. Economist Mark Zandi, who favors a fiscal stimulus package that includes increased infrastructure spending, also cautions that it takes a substantial amount of time for funds to flow to builders, contractors, and the broader economy. "Even if the funds are only used to finance projects that are well along in their planning, it is very difficult to know just when the projects will get underway and the money spent." Advocates of infrastructure spending have two responses to this concern. First, they point out that because economists now expect the current recession to be of long duration (longer than 12 months), projects with extended timeframes can still contribute to the economy's recovery, which is likely to be a two-year undertaking. Thus, the general concern about timing is less relevant, compared with previous shorter recessions, they say. Second, because every major infrastructure category has significant backlogs of projects that are "ready to go" except for funding, advocates are confident that large amounts of actual construction work can begin quickly (see discussion below, " "Ready to Go" Projects "). Some economists contend that public infrastructure investments stimulate economic growth only if the impact of the infrastructure outweighs the adverse effects of higher taxes that are needed to finance the investment, or if it outweighs the adverse effects of spending cuts in other areas, such as properly maintaining existing public works systems. Higher deficits that result from stimulus spending slow economic growth in the long run, it is sometimes said, because government borrowing crowds out private investment. Critics of this view say that this concern is valid in non-recessionary times when the economy is working at full capacity, because under those circumstances, government spending just changes the mix of jobs with no change in the overall quantity or quality of labor. According to this view, government spending in a recession affects resources and labor that are idle, and it does not fully displace private investment. Other economists say that if federal assistance merely provides fiscal relief by paying for spending that would have occurred anyway—that is, if federal dollars merely substitute for or replace local dollars invested in the same activity—it provides no economic stimulus. In response, state and local public officials say that that is not the case in today's economy. Because of the current recessionary pressures that they face, states and cities have been cancelling infrastructure projects. Another way of describing this situation could be to say that what is under discussion is really not entirely about stimulus, but it is better termed holding state and local governments harmless in order to encourage them to carry out projects that they couldn't otherwise do, because of budget shortfalls. Issues Funding infrastructure is a long-term investment, not quick-fix spending, that should lead to something durable, useful, and financially productive. The long-term nature of such investments can be at odds with the stimulus goal of quickly injecting money into the economy. Thus, the overriding question in debating infrastructure spending as part of economic stimulus is, what will the stimulus buy? Two important considerations regarding any fiscal stimulus proposal are, will the proposal produce stimulus quickly, and will it produce a significant amount of stimulus, relative to its budgetary cost. These issues are explored in the remainder of this report. Setting Priorities and Determining Funding Needs Traditionally, setting priorities for infrastructure spending is based on a combination of factors. Estimates of funding needs are one factor that is commonly used as a measure of the dimension of a problem and to support spending on some activities relative to others, as in: funding needs for X are much greater than for Y, therefore, society should spend more heavily on X. In the infrastructure context, funding needs estimates try to identify the level of investment that is required to meet a defined level of quality or service. Essentially, this depiction of need is an engineering concept. It differs from the concept of "ready to go" projects (discussed below), which is being used in connection with stimulus proposals. It also differs from economists' conception that the appropriate level of new infrastructure investment, or, the optimal stock of public capital (infrastructure) for society, is determined by calculating the amount of infrastructure for which social marginal benefits just equal marginal costs. The last comprehensive national infrastructure needs assessment was conducted by the National Council on Public Works Improvement that was created by the Public Works Improvement Act of 1984 ( P.L. 98-501 ). The Council reported in 1988 that government outlays for public works capital totaled about $45 billion in 1985 and that a commitment to improve the nation's infrastructure "could require an increase of up to 100 percent in the amount of capital the nation invests each year." This estimate of future needs by the Council may have been imprecise because of the inherent difficulties of needs assessments, something its report discusses in detail. It is worth highlighting a few of these key difficulties as a cautionary note when attempting to interpret infrastructure needs assessments discussed in the Appendix to this report and elsewhere. One of the major difficulties in any needs assessment is defining what constitutes a "need," a relative concept that is likely to generate a good deal of disagreement. For this reason, some needs assessments are anchored to a benchmark, such as current provision in terms of physical condition and/or performance. This current level of provision may be judged to be too high by some and too low by others, but nonetheless it provides a basis for comparison as future spending needs can be estimated in terms of maintaining or improving the current condition and performance of the infrastructure system. Needs estimates in highway and public transit are calculated in this way by the U.S. Department of Transportation (DOT). The Environmental Protection Agency (EPA) similarly estimates total U.S. funding needs for wastewater treatment facilities. EPA defines a "need" as a project, with associated costs, that addresses a water quality or public health problem existing as of January 1, 2004. Other federal agencies estimate the funding necessary to bring the current infrastructure system to a state of good repair. The resulting funding estimate is sometimes referred to as the infrastructure "backlog." Again, among other problems, such as inventorying the current condition of infrastructure and calculating repair costs, the needs estimate is affected by judgments about what constitutes a state of good repair. It is worth noting, too, that needs assessment are often conducted by organizations with a vested interest in the outcome. This is most obviously a concern when a needs assessment is conducted by an advocacy group, but may also occur with government agencies. A second major difficulty with needs assessments is estimating future conditions, especially consumer demand for services that infrastructure provides. To begin with, estimating demand is difficult because it is based on a host of assumptions such as the rate of population and economic growth. Typically, the longer the time period over which conditions are forecast, the harder it is to accurately predict them. Particularly hard to predict, and, thus, the effect they have on infrastructure needs, are structural changes in the economy and technological change. In addition, however, consumer demand can vary enormously depending on how a service is financed and priced, as well as other public policy decisions including regulation and conservation. For example, highway infrastructure is primarily financed by fuels and other taxes that provide a vague signal or no signal at all about the total cost of driving, particularly the external costs such as the fuel and time wasted in congested conditions. Highway tolls, on the other hand, particularly those that fluctuate in line with congestion, provide a direct price signal for a trip on a certain facility at a certain time of the day. Pricing highway infrastructure in this way has been found to reduce travel demand, thereby affecting infrastructure need. Consumer demand can sometimes be met without infrastructure spending. For example, water supply needs can be reduced by employing water conservation methods. Finally, it is worth mentioning that the need for public funding to supply infrastructure, including federal support, may often be an open question because the roles of the public and private sector can and do shift over time. Even within the public sector, the roles of federal, state, and local governments change and these shifting intergovernmental relationships may even affect the assessments of infrastructure needs. A third major difficulty with infrastructure needs assessments is that needs estimates for individual elements of public infrastructure are rarely comparable. Some assessments include only capital spending, others include both capital and operation and maintenance (O&M) spending. Some estimates of need are developed for the purposes of short-term, fiscally constrained spending plans, while others are developed to assess long-term needs based on current system condition and performance, future demand, and the effects of pursuing different policy options. Some needs assessments are for public sector spending by all levels of government, while others focus only on federal spending. Furthermore, needs estimates are rarely directly comparable because of differing underlying assumptions, such as those about economic and population growth, based on when the assessment is being done and for what purpose. Needs surveys are likely to be conducted at different times, thus will be expressed in different years' dollars. Comparing dollar estimates of infrastructure needs from different assessments is difficult. Many estimates are prepared in nominal dollars for the reference year, while others, particularly multi-year estimates, are sometimes prepared in constant dollars for a base year. Because there are different ways to inflate and deflate nominal dollar estimates, it should not be assumed that dollar estimates for the same year are necessarily comparable. Because of major differences in coverage and methodology, individual needs assessments cannot be added together to provide a single estimate of future public infrastructure needs, despite the political desire to do so. Moreover, as needs assessments are typically prepared separately, there may be instances where a need for a type of infrastructure is included in more than one estimate, resulting in double counting, and other instances of omission, resulting in undercounting. As separately estimated, these assessments also ignore competitive and complementary situations in which spending levels in one area may affect needs in another. For example, in the case of transportation infrastructure, an improved freight rail line might reduce the need to improve the highway system to accommodate truck traffic. "Ready to Go" Projects In September 2008 the House approved a job creation stimulus bill with $25 billion in FY2009 supplemental funding for highway, public transit, airport, passenger rail (Amtrak), wastewater and drinking water, water resources, and public school modernization/renovation programs ( H.R. 7110 ). Under the legislation, which failed in the Senate, most of the funding was to go to projects that could award contracts based on bids within a certain number of days of enactment, generally 120 days. Because of the urgency of responding to the economic downturn, emphasis has been on projects that could move to construction in 90 or 120 days, which are often referred to as "shovel ready" or "ready to go" projects. In an effort to support arguments for generous spending levels in a new stimulus bill, interest groups have come forward recently with lists and estimates of "ready to go" projects. These lists are fluid and evolving. In November, the National Governors Association identified $43 billion in "shovel ready" projects for roads ($18.9 billion), transit ($8 billion), passenger rail ($0.5 billion), wastewater ($9.2 billion), and drinking water projects ($6.0 billion). This estimate was essentially a compilation of information from other organizations. In mid-December, the U.S. Conference of Mayors identified $63 billion in "ready to go" projects in more than 400 cities. This list included nearly 9,000 projects for highways ($24.6 billion), transit ($8.8 billion), airports ($4.5 billion), passenger rail ($1.1 billion), wastewater and drinking water ($18.9 billion), and schools ($4.8 billion). The list was 30% bigger (in dollars) than an estimate from this group released 10 days earlier. State and local water agencies have reportedly identified from $9 to $20 billion in wastewater treatment projects and $10 billion in drinking water projects that are ""ready to go"." The American Association of State Highway Transportation Officials identified more than 5,100 road and highway projects totaling $64 billion, and the Association of Public Transit Officials identified more than 700 transit projects totaling $12.2 billion that are "shovel ready." The American Public Works Association identified more than 3,600 "ready to go" projects in 43 states totaling $15.4 billion for roads, water supply and wastewater, and other local public works. It is difficult to know what to make of such estimates, since the criteria used to develop them are largely unknown. Generally, the term "ready to go" is being used to refer to projects that lack funding but otherwise have been designed, engineered, and have cleared environmental permitting and other requirements, such as necessary land acquisition, and are ready to proceed. But that is not a standardized definition found in law, regulation, or technical guidance. Arguably, it is in the interest of those that are developing the lists to present estimates that demonstrate significant needs. Some projects may have permits, but sponsors might lack easements to or ownership of land in question. Experts point out that, unless a project has already been bid (a time-consuming process), even with all permits in hand, it still may not be able to proceed in 90 or 120 days. Without a recognized methodology for vetting them, the true status of the projects that stakeholder groups have identified is uncertain. Many of the "ready to go" lists include estimates of job creation that is expected to result from the identified projects. For example, the Conference of Mayors says that 790,910 jobs will be created from the infrastructure projects on its mid-December list. The methodology for deriving these estimates is often unstated, but in many cases is based on that used by the FHWA (discussed above). Two additional issues are apparent. One is whether spending undertaken as part of a stimulus program will represent investment in long-term assets for society. Some of the lists prepared by stakeholder groups identify projects with some description (for example, the Conference of Mayors list), but others only identify state-by-state project totals. Critics contend that lists of "ready to go" projects are likely to include many with marginal value, such as projects with plans that have been backlogged for some time because they lack sufficient merit, but for which there now is an opportunity to get funding. Under a stimulus program, the majority of actual funding decisions will be made by state and local officials with responsibility for determining priorities. Proponents believe that citizens will hold public officials accountable for the quality of projects. A second issue, related to the first, concerns the tension between funding activities that will create jobs quickly and the desire to invest in projects that will have sustained value. This also relates to the issue of timing, discussed previously. Critics worry that projects will be small and won't solve long-term problems or have strategic value. One such critic of additional infrastructure spending noted, "If additional infrastructure is worthwhile, it should be constructed. Such determinations are most likely to be accurate, however, when they are made without the haste associated with an attempt to respond to economic weakness." Proponents of a new stimulus program can be expected to try to balance the dual objectives of spending money quickly and investing for the long-term. Some types of public jobs programs may support jobs that have little long-term impact, such as hiring workers to sweep streets or rake leaves, sometimes called "make work." Projects that involve substantial new construction are slower to complete and to impact jobs, but often have a political appeal because of high visibility to the public. Some infrastructure, such as highway resurfacing and minor road repairs or replacement of pumps and compressors at water facilities, does benefit the value of the nation's capital assets and can be done more quickly than new construction. Likewise, acquiring new clean fuel buses or rehabilitating transit stations can occur more rapidly than extending collector sewer lines into unsewered communities. Many public officials are hoping that there will be room in an emerging stimulus program for both short-term and long-term infrastructure projects. Getting the Job Done: Resource and Governance Issues Two additional issues are important in considering how infrastructure stimulus spending is done. One is whether there will be adequate labor and other resources available to supply activities on the scale that some now contemplate. The other is how policymakers will ensure accountability for federal funds that will be spent. Currently, the state of the U.S. economy is such that there is excess capacity of both labor and materials for infrastructure projects. Large number of workers are unemployed, especially in the construction sector, which reported a 12.1% unemployment rate in November 2008. It is widely believed that a large number of those workers (many of whom had been employed in residential construction) could be employed on infrastructure construction projects, but how transferable those skills are to infrastructure projects is an open question. There is unlikely to be total substitutability, that is, unemployment will not disappear. It is possible, however, that some skills or expertise could become scarce, as a result of increased demand due to greater construction activity in multiple sectors. The same is true regarding materials used in construction. Industry officials believe that supplies of materials such as concrete and steel, and equipment such as pipes and valves, are adequate to meet additional demand, or will be available when needed. As with labor, however, it is an open question whether greatly increased demand across multiple sectors will lead to some scarcities. Resource issues also encompass the capacity of government to oversee projects that will be undertaken through a stimulus program. Some stakeholder groups advocate a stimulus program in which funds are directly disbursed by the federal government in the form of grants to project sponsors. This would differ from the current practice of most infrastructure assistance programs in which federal funds are provided to states, and they in turn select qualified projects and distribute monies locally. Some local government groups contend that state agencies are slow to make decisions and award funds, thus frustrating the goal of stimulating economic activity quickly. Unsurprisingly, states prefer that stimulus funds be allocated and distributed according to established selection and delivery mechanisms that include criteria for project priorities and eligibilities and contain fiscal safeguards, such as auditing requirements. Altering such procedures would be highly disruptive, states say. If a stimulus program were to feature direct federal grants, federal agencies would face significant additional grants management responsibilities for which most are likely to be unprepared. Another concern of some stakeholder groups is with programmatic and other requirements that typically apply to receipt of federal assistance. These range from program-specific planning mandates, procurement rules, and set-asides for purposes such as assisting economically disadvantaged communities, to cross-cutting requirements dealing with a variety of environmental, social, economic, and other issues, such as compliance with the Clean Air Act, Civil Rights Act of 1964, and the Davis-Bacon Act. These cross-cutting requirements promote and regulate national policy goals such as equal employment opportunity or protection of endangered species. Some groups contend that it would be appropriate to suspend these requirements in order to facilitate project spending, but not all are likely to support doing so. Waiving existing rules and policies that govern financial assistance programs could be seen as undercutting the numerous policy objectives that the requirements are intended to meet. Further, projects that are considered ""ready to go"" in terms of planning, design, etc. arguably have already complied with all or most of these requirements, so waiving them may not affect project timing. State match requirements present a different issue, according to some groups. They propose that Congress temporarily waive requirements in some programs that states must match a percentage of the federal funds that they receive with non-federal money. For example, the federal programs that provide assistance for highways, drinking water projects, and wastewater treatment plant construction require a 20% state match to ensure that states have a fiscal investment in projects and to enlarge the available pool of funds that can be disbursed to localities. Because state budgets already are severely pressed by the recession, many argue that they do not have the fiscal resources for this type of match, especially if a stimulus program provides a much larger amount of funds than states have recently been receiving. The overriding governance issue, for all levels of government, is ensuring accountability for funds that will be spent through a stimulus program. The amounts of federal dollars committed to such a program are likely to be enormous (some advocates are proposing $850 billion or more in total stimulus, to include as much as $350 billion for infrastructure) and other direct spending, making it particularly important for the public to be assured that decisions involving public dollars are made quickly yet with transparency, that investments are made in quality projects, and that projects have adequate oversight. One group, Building America's Future, recommends that states and cities should have to track and report on how the money is spent and how many jobs are created. How this issue will be addressed legislatively is unknown for now. Is There a Role for "Green Infrastructure" as Part of Economic Stimulus? President-elect Obama's agenda includes plans to "create millions of green jobs" through a variety of actions, such as increased use of renewable sources of electricity (i.e. wind and solar), home weatherization, and development and implementation of "next generation" vehicles. The concept that he and others advocate is, broadly speaking, to couple growing the economy and creating jobs with investments that will promote clean energy and environmental protection. Several interest groups have stepped forward with proposals for inclusion in a stimulus package. Among these, the Center for American Progress (CAP), a public policy and research think tank, has recommended green investment projects totaling $100 billion as part of "A Strategy for Green Recovery." Also, the Apollo Alliance, a coalition of labor, environmental, business, and community leaders, has proposed a 10-year, $500 billion program to create five million "green" jobs. Several questions arise concerning these proposals. First, what, exactly, is "green infrastructure?" The term is less precisely defined than is traditional infrastructure (see page 8), which some "green" advocates now refer to as "gray infrastructure." It has been defined as "strategically planned and managed networks of natural lands, working landscapes and other open spaces that conserve ecosystem values and functions and provide associated benefits to human populations," including natural elements such as wetlands and grasslands. For example, it describes the management of stormwater runoff through the use of natural systems, or engineered systems that mimic natural systems, to treat polluted runoff before it reaches streams or lakes. But in the current context of economic stimulus, the term extends more broadly to include support for constructing the manufacturing infrastructure to develop and commercialize various technologies that are more energy efficient (e.g, advanced vehicle batteries) or more environmentally friendly (e.g, investments in renewable energy sources and the electricity grid to transmit and distribute clean energy). Particular attention has been given to mass transit projects that can decrease energy consumption and reduce global warming pollution and other projects such as retrofitting schools and public buildings to use clean energy. A second question is, can investment in "green" projects occur quickly enough to help stimulate the economy out of the current recession? That is, are there "ready to go" "green" projects? As previously discussed, the key to stimulus spending is to get funds moving quickly into the economy. However, many of the proposals by green economy proponents were not conceived for the purpose of quickly stabilizing or increasing the number of jobs in the nation, or in industries particularly hard hit by the current recession. Studies like that of CAP recommend categories of projects to create green jobs, such as full funding of federal energy-efficiency programs, which "can start stimulating the economy relatively rapidly" and others, such as new authorization for grants to states to support manufacturing plant retooling to produce clean and energy-efficient technologies, that are "less fast-acting." Eighty percent of CAP's recommended funding would be for "less fast-acting" programs. Critics say that the types of "green" projects under discussion are pricey and would do little to stimulate the economy quickly, but proponents contend that "green" investments represent a downpayment on long-term economic growth and should be done even over a somewhat longer time period. One environmental advocacy group, American Rivers, reportedly has identified 194 water-related green infrastructure projects totaling $1.1 billion that are "ready to go" within six to nine months. The types of projects include installing green roofs, raingardens, and permeable pavement that can reduce the need for new wastewater treatment plants and stormwater and sewer pipes; restoring wetlands and natural floodplains; and planting urban forests. A final question is, what is the job creation potential of "green infrastructure"investments? Although all stimulative spending ultimately increases labor demand, the first round effects vary by the type of spending. This question is addressed in a recent CRS report. According to the CRS analysis, estimating the number of jobs dependent upon green infrastructure activities presents a greater challenge than estimates related to infrastructure projects as traditionally defined. The basis for most data collection by U.S. statistical agencies is the North American Industry Classification System (NAICS). It currently does not identify separately so-called green industries (e.g., those that utilize renewable resources to produce their outputs, or those that manufacture goods which minimize energy use). Within NAICS, the electric utility industry is disaggregated into hydroelectric, fossil fuel, nuclear, and other power generation, transmission, and distribution. Such renewable sources of energy production as wind, solar, and biomass are not uniquely recognized; they are included in the "other" category. If harnessing the wind to produce electricity and plant material to produce biofuel requires a substantially different mix of inputs than relying on coal and gasoline, for example, the conventional input-output (I-O) model does not seem well-suited as a basis for estimating the number of jobs supported by these green activities. Similarly, within NAICS, the building construction industry does not have a unique category for "green" retrofitting (e.g., installing additional insulation, fluorescent lighting, or energy-efficient heating and air-conditioning systems). Retrofitting likely requires a combination of inputs from supplier industries that differs from the mix for the top-to-bottom construction of buildings, once again making use of conventional I-O models problematic. This recognized difficulty generally is either not mentioned, or how it is dealt with is not described, in analyses of green job creation, according to the CRS report. The CAP study, mentioned above, does address the problem. The researchers explain that because "the U.S. government surveys and accounts that are used to construct the input-output tables do not specifically recognize wind, solar, biomass, building retrofitting, or new mass transit as industries in their own right," they created synthetic industries by combining parts of industries for which data are available. The researchers provided an example in the case of the biomass "industry:" they constructed it by combining the farming, forestry, wood products, and refining industries; then they "assigned relative weights to each of these industries in terms of their contributions to producing biomass products." As discussed in CRS Report R40080, Job Loss and Infrastructure Job Creation During the Recession , further complicating the matter is the context and manner in which estimates of green jobs generally are presented. Studies often develop employment projections based on differing sets of assumptions and time horizons. For example, some attempt to estimate the number of direct and indirect jobs 10 or more years in the future that are supported by an assumed increase in the demand for energy that is met by an assumed shift during the projection period from coal to wind and geothermal power generation. Some reports also include induced employment (see " Infrastructure Job Creation " above), but this is not always made clear. In addition, some analyses relate to a particular state. Their results may not be generalizeable to other areas, because state economies have different mixes of industries and may not be able to provide any or all of the inputs for a particular green output. The analyses also may express job estimates per unit of power generated by renewable resources and saved by increased demand for energy-efficient products and equipment, rather than per dollar of investment in green activities. And, the assumptions and methodologies underlying the job creation estimates often are not clearly articulated, which makes thoughtful review of the results very difficult. For these reasons, policymakers considering which if any green infrastructure programs to fund to create and preserve jobs in the near term to mitigate the recession's impact on U.S. workers may not find helpful many green economy studies. Appendix. Infrastructure Sector Categories This Appendix provides descriptions of a number of infrastructure categories that have recently been mentioned for inclusion in economic stimulus legislation in the 111 th Congress. The sectors are highways and bridges (page 22 ), transit (page 23 ), airports (page 25 ), passenger rail (page 27 ), water resources (page 30 ), wastewater (page 32 ), drinking water (page 34 ), electric transmission (page 36 ), schools (page 39 ), federal public buildings (page 41 ), and broadband (page 42 ).This list is not meant to be exclusive or definitive of categories that Congress and the Administration may consider. Evolving legislative proposals may include assistance for some or all of these, and could include others, as well. The descriptions include information on conditions, performance, and funding needs of each category; recent federal assistance; discussion of investment in each category as a mechanism for economic stimulus; and identification of other key issues for the sector. Table A-1 summarizes the level(s) of government and/or the private sector that typically are responsible for financing, policy, and standard setting for the infrastructure categories described in the Appendix. Highways and Bridges There are almost 4 million miles of highways in the United States. The vast majority of these highways are owned and operated by state and local governments, 20.4% and 76.5% respectively. Only 3.1% of highway mileage is federally owned and almost all of this mileage is in national parks, national forests, military bases, and other federal facilities. Just over 75% of U.S. highways are in rural areas, but these highways carry only 35.9% of total traffic as measured by vehicle miles traveled (VMT), and of this rural total almost half is on rural interstate highways and other major arterial highways. Conversely, the much smaller urban highway system carries fully 64.1% of all traffic, with urban interstates alone accounting for 15.4% of the total. The U.S. highway system has almost 600,000 bridges. Again, state and local governments own and operate almost all of the bridges in the U.S. system. As is the case for the highway system, a relatively small number of bridges carry the bulk of national traffic. Interstate highway bridges and bridges on arterial highways carry almost 90% of average daily traffic (ADT), with urban interstate bridges alone carrying almost 35% of ADT. Conditions, Performance, and Funding Needs There is broad consensus in the transportation community that U.S. highway and bridge infrastructure is in need of considerable investment in the years ahead, largely to accommodate future growth in passenger and especially freight traffic. This need exists in spite of the fact that increased federal, state, and local spending over the last decade and a half has, according to the Department of Transportation, generally resulted in measurable improvement to the condition and performance of much of the nation's highway and bridge system. This improvement has been particularly notable for bridges, where the number of structurally deficient bridges was cut almost in half between 1990 and 2007. According to a 2007 report by a congressionally established commission, spending on surface transportation by all levels of government needs to average somewhere between $145 billion and $276 billion per year depending on whether the goal is to maintain the existing system at a high level or expand the system to facilitate system growth. This compares with expenditure of $68 billion on surface transportation nationwide in 2007. It should be pointed out, however, that there are other estimates of need that are considerably below the levels espoused by the Surface Commission. Federal Assistance The federally operated, state administered, federal-aid highway program is the major conduit for federal funding of surface transportation infrastructure. FY2009 authorizations for this program amount to almost $42 billion. The majority of funding in the federal-aid program is provided through seven formula programs (also referred to as apportioned programs). Among these is a separate bridge program. Because of transferability and flexibility provisions in the program, states have considerable leeway in spending funds for various types of surface transportation infrastructure. The existing federal-aid program was last authorized in FY2005, and this authorization expires at the end of FY2009. Legislation reauthorizing the program is likely to be considered during the 1 st Session of the 111 th Congress, and this issue is still expected to dominate the congressional transportation agenda during the year ahead. Highways and Bridges as a Mechanism for Economic Stimulus Building and repairing highway and bridge infrastructure is often seen as a way to put people and assets to work constructively and to create economically valuable assets during a recessionary period. The principal argument against infrastructure spending is that it tends to be counter-cyclical, meaning that the slow spending nature of many large infrastructure projects is such that the benefit to the economy does not arrive in full measure until after the recession is largely over. For example, large bridge and highway construction projects often take multiple years to plan and construct. Transportation industry groups counter this argument in part by pointing out that there is an existing backlog of projects in the states that are "ready to go" and could put people and assets to work in short order. The American Association of State Highway and Transportation Officials (AASHTO), the principal interest group for this sector, has compiled a list of over 5,200 projects that it believes could be started quickly, creating a significant number of new jobs in the process. According to AASHTO and others, focusing on these projects would make a significant dent in the existing national backlog of projects that could not be constructed for many years if their funding was to rely on the current federal-aid highway program. Issues for Highways and Bridges There is some concern that using "ready to go" project lists will not result in building the most important infrastructure and will not necessarily build it in the places most impacted by the ongoing recession. For example, Utah is identified as having the largest share of projects in the AASHTO "ready to go" list, yet unemployment is below the national average in that state. There also are concerns that there are insufficient resources, labor, management, equipment, materials, etc., to allow for speedy spending of stimulus funds. An additional concern is that many states have announced cutbacks in infrastructure spending due to their own budget problems. As a result, the extent to which stimulus spending might serve as a substitute for foregone state spending is unclear, thus raising questions about whether the stimulus will provide the levels of infrastructure improvement and jobs that are expected by proponents. Transit Public transit infrastructure includes the track, stations, vehicles, and associated facilities and equipment owned and operated by more than 6,000 transit providers in urban and rural areas. The main forms of public transit service, known as "modes," are bus, heavy rail (subway and elevated), commuter rail, light rail, paratransit (also known as demand response), and ferryboat. About 60% of transit trips are made by bus, followed by heavy rail (29%), commuter rail (4%), and light rail (4%). Demand response accounts for a little more than 1% of all transit trips, and ferryboat a little less than 1%. Conditions, Performance, and Funding Need As a result of increases in overall government spending over the past decade, transit service provision has grown, and the condition and performance of transit systems have generally improved. Nevertheless, in its most recent assessment of transit needs, the Department of Transportation estimated that the capital cost to maintain the current condition and operational performance of transit systems in the United States from 2005 through 2024 is 25% more annually than is currently being spent by all levels of government. In 2004, transit capital spending by all levels of government was $12.6 billion, $3.2 less than the $15.8 billion that DOT estimated will be needed annually over the next 20 years. Federal Assistance The federal transit program administered by DOT's Federal Transit Administration (FTA) is a collection of individual programs, each with different funding distribution mechanisms and spending eligibility rules. The two major transit programs are the Urbanized Area Formula Grants Program and the Capital Investment Program. Of the $10.4 billion authorized by SAFETEA ( P.L. 109-12 ) for transit programs in FY2009, the Urbanized Area Formula Program accounts for about 40% of the total ($4.2 billion), and the Capital Investment Program accounts for 43% ($4.5 billion). The Capital Investment Program has three elements, the Bus and Bus Facilities Capital Program, the Rail Modernization Program, and the New Starts Program that are funded on a roughly 20-40-40 percentage share of program funds respectively. The remaining 17% of federal transit monies ($1.7 billion) authorized by SAFETEA in FY2009 funds several other programs, such as the Other Than Urbanized Area Formula Program (commonly referred to as the Rural Formula Program), the Elderly Individuals and Individuals with Disabilities Formula Program, the Jobs Access and Reverse Commute Program, as well as state and metropolitan planning, research, and FTA operations. Although federal transit programs focus on supporting capital expenses, about 30% of federal funding goes for operational expenses. Transit as a Mechanism for Economic Stimulus There were a number of proposals in 2008 for federal transit spending in addition to funding already authorized. Early on these proposals had to do mainly with helping transit agencies cope with an increase in fuel prices that caused a jump in operating costs and demand. Later in the year, as the poor health of the economy became more apparent, proposals were geared more toward economic stimulus and job creation. In October, the American Public Transportation Association (APTA) identified 559 "ready to go" projects worth about $8 billion, projects that could begin within 90 days of funding availability. In a second survey in mid-December, APTA identified 736 projects worth $12.2 billion. In a U.S. Conference of Mayors report published in mid-December, 726 "ready to go" transit projects worth $8.8 billion were identified. A general criticism of surface transportation infrastructure funding as economic stimulus is that it tends to spend out slowly, and it is thought that transit funding generally tends to spend out more slowly than highway funding. Another issue is that many "ready to go" projects identified by APTA and the Conference of Mayors are for bus and rail vehicle purchases, manufacturing that is dominated by foreign companies. Thus, despite domestic content requirements for foreign made vehicles bought using federal funds, some transit capital spending may not create as many jobs in the United States as hoped. Some might also question the historic bias in the federal transit program toward capital rather than operating expenditures, when research suggests that operating expenses tends to create more jobs, more quickly. Another issue is whether federal spending will merely replace rather than supplement state and local level spending, reducing the effectiveness of stimulus spending. A final issue is whether a large increase in transit spending will improve transit service where it is most needed and encourage new ridership, or alternatively will result in little used facilities that require long-term government support. Issues for the Transit Sector Despite rising patronage over the past decade, government's share of transit industry expenses has continued to rise. Fares and other operating revenue now cover only about 30% of industry costs. A long term issue for the transit industry, therefore, will be how to improve service and attract new riders without requiring substantially more support from federal, state, and local government. In terms of federal support for transit, one of the biggest challenges over the next few years will be the amount of funding available from the Highway Trust Fund. The Mass Transit Account of the Highway Trust Fund is the source of approximately 80% of federal transit program monies, with the remaining 20% drawn from the general fund of the U.S. Treasury. Although the transit account is in somewhat better financial shape than the Highway Account, it is clear that current revenue into the transit account will not sustain FTA programs and activities at current levels. Airports Civil aviation public infrastructure is composed mostly of airports and air traffic control facilities. Only airports will be discussed in this section. Overall, only about one-quarter of airports are publicly owned, typically by state and local governments, yet these airports represent the vast majority of utilized airport capacity, particularly that used for commercial aviation operations. Privately owned airports predominantly serve general aviation. According to the Federal Aviation Administration (FAA), there were 20,341 airports in the United States at the end of 2007. Of these, 5,221 were civil public use airports, with a more limited nationally significant 3,411 airports in the FAA's current National Plan of Integrated Airport Systems (NPIAS) and therefore eligible to receive Airport Improvement Program (AIP) grants. Conditions, Performance, and Funding Needs According to the FAA's NPIAS, the estimated capital needs of airports from 2009 through 2013 is $49.7 billion (in 2008 dollars), approximately $9.9 billion a year. The estimates contained in the NPIAS do not include projects that are ineligible for AIP funding. A more comprehensive accounting of airport project costs by the Government Accountability Office estimates the costs of airport capital development for the period 2007 through 2011 to be $14 billion a year (in 2006 dollars). FAA's estimate of airport infrastructure needs, as contained in the NPIAS, are obtained from airport master and state system plans and are reviewed for AIP eligibility and conformity with FAA forecasts of aviation activity. The GAO estimate is based on FAA's estimate of capital needs contained in the NPIAS, but also includes capital projects that are not included in the NPIAS, e.g. projects that are ineligible for federal grants under the AIP. Federal Assistance GAO calculated that public spending on airport capital improvements averaged about $13 billion per year between 2001 and 2005 (in 2006 dollars). Of this amount, $3.6 billion per year was funded from the federal Airport Improvement Program (AIP), $6.5 billion from airport bonds, $2.2 billion from the Passenger Facility Charge (PFC, a local tax levied by an airport), and $0.7 billion from state and local contributions. The AIP is funded entirely from the Airport and Airway Trust Fund. Airport and Air Traffic Control Investment as a Mechanism for Economic Stimulus In a letter to the leadership of Congress on December 10, 2008, 12 aviation interest groups called on Congress to add $1 billion to the AIP program for stimulus purposes. According to these groups such an additional investment would "provide needed stimulus to both cities and rural communities in all 50 states," and in the process create 35,000 high paying jobs (although it is unclear how this number was derived). In a separate letter on December 31, 2008, to Senator Harry Reid, the American Association of Airport Executives stated that "the FAA has indicated that $1.7 billion could be used for "ready to go" projects – projects that can be bid and under contract within 180 days." In addition to these estimates, numerous U.S. airports have asked that projects at their airport be considered for stimulus spending. Issues for the Air Transportation Sector Infrastructure needs for airports are expected to increase because air traffic is expected to grow significantly over the next few decades. FAA forecasts that revenue passenger enplanements will grow from 765 million in 2007 to 1,293 million in 2025, an average annual increase of 3.0%. Estimating infrastructure needs, however, presents a number of difficulties. Predicting the future is difficult and, although the FAA has a reasonably good record for accuracy in its activity forecasts, the FAA itself has pointed out that since the events of 9/11, the instability of the industry has led to larger errors in the agency's short-term forecasts. The recent unpredictability of fuel prices, a major component of aviation business costs, also brings a degree of uncertainty to aviation forecasts. In addition, the issue of quality versus quantity arises when considering airport stimulus spending. Approximately 73% of all airline enplanements takes place at the nation's 35 busiest airports. Obviously, anything that can be done to increase capacity and decrease delays at these airports has a significantly greater impact on national aviation connectivity than is the case at non-congested airports. In recent years the FAA has tried to emphasize funding infrastructure projects at these airports as part of its Operational Evolution Plan (OEP). Public discussions of airport stimulus spending thus far make it unclear whether and/or how prioritization of funding requests from a national benefit perspective will be part of the decision-making process for the distribution of additional AIP assistance. Passenger Rail Amtrak is the nation's only provider of intercity passenger rail service. It operates trains over a network covering around 22,000 miles, 97% of which is owned by freight rail companies. The portion of the network that Amtrak owns, the Northeast Corridor (the NEC, running from Washington, D.C. through New York City to Boston), includes some of the most heavily used sections of track in the nation, shared by Amtrak, commuter rail operations, and freight operations. Amtrak was created in 1970 by the federal government to preserve some intercity passenger rail service while allowing private railroad companies to discontinue their money-losing passenger rail service. Amtrak is structured as a private company, but virtually all of its stock is held by the federal government. Conditions, Performance, and Funding Needs Most of Amtrak's infrastructure was built over 100 years ago, and much of its equipment is over 30 years old. Due to perennial financial problems, Amtrak has regularly deferred investments in maintaining its infrastructure; it now has an estimated $5-$6 billion backlog in deferred maintenance. This estimate does not include the cost of major improvement projects. Speed and reliability are two key features of modern intercity passenger rail service, neither of which Amtrak is able to offer. In many other countries, electrified trains run on dedicated routes offering gentle curves and no intersections where roads cross railways at the same level ("at-grade crossings"). This permits average speeds between stations of 125 miles per hour (mph) or more, with top speeds of 175 mph or more, and good on-time performance. Amtrak's only "high-speed" electrified line, the NEC, still follows the alignment laid out over a century ago, and still has curves and several at-grade crossings that restrict speeds. As a result, the average speed of Amtrak's high-speed Acela service even between Washington, D.C. and New York City, where there are no grade crossings, is around 80 mph. In the rest of the country, Amtrak operates over freight rail lines, where Amtrak's maximum speed is generally limited to no more than 79 mph. Although federal law provides that Amtrak is to be given operating priority over freight trains, Amtrak nevertheless experiences many delays due to freight rail operations, as well as breakdowns of Amtrak's aging equipment. Amtrak's system-wide on-time performance ratio was 71% in FY2008; even on its flagship Acela route, on the NEC where Amtrak controls the operations of all trains, on-time performance was only 85%. Amtrak maintains a transcontinental network with service in 47 states, but it only captures a measurable share of intercity travel in a handful of relatively short corridors. About 39% of Amtrak's ridership occurs on the NEC while another 46% of ridership occurs on relatively short-distance corridors in other parts of the country. Nationally, Amtrak captures 0.8% of intercity trips over 100 miles, less than half the market share of intercity bus service (which captures 2.1%). Amtrak has been successful in competing with air passenger service between two city pairs in the NEC. Slightly more people ride Amtrak than fly between Washington, D.C. and New York City (56% to 44%) while slightly fewer ride the train than fly between New York City and Boston (41% to 59%). However, Amtrak captures only 5% of the air-rail travel market between Washington, D.C. and Boston. Even though Amtrak has been competitive with the airlines between many city pairs along the NEC, its real competitor is the automobile. For trips between 50 and 499 miles one way, Amtrak and the airlines combined capture only 2.4% of the market while personal vehicles capture over 95% of the market. Federal Assistance Railroad companies lost money on intercity passenger rail service before Amtrak was created, and Amtrak has continued to lose money offering that service. As a result, since its creation in 1970 Amtrak has relied on federal assistance to support its operations. In recent years, Congress has provided around $1.3 billion annually to support Amtrak. The Passenger Rail Investment and Improvement Act of 2008 ( P.L. 110-432 ) authorized significant increases in Amtrak funding, about $2.4 billion per year through FY2013. Congress also directed the DOT to issue a request for proposals from the private sector for the development of high-speed rail in 11 federally designated corridors. Because there is no dedicated user fee mechanism to raise revenue for rail investments, as there is for other transportation modes, Amtrak must compete with other funding priorities from the General Treasury. There is no guarantee that Congress will appropriate funding at levels close to the amount that it authorized in the recently enacted authorization bill. Railroad Investment as a Mechanism for Economic Stimulus While the Federal Highway Administration has attempted to evaluate road building as an economic stimulus tool by estimating resulting job creation and the timing of federal outlays, similar analysis specific to the rail sector is not available. However, some of the factors applicable to road building would appear equally applicable to the rail sector: winter weather would delay some projects in the northern half of the country, and it is likely that rail maintenance projects could get underway sooner than could new construction projects. On some routes, Amtrak receives financial support from state governments, so their approval of projects in some cases would be necessary. Since Amtrak runs on track owned by the freight railroads for most of its routes, cooperation from the host freight railroad is necessary. Regulatory approval of upgrades to freight rail infrastructure is not required, but negotiation with the freight railroad is necessary because Amtrak operates over their busiest corridors. The issue of publicly-funded improvements to private property may also arise. Railroad union work rules could be another factor affecting the jobs impact of funding rail improvements. Also, the transparency of Amtrak's account keeping has been an important issue for Congress in the past. Congress may seek to ensure that any economic stimulus funding for Amtrak is directed towards job-inducing projects rather than servicing its debt, for instance. Issues for the Railroad Sector Since intercity passenger rail service is likely to require operating subsidies in all but the most densely populated corridors meeting certain conditions, policymakers might consider the long-term public financial commitment that is associated with investments in intercity passenger rail. Rail can compete with the automobile for trips that are uncomfortably long to drive and where road congestion is a problem, parking is a concern at the destination city, gas prices are relatively high, and the destination city has an extensive public transit system. Thus, for most city destinations it may be difficult for passenger rail service to match the automobile's flexibility. Intercity passenger rail can be time competitive with the airlines for trips less than about 350 miles because this is not sufficient distance for the air mode to exploit its speed advantage. Where large cities are approximately this far apart, and there are important intermediate cities on the route, such as in the NEC, then there may be enough of a customer base to run trains as frequently as the airlines and to fill them, which is necessary to cover operating costs. Water Resources Water resources infrastructure includes locks, dams, levees, floodwalls, channels, breakwaters, hydropower facilities, canals, and related structures. A system of shared responsibilities for this infrastructure has evolved, with programs existing at all levels of government and in the private sector. While more than 25,000 publicly owned and 54,000 private dams provide the benefits of flood control, navigation, power generation, and irrigation water, they also pose safety risks and other challenges as they age. Although federal water resources agencies, principally the Bureau of Reclamation (Reclamation) and the U.S. Army Corps of Engineers (Corps), played a significant role in the construction of many large dams, few similar large federal facilities currently are under construction. The vast majority of U.S. dams were constructed and are maintained without federal assistance; however, most of the largest U.S. dams were built by Reclamation or the Corps. Reclamation owns and operates more than 600 dams and reservoirs and 58 powerplants capable of producing 40 billion kilowatt hours of electricity (enough to serve six million homes). The Corps also owns and operates more than 600 dams and has 75 hydropower projects in operation generating 68 billion kilowatt hours annually. Additionally the Corps maintains through dredging and infrastructure investments the navigation conditions of 900 harbors and nearly 12,000 miles of commercially active waterways. The Corps constructed, usually with nonfederal participation, roughly 9,000 miles of the estimated 30,000 miles of the nation's levees, but only maintains 600 miles. The remaining levees are operated by nonfederal entities, often special districts of local governments, which are responsible for maintaining the level of protection they provide. Conditions, Performance, and Funding Needs Many federal water resources structures were built more than 50 years ago and require rehabilitation, repair, or replacement to continue to generate benefits. These structures have contributed greatly to U.S economic development; however, they also have contributed to environmental degradation, resulting in ongoing efforts to restore aquatic ecosystems. For example, concerns about aging infrastructure have been raised for years and accompanied by calls to invest in improved hydroelectric facilities and new locks to reduce outages and improve efficiency. The federal agencies neither estimate their future infrastructure investment needs nor conduct national systematic needs assessments, instead they undertake activities pursuant to congressional direction. The backlog of active federal water resources construction projects that have been authorized by Congress but have not been completed is roughly $70 billion, and the backlog of deferred maintenance roughly $4 billion for Reclamation and Corps activities, Tennessee Valley Authority's dams and pumped storage facilities, and the water resource projects financed by the U.S. Department of Agriculture's Natural Resources Conservation Service (NRCS). Construction projects in this backlog have not been ranked on their economic or environmental merit via a competitive or formula basis. Two significant categories of nonfederal water resources infrastructure are nonfederal dams and levees. The Association of State Dam Safety Officials estimated $36.2 billion was needed to rehabilitate all nonfederal dams. There are no national-level estimates of the investment needs for other nonfederal flood protection measures, such as levees and flood walls. Federal Assistance Recent federal appropriations have been approximately $6.6 billion annually, not including emergency supplemental appropriations, for water resource activities of federal agencies. The vast majority of these funds are spent directly by these agencies and are not dispersed through grants or loans. The Corps typically requires local project sponsors to share construction costs and uses different cost-share formulas depending on the project purpose. Reclamation projects are generally financed up front with project users repaying the federal government for allocated proportions of construction costs. Exceptions include "ability to pay" adjustments for irrigators. Water Resources Investment as a Mechanism for Economic Stimulus Which water resources activities may be funded as part of a stimulus is central to the types of benefits that may be expected and whether these investments will be controversial; however, this central policy decision remains unknown. Instead more attention has been given to the potential level of investment. The American Society of Civil Engineers estimated that the Corps alone could use $7 billion for "ready to go" projects, and another $10 billion could be applied to critical nonfederal dams. H.R. 7110 (110 th Congress) included $300 million for Reclamation, with $126 million intended to go toward water reuse projects and the remainder directed toward capital improvements including rural water supply. Without information on which Corps projects or project types would be in the $7 billion portfolio, analysis of potential efficiency, equity, and long-term economic growth and environmental effects is highly constrained. The universe of Corps authorized projects is heterogeneous across purpose (i.e., the types of benefits to be produced ecosystem restoration, flood damage reduction, improved navigation), size, and economic effect. Moreover, many Corps projects are highly controversial and proceeding with these could be politically problematic. Economic stimulus of $7 billion would represent significantly more than the roughly $5.5 billion in annual appropriations for the agency. It is unclear whether or the degree to which the existing level of annual Corps appropriations is insufficient. Of the $7 billion, $3.2 billion is being discussed for Corps operation and maintenance activities. In FY2006, the agency had estimated its deferred maintenance well below this amount, at $1.8 billion. In contrast, the stimulus discussions for Reclamation funding target projects involving reclamation or reuse of wastewater or naturally impaired ground and surface water, as well as rural water supply projects. These are nontraditional roles for the agency, but have been supported through legislation and appropriations in recent Congresses. Over the decades, Congress has enacted user pays approaches and environmental laws that apply to water resources projects. The majority of federal water resources projects that could be funded through a stimulus require nonfederal cost-sharing. Whether and how quickly the nonfederal sponsors would be able to participate given their own financial situations remains unknown; if cost-sharing waivers are provided they raise their own equity and efficiency issues. Similarly, questions arise regarding how quickly these federal activities would be able to start given environmental planning and protection requirements (e.g., seasonal or other restrictions on construction due to threatened or endangered species), as well as weather, availability of materials, and agency contracting constraints. Issues for the Water Resources Sector Federal water resource construction activities shrank during the last decades of the 20 th century. Fiscal constraints, changes in national priorities and local needs, few remaining prime construction locations, and environmental and species impacts of construction all contributed to this shift. Although these forces are still active, there are proposals for greater federal financial and technical assistance to address growing pressures on developed water supplies and to manage regional water resources to meet demands of multiple water uses. Whether and how to adapt the federal role to current water resources demands, in particular how to select which actions to authorize and fund, is an ongoing issue for Congress. Similarly, how to systematically address the aging and operational challenges of existing facilities is a concern; rehabilitation and safety repairs have largely proceeded on a project-by-project basis. Wastewater Wastewater utilities operate facilities that clean the flow of used water from a community. Nationally, about 16,000 publicly owned wastewater treatment facilities and 24,000 collection systems provide these services. The federal government has had significant involvement with these systems, through setting standards to protect public health and the environment, and funding to assist them in meeting standards. Nearly all of these facilities are publicly owned and operated by local governments. Today, ratepayers fund both construction costs and costs associated with operating and maintaining facilities that serve their communities. Conditions, Performance, and Funding Needs Many wastewater systems were built more than 50 years ago and have reached the end of their useful design lives. Older systems are plagued by chronic overflows during major rain storms and heavy snowmelt and, intentionally or not, are bringing about the discharge of raw sewage into U.S. surface waters. The most recent survey of funding needed for wastewater facility projects estimates that $202.5 billion is needed nationally for projects and activities eligible for federal assistance under the Clean Water Act (CWA). This estimate includes $134.4 billion for wastewater treatment and collection systems, $54.8 billion to correct uncontrolled overflows from municipal sewers, and $9 billion for stormwater management. Needs for small communities represent 9% of the total. Federal Assistance The largest federal program for wastewater treatment assistance is administered by the Environmental Protection Agency (EPA) under the CWA. Since 1973 Congress has appropriated $78 billion in assistance under this act. Total FY2008 funding was $689 million. Federal funds are used to capitalize state loan programs (State Revolving Funds, or SRFs), and project loans are made by states to communities to assist projects on priority lists that are determined by the states, but according to criteria in the CWA. Loans are repaid to the states. In addition, the U.S. Department of Agriculture provides assistance through grant and loan programs for communities with populations of fewer than 10,000 persons. Total FY2008 funding for these USDA programs was $534 million. Even with federal assistance, local governments are the primary investors in wastewater and sewer systems. According to the U.S. Census, local governments invested nearly $14 billion in capital projects and nearly $22 billion in operations and maintenance in 2004-2005. Wastewater Investment as a Mechanism for Economic Stimulus As interest in providing economic stimulus through infrastructure investments has grown, states, localities, and stakeholder groups have attempted to identify wastewater projects that are "ready to go," that is, with engineering and permitting complete, but only needing financing. Totals in these several estimates vary widely. In December, the U.S. Conference of Mayors reported that cities have identified 3,343 water and sewer projects that are "shovel ready," but that need $18.9 billion in funding. The National Governors Association estimated that $9 billion in wastewater projects are "ready to go" throughout the country, while the Water Information Network estimates that nearly $20 billion in wastewater projects are "shovel ready." House-passed H.R. 7110 (110 th Congress) included $6.5 billion for wastewater projects, to be funded through the existing CWA SRF program. With respect to such spending, several questions arise about projects that may be funded. In terms of efficiency, will wastewater infrastructure funds deliver stimulus to the economy quickly, or will most spending occur after recovery has begun, since initial outlays for major infrastructure projects usually are 25% or less of funding provided in a given year? Also, will stimulus spending for wastewater result in additional investments, or will it displace other spending that would have gone to the same projects? In terms of equity, one question is whether stimulus funds will be equitably distributed across regions, between urban and rural areas, and with recognition of disadvantaged communities. In terms of sustainability, of particular interest is how to incorporate accountability to ensure that stimulus-funded projects provide significant water quality benefits. Issues for the Wastewater Sector A number of long-term issues are apparent for this sector, beyond those related to short-term stimulus. First, and broadly, how will communities meet their continuing funding needs for wastewater pollution control projects, in view of the large identified needs? Communities face long-standing needs to fund projects to comply with federal standards and projects not traditionally eligible for federal aid programs, such as major repair and replacement of existing systems. Second, what is the appropriate federal role in meeting those needs, and will the federal government play a significant future role in funding capital investments? Third, how should federal support be delivered? Issues include what is the appropriate state-level mechanism to administer funding, how should aid be provided (loans versus grants, for example), and should federal assistance be available to private as well as public entities. Drinking Water Drinking water utilities have the task of constructing, operating, and maintaining treatment plants, water supply transmission lines, storage facilities and other infrastructure needed to provide potable water to communities in both the appropriate quality and quantity. Nationwide, there are nearly 53,000 community water systems, and roughly 15% of these public utilities are investor owned. The federal government has been involved in this sector primarily as a regulator, setting standards to control the quality of public water supplies, but also has provided significant technical and financial assistance for drinking water infrastructure projects through several federal programs. Conditions, Performance, and Funding Needs The most recent survey of capital improvement needs for drinking water systems, prepared by the Environmental Protection Agency (EPA), indicated that water utilities need to invest $276.8 billion on infrastructure improvements over 20 years to ensure the provision of safe water and to comply with federal Safe Drinking Water Act (SDWA) regulations. Of the total national need, EPA estimates that $183.6 billion (two-thirds) is needed for the installation and rehabilitation of water supply transmission and distribution systems, and $53.2 billion is needed for treatment facilities. A broader EPA study, the 2002 Gap Analysis, estimates a potential 20-year funding gap for drinking water capital and operations and maintenance ranging from $45 billion to $263 billion, depending on different revenue and funding scenarios. The agency has cautioned that outdated and deteriorated water infrastructure poses a fundamental long-term threat to drinking water safety, and that in many communities, basic infrastructure costs far exceed SDWA compliance costs. Federal Assistance Local governments traditionally have provided the bulk of financing for drinking water projects. Notwithstanding the existence of several federal infrastructure funding programs, the U.S. Conference of Mayors reports that localities continue to provide 95% of investment in drinking water infrastructure. A key federal program, the drinking water state revolving loan fund (DWSRF) program, was authorized by the SDWA Amendments of 1996 ( P.L. 104-182 ). Paralleling the Clean Water Act SRF program, the DWSRF program helps public water systems finance infrastructure projects needed to comply with federal drinking water regulations and to protect public health. Under the DWSRF program, states receive capitalization grants to make loans to water systems for drinking water projects and other eligible activities. Each state develops a project priority list, based on statutory criteria that emphasize public health protection, compliance, and economic need. Since FY1997, Congress has provided more than $10.3 billion for this program, including approximately $829 million for FY2008. Also, as noted above, the U.S. Department of Agriculture (USDA) administers a loan and grant program for water and wastewater projects, with eligibility limited to communities having 10,000 or fewer people. For FY2008, this program received roughly $534 million for drinking water, wastewater, and waste disposal projects. Drinking Water Investment as a Mechanism for Economic Stimulus How many job-stimulating projects are actually ready to go? The American Water Works Association (AWWA), an association of water utility managers and professionals, has identified $10 billion worth of drinking water infrastructure projects that could move forward rapidly given funding. Using construction industry multipliers, the association projects that this funding level could generate 400,000 jobs and bring additional economic benefits to communities. In contrast, the U.S. Conference of Mayors estimates that $15.36 billion in identified 'ready to go' water and wastewater projects could generate133,193 jobs. Although much uncertainty surrounds the estimates associated with the potential benefits of a stimulus package, the backlog of water infrastructure projects is large. Water sector advocates note that stimulus funding is especially needed to assist projects pending nationwide that have been hampered by the credit crisis. Issues for the Drinking Water Sector Consideration of economic stimulus proposals raises a number of issues pertinent to the water sector. A key issue concerns the funds distribution mechanism. H.R. 7110 (110 th Congress) anticipated using the DWSRF program as the means for delivering stimulus funds. Such an approach would have benefits, as it would take advantage of an established federal-state program structure that includes criteria for project priorities and eligibilities, and contains fiscal safeguards, such as auditing requirements. Yet, some local water utility representatives have noted that the distribution of funds by states under this program can be sluggish. Others have noted that federal program requirements can pose time-consuming hurdles for projects, slow down project starts, and ultimately could reduce the effectiveness of economic recovery efforts. Also, how well do projects identified as "ready to go" complement state funding priorities? Similarly, some projects viewed as priorities by cities may be outside program eligibility or priority criteria. One policy question is whether such projects might be made eligible for stimulus funding. Similarly, should some federal requirements be relaxed, and if so, what might be the public health, environmental or other trade-offs in doing so? As an alternative or complement to the EPA program, the National Rural Water Association advocates using the USDA program which has an estimated $3 billion backlog of water and wastewater projects, and which the association argues distributes funds more quickly. However, this program is limited to small communities. Regardless of distribution mechanism, many questions arise. For example, how will priorities be set: in view of multiple considerations, including speed and efficiency in creating jobs, public health need, economic need, or ensuring urban/rural or state equity? A broader question concerns the long-term federal role in water infrastructure financing and how stimulus efforts might affect it. For example, how might stimulus funding impact congressional efforts to develop a sustainable funding source to replace or supplement federal appropriations, such as a water infrastructure trust fund? Electric Transmission The electric power transmission grid for the lower 48 states consists of approximately 160,000 miles of high voltage lines used to move electricity from power plants to load centers. The system is owned primarily by investor-owned utilities (IOUs); other owners include municipal and other public power entities (including federal entities), rural cooperatives, and independent transmission companies. In the West, where solar and wind potential are greatest, two federal Power Marketing Administrations (PMAs) own and operate a significant portion of the transmission system. The Bonneville Power Administration (BPA) maintains approximately 75% of the high-voltage transmission lines in the Northwest, a system of over 15,000 miles of transmission line in approximately 300 substations. The service area of the Western Area Power Administration (WAPA) covers 1.3 million square miles and WAPA maintains 17,000 miles of high-voltage transmission. The nation's electric generating capacity currently totals about 1,000,000 megawatts; These plants are owned and operated by IOUs, public power, cooperatives, and independent power producers. The degree of federal regulatory involvement of the electric power system varies; in general, the regulatory system for electric power is fragmented and inconsistent. In brief, for transmission , the Federal Energy Regulatory Commission (FERC) approves transmission rates for IOUs, independent transmission companies, and provides oversight for the PMAs but generally not for utilities in most of Texas. The Energy Policy Act of 2005 ( P.L. 109-58 , § 1241) allows for incentive rate making for new transmission in an attempt to encourage investment in transmission. FERC, under Order 679, has approved incentive rate making for many new projects. New transmission lines must be approved by every state the line crosses and, in many cases, FERC. For generation , state regulation over power prices varies with the degree of power market deregulation in the state. Plant siting regulations also vary by state, but siting decisions are also influenced by federal environmental regulations and access to the transmission system. Conditions, Performance, and Funding Needs The transmission grid was developed in patchwork fashion over decades and interconnected to support system reliability and a limited volume of bulk power sales. The role of the grid has changed with the partial deregulation of the power market over the past 30 years. The grid is now being used to carry a large volume of wholesale power sales and serves as a key element in maintaining competitive power prices in many parts of the nation. This new role for the grid, combined with low investment since the 1970s, has led to concerns that the grid is overstressed, and will ultimately fail to operate reliably and serve its new market-enabling function. In addition to the stress of traditional generators connecting to the grid, expanding the grid to reach remote areas suitable for developing wind and solar power is an emerging issue both for reliability concerns and concerns over who will construct the needed transmission. An overriding issue for both generation and transmission is how the nation may respond to climate change policies. The future emphasis on renewables and other "green" generating technologies or carbon sequestration would require large investment in the transmission system. The demand centers for electricity are in some cases relatively far from renewable resources or areas that would be geologically favorable for carbon sequestration. Renewable power is currently more costly than coal and natural gas-fired generation, so incentives or mandates would be required to meet a Department of Energy's July 2008 proposed goal of generating 20% electricity from wind by 2030. In general, electric generation capacity will have to expand to meet future growth. The current financial crisis will probably slow demand growth, but it will also reduce investment in new power plants and create additional uncertainty about the future balance of electricity supply and demand. The two issues of transmission capacity adequacy and reliability, and expansion of generating capacity generally and renewable power in particular, impact proposals for an extensive grid modernization program. These modernization proposals take two forms. One is the "smart grid," an umbrella term for a series of technologies that would create "an intelligent, auto-balancing [of supply and demand], self-monitoring grid, that integrates a variety of energy sources with minimal human intervention." In addition to upgrading the existing grid, a second proposal is to expand the existing grid with a new ultra-high voltage backbone system, that would allow renewable power in remote locations to be efficiently moved across the continent to demand centers. Investments required for the power system could be very large. One recent analysis, performed for the investor-owned electric power industry, suggests a total of $1.5 to $2.0 trillion by 2030 would be required to maintain reliability. Federal Assistance The federal government has numerous incentive programs intended to spur particular electric power investments in the private sector. These include production tax credits, currently scheduled to expire at the end of 2009, for wind and some other renewable power sources; tax credits for certain renewable and clean coal technologies; loan guarantees for nuclear and other low carbon technologies; and incentive rates for new transmission projects that meet certain criteria. The current and future effectiveness of these programs has been debated. For example, although the loan guarantee program was created by the Energy Policy Act of 2005, three years later the Department of Energy has still issued no guarantees. The production tax credits have often been used in complex financial transactions to develop new wind farms, but in a recession the opportunities to conduct these transactions may contract. Power Sector Investment as a Mechanism for Economic Stimulus As noted above, the potential investment requirements for the power sector may range into the trillions of dollars. Most of these private-sector investments would go into complex, long-lived privately owned and operated infrastructure, which requires significant up-front planning. Accordingly, there may be a question of how much short-term stimulus versus long-term benefits would result from power sector investments. Some larger concepts will require much more development before specific facilities can be built, such as the ultra-high voltage backbone grid. Certain smart grid technologies are perhaps ready for wide scale deployment, such as advanced electric meters, but there is currently no smart grid template ready for a national roll-out. Utilities do have many transmission projects planned, and these could perhaps be accelerated or expanded with federal incentives. In the West, additional federal investment for BPA and WAPA transmission expansion could provide a means for spurring wind and solar generation development. However, most of these transmission projects would still require lengthy (several year) siting approval from each state in which the transmission line would be built. Issues for the Electric Power Sector Two fundamental and related issues raised by the potential for greater federal intervention in the power sector are the role of national planning of a system owned primarily by the private-sector and federal preemption of state regulation. Certain initiatives, such as a concerted push to install renewable power or construction of a ultra-high voltage backbone transmission grid, could require additional federal control over power sector investment decisions. The PMAs could be used, especially in the West, to create a larger federal presence in the transmission system, thus allowing greater influence to implement climate change policies. Timely enhancements to the grid to accommodate new, remote renewable power and smart grid technology may require federal authority to override what have historically been state decisions. Another crucial issue is deciding what improvements are necessary to enhance the grid for increased reliability and the ability to accommodate increased intermittent resources such as wind and solar. While many concerns have been raised over the reliability of the existing transmission network, actual data is scarce and a new transmission reliability data gathering system has just started. Decisions must be made whether to promote nuclear power, clean coal, or natural gas-fired plants. Natural gas has been the main fuel for new power plants since the 1990s, but expanded use of gas raises the risk of reliance on another fossil fuel for which the nation may ultimately have to rely on large imports. Schools U.S. Department of Education (ED) data indicate that an estimated 50 million students were enrolled in public elementary and secondary schools (grades preK-12) in 2008. Safe, healthy, up-to-date school facilities are considered essential for successful educational programs. School infrastructure has traditionally been considered largely a state and local responsibility. The federal government has played a relatively small role in financing school construction and renovation. Conditions, Performance, and Funding Needs Data on school infrastructure needs are extremely limited and difficult to assess in part because of the wide variation of potential assumptions and definitions regarding both conditions and needs. At present there is no ongoing federal collection of data on the conditions of schools. However, in response to concerns about the physical condition of schools and a Congressional mandate, in 2000, ED issued a one-time study with estimates of the costs of needed modernization, renovation, and repair to school buildings and/or building features. It remains the latest reliable estimate of these needs. This study is based on 1999 survey data collected by ED of 903 public elementary and secondary schools, weighted to provide a national estimate. These data are based on surveys of school officials rather that on direct, independent data collection. ED estimated the costs to bring school facilities into good condition in 1999 at $127 billion. ED found that although most public schools in 1999 were in adequate or better condition, a significant number were not. The ED survey found that approximately 25% of schools indicated that at least one type of onsite building was in less than adequate condition. Fifty percent indicated that one or more building feature(s) was not in adequate condition, and 40% indicated that one or more environmental condition(s) was unsatisfactory. Federal Assistance As noted above, the federal government plays a relatively small role in school infrastructure. It does, however, provide some indirect support for school construction (mainly by exempting the interest on state and local governmental bonds used for school construction and renovation from federal income taxation), and some direct support through federal education programs such as Impact Aid. The largest federal contribution to school infrastructure occurs via indirect support, i.e., the foregone revenue attributable to the exemption of interest. School Infrastructure Investment as a Mechanism for Economic Stimulus Many school modernization, renovation, and repair projects will require start up time. This will potentially limit their effectiveness as a quick economic stimulus. However, because many states and localities face budget shortfalls and may not have funds available for needed school modernization, renovation, and repair projects, federal investment in these projects would provide an important alternative source of funding. According to Education Daily, not only are school districts "increasingly faced with difficult financial choices and must meet daily operating expenses, like payroll, while delaying higher-priced construction of schools and libraries," but they also must confront the unavailability of affordable credit for capital improvements to schools. In a letter to the Speaker of the U.S. House of Representatives, the Committee for Education Funding argued that "$20 billion spread over a five-year period, has the potential to support an estimated 50,000 jobs a year. If all new school construction and renovation used the 'green' approach energy savings alone would total $20 billion over the next 10 years, while also creating new and innovative jobs." Issues Regarding School Construction, Modernization, Repair and Renovation As noted above, school infrastructure needs are significant and are affected by a variety of complicated variables. Not only are the age and physical condition of a school important, but a variety of other factors are important as well, e.g., shifts in the student population, changes in school policies (such as implementing smaller class size), changes in technology, changes in school instructional practices, energy efficiency requirements, and retrofitting schools to meet requirements of legislation such as the Americans with Disabilities Act ( P.L. 101-336 ). Currently there is no regular federal collection of data on the condition of schools. This lack of data makes accurate projections of school infrastructure needs difficult. In addition, although there is currently a backlog in needed school infrastructure projects, the ability of states and localities to finance these projects is particularly strained under current economic conditions. This raises questions regarding whether or not a greater role for the federal government in financing school infrastructure should be considered, and if so, what form federal assistance should take. Federal Public Buildings The Public Building Service (PBS), a component of the General Services Administration (GSA), is responsible for meeting the space needs of more than 100 federal departments and agencies. In support of its mission, PBS constructs new buildings, renovates existing ones, and leases space. When new construction is required, PBS contracts with private sector architects, construction managers, and engineers to design and build the structure. New construction projects are tailored for a range of government activities, and may include courthouses, land ports of entry, federal office buildings, laboratories, and data processing centers. PBS also repairs, alters, and renovates the 1,500 buildings already in its inventory. Conditions, Performance, and Funding Needs Each year the Public Building Service surveys the housing needs of its client agencies and determines whether it has space in its existing inventory to meet those needs. In its budget justification, PBS identifies the construction and renovation projects it believes are needed to meet the most critical workspace needs, and ranks them in order of priority. In FY2008 and FY2009, PBS has ranked homeland security projects among its top capital investment priorities, including the consolidation of homeland security headquarters workspace, and the modernization of several existing land ports of entry, which it describes as outdated and unable to accommodate current workloads and technology. PBS also ranked federal courthouses as priorities for capital investment in FY2008 and FY2009, citing the need for additional space, building systems modernization – such as replacing failing pipes and obsolete fire alarms – and enhanced security. Federal Assistance Construction and renovation projects, as well as other PBS property management activities, are funded through the Federal Buildings Fund (FBF). The FBF is a revolving fund that is financed by income from rent charged to occupants of GSA-controlled space, and by additional funds appropriated by Congress. Funds in the FBF are subject to enactment of new obligational authority each year, which is referred to as a limitation on the use of revenue. For FY2008, Congress provided just over $1.25 billion for new construction projects ($531 million) and renovation of existing facilities ($722 million). For FY2009, GSA's budget justification included a request for $1.31 billion for new construction ($620 million) and renovation ($692 million). Federal Building Construction and Renovation as Mechanisms for Economic Stimulus The FBF provides capital for construction and renovation projects that typically range from several million to hundreds of millions of dollars. When viewed as potential mechanisms for economic stimulus, it may be noted that construction and renovation projects may not be distributed widely or equitably across states and localities. In recent years, FBF funding has been concentrated in a relatively small number of projects. In FY2008, for example, $722 million was appropriated for six renovation projects, and $531 million was appropriated for 11 new construction projects. FBF funding may be geographically concentrated as well. The geographic concentration of construction funds is a consequence of Congressional infrastructure priorities: eight of the 11 new construction projects funded in FY2008 were land ports of entry, all of which were necessarily located in states that bordered Mexico or Canada. The geographic concentration of FBF funds also occurs because cities with the largest existing federal presence are more likely to receive funding for workspace renovation, expansion, or consolidation. Three of the six FBF renovation projects that Congress funded in FY2008, for example, were in the District of Columbia. Issues for the Federal Building Construction and Renovation Sector An ongoing challenge for the federal building construction and renovation sector is to secure adequate funding to meet homeland security needs, improve space and security at federal courthouses, and reduce the backlog of federal buildings in need of repair. The FBF does not now have the resources to meet all of those needs, and there may be discussions in the future about restructuring the FBF to increase its available capital. Broadband Broadband infrastructure refers to networks of deployed telecommunications equipment and technologies necessary to provide high-speed Internet access and other advanced telecommunications services for private homes, businesses, commercial establishments, schools, and public institutions. In the United States, broadband infrastructure is constructed, operated, and maintained primarily by the private sector, including telephone, cable, satellite, wireless, and other information technology companies. Although broadband is deployed by private sector providers, federal and state regulation of the telecommunications industry as well as government financial assistance programs can have a significant impact on private sector decisions to invest in and deploy broadband infrastructure. Conditions, Performance, and Funding Needs The latest data from the Federal Communications Commission (FCC) indicate that broadband adoption stands at roughly 58% of U.S. households, while less than 10% of households have no access to any broadband provider whatsoever (not including satellite). Data from the FCC, the Pew Internet and American Life Project, and the U.S. Government Accountability Office (GAO) indicate that broadband infrastructure is most lacking in rural and lower-income areas in which there is less economic incentive for companies to invest in such infrastructure. Even in areas where broadband infrastructure is present, demand for those services may lag because of factors such as a household's inability to afford computers or broadband service. It is difficult to estimate with any degree of precision the amount of funding that would be necessary to deploy a ubiquitous broadband infrastructure throughout the United States. "Broadband" can refer to a complex array of technologies, speeds, and capacities, each with its own set of costs and benefits. Additionally, the state of broadband data in the United States is incomplete, and policymakers do not yet have a clear or complete picture of where broadband is and is not deployed, nor is there agreement on what criteria determine whether an area is considered "underserved," and the extent to which it may require federal assistance. Federal Assistance The Rural Broadband Access Loan and Loan Guarantee Program and the Community Connect Grant Program – both housed in the Rural Utilities Service (RUS) of the U.S. Department of Agriculture – are the only federal programs exclusively focused on financing broadband infrastructure in unserved and underserved areas. Since inception, these programs have provided $1.8 billion in loans (since FY2003) and $83.7 million in grants (since FY2002), and in FY2009 will make available $594 million in loans and $13.4 million in grants. Additionally, there exist other federal programs that provide financial assistance for various aspects of telecommunications development that have been or could be used for financing broadband infrastructure. These include programs under the FCC's Universal Service Fund (USF), RUS rural telephone loans and distance learning and telemedicine loans and grants, and potential Department of Commerce grants to states for broadband data collection and mapping as directed by the recently enacted Broadband Data Improvement Act ( P.L. 110-385 ). Broadband Investment as a Mechanism for Economic Stimulus To be effective for economic recovery, any federal broadband infrastructure program must induce incremental broadband investment beyond that which would be undertaken absent the program. It is difficult to estimate precisely the impact of broadband infrastructure spending on employment. According to the Communications Workers of America, every $5 billion invested in broadband deployment would create 97,500 direct jobs in the telecommunications, information technology, and computer sectors, and indirectly lead to 2.5 million new jobs throughout the economy. A June 2007 report from the Brookings Institution found that for every one percentage point increase in broadband penetration in a state, employment is projected to increase by 0.2 to 0.3% per year. Additionally, many point to successful broadband deployments in other nations, and argue that a comparable broadband infrastructure is essential for future U.S. economic competitiveness. Issues for the Broadband Sector The overarching issue is how to strike a balance between providing federal assistance for unserved and underserved areas where the private sector may not be providing acceptable levels of broadband service, while at the same time minimizing any deleterious effects that government intervention in the marketplace may have on competition and private sector investment. In addition to loans, loan guarantees, and grants for broadband infrastructure deployment, a wide array of policy instruments are available to policymakers including tax incentives to encourage private sector deployment, demand-side incentives (such as assistance to low income families for purchasing computers), government-backed "broadband bonds," regulatory and deregulatory measures, and spectrum policy to spur roll-out of wireless broadband services. In assessing stimulus incentives for broadband deployment, Congress will likely consider the appropriate mix of broadband deployment incentives to create jobs in the short and long term, the extent to which incentives should target next-generation broadband technologies, and how broadband stimulus measures might fit into the context of overall goals for a national broadband policy.

Interest in using federal government spending to stimulate U.S. economic recovery has intensified recently in response to indicators showing significant deterioration of the economy. Policymakers at all levels of government are debating a range of options to address these problems. Some favor using traditional monetary and fiscal policies. Others, however, favor making accelerated investments in the nation's public infrastructure in order to create jobs while also meeting infrastructure needs. This report is an overview of policy issues associated with the approach of using infrastructure as a mechanism for economic stimulus. When most people think about infrastructure, they probably have in mind systems that are publicly provided and are important to the productive capacity of the nation's economy. Today, policymakers define the term more broadly to include both publicly and privately owned systems and facilities and categories that vary considerably in the degree of historic federal investment in building or rebuilding physical structures. A relatively new dimension in today's context is the notion of coupling public works with investments in environmentally friendly systems that incorporate renewable technologies or energy efficiency—called "green infrastructure." Academics, economists, and policymakers debate two issues concerning the contribution of infrastructure investment to the economy. One is the effects of infrastructure investment on productivity and growth, including job creation. The second related issue is the role of infrastructure spending, which is typically a long-term activity, as a short-term mechanism to stimulate a faltering economy. Research conducted over time has resulted in a general consensus that there can be positive returns on productivity of investing in infrastructure. Many experts now argue that infrastructure spending could be an important source of stimulating labor demand and enhancing U.S. productivity through investments in roads, bridges, water systems, etc. Still, some analysts are cautious about the effectiveness of this type of fiscal stimulus because of one key issue: timing. By definition, the goal of stimulus spending is to get money into the economy swiftly. But that objective can conflict with the reality of building infrastructure projects that typically are multiyear efforts with slow initial spendout. Spending advocates counter that because the current recession is expected to be of long duration, projects with extended timeframes can still contribute to the economy's recovery, and that investments that improve long-term productivity are preferable to options that focus on consumption as a stimulus tool. The overriding question in debating infrastructure spending as part of economic stimulus is, what will the stimulus buy? Two important considerations are, will the proposal produce stimulus quickly, and will it produce a significant amount of stimulus, relative to its budgetary cost. Because of the urgency of responding to the recession, stakeholder groups have been preparing lists of projects that are "ready to go," but the criteria for developing these lists are largely unknown. There is tension between the goal of funding activities that will create jobs quickly and the desire to invest in projects that will have sustained value that contributes to U.S. productivity. A critical issue for all levels of government is ensuring accountability for funds that will be spent through a stimulus program, to assure the public that decisions involving public dollars are made quickly yet with transparency, efficiency, and sufficient accountability. This report will not track legislative developments; other CRS reports referenced here will do so.

Scope of the Issue Although long a component of U.S. foreign policy, successive U.S. Administrations have explicitly identified weak or failing states as U.S. national security concerns since 1998. The past three U.S. National Security Strategy documents all point to several threats emanating from states that are variously described as weak, fragile, vulnerable, failing, precarious, failed, in crisis, or collapsed. These threats include providing safe havens for terrorists, organized crime, and other illicit groups; causing or exacerbating conflict, regional instability, and humanitarian emergencies; and undermining efforts to promote democracy, good governance, and economic sustainability. The President, in his 2005 National Security Presidential Directive ( NSPD ) 44, asserts that "the United States should work ... to anticipate state failure, avoid it whenever possible, and respond quickly and effectively when necessary and appropriate...." To this end, the Administration has established as a goal the "transformation" of U.S. national security institutions "to meet the challenges and opportunities of the 21 st century," which includes strengthening weak and failing states. However, as U.S. policy toward these states has grown in priority and cost—particularly since the terrorist attacks of September 11, 2001—some U.S. officials and other analysts have begun to question the effectiveness of the Administration's policies for dealing with these types of problem states. As the debate continues into the next presidential term, this is likely to continue to be a contentious area, with congressional involvement in U.S. policy toward weak and failing states flowing from its funding and oversight responsibilities. Currently, policy makers and observers are advocating competing visions for addressing state weakness, which could pose significant consequences for U.S. national security policy and U.S. preparedness for combating 21 st -century security threats. On one side of the spectrum are those who advocate a "Whole-of-Government" vision for strengthening weak states. Advocates of this approach perceive weak states to present multiple, interdependent challenges to political stability, military and security capabilities, and development and humanitarian needs. As a result, they recommend developing mechanisms and procedures for interagency planning that coordinate all aspects of U.S. policy toward weak states. The implications of enhancing U.S. government interagency processes could be substantial for the legislative and executive branches. Supporters have discussed the potential for significant reform of congressional funding and authorizing responsibilities, as well as a substantial organizational overhaul of several federal agencies. At the other extreme are those who are critical of U.S. nation-building activities; they fundamentally question the appropriateness of state weakness as a lens through which to identify national security threats. Instead, such analysts recommend developing strategies to combat specific threats, such as ungoverned territories conducive to criminal exploitation, international terrorism, transnational crime, and nuclear weapons proliferation, regardless of how strong a state's government is. In the case of conflict or post-conflict situations, some critics also discourage institutionalizing potentially costly U.S. stabilization and reconstruction capabilities. Some critics also claim that the concept of strengthening states inherently prescribes a Western model of state function that may not be appropriate in all situations. If U.S. national security policy priority on weak and failing states is not necessary or desirable, the existence and funding levels of several recently created programs and strategies to combat weak states threats may be called into question. U.S. policy toward weak and failing states currently hangs in an uneasy balance between these two perspectives. In recent years, this has resulted in a proliferation of new programs designed to address the challenges of strengthening weak and failing states. The Office of the Coordinator for Reconstruction and Stabilization (S/CRS) in the Department of State, stood up in July 2004, is mandated with leading and coordinating U.S. efforts for conflict prevention and response in failing states; in this capacity, S/CRS has sought to implement a whole-of-government approach for addressing conflict in failed states since at least 2006. At the same time, DOD has expanded its role in conflict prevention and stability operations—revising military doctrine to elevate these activities to primary missions, devoting greater resources to such activities, and establishing new institutions to train DOD personnel and facilitate DOD's involvement in stability operations, including "phase zero" or "shaping" operations that, prior to 2004, had not been the purview of DOD strategy or mission goals. U.S. weak states initiatives, however, remain limited by a lack of interagency cohesion and unclear resources across agencies to carry out programs to strengthen weak states and combat potential national security threats emerging from such states. Pointing to these limitations, some observers question whether U.S. commitment to strengthening weak states is in decline. In light of the current debate, possible oversight questions for Congress relating to U.S. policy toward weak and failing states include the following: Is there a need for an interagency strategy to coordinate agency responses to weak and failing states? When is it appropriate for the United States to prevent or respond to situations of state failure abroad? How effective are U.S. programs in preventing state failure? To what extent are U.S. government "early warning" predictors of state failure influencing policy planning? What do other countries do and how can international cooperation on weak and failing states be improved? What types of unintended consequences could U.S. policies to strengthen weak states have in the short- and long-term? This report is intended to serve as a primer on weak and failing states and related U.S. policy issues. The report first provides definitions of weak states and describes the links between weak states and U.S. national security and development challenges. Second, it surveys recent key U.S. programs and initiatives designed to address threats emanating from weak states and identifies remaining issues related to the new programs. Finally, it highlights potential legislative issues that Congress may be asked to consider. Definitions and Characteristics No universal definition for "weak state" or "failing state" exists. Some analysts describe state weakness as the erosion of state capacity—a condition characterized by gradations of a regime's ability to govern effectively, which, in its most extreme form, results in the complete collapse of state power and function. Most countries in the developing world fall along this spectrum, exhibiting at least some elements of weakness. Failing states, which are seen as including only a handful of countries in the world, exhibit more pronounced weaknesses than others. Among the universe of weak and failing states, there is no single pathway to failure. In some cases, states are characterized by gradual, yet persistent, institutional decay and political instability. In other cases, states rapidly tumble into failure, faltering under the weight of political instability, an acute natural disaster, or economic crisis. Based on quantitative development indicators, weak and failing states tend to be among the least-developed and most underperforming states in the world. Notable U.S. government and government-affiliated efforts to describe weak and failing states focus on four major, often overlapping, elements of state function. Factors stressed include (1) peace and stability, (2) effective governance, (3) territorial control and porous borders, and (4) economic sustainability. Peace and Stability: Failing states are often in conflict, at risk of conflict and instability, or newly emerging from conflict. Lacking physical security, other state functions are often compromised; frequently cited examples of such states today include Sudan and Iraq. Effective Governance: Countries can also be hampered by poor governance, corruption, and inadequate provisions of fundamental public services to its citizens. In some cases, as in North Korea or Zimbabwe, this may occur because leaders have limited interest, or political "will," to provide core state functions to all its citizens. A government's perceived unwillingness to provide adequate public services can incite destabilizing elements within a state. Territorial Control and Porous Borders: Weak and failing states may lack effective control of their territory, military, or law enforcement—providing space where instability can fester; such places may also be called "ungoverned spaces" or "safe havens." The Pakistan-Afghanistan border and the Sahel region of Northern Africa are common examples where such elements of state weakness exist. Economic Sustainability: Many weak states are also among the poorest countries in the world. Arguably as a consequence of other security and political deficiencies, weak and failing states often lack the conditions to achieve lasting economic development. Such countries include Bangladesh and many in Sub-Saharan Africa. Links to U.S. National Security Threats Failed states have appeared as a matter of concern in U.S. National Security Strategy documents since 1998, though the term had long been the topic of significant academic debate and implicitly informed U.S. national security policy since at least the end of World War II. As the Cold War concluded in the early 1990s, analysts became aware of an emerging international security environment, in which weak and failing states became vehicles for transnational organized crime, nuclear proliferation pathways, and hot spots for civil conflict and humanitarian emergencies. The potential U.S. national security threats weak and failing states pose became further apparent with Al Qaeda's September 11, 2001, attack on the United States, which Osama bin Laden masterminded from the safe haven that Afghanistan provided. The events of 9/11 prompted President George W. Bush to claim in the 2002 U.S. National Security Strategy that "weak states, like Afghanistan, can pose as great a danger to our national interests as strong states." In 2005, Secretary of State Condoleezza Rice further emphasized how weak and failing states pose "unparalleled" danger to the United States, serving as "global pathways" that facilitate the "movement of criminals and terrorists" and "proliferation of the world's most dangerous weapons." Many national security observers highlight such Administration language to indicate that U.S. interest in weak and failing states has become more substantial since 9/11 and is motivated largely by national security interests. Current Threats Analysts identify numerous links between weak and failing states and transnational security threats, ranging from terrorism and nuclear proliferation to the spread of infectious diseases, environmental degradation, and energy security. U.S. national security documents generally address weak states in relation to four key threat areas: (1) terrorism, (2) international crime, (3) nuclear proliferation, and (4) regional instability. Other analysts caution, however, that despite anecdotal evidence supporting a potential nexus between state weakness and today's security threats, weak states may not necessarily harbor U.S. national security threats. Furthermore, the weakest states may not necessarily be the most significant threats to U.S. national security; relatively functional states, characterized by some elements of weakness rather than complete state collapse, may also be sites from which threats can emerge. Terrorism According to several analyses, weak and failing states are perceived as "primary bases of operations" for most U.S.-designated foreign terrorist organizations, including Al Qaeda, Hamas, Hezbollah, Islamic Jihad, and Jaish-I-Mohammed. Terrorists can benefit from lax or non-existent law enforcement in these states to participate in illicit economic activities to finance their operations and ease their access to weapons and other equipment. As with Afghanistan in 2001, weak and failing states can also be ideal settings for terrorist training grounds, when the host country's government is unable to control or govern parts of its territory. States mired in conflict also provide terrorists with opportunities to gain on-the-ground paramilitary experience. Researchers find, however, that not all weak states serve as safe havens for international terrorists. Terrorists have been known to exploit safe havens in non-weak as well as weak states. The Political Instability Task Force, a research group commissioned by the Central Intelligence Agency, found in a 2003 report that terrorists operate in both "caves" (i.e., failed states, where militant groups can exist with impunity) and "condos" (i.e., states that have the infrastructure to support the international flow of illicit people, funds, and information). The preference for "condos" suggests that countries most devoid of functioning government institutions may sometimes be less conducive to a terrorist presence than countries that are still weak, but retain some governmental effectiveness. International Crime As with terrorist groups, international criminal organizations benefit from safe havens that weak and failing states provide. According to the U.S. Interagency Working Group report on international crime, weak states can be useful sites through which criminals can move illicit contraband and launder their proceeds, due to unenforced laws and high levels of official corruption. Since the Cold War, the international community has seen a surge in the number of transnational crime groups emerging in safe havens of weak, conflict-prone states—especially in the Balkans, Central Asia, and West Africa. Criminal groups can thrive off the illicit needs of failing states, especially those subject to international sanctions; regimes and rebel groups have been known to solicit the services of vast illicit arms trafficking networks to fuel deadly conflicts in countries such as Afghanistan, Angola, Liberia, Sierra Leone, and Sudan when arms embargoes had been imposed by the United Nations and other members of the international community. Links between transnational crime and terrorists groups are also apparent: Al Qaeda and Hezbollah have worked with several criminal actors, ranging from rebel groups in the West African diamond trade to crime groups in the Tri-Border region of Argentina, Brazil, and Paraguay, among others. In 2008, a U.S. Drug Enforcement Administration (DEA) official stated that at least 19 of 43 Foreign Terrorist Organizations (FTOs) listed by the State Department have established links to drug trafficking. Some researchers contend, however, that the weakest states are not necessarily the most attractive states for international criminals. This may be because some illicit transnational groups might be too dependent on access to global financial services, modern telecommunication systems, transportation, and infrastructure that do not exist in weak states. Researchers also find that some forms of international crime are more associated with weak states than others. Narcotics trafficking and illicit arms smuggling, for example, often flow through weak states. However, other types, such as counterfeiting and financial fraud, may be more prevalent in wealthier states. Weapons Proliferation Weak and failing states, unable or unwilling to guarantee the security of nuclear, chemical, biological, and radiological (CBRN) materials and related equipment, may facilitate underground networks that smuggle them. Endemic corruption and weak border controls raise the possibility of these states being used as transshipment points for illicit CBRN trafficking. Porous international borders and weak international controls have contributed to 1,080 confirmed nuclear and radiological material trafficking cases by member states from 1993 to 2006, according to the International Atomic Energy Agency. The majority of smuggled nuclear material reportedly originates in Central Asia and the Caucasus where known stockpiles are said to be inadequately monitored. Other sources of concern include poorly secured materials in research, industrial, and medical facilities. A relatively new region of concern for the United States is Africa, where more than 18% of the world's known recoverable uranium resources exist. Lax regulations, weak governments, and remotely located mines that are difficult to supervise combine to make the removal and trafficking of radioactive substances in Africa "a very real prospect." Analysts also contend that while the potential for weapons of mass destruction (WMDs) trafficking through weak states is considerable, most weak states may be unlikely destinations for smuggled WMD devices. Such equipment requires a certain level of technological sophistication that may not exist in some weak and failing states. Regional Instability According to recent research, states do not always become weak or failed in isolation—and the spread of instability across a region can serve as a critical multiplier of state vulnerability to threats. Instability has a tendency to spread beyond a weak state's political borders, through overwhelming refugee flows, increased arms smuggling, breakdowns in regional trade, and many other ways. The National Intelligence Council acknowledges that state failure and its associated regional implications pose an "enormous cost in resources and time" to the United States. Challenges to Development In addition to the potential transnational security threats that weak and failing states pose to the United States, they also present unique challenges from a development perspective—a dimension of U.S. international policy that the 2002 U.S. National Security Strategy elevated in priority to be equivalent to U.S. policy on defense and diplomacy. According to some U.S. officials, the primary programs to support development are inappropriate for fragile states. For example, weak and failing states have greater difficulty achieving the U.N. Millennium Development Goals and qualifying for U.S. assistance programs under the Millennium Challenge Act (22 U.S.C. 7701 et seq.), which essentially precludes assistance under this act to most weak and failing states. Some weak states also have difficulty absorbing large amounts of foreign assistance, even when donor countries provide funding. According to the World Bank, fragile states grow only one-third as fast and have one-third the per capita income, 50% higher debt-to-gross domestic product ratios, and double the poverty rates of other low-income countries. The World Bank also finds that nearly all fragile states identified in 1980 are still fragile today, highlighting the difficulty in achieving sustained progress in weak and failing states. Statistical estimates by World Bank analysts predict that a fragile states is likely to remain so for 56 years, and the probability of a fragile state experiencing a "sustained turnaround" in any given year is a mere 1.8%. Issues for New U.S. Programs and Initiatives The United States does not have an official strategy or interagency guidelines for dealing with weak and failing states. However, several notable programs and initiatives have been created since 9/11 that aim to help prevent state failure, strengthen weak states, and counter existing threats emanating from weak and failing states. These programs span all aspects of state weakness issues to include (1) identifying threats and monitoring weak states, (2) engaging weak states through diplomacy, (3) directing foreign assistance toward the alleviation of state weakness symptoms, and (4) implementing on-the-ground civilian and military stabilization operations. Depending on the level of state weakness, available resources, and political considerations, U.S. policy makers may decide to apply one or more of these programming areas to weak states. Some analysts remain critical of recent U.S. programs designed to address issues of state weakness. The following sections describe new U.S. programs and initiatives and highlight existing criticism and concerns. Conflict and Threat Early Warning The U.S. government uses conflict and threat early warning systems to predict which states are likely to fail and to identify which near-term emerging conflict situations require U.S. engagement. These include quantitative measures and subjective government analyses of state fragility. Early warning systems are used to assist U.S. agencies to prepare for international crises and identify areas in which assistance can be provided before a state slides further into failure. The overarching goal behind the implementation and use of these early warning systems is to help identify in advance weak states so that the U.S. government can plan and prepare for a likely crisis situation, and possibly preemptively react to developments. The National Intelligence Council, Department of State's Office of Early Warning and Prevention (located within S/CRS), U.S. Agency for International Development (USAID), and Department of Defense (DOD) have roles in identifying and monitoring potential threats emanating from weak and failing states. One U.S. government warning list of weak and failing states has been prepared by the National Intelligence Council twice per year since 2005, using classified and unclassified sources. According to government officials, this assessment is based at least in part on analysis of the Central Intelligence Agency-commissioned Political Instability Task Force, which boasts more than an 80% accuracy rate for predicting politicide, genocide, and ethnic and revolutionary wars. USAID began producing a separate list of fragile states under its Conflict and Fragility Alert, Consultation, and Tracking System ( C/FACTS ) in 2006. In addition, U.S. officials say DOD has worked on developing a list of potential countries where future U.S. military force may be required; DOD has also worked on identifying potential ungoverned areas and assessing the threats that they pose to U.S. national security. According to U.S. officials, the lists of weak states generated by these efforts are used to inform the various agency's programming agendas. A May 2007 report by the State Department's Office of Inspector General praised the extent to which interagency coordination for early warning conflict assessment occurs between S/CRS, DOD, USAID, the intelligence community, and others. However, the extent to which the U.S. government can respond to multiple crises, let alone mobilize to prevent a crisis from occurring, based on early warning assessments remains unclear. Among some analysts, the value of effective early warning assessments can often be undermined by lack of political will to mobilize in time for an emerging crisis, as well as the lack of sufficient resources and capabilities to deploy to the potentially numerous states that present early signs of potential state failure at any given time. In the case of S/CRS, for example, which is mandated with leading and coordinating U.S. efforts for conflict prevention and response in failing states, many observers have suggested that the office's small size and limited resources hamper its ability to address the full range of today's weak states; instead, S/CRS has been able to focus only on a small handful of weak states. International Diplomacy International diplomacy is one way in which the United States can engage countries on issues that weaken the state and pose threats to U.S. national security. By working in cooperation with international actors on weak states issues, including democracy promotion, the United States aims to prevent transnational threats from emerging. In 2006, Secretary Rice unveiled transformational diplomacy as one such initiative. Under the banner of transformational diplomacy, approximately 300 U.S. diplomats were designated to be shifted to "strategic posts" in the Near East, Asia, Africa, and Latin America over the course of the next several years. The new posts focus on promoting democracy and good governance as well as bolstering state capacity against terrorism, nuclear proliferation, and other security threats in countries often characterized as weak. Although the scope of transformational diplomacy extends beyond the issues of state weakness, the resulting Strategic Plan for Fiscal Years 2007-2012 specifically aims to "directly confront threats to national and international security from ... failed or failing states," and strengthen state capacity to "prevent or mitigate conflict, stabilize countries in crisis, promote regional stability, protect civilians, and promote just application of government and law." According to some analysts, however, the future of transformational diplomacy hangs in question. There remains some disagreement over whether transformational diplomacy requires new congressional legislation; the Administration claims the initiative does not and has not requested new authorities from Congress to implement transformational diplomacy. In addition, some experts and foreign governments have raised concerns about the particular prominence of democracy promotion in Administration's transformational diplomacy initiative and its potential use as a "pretext" for intervening in other country's domestic affairs. Lacking legal requirements to implement the transformational diplomacy initiative, it is possible that the next Administration may rethink or replace it. Foreign Assistance The Bush Administration has begun several new, and sometimes controversial, foreign aid initiatives that seek to help fragile states build, or reinforce weak institutions and basic state infrastructure. These include transformational development; civilian stabilization and reconstruction assistance; USAID's Fragile States Strategy; and military, police, and counter-terrorism assistance. In aggregate, these programs have raised several questions that tie into larger debates about the use of foreign assistance for national security purposes, including weak states. Major related issues include whether the Foreign Assistance Act of 1961 should be modified, revised, or entirely rewritten; what role the U.S. military should participate and the extent to which the U.S. military should be involved in foreign assistance funding to strengthen weak states; and whether or to what extent U.S. foreign assistance should be used to train and equip foreign police and other interior law enforcement elements. Transformational Development The State Department's 2006 transformational development initiative created the office of the Director of Foreign Assistance (DFA) and introduced a new Foreign Assistance Framework. The DFA serves concurrently as the USAID Administrator and has authority over State Department and USAID foreign assistance programs. The Foreign Assistance Framework categorizes foreign aid recipients as rebuilding, developing, transforming, sustaining partners, and restrictive countries, and identifies five development objectives for all country categories—peace and security, governing justly and democratically, investing in people, economic growth, and humanitarian assistance. U.S. officials claim that the Framework implicitly addresses state fragility, with the majority of so-called weak and failing states falling in the rebuilding category and some falling in the developing and restrictive categories. The new framework has the potential to improve alignment of foreign assistance allocations with foreign policy priorities, such as weak and failing states, by centralizing management and accountability over State Department and USAID funds. However, U.S. officials have stated that the new Office of the Director for Foreign Assistance has yet to develop strategic guidelines or a methodology to inform the allocation of aid resources to any of the Framework's country categories and for weak states specifically. Furthermore, the extent to which the Director of Foreign Assistance will be able to influence other U.S. agencies—particularly DOD—that provide foreign assistance funding remains unknown. In CY2005, 48% of U.S. Official Development Assistance (ODA) was controlled by agencies outside of the State Department and USAID, including the Departments of Defense, Agriculture, Energy, Health and Human Services, Labor, and Treasury. In CY2005, DOD alone disbursed more than one-fifth of U.S. foreign assistance. Civilian Stabilization Assistance From 2006 to 2007, S/CRS has supported projects in 18 countries that it identified as in crisis or at risk of crisis, including Kosovo, Haiti, Colombia, Mali, Mauritania, Niger, Sudan, Liberia, Chad, Somalia, the Philippines, Malaysia, Indonesia, Yemen, Lebanon, Iraq, Nepal, and Afghanistan. Funding for these projects was supported through traditional foreign assistance accounts, as well as through DOD under a temporary transfer authority provided by Congress—capped at a total of $100 million per fiscal year through FY2008—in section 1207 of the FY2006 National Defense Authorization Act, as amended (commonly referred to as "Section 1207" funds). Some point to the fact that DOD funds these civilian stabilization assistance programs as indicative of resource shortfalls within the State Department for effectively addressing fragile states. Some also raise concern with DOD's role in approving these civilian programs; such critics argue that the requirement that the Defense Secretary sign off on civilian stabilization assistance projects could encourage DOD to encroach into foreign assistance policymaking that had previously been the primary responsibility of the Secretary of State. On the other hand, supporters of DOD's role in civilian stabilization assistance argue that it creates opportunities for whole-of-government approaches to foreign assistance and enhances interagency programming by requiring approach of both the State Department and DOD (and thus potentially improving civil-military coordination between military combatant commanders, U.S. ambassadors, and other State Department and DOD policy officials). Supporters also argue that this budgetary arrangement between the State Department and DOD for civilian stabilization assistance is practical and necessary for U.S. national security purposes, as it enables the State Department to respond to immediate reconstruction and stabilization needs before more formal programs can be developed. USAID's Fragile States Strategy USAID has been at the forefront of U.S. efforts to prevent future state failure by addressing the underlying sources of weakness. In 2003, USAID established the Office of Conflict Mitigation and Management to examine the underlying causes of political instability, conflict, and extremism, and to improve the Agency's response to such conditions. In 2004, USAID also created a new type of foreign service officer, called "Crisis, Stabilization, and Governance Officers," that specializes in providing the humanitarian, economic stabilization, and governance aspects of development assistance to fragile and weak states. They are given different training and shorter tours that focus specifically on the post-conflict phase of development, and operate in countries such as Afghanistan and Sudan. In 2005, USAID unveiled its Fragile States Strategy, which provides a strategic vision for how USAID can most effectively respond to fragile states. Among its main objectives, the Strategy sought to enhance the Agency's rapid crisis response capabilities and establish a strategic planning process that could take into account conditions of weakness unique to each country. According to U.S. officials and independent observers, however, the Strategy's new programming objectives and strategic priorities for fragile states seem to have been sidelined by the 2006 launch of the Secretary of State's transformational development initiative. Military, Police, and Counter-Terrorism Assistance A subset of foreign assistance distinct from bilateral economic aid, U.S. support for foreign military, police, and counter-terrorism assistance is a primary means by which to prevent security threats emanating from weak and failing states. By providing this specialized form of assistance, the Administration seeks to build and reinforce the security sector capabilities of partner nations in order to prevent state weaknesses that transnational threats could exploit. Examples of counter-terrorism programs in weak states that focus on military assistance and training include the Regional Defense Combating Terrorism Fellowship Program and the Trans-Sahel Counter-Terrorism Initiative (TSCTI). Congress has actively supported the growth of this realm of foreign assistance in recent years through military, police, and counter-terrorism funding appropriated in the annual Foreign Operations and supplemental appropriations bills. Under new authorities granted by Congress in 2005, DOD is using additional funds to train and equip foreign security forces for counter-terrorism and stability operations. DOD's growing prominence in providing security sector assistance, however, has raised particular concern among some policy makers, including Members of Congress, who question whether the U.S. military is playing too large a role in a realm of foreign affairs traditionally dominated by the State Department and USAID. Post-Conflict Stability Operations Civilian Capabilities The current Administration has sought to develop effective civilian procedures for stability operations in failing states that go beyond traditional peacekeeping activities. In August 2004, then-Secretary of State Colin Powell created the Office of the Coordinator for Reconstruction and Stabilization (S/CRS) to plan and conduct civilian post-conflict operations and to coordinate with DOD in situations that require a military presence. In December 2004, Congress granted statutory authority for the existence of S/CRS in the Department of State and Related Agency Appropriation, 2005. One year later, the President officially lent his support to S/CRS with NSPD 44 in December 2005. NSPD 44 not only identified the State Department as the lead agency for coordinating stabilization and reconstruction operations in failing states, but also mandated that it consider and propose "additional authorities, mechanisms, and resources needed to ensure that the United States has the civilian reserve and response capabilities necessary for stabilization and reconstruction activities." S/CRS responded to the President's NSPD 44 with a proposal for a "Civilian Stabilization Initiative." Under this plan, S/CRS seeks to create a cadre of volunteer civilians that could be rapidly deployed anywhere in the world in response to an emerging crisis. These civilians would have unique skills and training that could be useful in post-conflict situations and would include police officers, judges, lawyers, agronomists, public health officials, city planners, economists, and others. S/CRS aims to develop three distinct pools of such civilians: (1) an "Active Response Corps" of about 250 full-time U.S. federal government employees who can be continuous deployed abroad; (2) a "Standby Response Corps" of about 2,000 U.S. federal government employees that can be called up from their day jobs to deploy within 45 to 60 days of a crisis; and (3) a "Civilian Reserve Corps" of about 2,000 additional people from the private sector and from state and local government work, who can be called up from their day jobs to deploy within two months of a crisis. See " Possible Legislative Issues for Congress " section, below, for further discussion. Military Capabilities The Secretary of Defense issued Directive 3000.05 in November 2005 on "Military Support for Stability, Security, Transition, and Reconstruction Operations." In Directive 3000.05 , the Secretary elevates stability operations to a "core U.S. military mission" and calls on the military to be prepared to conduct and support "all tasks necessary to establish or maintain order"—including tasks normally "best performed" by civilians. Stability operations from a Department of Defense perspective encompass a broad array of non-traditional military engagements, which include peacekeeping, humanitarian and civic assistance, counter-terrorism, counter-narcotics, and counter-insurgency efforts. Since 2005, DOD has created a new Deputy Assistant Secretary of Defense for Stability Operations, a Defense Reconstruction Support Office, and Senior Directors for stability operations in each Combatant Command. According to DOD officials, Directive 3000.05 remains in the initial stages of implementation and U.S. military doctrine is under revision to incorporate stability and reconstruction operations into military field manuals. Recent post-conflict stability operations have highlighted possible tensions in DOD's relationship with civilian agencies. In 2005, for example, a report by the Defense Science Board Task Force on the status of DOD stability operations capabilities found that "the progress of other organs of Government has been less fulsome" and that it could not "have confidence in the speed with which changes in other departments and agencies outside DOD will take place." Analysts suggest that DOD efforts to compensate for other agencies' shortcomings may have the unintended consequence of causing civilian agencies to rely increasingly on DOD in future stabilization operations. Some argue that such reliance is not necessarily problematic, as the military's "built-in" capabilities in war zones and standby logistics to immediately deploy and provide basic-needs reconstruction relief makes it a "natural lead" in post-conflict reconstruction. Others, however, argue that the potential reliance on military capabilities could compromise or conflict with broader U.S. foreign policy goals. Interagency Coordination Cross-agency collaboration on U.S. projects in weak states appears to be increasing in frequency and institutionalization. The creation of S/CRS in 2004 is one testament to this development, as it is the first formally mandated office to serve indefinitely as the lead coordinator for all civilian and military activities related to conflict prevention and post-conflict reconstruction. S/CRS is also leading an ongoing effort, the Interagency Management System, to develop interagency planning and improved coordination for stability operations. Prior to the creation of S/CRS, President Clinton's 1997 Presidential Decision Directive 56 ( PDD 56 ) governed interagency management of post-conflict situations. Under PDD 56 , an ad hoc interagency working group called the Executive Committee would be called upon to supervise the day-to-day management of U.S. operations when crises occurred. Many analysts and U.S. officials observe, however, that the current interagency approach to weak states—which spans not only post-conflict stability operations planning, but also development assistance and intelligence community cooperation on early warning threat assessments in weak and failing states—nevertheless remains a "messy amalgam" of programs and policies, lacking strategy-level, cross-agency guidance. Criticism by U.S. officials points to overlapping and redundant responsibilities, as well as programs that are, at times, working at cross-purposes. Recent World Bank and OECD research indicates, for example, that foreign assistance flows to fragile states tend to be uneven, irregular, and fragmented from all major donor countries and organizations, including the United States. Some officials acknowledge that confusion also remains regarding which agencies should be invited to interagency policy planning discussions on various weak state issues. In the case of the S/CRS Interagency Management System, the U.S. Government Accountability Office (GAO) reports that this proposed interagency planning mechanism for post-conflict situations remains hampered by several fundamental problems. These include (1) "unclear and inconsistent guidance" on the roles and responsibilities of S/CRS and other offices within the State Department, which have resulted in "confusion and disputes" about who leads policy development and who controls the resources for stability operations; (2) a "lack of a common definition for stability and reconstruction operations" across the interagency, which makes it unclear when, where, or how the Interagency Management System would be applied in actual crises; and (3) concerns that the Interagency Management System was "unrealistic, ineffective, and redundant" and general skepticism among interagency participants that this new planning process would improve outcomes or increase resources available for fragile states. Other recent U.S. projects in weak states are also testing U.S. capacity for interagency coordination. Such efforts include the Provincial Reconstruction Teams in Iraq and Afghanistan, the Trans-Sahara Counter-Terrorism Initiative, and counter-extremism projects in the Horn of Africa. In all of these recent initiatives, civilian and military officials are working together to strengthen state capacity holistically across multiple dimensions of security sector reform, institutional capacity building, and economic development. In the case of the Horn of Africa projects, as an illustrative example, USAID funded an assessment that examined the causes of extremism and identified the most unstable areas in the region. USAID then collaborated with the Department of State and DOD's Combined Joint Task Force for the Horn of Africa to implement a variety of initiatives to counter extremism in the region. DOD provided the "hardware" by building or rehabilitating essential infrastructure, such as schools, clinics, and wells, while the Department of State and USAID provided the "software," which included educational and medical training and resources and building institutional capacity. USAID has also been working to synchronize civilian-military relations in national security-related programming since 2005, with the creation of the Office of Military Affairs and the Tactical Conflict Assessment Framework for on-the-ground conflict situations. The recently created U.S. Africa Command (AFRICOM), a new DOD combatant command post that will include significant State Department leadership, is also indicative of increasing civil-military collaboration. According to U.S. officials, DOD also aims to apply the AFRICOM model to transform the U.S. Southern Command (SOUTHCOM) by 2016. Possible Legislative Issues for Congress The following sections identify several wide-ranging legislative issues that relate to U.S. programs and initiatives for weak and failing states. They include (1) civilian post-conflict management authorities, (2) DOD transfer authority to the State Department for Security and Stabilization Assistance, (3) DOD global train and equip authorities and funding, (4) foreign police training authorities, and (5) interagency policy effectiveness. Civilian Post-Conflict Management Authorities Building civilian post-conflict capabilities in weak states is a key area of focus, which policymakers have been debating at least since 2004. At the State Department's request, Congress is considering new authorizations to develop civilian post-conflict stabilization capabilities in the Reconstruction and Stabilization Civilian Management Act of 2008 ( S. 613 , H.R. 1084 , and H.R. 5658 ). These bills seek to authorize funding for stabilization and reconstruction assistance in failing states, as well as the creation of a Response Readiness Corps. This Response Readiness Corps would include what S/CRS currently calls the "Active Response Corps" and the "Standby Response Corps." Congress has appropriated up to $75 million in initial funding for the Response Readiness Corps to the State Department and USAID in FY2008 emergency supplemental appropriations ( P.L. 110-252 ). Congress also appropriated an additional $50 million for the creation of the third component of the S/CRS Civilian Stabilization Initiative, the "Civilian Reserve Corps," in FY2007 supplemental appropriations; this funding, however, is contingent upon specific authorization. For FY2009, the State Department included in its budget request to Congress a total of $248.6 million to stand up the Civilian Stabilization Initiative and other costs associated with S/CRS. The State Department did not include in its FY2009 request funding for a Conflict Response Fund; instead it requests the continuation of DOD's authority to transfer funds to the State Department for security and stabilization assistance, which currently is set to expire at the end of FY2008. Supporters of the bill, including Defense Secretary Robert M. Gates, maintain that the State Department's ability to perform its mandated mission in post-conflict situations is hindered by the lack of support for a conflict response fund and a civilian reserve corps; critics remain hesitant to provide additional funding to a relatively new office, charged with developing new concepts. Unlike the State Department, which has had difficulty in obtaining permanent funding for civilian stabilization capabilities, the Department of Defense has obtained more congressional funds for U.S. stabilization operations in Afghanistan and Iraq. Some analysts have pointed to DOD's Commander's Emergency Response Program (CERP) as a potentially useful example of an emergency funding mechanism for strengthening weak and failing states. Through CERP, U.S. commanders can rapidly disburse discretionary funds for humanitarian relief and reconstruction needs of local civilians. International support for the development of civilian post-conflict capabilities appears to be developing, albeit slowly. In early 2008, British Prime Minister [author name scrubbed] proposed a 1,000-person civilian rapid reaction force that could respond to crises in fragile and failing states. This force would resemble the State Department's proposed Civilian Stabilization Initiative, consisting of police, emergency service personnel, judges, trainers, and other crisis experts who could be called upon in humanitarian or post-conflict emergencies. DOD Transfer Authority to the State Department for Security and Stabilization Assistance U.S. foreign assistance for stabilization efforts in fragile states is funded in part by DOD through a controversial, temporary transfer authority. Under authority stated in Section 1207 of the National Defense Authorization Act for FY2006 ( P.L. 109-163 , H.R. 1815 ), Congress provided the State Department a mechanism to receive DOD funds for "reconstruction, security, or stabilization assistance to a foreign country." In the conference report that accompanied H.R. 1815 ( H.Rept. 109-360 ), the conferees noted that they viewed this provision as a "temporary authority to provide additional resources, if needed, to the Department of State until S/CRS is fully stood up and adequately resourced." S.Rept. 110-77 , which accompanied the FY2008 National Defense Authorization Act, also described it as a "pilot project." Nevertheless, Section 1210 of the National Defense Authorization Act for Fiscal Year 2008 ( P.L. 110-181 ) extended the original transfer authority to September 30, 2008. For FY2009, DOD is requesting an increase in the transfer authority cap, up to $200 million per fiscal year from the current $100 million. DOD is also requesting that the transfer authority be extended to other U.S. agencies, besides the State Department. Supporters of the extended transfer authority provision argue that the State Department's stabilization capabilities remain underfunded and prevent effective civilian management of post-conflict situations. Critics echo the 2006 conference report, which states that the conferees "do not believe it is appropriate, and are not inclined, to provide long-term funding from the Department of Defense to the Department of State so that they Department of State can fulfill its statutory authorities." Highlighting continued debate over the appropriateness of DOD's Section 1207 authority, the House version of the FY2008 bill did not extend the transfer authority, while the Senate version extended the transfer authority through September 30, 2008, and increases such authorized funding from $100 million to $200 million. In the final FY2008 defense authorization, Congress ultimately agreed to extend the transfer authority, but maintained the funding limit of $100 million through FY2008. DOD Global Train and Equip Authorities and Funding An ongoing congressional concern is the extent to which DOD should be involved in strengthening weak states' militaries to combat terrorism and other transnational threats that are perceived to emanate through such states. At the heart of this debate is a temporary congressional authority to allow DOD to train and equip foreign military forces for counter-terrorism operations and military and stability operations in which U.S. armed forces are involved (under Section 1206 of the National Defense Authorization Act for Fiscal Year 2006 [ P.L. 109-163 ]). In 2006, DOD obligated $100.1 million under this authority; in 2007, $279.5 million; and as of May 2008, $24.8 million. This new authority, which began as a two-year pilot program, has raised concerns among some analysts that it is contributing to a perceived shift in U.S. foreign assistance funding control from the State Department to DOD. Supporters of Section 1206, however, argue that DOD may be better able to operate such train and equip programs than the Department of State. To this end, the Administration has requested that Congress broaden DOD's Section 1206 authorities to include (1) training and equipping foreign gendarmerie, constabulary, border protection, and internal defense forces; (2) increasing funding authorization levels from $300 million to $750 million; (3) allowing the President or the Secretary of State to waive any legislative restrictions, including human rights restrictions, that may apply to assistance for military or other security forces; and (4) making the authorities permanent. Although Congress raised the initial amount of authorized funding from $200 million to $300 million per year in Section 1206 of the John Warner National Defense Authorization Act for Fiscal Year 2007 ( P.L. 109-364 ), Congress has turned down the Administration's request to broaden Section 1206 authorities further. Additionally, Congress has not appropriated funds in any fiscal year for the purpose of Section 1206 authorities. For FY2009, the House version of the National Defense Authorization Act ( H.R. 5658 ), which passed on May 22, 2008, would extend Section 1206 authorities to FY2010. The Senate version would extend the authorities to FY2011, increase the authorized funding cap to $400 million per fiscal year, and extend the authorities' use beyond foreign national militaries to include building the capacity of a foreign country's coast guard, border protection, and other security forces engaged primarily in counter-terrorism missions. Foreign Police Training Authorities The U.S. government's ability to assist foreign countries in law enforcement is a critical component in stabilizing weak states. Section 660 of the Foreign Assistance Act of 1961 (P.L. 87-195), as amended by the 1973 Foreign Military Sales and Assistance Act ( P.L. 93-189 ), restricts the use of foreign assistance funds for the training of foreign police, unless Congress grants an exception. Some observers consider Section 660 as "among the most significant restrictions for stabilization and reconstruction operations" in weak and failing states. Such analysts recommend repealing this prohibition to allow for greater flexibility in developing strategies to address weaknesses in foreign police forces. On the other hand, some observers also point to Congress's willingness to grant numerous exemptions to Section 660 over the years as indication that Congress has already taken sufficient account of the potential importance of foreign police training assistance for strengthening weak states. Interagency Policy Effectiveness According to some observers, the issues surrounding challenges posed by weak and failing states highlight the broader problem of interagency coordination in national security affairs. In one recent, congressionally mandated effort to address long-term strategies related to foreign assistance policy, the bipartisan "HELP Commission" recommended that Congress rewrite the Foreign Assistance Act of 1961 to address, among other considerations, the perceived need for improved coordination between security concerns and development priorities in failed and failing states. "Once thought to be distinct and removed from one another, security and development now intersect regularly," the Commission explains. "Moving states from failed and failing to capable requires going beyond assistance, linking trade, democratic principles of governance, and security with traditional assistance." Other groups are exploring options for reforming interagency coordination on national security issues, which could include rewriting the National Security Act of 1947 and revising congressional rules governing committee structure and practice to improve oversight of interagency activity. The implications of enhancing U.S. government interagency processes, not only could be substantial; observers often compare calls for interagency reform of U.S. national security institutions to the Goldwater-Nichols Act of 1986 ( P.L. 99-433 ), which fundamentally altered how the various branches of the U.S. armed services coordinate capabilities and function. Advocates of interagency reform call for institutionalized mechanisms to require interagency strategic and operational planning, as well as coordinated resource allocation and execution. Critics, however, caution that such proposals could potentially involve significant reform of congressional funding and authorizing responsibilities for national defense, foreign operations, and intelligence. Appendix A. Definitions of Weak States Selected U.S. government and government affiliated efforts to define weak states include the following: U.S. Agency for International Development (USAID) In the 2005 Fragile States Strategy, USAID uses the term "fragile states" to include those that fall along a spectrum of "failing, failed, and recovering from crisis." The most severe form of fragile states are "crisis states," where conflict is ongoing or "at great risk" of occurring and the central government does not exert "effective control" over its territory, is "unable or unwilling to assure the provision of vital services to significant parts of its territory," and holds "weak or non-existent legitimacy among its citizens." National Intelligence Council (NIC) The NIC describes "failed or failing states" as having "expanses of territory and populations devoid of effective government control" and are caused by internal conflicts, in the 2020 Project's 2004 final report, Mapping the Global Future . In this report, the NIC considers the terms "post-conflict" and "failed state" to be synonymous. National Security Council (NSC) The NSC defines "weak states" as lacking the "capacity to fulfill their sovereign responsibilities" in the 2003 National Strategy for Combating Terrorism ( NSCT ). The strategy document also describes some weak states as lacking "law enforcement, intelligence, or military capabilities to assert effective control over their entire territory." The NSC describes "failing states" in the 2006 NSCT as similar to "states emerging from conflict." U.S. Government Accountability Office (GAO) GAO, in its 2007 report Forces That Will Shape America ' s Future , defines "failed or failing states" as "nations where governments effectively do not control their territory, citizens largely do not perceive the governments as legitimate, and citizens do not have basic public services or domestic security." U.S. Interagency Working Group on International Crime In the 2000 International Crime Threat Assessment report, an interagency working group created under the Clinton Administration defines "failed states" as "unwilling or unable" to meet "many of the accepted standards and responsibilities of sovereign control over its territory," which may lead to "significant economic deterioration and political unrest that threatens both internal and regional stability." Organization for Economic Cooperation and Development (OECD) The OECD's Development Assistance Committee (DAC), of which the United States is a member, defines "fragile states" as lacking "either the will or the capacity to engage productively with their citizens to ensure security, safeguard human rights, and provide the basic function for development." They are further characterized as possessing "weak governance, limited administrative capacity, chronic humanitarian crisis, persistent social tensions, violence, or the legacy of civil war." Political Instability Task Force (PITF) Originally commissioned by the CIA's Directorate of Intelligence in 1994 and called the "State Failure Task Force," PITF defines "state failure" as a "range of severe political conflicts and regime crises" and is characterized by a "total or near-collapse of central political authority." The Task Force's statistical methodology identifies instances of politicide, genocide, adverse regime changes, and ethnic and revolutionary wars as situations when total or partial state failure occur. U.S. Commission on Weak States This bipartisan commission, sponsored by the Washington think tank Center for Global Development, in its final 2003 report entitled On the Brink: Weak States and U.S. National Security , defines "weak states" as those with "governments unable to do the things that their own citizens and the international community expect from them: protecting people from internal and external threats, delivering basic health services and education, and providing institutions that respond to the legitimate demands and needs of the population." World Bank The World Bank's Fragile States Initiative, previously called the Low-Income Countries Under Stress (LICUS) Initiative, describes "fragile states" as often characterized by poor governance, internal conflicts or tenuous post-conflict transitions, weak security, fractured societal relations, corruption, breakdowns in the rule of law, and insufficient mechanisms for generating legitimate power and authority. All are low-income, which is defined as countries with a 2006 gross national income (GNI) per capita of $905 or less, calculated using the World Bank's Atlas Method. Appendix B. Various Lists Identifying "At Risk" States

Although long a component of U.S. foreign policy, strengthening weak and failing states has increasingly emerged as a high-priority U.S. national security goal since the end of the Cold War. Numerous U.S. government documents point to several threats emanating from states that are variously described as weak, fragile, vulnerable, failing, precarious, failed, in crisis, or collapsed. These threats include providing safe havens for terrorists, organized crime, and other illicit groups; causing conflict, regional instability, and humanitarian emergencies; and undermining efforts to promote democracy, good governance, and economic sustainability. The U.S. government remains in the early stages of developing targeted capabilities and resources for addressing a complex mix of security, development, and governance challenges confronting weak states. U.S. programs and initiatives fall under five main categories: (1) conflict and threat early warning, (2) international cooperation and diplomacy, (3) foreign development assistance, (4) post-conflict stability operations, and (5) interagency coordination. However, as U.S. policies toward weak and failing states have grown in priority and cost, particularly since 9/11, some policy makers and analysts have begun to question the Administration's commitment to addressing effectively the problems posed by these states. Congress plays a crucial role in the funding and oversight of programs designed to address weak and failing states. Several recent bills in the 110th Congress and laws directly relate to and have changed aspects of U.S. policy toward these states. Among these include efforts to address (1) civilian post-conflict management authorities and funding (S. 613/H.R. 1084, S. 3288, and H.R. 5658), (2) temporary Department of Defense (DOD) funding transfer authorities to the State Department for security and stabilization assistance (S. 3001/H.R. 5658), (3) temporary DOD security assistance authorities and funding (S. 3001/H.R. 5658), and (4) options for reforming foreign assistance and interagency coordination (as mandated in P.L. 108-199 and P.L. 109-364). This report first provides definitions of weak states and describes the links between weak states, U.S. national security, and development challenges. Second, the report surveys recent key U.S. programs and initiatives designed to address threats emanating from weak states. Finally, it highlights relevant issues about U.S. policy toward these states that Congress may consider. For further analysis, see CRS Report RL32862, Peacekeeping/Stabilization and Conflict Transitions: Background and Congressional Action on the Civilian Response/Reserve Corps and other Civilian Stabilization and Reconstruction Capabilities, by [author name scrubbed]; CRS Report RS22855, Section 1206 of the National Defense Authorization Act for FY2006: A Fact Sheet on Department of Defense Authority to Train and Equip Foreign Military Forces, by [author name scrubbed]; CRS Report RS22871, Department of Defense "Section 1207" Security and Stabilization Assistance: A Fact Sheet, by [author name scrubbed]; and CRS Report RL34455, Organizing the U.S. Government for National Security: Overview of the Interagency Reform Debates, by [author name scrubbed], [author name scrubbed], and [author name scrubbed].

Current Tax Law Two areas of current tax law are related to the issue of income exclusion for civilians serving in combat zones: the income exclusion provision for military personnel, and the income exclusion provision for U.S. citizens working overseas. Exclusion of Income Earned by Military Personnel Serving in Combat Since the enactment of the Revenue Act of 1913, all or portions of military pay have been exempt from taxation during periods of war for those serving in a combat zone. Internal Revenue Code Section 112 exempts from income taxation all compensation received for active service when serving as a warrant officer, or enlisted member for any month (during any part of which) such member serves in a combat zone. In the case of commissioned officers, the exemption amount is limited to the highest rate of basic pay for an enlisted person, plus the amount of hostile fire/imminent danger pay that the officer receives. Based on FY2007 pay rates, the officer exclusion was limited to $6,381 per month. For members of the U.S. Armed Forces who serve in a combat zone, the following amounts may be excluded from their income: Active duty pay earned in any month during service in a combat zone. Imminent danger/hostile fire pay. A reenlistment bonus (when the voluntary extension or reenlistment occurs in a month served in a combat zone). Pay for accrued leave when earned in any month served in a combat zone. The Department of Defense must determine that the unused leave was earned during that period. Pay received for duties as a member of the Armed Forces in clubs, messes, post and station theaters, and other nonappropriated fund activities. Again, the pay must be earned while serving in a combat zone. Awards for suggestions, inventions, or scientific achievements when the taxpayer made the suggestion during a month while serving in a combat zone. Student loan repayments, such as those received from the Department of Defense Educational Loan Repayment Program, that are attributable to the period of service in a combat zone. States may or may not adopt federal procedures for determining income tax liability. In general, almost all states with an income tax have laws extending the combat zone income tax exclusion to state income tax. However, the manner in which various states allow tax incentives for those serving in combat varies. Some states have legislation that mirrors the federal provisions while other states' tax laws address the matter differently. For instance, in the state of Michigan all military pay is exempt. However, in the state of Mississippi enlisted service members may exclude from gross income all income earned during any month served in combat, while officers may exclude up to $500 per month. Exclusion of Income Earned by U.S. Citizens Abroad Current tax law allows some exclusions from U.S. income tax for citizens who work overseas. Thus a proposed civilian combat zone exclusion would provide added tax savings only to the extent overseas personnel still owe federal taxes after using the existing exclusions. U.S. federal civilian employees who work overseas can exclude certain special allowances under Section 912 of the Internal Revenue Code (IRC). The allowances are primarily for the general cost of living abroad, housing, education, and travel. Section 911 of the IRC permits other U.S. citizens (non-federal employees) to exclude up to $82,400 in foreign earned income and certain housing expenditures. The exclusion of income earned abroad depends on several factors, some of which may or may not apply to civilians in combat zones. In particular, to qualify for the income tax exclusion, a person must be a U.S. citizen, must have his or her tax home in a foreign country, and must be a resident of that foreign country or have lived abroad for at least 330 days out of any 12 consecutive months. If a person qualifies for the exclusion for only part of the tax year, then only part of the exclusion can be claimed. All U.S. citizens can credit foreign taxes paid against their U.S. income taxes. However, federal employees are usually exempt from foreign taxes. The tax treatment of income earned by U.S. citizens abroad is often justified by proponents by pointing to the differences in the cost of living and income tax rates that U.S. citizens experience overseas. These differences in cost of living cause the tax liabilities of U.S. citizens working abroad to differ from the tax liabilities of individuals with identical incomes who live and work in the United States. Individuals working overseas may face high foreign taxes, in which case, the foreign tax credit can be used to offset that expense. For those individuals who experience low foreign taxes, the tax credit can reduce the amount of U.S. taxes paid. Proposals for Change In recent Congresses, proposals were made to modify the income tax exclusion to apply to federal civilian employees employed in combat zones. In the 110 th Congress, the Federal Employee Combat Zone Tax Parity Act ( H.R. 1974 and S. 1166 ) has been introduced. The proposal would expand the current armed forces income tax exclusion to include federal civilians employed in combat zones. In the 109 th Congress, H.R. 294 proposed to exclude from gross income compensation earned by certain DOD civilian employees on active service in a combat zone. This proposal parallels the existing provision for members of the Armed Forces, which allows the exemption for all income earned in any month the taxpayer serves in a combat zone. The proposal follows current law by limiting the exemption amount so as not to exceed the maximum amount for enlisted personnel. Proposed legislation in the 108 th Congress, H.R. 117 and H.R. 1133 , included provisions that proposed to extend the combat zone tax treatment to civilian employees of DOD serving in combat zones. Amendments were proposed to accompany H.R. 878 to extend the combat zone exclusion benefits to DOD civilians working in a combat zone. Policy Arguments Current legislation proposes extending the combat zone income tax exclusion to civilian DOD personnel, but other proposals have been made in the past that would also extend the exclusion to civilian contractors. Thus, the analysis in this section includes both civilian DOD employees and civilian contractors. The combat zone income exclusion is a federal subsidy that treats income earned by personnel serving in combat favorably compared to other income. Typically, this kind of subsidy can influence how economic actors behave and how the economy's resources are employed. Yet the rationale for this military tax benefit was based on a desire to reduce the tax burdens of military personnel during wartime, rather than an incentive to encourage taxpayers to be employed in a combat zone. Efficiency Generally, tax incentives are used to encourage more activity than would otherwise be undertaken. According to economic theory, in most cases an economy best satisfies the wants and needs of its participants if markets operate free from distortions by taxes and other factors. Market failures, however, may occur in some instances, and economic efficiency may actually be improved by tax distortions. Market failures occur when a market, left on its own, fails to allocate resources efficiently. In particular, market transactions are inefficient when the marginal benefits are less than the marginal costs. Market failures may be due to a variety of circumstances, including the presence of externalities and common resources, public goods, imperfect competition, and/or asymmetric or incomplete information. If there is a market failure and a tax subsidy remedies that failure, then there is economic justification for the subsidy because of its efficiency gains. But a tax benefit lowers efficiency if it distorts behavior in the absence of a market failure. The combat zone income tax exclusion does not address a market failure, and as such, does not improve economic efficiency. At the same time, the exclusion is unlikely to distort behavior and thus may not lower efficiency. Economic theory suggests that the efficiency of most tax incentives can be determined by examining their success in causing an intended response, or degree of response, by recipients of the tax incentive. Yet, the combat zone income tax exclusion is not designed to cause a response, such as encouraging more individuals to serve in combat. Instead, the provision is simply an additional benefit received by members of the Armed Forces. In the case of extending an exclusion to federal civilian employees or civilian contract employees serving in a combat zone, the primary issues revolve around the purpose of the extension, which has not been stated by proponents. The purpose could be to provide additional compensation for certain individuals serving in combat and thus facilitate recruitment for such work. Alternatively, the purpose could be one of equity, to make civilian employee benefits equal to those of the armed forces. Efficiency: Additional Compensation to Individuals Serving in Combat If the intent of the exclusion is to provide additional compensation to individuals serving in combat, then a question of efficiency arises as to whether a tax subsidy is more appropriate than a direct payment. A subsidy in the form of an income tax exclusion benefits individuals differently based upon their household characteristics that influence their taxable income and liability. This variance in benefit is not related to the purpose of the subsidy, yet influences its value nonetheless. Economists consider this inefficient. Direct spending programs do not have this unintended variance in benefit. In the case of the combat zone income tax exclusion, an alternative subsidy could be to increase income earned while in combat. Examples of existing income subsidies for combat include hazardous duty pay and imminent danger pay. Increases in one or more of these types of income would, however, have adverse budgetary effects by increasing the cost of appropriations for military spending. Although the implementation of a tax benefit would also increase the cost of military spending, these costs do not require an appropriations process and, therefore, tend to receive less scrutiny. Equity: Among Taxpayers An exclusion refers to an item of income specifically excluded from the determination of adjusted gross income. An exclusion results in the subtraction of a portion of gross income before arriving at adjusted gross income. The beneficiaries of income tax exclusions, like most tax incentives, vary by type of taxpayer. Taxpayers differ by income, marital status, and number of dependents, and, as a result, the same tax incentive can affect taxpayers differently. Married individuals filing joint returns comprised 39.1% of all tax returns in 2001 (the most recent year for which those data are available), while single filers were 44.6%, and heads of households were 14.4%. These differences in household composition, along with differences in the number of dependents, alter the distribution of taxes among income groups, which can affect the degree of fairness in the tax code. Our income tax system is based on progressivity. Simply stated, the more taxable income a taxpayer has, the greater the percentage of income imposed as taxes. Because of this, the value of an exclusion from taxation increases with marginal tax rates (and income). That is to say, the tax liability of an individual in the 10% tax bracket (the lowest federal income tax rate) would be reduced $10 for each $100 of excluded income. In contrast, the tax liability of an individual in the 35% tax bracket (the highest federal tax bracket) would be reduced $35 for each $100 of excluded income. The lowest-paid personnel, because of current personal exemptions, the standard deduction amount, and other federal tax provisions such as the earned income tax credit, may owe little or nothing in federal taxes, and thus would not benefit greatly from an exclusion. Those persons (notably commissioned officers) making the largest salaries, however, benefit the most from an exclusion. However, as mentioned previously, there is a limit on the amount of the exclusion for officers, and that limit also would apply to civilians. The international tax provisions that benefit U.S. citizens working overseas may benefit certain civilians serving in combat, but not all civilians. As mentioned previously, federal civilians cannot benefit from the $82,400 income tax exclusion, though they can exclude the value of housing and certain other allowances they receive. Non-federal civilians benefit from the income exclusion to the degree that they meet the rules of the provision. In particular, if private sector civilians are located overseas for all or most of the 330 days out of 12 months required by the income exclusion, they may claim all or most of the exclusion. An income tax exclusion for non-federal civilians serving in combat zones would benefit two types of individuals; those unable to meet the requirements for the existing foreign-earned income exclusion, and those who earn more than the $82,400 allowable amount of the existing exclusion. Thus, a proposal to extend the combat zone tax exclusion to non-federal civilians, to the extent that it would benefit primarily high-income households, would diminish the progressivity of the income tax system. The foreign tax credit, however, was designed to offset the income taxation of individuals working abroad and alleviate double taxation, not as an economic incentive or subsidy. Personnel serving in combat are not subject to foreign taxes on the income earned while in the region, and thus do not require an income tax credit to offset foreign taxes paid. Equity: Among Individuals Serving in Combat If the intent of extending the combat zone exclusion to civilians is to make civilian benefits equal to those of the Armed Forces, then the distinctions between military service and civilian employment become important in the analysis of the policy. In that context, it has been observed that military personnel cannot resign when facing danger; they cannot refuse assignment; they are considered to be on duty 24 hours a day, every day; and they may be required to work until the job is done with no specific relationship to compensation. Whereas military personnel must perform those duties, civilian employees may or may not, depending on for whom they work, or the contracts they have negotiated, and those contracts could include monetary and other incentives for working in combat zones not available to military personnel. Also, military members are controlled, directed, organized, coordinated, and employed by a commander through a chain of command. Command is authority that a commander in the Armed Forces lawfully exercises over subordinates by virtue of rank or assignment. Should a subordinate fail to obey the lawful orders of a commander above him, he or she is subject to criminal punishment in accordance with the Uniform Code of Military Justice (UCMJ). This same authority does not exist over civilian employees except during times of war, in which case all civilian employees serving with or accompanying an armed force in the field are subject to the UCMJ. Advocates of expanding the income tax exclusion to civilians note that such a change would act as an expression of national concern and gratitude to all individuals serving our nation in dangerous situations, whether they are military or civilian personnel. Civilians accompanying the armed forces in combat zones include civilian government employees, civilian members of military aircraft crews, supply contractor personnel, contractor technical representatives, war correspondents, and members of labor units or civilian services contributing to the welfare of Armed Forces. Certain civilians work close to hostilities, often wearing uniforms and carrying weapons, which makes them likely to appear as combatants to opposition forces. Supporters of an extension of the income tax exclusion to civilians in combat assert that individuals in such dangerous situations are as likely as uniformed military personnel to become casualties of the operation. It may be more appropriate to argue that certain civilians, but not all, have a likelihood of becoming casualties of war. For instance, of the 2,363 fatalities of the Iraq war, as of December 2005, five were civilian DOD employees. Those five civilian DOD fatalities were in contrast to the fatalities of 2,145 members of the Armed Forces, and 110 contractors during the same time period. As shown in Table 1 , 85% of all individuals in service in Iraq are members of the Armed Forces, yet that group represents 95% of all fatalities. DOD civilian employees represent a little more than 2.5% of the people in service in Iraq, but 0.2% of fatalities. It could be argued that civilian individuals captured by an enemy force may be treated worse than military personnel. It may be further argued that such individuals, by accepting certain dangerous assignments, have demonstrated a readiness to put themselves in harm's way, and that extending the combat tax exclusion to them allows for more equitable treatment of all personnel serving in combat zones. Alternatively, federal civilian employees in combat zones already receive benefits, like danger pay allowances, that provide additional compensation for hazardous working conditions. Thus, civilians do not require additional income tax incentives because they receive increased income. Imminent danger pay, for instance, is administered by the Department of State and provides additional compensation above basic compensation to all U.S. Government civilian employees for service at places in foreign areas where there exist conditions of civil insurrection, civil war, terrorism or wartime conditions which threaten physical harm or imminent danger to the health or well-being of an employee. In the case of civilian DOD employees, the amount of imminent danger pay varies between rates of 15%, 20% and 25% of basic compensation, based on the determined level of danger and the presence of non-essential personnel and dependents located in the area of assignment. Those who oppose extending income tax exclusion to civilian contractors could argue that civilian contractors receive significant differences in salary that serve as a risk premium for service in combat zones. Thus, in this view, the income tax exclusion is unnecessary and an erosion of potential tax revenue for the government. Also, exempting civilian income from federal income taxation could make civilian service in a combat zone more financially attractive in comparison to military service in a combat zone. This could in turn have a negative effect on military recruitment and retention. A CNN article that examined the use of private contractors in Iraq reported that private contracts paid from $350 to $1,500 a day. Although some justify these salaries on the basis that private contractors supplement the work of the military, others argue that such lucrative salaries, which can exceed $100,000 a year, deplete the ranks of the Armed Forces by attracting experienced military personnel. A Brookings Institution report indicated that former military personnel working for private sector security firms typically make between two to 10 times what they would have made if they were in the military. As an example, a former Green Beret can make up to $1,000 a day in Iraq as a private contractor (as mentioned previously, up to $82,400 of this income may be excluded from taxation). Examples of this pay differential for contractors can be found in many reports. One news article asserted that the basic labor rate for an individual to dispose of captured munitions was $350,000 per year under a contract that the U.S. Army Corps of Engineers awarded to a private firm. The Defense Contract Audit Agency (DCAA) published a memorandum that reported the results of surveys of 37 contractors working in Iraq. The DCAA found that, in addition to base pay, the contractors offered varying combinations of allowances, differentials, bonuses, and miscellaneous benefits for work performed in Iraq. For example, all but five contractors offered hardship pay, which most paid at a rate of 20%-25% of base pay, and all but five contractors offered a danger pay allowance, which most paid at a rate of 25% of base pay. Approximately half of the contractors offered assignment completion bonuses, either in the form of a lump-sum payment (up to $10,000) or a percentage of base or total pay (up to 60% of total pay), and 12 contractors offered a foreign service premium or allowance, which most paid at a rate of 15%-25% of base pay. Civilian DOD Employees vs. Civilian Contractors According to DOD, in Operation Iraqi Freedom, 83% of the civilians deployed into the theater of operations were contractors, while 17% were civilian federal workers. Some contractors perform the traditional civilian support roles, whereas others do not. For example, some contractors may, like civilians, serve in such areas as vehicle maintenance and repair, while other contractors serve as security force members in very dangerous roles. Distinctions between civilian DOD employees and civilian contractors complicate the issue of equalization of benefits for civilians and members of the Armed Forces. Civilian DOD personnel, it could be argued, operate with similar levels of commitment and control as military personnel. Contractors, on the other hand, may not. Commanders have some control over civilian DOD employees, yet it is not in the same way as control over military members. The penalties commanders can impose if civilians fail to perform are administrative rather than criminal. While contractor personnel are civilians, they are unlike government employees because they are employed by third parties under contract to the United States. The ability to ensure that contractors abide by federal laws and codes of conduct is determined by the nature of the contract written and signed between the contracting firm and the DOD. Military commanders have less control over contractors and less recourse in the event of non-compliance. Essentially, a commander's remedy against a contractor who violates directives is to cancel the contract. Simplicity The combat zone income tax exclusion is relatively simple, with the majority of the administrative burden placed upon the employer. It is the employer's responsibility to separate nontaxable income from taxable income and to report that information to both the employee and to the Internal Revenue Service. In the case of DOD, these distinctions in type of income and the associated reporting to the IRS are already being performed for members of the Armed Forces. For the contractors who employ civilians in combat zones this type of reporting may be new and require additional administrative expense and complexity. Appendix. List of Current Combat Zones Combat zones can be designated by an executive order of the President and by Congress through enactment of public law. Additionally, the Department of Defense (DOD) has authority to extend combat zone tax benefits to military personnel that provide direct military support to combat zones but are not located in the combat zones. Three combat zones are designated by executive order as areas in which the U.S. Armed Forces are engaging or have engaged in combat. 1. Military operations in the Persian Gulf area . Effective January 17, 1991, the waters of the Persian Gulf, the Red Sea, the Gulf of Oman, the part of the Arabian Sea that is north of 10 degrees north latitude and west of 68 degrees east longitude, the Gulf of Aden, and the total land areas of Iraq, Kuwait, Saudi Arabia, Oman, Bahrain, Qatar, and the United Arab Emirates have been designated as a combat zone for purposes of tax relief under Code Section 112 (Executive Order 12744). Separately, DOD has certified that military personnel in Turkey, Israel, Jordan, Egypt, and the Mediterranean Sea east of 30 degrees East longitude, were eligible for all combat zone related tax benefits due to their service in direct support of military operations in the Persian Gulf-area combat zone. The effective date of the DOD certifications for Turkey and Israel was January 1, 2003, though the certification for Israel expired July 31, 2003. The effective date of the DOD certifications for Jordan, Egypt, and the Mediterranean Sea area was March 19, 2003. Two of these certifications expired: the certification for Egypt expired on April 20, 2003, and the Mediterranean Sea area on July 31, 2003. 2. Military operations in Kosovo . Effective March 24, 1999, the Federal Republic of Yugoslavia (Serbia/Montenegro), Albania, the Adriatic Sea, and the Ionian Sea north of the 39 th parallel (including the airspace above those areas) have been designated as a combat zone for purposes of Code Sec. 112 (Executive Order 13119). These areas are also qualified hazardous duty areas and will be treated in the same manner as combat zones under Code Sec. 112 ( P.L. 106-21 ), §1(a)). These areas will continue to be qualified hazardous duty areas for as long as any member of the Armed Forces of the United States serving there is entitled to hostile fire/imminent danger pay. 3. Military operations in Afghanistan . Effective September 19, 2001, Afghanistan and the airspace above have been designated as a combat zone for purposes of tax relief under Code Sec. 112 (Executive Order 13229). Separately, DOD has certified that military personnel in Uzbekistan, Kyrgystan, Pakistan, Tajikistan, and Jordan are eligible for all combat zone related tax benefits due to their service in direct support of military operations in the Afghanistan combat zone. The effective date of the DOD certification began on September 19, 2001, for Pakistan, Tajikistan, and Jordan, and on October 1, 2001, for Kyrgystan and Uzbekistan. Kyrgystan and Uzbekistan were not eligible for imminent danger pay in September. Beginning on November 21, 1995, P.L. 104-117 designated three parts of the former Yugoslavia as a Qualified Hazardous Duty Area, to be treated as if it were a combat zone. Military operations in and near Bosnia . Tax relief for members of the Armed Forces serving in the former Republic of Yugoslavia was also provided ( P.L. 104-117 , as enacted on March 20, 1996). The law designates Bosnia-Herzegovina, Croatia, and Macedonia as "qualified hazardous duty areas" and treats the areas as combat zones. These countries are considered qualified hazardous duty areas for as long as any member of the Armed Forces of the United States serving there is entitled to hostile fire/imminent danger pay. U.S. peace-keeping troops participating in Joint Endeavor (the NATO operation) or Operation Able Sentry (the United Nations operation) qualify for the exclusion of combat zone compensation from gross income under Code Section 112.

Legislative proposals have been made to extend the combat zone income tax exclusion to civilian employees who are on active service in a combat zone. Under present tax law, the designation of an area as a "combat zone" confers tax benefits only to military personnel serving in the combat area. No comparable provision under present tax law provides tax relief for civilian or contract employees serving in combat. However, certain income tax exclusions exist for U.S. citizens who work overseas. As an example, the proposed combat zone exclusions in the Federal Employee Combat Zone Tax Parity Act (H.R. 1974 and S. 1166) would grant added tax relief to federal civilians who are not eligible for existing exclusions. In the case of extending an exclusion to federal civilian employees or civilian contract employees serving in a "combat-type" zone, the primary issues revolve around the purpose of the extension, which has not been stated by proponents. The purpose could be to provide additional compensation for certain individuals serving in combat and thus facilitate recruitment for such work. Alternatively, the purpose could be one of equity, to make civilian employee benefits equal to those of the Armed Forces. If the purpose of the extension is to provide additional compensation to individuals serving in combat, than a question of efficiency arises as to whether a tax subsidy is more appropriate than a direct payment. Direct spending programs are often more successful at fulfilling policy objectives than indirect subsidies made through the tax system. If the purpose of extending the combat zone exclusion to civilians is to make civilian benefits equal to those of the Armed Forces, then the distinctions between military service and civilian employment become important in the analysis of the policy. In that context, it has been observed that military personnel cannot resign when facing danger; they cannot refuse assignment; they are considered to be on duty 24 hours a day, every day; and they may be required to work until the job is done with no specific relationship to compensation. Whereas military personnel must perform those duties, civilian employees may or may not, depending on for whom they work or the contracts they have negotiated, and those contracts could include monetary and other incentives for working in combat zones not available to military personnel. Also, there are distinctions between civilian DOD employees and civilian contractors that complicate the issue of equalization. This report provides information about the tax treatment of both the earned income of members of the Armed Forces serving in combat zones and the earned income of U.S. citizens working overseas. A brief discussion of the possible expansion of income tax exclusion to government civilian employees in a combat zone and an analysis of the relevant policy issues is also included. This report will be updated as warranted by legislative events.

Introduction About 362 million travelers (citizens and non-citizens) entered the United States in FY2013, including about 102 million air passengers and crew, 18 million sea passengers and crew, and 242 million incoming land travelers. At the same time about 205,000 aliens were denied admission at ports of entry (POEs); and about 24,000 persons were arrested at POEs on outstanding criminal warrants. Within the Department of Homeland Security (DHS), U.S. Customs and Border Protection's (CBP) Office of Field Operations (OFO) is responsible for conducting immigration inspections at America's 329 POEs. About 21,464 CBP officers inspect travelers, agricultural products, and cargo at U.S. ports and abroad. Most foreign nationals visiting the United States also are subject to some form of screening prior to their arrival at a POE, including when they apply for a nonimmigrant visa or to enter through the Visa Waiver Program, and through CBP's screening of information provided by air and sea carriers. CBP's primary immigration enforcement mission at ports of entry is to confirm that travelers are eligible to enter the United States and to exclude inadmissible aliens. This mission is challenging because of the scope and complexity of immigration inflows: millions of travelers at hundreds of ports must be individually screened against dozens of rules governing who may or may not enter the country. Moreover, strict enforcement is in tension with a second core mission: to facilitate the flow of lawful travelers, who are the vast majority of persons seeking admission. A fundamental question for Congress and DHS is how to balance these competing concerns. The answer to this question varies across diverse geographic regions, different modes of travel, and in response to a constantly shifting landscape of potential threats and legal immigration flows. As part of this dual mission, and in support of its broader mandate to manage the U.S. immigration system, DHS also is responsible for implementing an electronic entry-exit system at POEs. Congress required DHS' predecessor to develop an entry-exit system beginning in 1996, but the implementation of a fully automated, biometric system has proven to be an elusive goal. This report reviews the legislative history of immigration inspections requirements and the entry-exit system. The report then describes the implementation of these provisions, including pre-travel screening, primary and secondary inspections, trusted traveler programs, outbound enforcement, and the entry-exit system. The final section of the report identifies a number of issues for Congress related to immigration admissions and enforcement at POEs. Immigration Inspections: Policy Goals Controlling admissions is a core element of state sovereignty; but such control entails the opposing goals of: 1) preventing unlawful entries, while 2) facilitating legal flows. These policy goals are inherently in tension, as efforts to identify and interdict illegal entrants inevitably challenges, and may delay, the smooth flow of legitimate travelers. The Supreme Court has long held that Congress has absolute authority to control immigration by establishing rules for the admission, exclusion, and deportation of non-citizens. Some of the first federal laws, the so-called Aliens and Seditions Acts of 1798, authorized the President to arrest and/or deport any alien who represented a danger to the United States. And while Congress during most of the 19 th century generally favored open admissions to the sparsely populated country, a series of laws beginning in 1875 excluded several classes of aliens, including criminals and prostitutes, aliens from certain countries and regions, anarchists, communists, and aliens engaged in espionage, among others. Thus, while the specific issues in U.S. immigration law have evolved over time, a core policy goal has always been to prevent the entry of aliens who threaten U.S. interests . For the last several decades, these threats, or enforcement priorities, have fallen within three broad categories: Unauthorized immigration . Since 1980, the estimated unauthorized population in the United States has increased from about 2.5 million to about 11.7 million people. Between one-third and one-half of these aliens are believed to have entered lawfully through a POE and over-stayed their visas. An unknown proportion of illegal entrants also passed through POEs, either concealed in a vehicle or by using fraudulent documents. One enforcement priority at POEs, therefore, is to prevent these unlawful entries. Transnational crime . CBP officers performing immigration inspections are the primary line of defense against certain illegal flows, including in particular most illegal drug flows other than marijuana. Immigration inspectors also seek to arrest known smugglers and other criminals at POEs. International terrorism . National security concerns have loomed large in immigration policy in the years since the 2001 Al Qaeda attacks against the United States (the 9/11 attacks). All 19 of the 9/11 hijackers entered the United States legally through POEs, and constraining terrorist travel is now recognized as a critical defense against terrorist attacks within the United States. Yet while most people would agree that terrorists, criminals, and immigration violators are appropriate enforcement targets, no consensus exists about how to prioritize these threats because the likelihood of each type of illegal entry is unknown, and because the potential consequences of these threats are subjective and difficult to measure. The likelihood of each of these threats occurring also varies by geography and mode of entry. For example, certain types of illegal migrants may be more likely to travel by bus or car across the southern border, smugglers may favor other distribution routes, and terrorists may be likely to reach the United States by air and/or at northern border POEs. Threat actors also may seek to counter enforcement efforts by adapting their behavior to avoid such patterns. Enforcement must be balanced by a second overarching goal: the facilitation of legal flows. With international tourism directly accounting for over $200 billion in 2012 (almost 1% of U.S. gross domestic product), travel facilitation supports the U.S. economy. Smooth processing at POEs also streamlines travel for the tens of millions of U.S citizens returning from international trips each year, and may improve Americans' experiences abroad through reciprocal arrangements. In addition, immigration agents at POEs define visitors' first impressions of America and the U.S. government, and therefore play an important diplomatic role. Enforcement and travel facilitation are fundamentally in tension because efforts to identify and interdict unlawful travelers tend to impede the flow of the entire admissions queue, and efforts to expedite the line may increase the risk that an illicit traveler is overlooked. Thus, in addition to questions about how to prioritize diverse threats, Congress and DHS must decide how to balance enforcement and the facilitation of legitimate travel. Is it better to admit one illegal actor, or to delay the admission of 1,000 lawful travelers? How should Congress and DHS weigh the benefits of more robust enforcement against the costs to commerce, privacy and civil liberties, and related concerns? In an effort to reduce border wait times without compromising border security, CBP's response to these questions emphasizes "risk management." In general, risk management refers to a process for assessing the risks associated with potential threats and calibrating the enforcement response to the estimated gravity of the threat. In the case of immigration inspections, risk management involves screening travelers at multiple points in the immigration process to distinguish between low- and high-risk travelers. Low-risk travelers may be eligible for expedited admissions processing through the Visa Waiver Program and/or trusted traveler programs, while higher-risk travelers may be subject to more extensive secondary inspections. Unauthorized migrants at POEs may be subject to expedited removal and other types of immigration enforcement (see "The Immigration Inspections Process"). Legislative History Inspections for Admission The procedures governing inspections of persons applying for admission are described in 8 C.F.R. Section 235, which derives its authority from Sections 101, 103, 215, 221, and 235 of the Immigration and National Act of 1952 (INA, P.L. 82-414), as amended. Under INA §215, in particular, both aliens and citizens are required to present appropriate entry documents, except as otherwise ordered by the President; and (pursuant to 8 C.F.R §235.1) to enter through designated ports of entry. INA §211 spells out additional documentary requirements for immigrant admissions. And INA §287 authorizes immigration officers, among other powers and pursuant to regulations, to interrogate any person believed to be an alien as to the person's right to enter or remain in the United States, and to arrest any alien attempting to enter the United States unlawfully. Prior to 2002, INA §103 made the Attorney General responsible for controlling U.S. borders and enforcing these laws. Pursuant to §§401- 403 of the Homeland Security Act of 2002 (HSA, P.L. 107-296 ), these responsibilities were transferred to DHS. The INA also authorizes the consular processing system as part of the visa issuance process, giving State Department consular officers sole authority to issue visas to aliens seeking admission to the United States. Section 428 of the HSA charged DHS with issuing regulations on visa issuances and authorized DHS personnel abroad to advise consular officers and to review and investigate visa applications; but the HSA left the State Department in charge of actual visa issuance (also see "Consular Reviews"). Historically, U.S. citizens and most citizens of Canada and Bermuda entering the United States by land or sea from the Western Hemisphere were exempted from certain document requirements. Following the 9/11 attacks, based on a recommendation by the National Commission on Terrorist Attacks upon the United States (the 9/11 Commission), Section 7209 of the Intelligence Reform and Terrorism Prevention Act of 2004 (IRTPA, P.L. 108-458 ) directed DHS, in consultation with the Department of State (DOS), to develop a plan to require a passport or other secure document(s) for all travel into the United States by U.S. citizens and others. The resulting plan, known as the Western Hemisphere Travel Initiative, requires adult land and sea travelers entering the United States from within the hemisphere to present a passport or other secure document. Entry-Exit System: Legislative Requirements Section 110 of the Illegal Immigration Reform and Immigrant Responsibility Act of 1996 (IIRIRA, P.L. 104-208 , Div. C) required the Attorney General, within two years of enactment (i.e., by September 30, 1998), to develop an automated entry and exit control system that would collect records of alien arrivals and departures and allow the Attorney General through online searches to match such arrivals and departures and thereby identify nonimmigrant aliens who remain in the United States beyond the periods of their visas (i.e., visa overstayers). The bill also required the Attorney General to annually report to Congress on the number of visa overstayers and their countries of origin. Congress has amended the system's requirements and deadlines on several occasions since then, including by adding an entry-exit requirement to legislation authorizing the Visa Waiver Program and by requiring the entry-exit system to include biometric technology and to be fully interoperable with DOS and Department of Justice (DOJ) databases. See the Appendix for a full list of entry-exit legislation. Despite Congress's ongoing attention, however, the entry-exit system remains incompletely implemented (see "Entry-Exit System: Implementation"). Travel Facilitation With the increased focus after 9/11 on national security during immigration screening, Congress has taken steps to ensure that DHS also focuses on travel facilitation. Section 302(b)(1) of the Enhanced Border Security and Visa Entry Reform Act of 2001 (EBSVERA, P.L. 107-173 ), for example, directed the departments to "utilize technologies that facilitate the lawful and efficient cross-border movement of commerce and persons without compromising the safety and security of the United States." In addition, §7209(k) of the IRTPA described congressional findings that "expediting the travel of previously screened and known travelers across the borders of the United States should be a high priority," including because it "can permit inspectors to better focus on terrorists attempting to enter the United States." The section directs DHS to develop and implement a registered traveler program for this purpose (see "Trusted Traveler Programs"). IRTPA §7210 also amended INA §235A to require DHS to add 25 preinspection stations (up from 5 required under IIRIRA) and to locate such stations at locations that "would most effectively facilitate the travel of admissible aliens" in addition to reducing the arrival of inadmissible aliens, as in the original language (see "Preclearance"). The Immigration Inspections Process Travelers seeking to enter the United States go through one to three steps in the immigration inspection process. In the first step, prior to travel, most travelers who are not U.S. citizens or legal permanent residents (LPRs) must apply for permission to enter the United States, by obtaining a visa at a U.S. consulate abroad or through the Visa Waiver Program. Air travelers are subject to additional screening prior to arrival (see "Pre-Travel Screening"). Second, all arriving travelers are subject to inspection (or preclearance) by a CBP officer prior to entering the United States (see "Primary Inspections"). Third, some passengers also may be selected through risk-based screening or at random for more intensive scrutiny (see "Secondary Inspections and Immigration Enforcement"). Participants in CBP's trusted traveler programs volunteer for additional screening in advance and thereby become eligible for expedited processing at POEs (see "Trusted Traveler Programs"). Pre-travel Screening Most foreign nationals seeking to enter the United States must get permission to do so prior to travel, and are subject to pre-travel screening. With the exception of U.S. LPRs, certain Canadian citizens, and certain residents of Caribbean islands other than Cuba, foreign nationals seeking admission to the United States must apply in advance for a nonimmigrant visa at a U.S. consulate abroad (see "Consular Reviews"), or in certain cases through an on-line process for permission to participate in the U.S. Visa Waiver Program (see "Visa Waiver Program"). Air passengers are subject to further screening at several points during the lead-up to their U.S.-bound flights (see "Air Passenger Screening"). Consular Reviews35 Before applying for admission at a U.S. port of entry, aliens seeking to visit the United States generally must obtain a visa at a U.S. consulate abroad. Visa applicants are required to submit biographic and biometric data, and usually must participate in an in-person interview. Applicants also may be subject to physical and mental examinations. Consular reviews are designed to ensure that aliens do not receive a visa to visit the United States if they are inadmissible for any of the reasons identified in INA §212, including health-related grounds, criminal history, security and terrorist concerns, indigence (likely to become a public charge), seeking to work without proper labor certification, ineligibility for citizenship, and certain previous immigration violations. As part of the visa application process, DOS consular officers use the Consular Consolidated Database (CCD) to screen visa applicants. The CCD is a database of over 100 million visa and passport case records and 75 million photographs from 25 different DOS systems. The CCD links automatically to the Consular Lookout and Support System (CLASS) database, which consular officers use to identify visa applicants on security watchlists or with other derogatory information, and to the Arrival and Departure Information System (ADIS) and the Automated Biometric Identification System (IDENT), which CBP officers use to screen arriving travelers at POEs (see "Text Box: Select Immigration Inspections Databases and Systems"). Consular officers refer high risk cases to DHS and other law enforcement agencies for Security Advisory Opinions (SAOs). At certain consulates, the review process is further supplemented by the DHS Immigration and Customs Enforcement (ICE) Visa Security Program (VSP). Under this program, special agents at U.S. Immigration and Customs Enforcement (ICE) headquarters and in 20 high-risk consulates work with consular officers to examine visa applications for fraud, initiate investigations, coordinate with local law enforcement partners, and provide training and advice. The VSP Security Advisory Opinion Unit works with other law enforcement and intelligence agencies to provide a coordinated response when consular officers seek an SAO about a high risk case. Visa Waiver Program The Visa Waiver Program (VWP) allows nationals from certain countries to enter the United States as temporary visitors for business or pleasure without obtaining a visa from a U.S. consulate abroad. Thus, the program is designed to facilitate travel and tourism from low-risk countries, while also fostering positive relations with such countries, and holding down consular operating costs. In FY2013, there were over 19 million visitors who entered the United States under the VWP program, constituting 40% of overseas visitors. Some Members of Congress have raised concerns that the VWP may weaken security because travelers are not required to provide biometric data when applying for admission through the program and are exempted from consular reviews. In addition, some people see the program as vulnerable to visa overstays since the entry-exit system has not been fully implemented (see "Entry-Exit System: Implementation"). On the other hand, aliens seeking admission under the VWP are required to submit biographic information and respond to eligibility questions through an on-line Electronic System for Travel Authorization (ESTA). Upon receipt of an ESTA application, CBP screens applicants' data against TECS and the Automated Targeting System. And aliens authorized for travel under the VWP must provide biometric data during primary inspection at a POE prior to entering the United States. The program also may enhance U.S. security because partner countries must meet specified document security and information-sharing requirements, and it benefits U.S. visitors to VWP countries because they receive reciprocal visa-free travel benefits. Air Passenger Screening CBP conducts additional pre-travel screening of all persons (including U.S. citizens) seeking to travel to the United States by air. Upon a traveler's purchase of an airline ticket, commercial airlines are required to make Passenger Name Record (PNR) systems and data available to CBP up to 72 hours in advance of travel. When passengers check in for international flights to the United States, carriers are required to transmit passenger and crew manifests to CBP prior to securing aircraft doors before departure. Biographic traveler data (passport and travel itinerary information) is submitted to the Advance Passenger Information System (APIS). Passenger PNR and APIS data (as well as visa and ESTA data) are forwarded to CBP's National Targeting Center (NTC), where they are vetted against intelligence and law enforcement databases, including the consolidated terrorist watchlist and Interpol's lost and stolen passport list. Data are matched against targeting rules through the ATS to identify risky travelers. The NTC may issue a no-board recommendation to air carriers, and/or flag travelers for a secondary inspection upon arrival at a U.S. POE. The NTC issued 3,181 no-board recommendations in FY2011; it issued 4,199 no-board recommendations in FY2012, and 5,378 no-board recommendations in FY2013. Under the Immigration Advisory Program (IAP) program, created in 2004, CBP officers also are posted at 11 international airports in 9 partner countries. IAP officers review documents, conduct interviews, and identify high-risk travelers. They do not have enforcement authority, but may recommend that air carriers not board certain passengers for U.S.-bound flights, flag passengers for secondary inspection upon arrival, and notify host-state law enforcement agencies of suspected criminal violations. Building upon the IAP concept, CBP launched the Joint Security Program (JSP) in 2009. Currently operational in Mexico City and Panama City, the JSP performs similar functions as the IAP, but also addresses travelers on international flights not bound to or from the United States. The IAP and JSP issued 2,890 no-board recommendations in FY2011, 2,505 no-board recommendations in FY2012, and 3,501 no-board recommendations in FY2013. As of November 22, 2013, the IAP and JSP had made a total of 19,998 no-board recommendations since the IAP's inception in 2004. Primary Inspections CBP officers at ports of entry interview arriving travelers and check their travel documents to determine whether the person is admissible to the United States. Basic biographic information (e.g., name, travel document number, date and location of arrival) for all travelers (including U.S. citizens) is collected and stored within TECS. Arriving travelers are subject to certain immigration, criminal, and national security background checks through the TECS system and the ATS, which identify certain travelers to be selected for secondary inspection. In general, these primary inspection activities have become far more intensive during the post-9/11 period. For example, whereas CBP historically examined drivers' documents at land POEs but did not consistently examine passenger documents, since 2010 CBP has inspected documents for 100% of land travelers. And whereas only 5% of land travelers were subject to law enforcement database queries in FY2005, 97% of land travelers were subject to such queries in FY2013. Southern border inspection protocols have focused in particular on evolving threats related to drug trafficking organizations, smugglers, and unauthorized immigrants. Travelers are also validated against visa or visa waiver program records (for non-citizens) and against the APIS database (for all air travelers). Non-citizens arriving at air and sea ports are required to provide biometric data (fingerprints and digital photographs), which are added to the IDENT database and vetted against additional biometric databases (see "Text Box: Select Immigration Inspections Databases and Systems"). Travelers determined by the CBP officer to be admissible are allowed to enter the United States, though they may be subject to a separate customs and/or agricultural inspection. Travelers suspected for any reason of being inadmissible, including because of high ATS scores or derogatory information in the TECS system, are referred to secondary inspection for additional screening and/or a more thorough interview (see "Secondary Inspection"). Preclearance Travelers from 15 airports in Canada, Ireland, the Bahamas, Bermuda, and Aruba may be eligible to be pre-cleared by CBP officers based abroad. Preclearance (sometimes referred to as preinspection) includes the same document inspection, interview, and (as necessary) secondary inspection as normally occurs at a U.S. port of entry, including customs and agricultural screening. Preclearance officers at partner airports are unarmed and do not have law enforcement authority, but officers may refer people suspected of host-state criminal violations to partner country law enforcement agencies. Travelers arriving in the United States following a preclearance inspection may depart the aircraft directly into the arriving airport as they would from a domestic flight. CBP may initiate preclearance facilities at the request of a host government and pursuant to a formal agreement with such a government. Host governments are responsible for providing secure preclearance facilities, and CBP covers officer salaries (including certain overseas expenses). CBP views passenger preclearance programs as enhancing U.S. security and reducing deportation costs because such programs screen passengers earlier in the travel process, preventing the arrival of inadmissible travelers, as well as illegal weapons, agricultural products, etc., on U.S. soil. The programs also speed lawful travel by reducing congestion at U.S. airports, and they allow international travelers to take advantage of tighter U.S. connection times. In April 2013, DHS reached an agreement with the government of the United Arab Emirates (UAE) to set up a preclearance facility in the Abu Dhabi International Airport. Some Members of Congress have raised objections to the proposed Abu Dhabi program because no U.S. air carriers fly directly from Abu Dhabi to the United States, arguably giving the UAE-owned Etihad Airlines a competitive advantage over U.S.-owned carriers, and because UAE is not a signatory to the United Nations Refugee Convention. House appropriators included language in the House's FY2014 DHS Appropriations report to limit funding for preclearance operations in new locations unless an economic impact analysis of the new location on U.S. air carriers has been conducted and provided to the committee, among other conditions. I-94 Arrival/Departure Records Certain classes of nonimmigrants visiting the United States for a temporary period are issued an I-94 arrival/departure record upon admission. The I-94 record indicates the date of admission, class of admission (i.e., visa category), and visa expiration date. For travelers arriving at land ports, the I-94 consists of a paper form stapled to the foreign passport. Travelers are supposed to surrender the I-94 upon departure; and CBP may use I-94 receipts to track nonimmigrant exits and identify visa overstays. In practice, however, this system has proven difficult to implement, and paper I-94 receipts often are not collected from departing travelers. In 2013, CBP discontinued issuing paper I-94 forms for travelers arriving at air and sea ports. CBP now uses the APIS system and information collected by the State Department and by CBP officers at ports of entry to create electronic arrival/departure records for these travelers. In place of paper I-94 receipts for exiting air and sea travelers, CBP relies on carrier exit manifests (passenger lists) to confirm passenger departures (see "Entry-Exit System: Implementation"). Secondary Inspections and Immigration Enforcement Travelers who trigger an alarm in the ATS, who are the subject of certain derogatory information in TECS, or who arouse suspicion (through their behavior, responses to questions, or suspicious documents) during primary inspection may be referred for secondary inspection. A small sample of travelers at certain POEs also is randomly selected for secondary inspection (see "Random Compliance Examination (COMPEX) Program"). Travelers at land POEs who are required to obtain I-94 arrival/departure records (see "I-94 Arrival/Departure Records") also are automatically referred to secondary inspection, where I-94s are issued. In general, travelers selected for secondary inspection may be subject to a more extensive interview and/or a physical search, as well as being subject to vetting against additional databases. At land POEs, travelers selected for secondary inspection (in contrast with other land travelers) must provide fingerprints data to be vetted against IDENT and other biometric databases (see "Text Box: Select Immigration Inspections Databases and Systems"). Inspection Outcomes Table 1 describes primary and secondary inspections by mode of entry for FY2005-FY2013. As Table 1 indicates, primary inspections at air and sea POEs fell slightly in FY2008 - FY2009, likely as a result of the global economic downturn, and inflows have increased since that time. Overall, inspections at air POEs increased about 19% in FY2005-FY2013, from about 86 million to about 102 million. Inspections at land ports fell more sharply, dropping every year FY2005-FY2011, before recovering slightly in FY2012-FY2013. At 242 million, land inspections in FY2013 were down 31% from the FY2005 total of 318 million. As a result of these trends, the total number of inspections fell from 420 million in FY2005 to 340 million in FY2011, before climbing back to 362 million in FY2013; and the proportion of all primary inspections occurring at land POEs fell from about 75% in FY2005 to about 67% in FY2013. As Table 1 also indicates, an increasing share of travelers was subject to secondary inspections during FY2005-FY2013. This trend exists across all three modes of entry, but was most pronounced at air POEs, where the proportion of travelers subject to secondary inspection increased from 2.0% in FY2005 to 6.4% in FY2010, before falling to 5.2% in FY2013 (5.3 million out of 102 million). At sea POEs, the proportion of travelers subject to secondary inspection increased from 0.49% in FY2007 (the first year for which data are available) to a high of 1.3% in FY2010, to 0.7% in FY2013. And at land POEs, the proportion of travelers subject to secondary inspection increased from 11.9% in FY2005 to about 14% in FY2010-FY2012, before falling back to 12.3% in FY2013. At land ports, the increase in the secondary inspection rate has been a function of the fall in total travelers at such ports, not an increase in the number of secondary inspections. A final observation about Table 1 is that the great majority of travelers inspected at POEs are determined to be eligible for admission . Overall, the annual rate at which persons inspected at POEs were admitted to the United States remained steady at between 99.94% and 99.95% in FY2005-FY2013. (Put another way, about 5 out of 10,000 people arriving at a POE are denied admission.) Approval rates were similar across air, sea, and land modes of entry. Immigration Enforcement Pursuant to 8 C.F.R. 235.1, the burden of proof is on the traveler to demonstrate to a CBP officer at a POE that the traveler is a U.S. citizen or an admissible foreign national. In general, a person arriving at a POE who is determined to be ineligible for admission may be subject to similar sanctions as an unauthorized alien present in the United States, including four main outcomes: Withdrawal of application : Pursuant to INA §235(a)(4), a CBP officer may permit an alien applying for admission to withdraw his or her application for admission and depart immediately from the United States. An alien withdrawing an application is not subject to additional penalties (i.e., a withdrawal does not result in a period of inadmissibility), but a record of the withdrawal is added to the alien's file and may influence a future visa eligibility determination. Standard removal : In general, an alien at a POE whom CBP determines to be inadmissible under INA §212 may be subject to removal from the United States under INA §240. Pursuant to INA §239, a CBP officer may initiate removal proceedings by serving an alien with written notice, known as a notice to appear (NTA). Pursuant to §240, an alien facing such removal proceedings generally may appear before an immigration judge and may be eligible to seek certain types of discretionary relief from removal. An alien who is formally removed from the United States generally is ineligible for a visa (i.e., is inadmissible) for at least five years, and may be subject to criminal charges if he or she illegally reenters the United States. Expedited removal : Pursuant to INA §235(b), an alien arriving at a POE without documents or with fraudulent documents and who does not indicate a fear of persecution may be subject to "expedited removal" (ER). Under this provision, an alien may be formally removed by order of a CBP officer without appearing before an immigration judge and without being eligible for certain forms of relief. Aliens removed by ER are subject to the same penalties as aliens removed under INA §240. Criminal arrest : CBP may arrest individuals (including U.S. citizens) at land, sea, and air POEs on the basis of an outstanding federal, state, local, or tribal criminal warrant; in response to a suspected violation of federal immigration-related crimes; or in response to a suspected violation of other federal border-related crimes, including smuggling crimes. Table 2 describes selected immigration enforcement outcomes at ports of entry for FY2005-FY2013. As Table 2 indicates, there is no clear, sustained trend in three categories of interest: the overall number of aliens denied admission during this period has fluctuated between about 253,000 aliens in FY2005 and about 195,000 aliens in FY2012; the number of aliens issued a notice to appear (i.e., placed in standard removal proceedings) has fluctuated between about 15,000 aliens in FY2005 and about 24,000 aliens in FY2007 and FY2013 (consistently between 6 and 12% of aliens denied admission); and the number of persons arrested on criminal charges or warrants has fluctuated between about 23,000 and 28,000. Table 2 also reveals two apparent trends in enforcement outcomes at POEs. First, the number of aliens permitted to withdraw their applications for admission has fallen steadily from about 96,000 in FY2005 to about 52,000 in FY2013. According to CBP, this reduction is explained, at least in part, by a 2008 OFO directive permitting officers to exercise discretion in certain cases where applicants for admission are technically inadmissible due to a minor documentary deficiency, such as a recently expired passport or nonimmigrant visa. In such cases, aliens may be permitted to correct their documentation and reapply for admission at a later date and time without being required to formally withdraw an application for admission. Second, the number of aliens placed in expedited removal fell by about one-third between FY2005 and FY2009 (from about 55,000 to about 38,000), and has remained roughly flat since that time. It is not clear whether the initial drop in ER cases reflected a policy change, a change in the demographics of arriving aliens, or a statistical anomaly. Overall, the data in Table 2 do not appear to reflect a significant shift at POEs toward "high consequence" enforcement outcomes (i.e., an increase in the proportion of removable aliens facing criminal charges and/or formal removal). This trend stands in contrast to enforcement trends between ports of entry, where the Border Patrol has more systematically implemented CBP's Consequence Delivery System. Random Compliance Examination (COMPEX) Program CBP's Random Compliance Examination (COMPEX) program was established by the legacy U.S. Customs Service in 1999 to gather information about the effectiveness of the passenger inspections process, and CBP expanded the program after the creation of DHS to also encompass more general immigration and agricultural inspection activities. The program selects a random sample of vehicles and air passengers who would be cleared for admission to the United States during primary inspection, and subjects the sample to a detailed secondary examination. CBP counts violations detected in the sample of otherwise-cleared travelers to estimate the number of undetected violations. In FY2012, CBP reports that the COMPEX program was operational at 19 commercial airports representing over 80% of traveler volume, and at 105 land POEs representing over 94% of private vehicle volume. The program conducted over 640,000 random secondary inspections, including 184,000 air passengers and 456,000 vehicles at land POEs. Overall, a very small percentage of travelers in the sample were found to have committed a major violation. Theoretically, the COMPEX program offers a powerful tool to estimate illegal flows and CBP's effectiveness rate at POEs. Whereas developing accurate and reliable estimates of illegal flows and of the effectiveness of enforcement between POEs is notoriously difficult because of uncertainty about the number of unobserved inflows, detailed secondary inspections on a sample of inflows at POEs should produce an accurate count of violations within this group. And as long as the sample is statistically valid, CBP could use COMPEX results to estimate total illegal inflows and the apprehension rate at POEs. On the other hand, COMPEX is limited in some respects as a tool for describing illegal immigration flows. One limitation is that the program covers air passengers and personal vehicles at land POEs, but does not cover sea passengers, pedestrians at land POEs, or most cargo operations. Second, while a CBP officer may order the collection of biometric data as part of a COMPEX secondary inspection, such data is not collected systematically. As a result, while the program likely detects certain types of illegal migration through POEs (i.e., unauthorized immigrants hidden within passenger vehicles), COMPEX is not designed to detect certain other illegal inflows (i.e., unauthorized immigrants hidden within cargo containers or unauthorized immigrants using fraudulent documents or documents belonging to another person—not to mention flows of legal visitors who eventually overstay a nonimmigrant visa). A third limitation is that while COMPEX is designed to produce a statistically valid estimate of the overall number of POE violations, the program is not designed to measure violations within specific subcategories of flows, including the subcategory of illegal migration. In addition, while sampling at land POEs is based on the random assignment of cases through the TECS system, sampling at airports is based on the manual selection of cases by port managers and senior officers, which may introduce sample bias. Reportedly, COMPEX inspections also may be suspended at certain ports and certain times in order to speed processing times. For all of these reasons, it is not possible, based on COMPEX findings, to draw reliable inferences about total illegal inflows through POEs. A final concern about COMPEX is that information about the program has not been widely available. CBP considers such information law-enforcement sensitive, and does not publish information about COMPEX results or methodology; Congress has never held a public hearing on the program; and it has never been the subject of an extensive Government Accountability Office (GAO) study. These limitations make it difficult to evaluate the program or to weigh potential program reforms (also see "Illegal Migration through Ports of Entry"). Trusted Traveler Programs Pursuant to §7209(k) of the IRTPA, CBP manages a number of "trusted traveler" programs that permit travelers to voluntarily provide detailed biometric and biographic data to CBP, and thereby to be eligible for expedited admission at POEs. Trusted traveler programs are designed to facilitate the admission of known, low-risk travelers and to strengthen security by focusing enforcement resources on unknown travelers (also see "Trusted Traveler Programs: Issues for Congress"). Global Entry The main trusted traveler program is Global Entry, which is open to U.S. citizens and LPRs, Dutch citizens, South Korean citizens, and Mexican nationals. Canadian nationals also may receive Global Entry benefits by joining NEXUS (not an acronym; see "NEXUS"). In addition to meeting the nationality requirement, Global Entry applicants must not provide false or incomplete application information; have any previous criminal convictions or outstanding warrants; have any previous immigration violations; be the subject of an ongoing criminal investigation; be inadmissible to the United States; have any known or suspected terrorist connections; or be unable to satisfy CBP that they are low risk. Applicants are required to provide biometric data and participate in an in-person interview. Applicants are checked against a variety of national security and criminal databases during the initial application and upon each visit to the United States; and the entire trusted traveler list also is subject to regular re-checks against certain databases. In general, Global Entry members are eligible for expedited processing at participating POEs, which include 44 airports in the United States, Canada, Ireland, Guam, Northern Mariana Islands, and Puerto Rico. Instead of the normal primary and customs inspections, members present their machine-readable travel documents (via a card-swipe system), fingerprints (via a scanner), and customs declarations (via touchscreen) at an automated Global Entry kiosk. In most cases, the kiosk issues a receipt, and travelers may claim their bags and exit into the airport without further inspection. Global Entry members still may be selected for secondary inspection on the basis of derogatory information during the screening process or at random. NEXUS NEXUS (not an acronym) is a jointly-managed U.S.-Canadian trusted traveler program. NEXUS applicants must meet similar eligibility requirements as those for Global Entry, and must be approved by both countries. As noted, NEXUS members automatically are eligible to use Global Entry kiosks and enjoy similar benefits at Global Entry locations. NEXUS members also receive a secure, Radio Frequency Identification (RFID) photo ID card that is Western Hemisphere Travel Initiative (WHTI) compliant, and that offers expedited processing through dedicated NEXUS travel lanes at 20 land POEs on the U.S.-Canadian border. Secure Electronic Network for Travelers Rapid Inspection (SENTRI) The Secure Electronic Network for Travelers Rapid Inspection (SENTRI) program is a trusted traveler program that provides similar benefits at the U.S.-Mexico border as NEXUS provides at the U.S.-Canada border. SENTRI members receive a WHTI-compliant RFID card, which may be used at 11 land POEs. Unlike NEXUS, SENTRI is not jointly managed by the United States and Mexico. SENTRI members also must register their vehicles with the program, and may only use SENTRI lanes while driving registered vehicles. SENTRI applicants are subject to somewhat more stringent application requirements, and must provide original evidence of citizenship; original evidence of admissibility to the United States (for non-U.S. citizens); driver's license or state ID document; vehicle registration and proof of insurance or a notarized letter authorizing use of the vehicle if the SENTRI applicant is not the vehicle owner; evidence of employment or financial support; and evidence of residence. Table 3 summarizes cumulative trusted traveler program membership for FY2009-FY2013. As Table 3 indicates, all three programs have grown substantially during this period, with NEXUS and SENTRI growing five-fold and seven-fold, respectively, and Global Entry growing by a factor of 45. As of FY2013, Global Entry and NEXUS each counted over 900,000 members, while SENTRI included almost 360,000. Table 4 describes the annual number of travelers admitted through NEXUS and SENTRI lanes and Global Entry kiosks in FY2010-FY2013. As Table 4 indicates, trusted traveler flows have also increased during this period, though not as quickly as program membership, with Global Entry flows increasing seven-fold since FY2010, NEXUS flows doubling during this period, and SENTRI flows growing by about 50%. Outbound Enforcement At certain land ports on the Southern border, travelers may be subject to screening and potential inspection as they depart the United States. Outbound enforcement is managed by the Outbound Programs Division within the Office of Field Operations. The division's mandate focuses on addressing violence in Mexico and the Mexico-United States drug trade by interdicting illegal currency, arms, and ammunition outflows. DHS reports that about 700 CBP officers participate in the outbound enforcement program. Table 5 describes annual seizures by the Outbound Programs Division for FY2009-FY2013. As Table 5 indicates, outbound enforcement seized a total of about 5,100 kilograms of illegal drugs during this period in 3,442 separate seizure incidents; $221 million worth of illegal currency exports; 8,210 illegal weapons, and about 12.1 million rounds of ammunition. Some experts view the number of southbound drug seizures—almost 3 per day in FY2013—as an indicator of the global nature of the market for illegal drugs, and of the United States' emerging role as a transshipment country for illegal drugs. At the same time, while seizure incidents have increased since FY2009, the average seizure size fell sharply in FY2013. Illegal currency and ammunition seizures are also down since FY2009 and FY2010, respectively. It is not clear whether the recent drop in illegal drug volume and the sustained drops in currency and ammunition seizures reflect changes in tactics by drug trafficking organizations or are statistical anomalies. Some people have argued that the United States should place greater emphasis on outbound enforcement to disrupt transnational criminal operations. According to this view, preventing U.S.-Mexico money and currency flows would eliminate the incentive for Mexico-U.S. drug flows, while also reducing criminal organizations' firepower. Outbound enforcement efforts confront a number of challenges, however. Laws restricting international currency transfers are notoriously difficult to enforce. Outbound enforcement also takes resources away from inbound inspections, so that increasing outbound screening may add to inbound delays or compromise inbound security. In addition, most outbound lanes are not equipped with inspection infrastructure, leaving officers exposed to the elements and to nearby traffic flows. Limited outbound lanes also mean that inspections may result in long waits for outbound travelers. Partly to address these concerns, outbound enforcement operations are normally short-term surges, followed by periods of reduced inspections. Yet some analysts have argued that sophisticated criminal organizations can defeat enforcement surges by monitoring outbound lanes, and by suspending high value outflows whenever a surge is underway. Entry-Exit System: Implementation As noted elsewhere, Section 110 IIRIRA, as amended, requires DHS to implement an automatic, biometric entry-exit system that covers all non-citizen travelers into and out of the United States and that identifies visa overstayers (see "Entry-Exit System: Legislative Requirements"). Prior to 1997, the INS collected entry-exit data manually by obtaining paper copies of traveler's I-94 records (see "I-94 Arrival/Departure Records"), and an INS contractor manually keyed in data from the forms. This system was unreliable because paper forms were not consistently collected (particularly departure forms); forms were not timely provided to the contractor; and data input errors were widespread. INS initiated a pilot program in 1997 to further automate I-94 data collection by having airlines provide magnetic stripe I-94 arrival cards. Passengers passed the cards to INS agents at POEs during primary inspection. The automated system also proved problematic, however, because airlines were reluctant to participate, because departure cards still were not reliably collected, and because the system did not cover land travelers, among other shortcomings. With the passage of new entry-exit mandates in 2000-2001 (see "Entry-Exit system: Legislative Requirements") and the creation of the Department of Homeland Security (DHS) in 2002, the U.S. Visitor and Immigrant Status Indicator Technology (US-VISIT) program was established within DHS in 2004 to manage the entry-exit system. US-VISIT was renamed the Office of Biometric Identity Management (OBIM) in March 2013. CBP works with OBIM to collect and manage entry-exit data as described below. Entry-Exit Databases Entry-exit data are stored in two DHS databases: the Arrival and Departure Information System (ADIS) and the Automated Biometric Identification System (IDENT). Arrival and Departure Information System (ADIS) ADIS includes biographic traveler identification data (name, date of birth, nationality, gender, passport number and country, U.S. visa number, and related information), arrival and departure information (POE and travel date), and a person-specific Fingerprint Identification Number System (FINS) identifier that allows ADIS to be cross-referenced with the IDENT system (see "Automated Biometric Identification System (IDENT)"). Although ADIS includes the FINS biometric identifier, ADIS is a biographic database because its records are populated by reading identity documents, rather than by capturing fingerprints or other physiological data directly from the traveler. As of September 30, 2013, ADIS included over 280 million unique records. Automated Biometric Identification System (IDENT) IDENT includes biographic data (including name, aliases, date of birth, phone numbers, addresses, nationality, personal descriptive data), biometric identifiers (including fingerprints and photographs), and information about subjects' previous immigration enforcement histories (including previous immigration apprehensions and arrests). IDENT is a fully biometric database that makes use of fingerprint scanners and digital cameras to collect physical data directly from database subjects. As of September 30, 2013, IDENT included over 160 million unique records. The IDENT database initially was designed to capture only index fingerprints (i.e., two prints per person), and mainly was conceived of as a tool for tracking foreign visitors and identifying visa overstayers. With the creation of the Federal Bureau of Investigation's (FBI's) Integrated Automated Fingerprint Identification System (IAFIS) in 1999, the legacy Immigration and Naturalization Service (INS) and the FBI decided to integrate the IDENT and IAFIS databases to better identify criminal aliens. This integration eventually required the reconfiguration of IDENT as a ten-print system. It took several years to complete this transition, but by 2010 all CBP and Border Patrol locations had deployed fully integrated IDENT/IAFIS workstations. Particularly after the 9/11 attacks, the entry-exit system increasingly was seen as a national security tool for vetting arriving passengers. The USA PATRIOT Act required that the system be designed to permit background checks against relevant databases and identity verification throughout the visa application and admissions processes (see "Entry-Exit System: Legislative Requirements"). As of September 30, 2013, the IDENT security watchlist included 7.2 million people. Collection of Entry Data Under US-VISIT/OBIM, the automated I-94 pilot program was discontinued, and entry data collection has been integrated into the immigration inspections process. In general, CBP officers collect entry data at ports of entry, and entry records automatically are added to the ADIS and (as appropriate) IDENT databases. Entry data collection has been enhanced in three main ways in the post-9/11 period. First, pursuant to the Visa Waiver Permanent Program Act ( P.L. 106-396 ) and the IRTPA ( P.L. 108-458 ), almost all travelers to the United States must present machine-readable passports or similarly secure travel documents to enter the country (see "Inspections for Admissions"). These standards are designed to improve biographic data collection by combatting document and identity fraud and reducing data input errors by automating information capture. Second, beginning in 2004, US-VISIT deployed integrated biometric workstations (i.e., fingerprint scanners) at POEs to facilitate biometric data collection. Workstations were deployed at 115 airports and 14 sea ports beginning in January 2004, expanded to the 50 busiest land POEs by the end of 2004, and have been operational at almost all POEs since December 2006. Third, under a final rule published in 2009, all non-U.S. citizens entering the United States are required to provide biometric data with the exceptions of Canadian nationals admitted as visitors, LPRs returning from cruises that begin and end in the United States or entering at land ports of entry, Mexican nationals with border crossing cards (BCCs), and travelers with other visas explicitly exempted from the program. In practice, the 2009 rule means that virtually all arriving non-citizens at air and seaports (other than U.S. LPRs returning from U.S.-based cruises) are required to provide biometric data during primary inspection. At land ports, arriving passengers only provide biometric data in secondary inspection (see "Secondary Inspections"). It bears emphasis that while a relatively small number of visa categories are exempted from the biometric requirement, these exemptions cover the majority of foreign visitors to the United States. Collection of Exit Data In general, the United States does not have a history of collecting exit data from departing travelers. (In contrast, European Union member states, among other countries, for many years have required that people pass through passport control booths not only upon admission to the country, but also prior to their departure.) As a result, DHS and its predecessor agency have confronted inadequate port infrastructure and staffing to readily implement exit data collection as required by existing law. Since 2004, DHS has tested six exit data pilot programs and demonstration projects described below. Four of the programs have been described as problematic, and have been discontinued; but two programs involving biographic information sharing with air carriers and with the government of Canada have been described by DHS as successful, and are ongoing. 2004-2007: Air/Sea Exit Pilot Program Between January 2004 and May 2007, US-VISIT tested three different biometric exit technologies at 12 airports and 2 seaports under the so-called Increment 1B Pilot Program. At different airports and seaports, the program tested biometric collection kiosks located inside secure checkpoints, biometric collection mobile devices located in departure gate areas, and a combination of kiosks and mobile validator devices. DHS's evaluation of the program reportedly found that all three technologies and scenarios successfully captured biometric and biographic information, and that data collection required between 60 and 90 seconds per passenger. Based on a series of reports in 2005-2007, GAO concluded in 2007 that the Increment 1B air and sea pilot had "not been managed well"; and GAO recommended that DHS discontinue the program. In addition to concerns about program planning, oversight, and analysis of alternatives, GAO found that only 24% of travelers subject to US-VISIT requirements complied with the exit procedures, and that the program lacked enforcement measures and had not evaluated the effect of adding such measures. According to DHS's evaluation of the program, traveler compliance could be improved by integrating biometric data collection into the normal departure flow. 2005-2006: Land Exit Proof of Concept The lack of exit infrastructure and the potential for congestion as a result of exit data collection are viewed as particularly problematic at land POEs. Between August 2005 and November 2006, DHS operated a land exit proof-of-concept demonstration project at five ports of entry on the southern and northern borders to test the use of Radio Frequency Identification (RFID) technology for tracking departures. Under the project, RFID tags were added to about 200,000 I-94 forms issued to nonimmigrant visitors. The goal of the project was to capture exit data with minimal new infrastructure or DHS staffing and without adding to border congestion. RFID technology is limited to biographic data, however. In addition, based on the demonstration project, RFID data collection proved unreliable, with successful data collection from RFID tags rates as low as 14% at some ports, and with scanners unable to consistently distinguish between RFID entries and exits. Thus, the conclusion drawn by GAO from the demonstration project was that RFID appears to be an inappropriate technology for exit data collection. 2009: Air Exit Pilot Program Between May and July of 2009, US-VISIT worked with CBP and the Transportation Security Administration (TSA) to operate a pair of biometric air exit pilot programs. At the Detroit airport, CBP officers collected biometric data from aliens subject to US-VISIT at departure gates for selected international flights. Data was usually collected in aircraft jetways, between air carrier boarding pass collection and travelers' entry onto aircraft. Certain CBP officers were assigned to review travelers' documents to identify people subject to the program, who were then referred to additional officers for data collection. At the Atlanta airport, TSA officers screened travelers prior to their entry into the TSA security checkpoint to identify people subject to US-VISIT requirements. Such people were referred to a special line within the checkpoint, where other TSA officers collected their biometric data. DHS concluded that the pilot generally confirmed that biometric data may be collected from departing travelers. During the course of the program, about 500,000 travelers were screened by CBP and TSA officers; about 30,000 were identified as subject to US-VISIT; and only one traveler refused to provide his biometric data. Data collection only required a few seconds per passenger, and produced data of adequate quality for enrollment in IDENT. On the other hand, DHS also found that identifying travelers subject to US-VISIT requirements necessitated "extensive interaction" between screeners and travelers, that scaling up a program to cover all departures would greatly exceed available staffing capacity, that flight delays and related problems interfered with data collection, and that pilots and crew often boarded flights too early to be enrolled by CBP officers. Locating US-VISIT screening and data collection at TSA checkpoints also had an impact on a large number of U.S. citizens and passengers scheduled for domestic flights; and screening at TSA checkpoints arguably is less reliable than jetway screening when it comes to ensuring that people providing exit data actually leave the country. In addition to these specific concerns, DHS's more extensive review of its biometric exit testing concluded that a comprehensive biometric air exit system "faces enormous cost and logistical challenges," with funding requirements projected to total about $3 billion over a 10 year period. For these reasons, in 2010 DHS adopted a plan to focus in the near-term on enhanced biographic data collection and analysis to identify potential overstayers, and to invest in research and development of emerging biometric technology to be employed in a future exit system. 2009-2010: H-2A and H-2B Land Exit Pilot Program In December 2009, US-VISIT and CBP initiated a pilot program to collect biometric data from exiting H-2A and H-2B temporary workers. The pilot deployed kiosks adapted for outdoor use, and applied to certain H-2A and H-2B workers who entered and exited through the San Luis, AZ and Douglas, AZ POEs. DHS reportedly plans to use information from the land exit pilot program to inform future land exit program planning, but CRS has not been able to locate additional information about the program. 2008—Ongoing: Air Carrier Information Sharing Since 2008, under the Advanced Passenger Information System (APIS) program, air and sea carriers are required to provide CBP with electronic copies of passenger and crew manifests prior to the departure of all international flights and voyages to or from the United States. For air carriers, such data must be provided prior to securing aircraft doors. CBP vets inbound passenger manifests against terrorist watchlist data, and CBP adds passenger arrival and departure data to the ADIS biographic database. According to DHS officials, air carrier compliance with APIS requirements has been close to 100% since 2010, and analysis of ADIS records allows DHS to identify air travelers who may have overstayed their visas (also see "Overstay Analysis"). While DHS apparently views the APIS program as a viable system for tracking air and sea exits, the system may be seen as not meeting the entry-exit system's legislative requirements in at least three ways. First, although air and sea carriers review passengers' passports prior to issuing a boarding pass, APIS does not include a mechanism to authenticate biometric data (i.e., APIS only collects biographic data). Second, relatedly, the APIS system is not designed to reliably insure that the same individual who checks in for a flight or voyage actually boards the aircraft or vessel. Third, although APIS provides CBP with electronic passenger manifest lists, the manifests are generated by carrier agents during the check-in process; such "manual" data may be less secure than data collected directly from travelers' passports (i.e., "machine-readable" data). 2012—Ongoing: U.S.-Canada Information Sharing On February 4, 2011, President Obama and Canadian Prime Minister Harper signed a joint declaration describing their shared visions for a common approach to perimeter security and economic competitiveness: the Beyond the Border agreement. Among other provisions, the agreement calls for the two countries to develop an integrated entry-exit system so that the record of a land entry into one country establishes an exit record from the other. The first phase of the program ran from September 2012 – January 2013, and included the exchange of biographic records for third country nationals and permanent residents (i.e., for persons other than U.S. or Canadian citizens) at four designated POEs. Canada was able to reconcile 94.5% of U.S. entries (i.e., Canadian exits) with Canadian immigration databases, and the United States was able to reconcile 97.4% of Canadian entries. Based on these results, the countries initiated phase 2 of the pilot program in June 2013, expanding data collection to all automated POEs on the U.S.-Canada border. DHS apparently views the U.S.-Canadian integrated entry-exit system as a promising approach for collecting exit data at the northern border. Under the current agreement, such information sharing will be limited to biographic data. DHS' ability to treat Canadian entry data as a reliable record of U.S. exits depends on both the organizational capacity of the Canada Border Services Agency (CBSA), and on a high level of trust and collaboration between CBSA and CBP. Overstay Analysis Within DHS, U.S. Immigration and Customs Enforcement's (ICE's) Overstay Analysis Unit identifies potential visa overstayers by matching ADIS arrival and departure records. ICE's Counterterrorism and Criminal Exploitation Unit (CTCEU) prioritizes certain overstay leads for further investigation. According to GAO's analysis of DHS data, DHS's enhanced biographic exit program reviewed a backlog of 1.6 million potential overstay records in 2011. About half of these cases (863,000) were found to have departed the United States or to have adjusted status. Out of the remaining records, along with 82,000 additional cases identified by CTCEU (i.e., a total of 839,000 records), DHS prioritized 1,901 (0.2% of overstayers; 0.1% of all cases initially reviewed) as possible national security or public safety risks. Further investigation of these high priority cases found that 1,013 individuals had departed the United States or adjusted to a lawful migration status, 9 individuals were arrested, and 481 individuals were the subject of ongoing ICE enforcement efforts as of March 2013, among other outcomes. The GAO also determined that about 1.2 million ADIS arrival records could not be matched to departure data, and raised questions about the quality of DHS's overstay data. Moreover, DHS and its predecessor agency have not provided Congress with statutorily required reports on visa overstays since 1994, though then-DHS Secretary Janet Napolitano testified in February 2013 that the department would report to Congress by the end of the year. Issues for Congress Screening for Infectious diseases at POEs115 News of humans infected with Ebola in West Africa has heightened concerns about the health screening of people arriving in the United States. Under current law, foreign nationals not already legally residing in the United States who wish to come to the United States generally must obtain a visa and submit to an inspection to be admitted. They must first meet a set of criteria specified in the Immigration and Nationality Act (INA) that determine whether they are eligible for admission. Moreover, they must not be deemed inadmissible according to specified grounds in the INA. One of the reasons why a foreign national might be deemed inadmissible is on health-related grounds. From an immigration standpoint, an outbreak of an infectious disease places substantial procedural and resource pressures on CBP, which is charged with screening all travelers at land, sea, and air ports of entry for admission. CBP works in conjunction with the Centers for Disease Control and Prevention (CDC) in HHS to monitor travelers for health-related risks and attempt to contain any diseases that may be spread by travelers coming from abroad. The CDC is the lead agency charged with protection against communicable diseases and is responsible for providing the technical instructions to CBP officers. CDC officials are not present at the border on a day-to-day basis, but there are quarantine stations located in a number of international airports and near a few land ports of entry. However, these stations constitute a small fraction of the 329 ports of entry operated by CBP. Even fully staffed quarantine stations are not in a position to perform routine health screening on all passengers crossing the border as a standard operating procedure. Rather than staffing all the POEs, the CDC, through their Division of Global Migration and Quarantine (DGMQ), trains CBP inspectors to watch for ill persons and items of public health concern. The CBP Inspector's Field Manual states that CBP officers are responsible for observing all travelers for obvious signs and symptoms of quarantinable and communicable diseases, such as (1) fever, which could be detected by a flushed complexion, shivering, or profuse sweating; (2) jaundice (unusual yellowing of skin and eyes); (3) respiratory problems, such as severe cough or difficulty breathing; (4) bleeding from the eyes, nose, gums, or ears or from wounds; and (5) unexplained weakness or paralysis. However, CBP officers are not medically trained or qualified to physically examine or diagnose illness among arriving travelers. The CDC also approves the physicians used at the POEs, and tests are performed in consultation with and in accordance with CDC guidance. CDC officials are to be stationed at the border during immigration emergencies and other periods when public health may be threatened. In the current context of the Ebola outbreak in West Africa, the Administration has established new screening procedures at five airports and requires all persons whose travel originated in Guinea, Liberia, and Sierra Leone to enter the United States through these five airports. The airports were selected because reportedly they represent more than 94% of the travelers coming from those three countries. When passengers arrive whose travel originated in one of the aforementioned countries—including U.S. citizens—they are escorted to a separate area for additional screening. The travelers fill out an extensive questionnaire, and have their temperature taken. Staff from the CDC is present at these airports to assist with the screening. Travelers without febrile illness or symptoms of Ebola will be monitored two times a day by state and local health departments for 21 days from their departure from West Africa. These travelers are also given a kit that contains a tracking log, a pictorial description of Ebola symptoms, a thermometer, and a wallet card with information on whom to contact if they have symptoms that can be presented to a health care provider if necessary. Those that have a fever or have symptoms consistent with Ebola will be immediately isolated. Entry-Exit System: Issues for Congress The completion of a more comprehensive entry-exit system has been a persistent subject of congressional concern. As discussed elsewhere, two limitations of the current system are that most people entering the United States by land POEs only provide biographic data (i.e., do not provide biometric data), and that DHS may not have a fully reliable system for overstay analysis (see "Entry-Exit System: Implementation"). DHS reportedly has made progress with respect to real-time overstay analysis, but did not publish estimated overstay rates that had been expected in 2013. In addition, even when DHS identifies potential visa overstayers in its dataset, the department has limited ability to track down and remove such overstayers. Arguably, the biggest questions about the entry-exit system concern the collection of exit data. No exit data are collected from persons leaving through southern border land ports; and data collection at other ports is limited to biographic data, is not always based on machine-readable data, and relies on information sharing with Canada and with air and sea carriers. DHS reportedly believes that the biographic information sharing generally meets its needs for purposes of exit tracking at an acceptable cost, and CBP has indicated, for purposes of immigration screening, that "[w]hile biometric information is growing in importance, the vast majority of data available for use at the POEs is biographical." At the same time, DHS has also argued that strengthening biographic data collection is a necessary precursor to biometric data collection, and views a biographic system as a desirable long-term goal for the entry-exit system. Members of Congress concerned with exit tracking may focus on the following questions: Are biographic data adequate for entry-exit tracking, or should biometric exit data collection be viewed as a priority? If biographic data are adequate, would an upgrade to machine-readable biographic data represent an improvement over the status quo? Is information-sharing using data provided by airlines and by Canada an acceptable model for exit data, of should DHS collect exit data directly? If information-sharing is acceptable, can a similar model be implemented on the U.S.-Mexico border , or does the Southern border require a different approach? If information-sharing is not acceptable, what additional infrastructure and personnel are required (and at what cost) for CBP to collect universal exit data? The 114 th Congress is considering legislation that would require the completion of the entry-exit system. The Secure Our Borders First Act of 2015 ( H.R. 399 ) would require the Secretary of Homeland Security to submit an implementation plan to execute a biometric exit data system. The bill would create a six-month pilot program to test the biometric exit system, which would precede the implementation of the roll out of the program. The bill sets forth staggered deadlines for full implementation of the exit system but would require full implementation of the system within five years of enactment. Illegal Migration through Ports of Entry Discussions of immigration control and border security often focus on unauthorized flows between ports of entry; but unauthorized immigrants also enter through ports of entry, either illegally or by overstaying a nonimmigrant visa. Visa overstayers enter legally on temporary (nonimmigrant) visas but fail to depart before the visa expires. Unauthorized immigrants enter through ports of entry by using fraudulent documents (including counterfeit or altered documents, and legitimate documents that do not belong to them) or by evading inspection, for example by being hidden inside a vehicle. A potentially important question for Congress, particularly in light of the ongoing debate about immigration reform, is how much unauthorized immigration occurs through POEs ? A 2006 study estimated that 40-50% of unauthorized immigrants in the country at the time were visa overstayers, and this study remains the most recent reliable public estimate. In addition, interviews conducted with current and former unauthorized migrants in 2009 found that one out of four illegal entrants from Mexico had entered illegally through a port, either hidden in a vehicle or using borrowed or fraudulent documents, and that aliens attempting illegal entry through a POE were half as likely to be apprehended as those crossing between the ports. DHS has not published an estimate of the total number of visa overstayers in the United States or of the rate of illegal immigration through POEs, though the department reportedly plans to report on visa overstayers, as noted elsewhere. The department reportedly does not have plans to produce an estimate of illegal flows through POEs, and the COMPEX program is not currently designed to produce such an estimate (see "Random Compliance Examination (COMPEX) Program"). The program likely could be modified—primarily by increasing sample size—to produce such an estimate if Congress viewed such modifications as a priority, though CBP reportedly does not support such a change. Recent border security bills have targeted a greater share of resources to enforcement between ports of entry than to inspections and enforcement at POEs (see "Port of Entry Infrastructure and Personnel"). Some legislation in the 113 th Congress focused on enforcement between the ports. For example, S. 744 would require DHS to develop a strategy to achieve "effective control" of Border Patrol sectors between ports of entry, but does not establish goals or metrics for enforcement at the ports. On the other hand, the Border Security Results Act of 2013 ( H.R. 1417 ), as reported by the House Homeland Security Committee, would establish POE enforcement metrics, though it would not authorize new enforcement measures. Port of Entry Infrastructure and Personnel One potential strategy for speeding migration flows while also enhancing border security is to add POE personnel and infrastructure. For any given volume of incoming travelers, both the flow rate (or "service level") and the time spent on inspections are a positive function of the number of CBP officers on duty and the number of active travel lanes. Conversely, according to a 2008 GAO report, infrastructure weaknesses increased the risk that vehicles could enter the United States without inspection; and staffing shortages contributed to morale problems, fatigue, lack of backup support, and safety issues, "increasing the potential that terrorists, inadmissible travelers, and illicit good could enter the country." GAO revisited these concerns in 2011 and reported that DHS was taking steps to address GAO's recommendations regarding staffing and infrastructure, but that CBP faced challenges in developing POE performance metrics. CBP's Workload staffing model identifies a need for 3,811 additional CBP officers at POEs in FY2014, and the Administration's FY2014 budget proposal included a request for 3,477 additional officers. To some extent, the Office of Field Operations (OFO) competes for resources with CBP's Border Patrol and with U.S. Immigration and Customs Enforcement (ICE). The Border Patrol has grown about three times faster than OFO in the post-9/11 period. Similarly, S. 744 , would direct CBP to more than double the number of Border Patrol agents on the southwest border, while only authorizing a 16% increase in OFO officers. Other bills in the 113 th Congress would augment POE staffing, however. Recent fiscal pressures have been a barrier to POE personnel increases. As mentioned, during the FY2014 budget process, the Administration proposed to hire 3,477 additional CBP officers (about half through increased appropriations and half through fee increases), but Congress approved a slower personnel growth, with half the proposed funding. Congress also authorized a pilot program in the FY2013 appropriations bill that permitted CBP to enter into public-private partnerships (PPPs) with certain localities and permitted the private sector to fund improvements in border facilities and port services, including by funding additional CBP officers and underwriting overtime hours. In its FY2014 budget, the Administration proposed expanding the pilot program by permitting CBP to accept donations to expand port operations. Approving the Administration's request, Congress extended the pilot program in the FY2014 DHS appropriations bill. The current pilot program permits CBP to accept donations to expand port operations, among other things. Trusted Traveler Programs: Issues for Congress As noted elsewhere, one of CBP's primary tools for risk management at POEs is the use of trusted traveler programs, including Global Entry, NEXUS, and SENTRI (see "Trusted Traveler Programs"). Trusted traveler programs are designed to facilitate legal flows by allowing low-risk, known travelers to be exempted from certain screening and inspections and also to enhance security by allowing CBP officers to focus greater attention on higher-risk flows. The benefits of trusted traveler programs should increase with scale because moving more travelers into expedited lanes speeds overall processing times, and fewer unknown travelers mitigates the "needle in the haystack" challenge of enforcement at POEs. Thus, legislation in the 113 th Congress would promote membership in trusted trade programs. Congress and CBP confront certain obstacles to expanding trusted traveler programs, however. One of the main incentives CBP can offer trusted travelers is to reduce the likelihood of secondary inspections; but doing so may encourage mala fide actors to enroll in these programs to game the system. In addition, at land POEs, travelers only benefit from an expedited inspections process if they are also able to take advantage of dedicated NEXUS or SENTRI lanes (i.e., so that the entire queue is subject to expedited processing). But CBP has limited capacity to add and extend dedicated lanes because many ports are located in urban areas with limited space for expansion, though the agency has addressed this problem, to some extent, by using "active lane management" systems that adjust lane assignments based on real-time demand. Appendix. Entry-Exit System Legislation Congress has enacted the following legislation concerning an entry-exit system: Illegal Immigration Reform and Immigrant Responsibility Act of 1996 (IIRIRA, P.L. 104-208 , Div. C). Section 110 required the Attorney General, within two years of enactment (i.e., by September 30, 1998), to develop an automated entry and exit control system that would collect records of alien arrivals and departures and allow the Attorney General through online searches to match such arrivals and departures and thereby identify nonimmigrant aliens who remain in the United States beyond the periods of their visas (i.e., visa overstayers). The bill also required the Attorney General to annually report to Congress on the number of visa overstayers and their countries of origin. P.L. 105-259 and P.L. 105-277 . These appropriations acts amended §110 of IIRIRA to extend the deadline for implementing the entry-exit system to October 15, 1998 for airports and seaports and to March 30, 2001 for land POEs. Immigration and Naturalization Service Data Management Improvement Act ( P.L. 106-215 ). The act amended IIRIRA §110 to describe the entry-exit system in greater detail; clarified that the system's mandate did not impose new documentary requirements on travelers to the United States; and imposed new deadlines of December 2003 for implementation of the entry-exit system at all U.S. airports and seaports, December 2004 for implementation of the system as the 50 busiest land POEs, and December 2005 for making data from the system available to immigration officers at all POEs. The act also authorized the Attorney General to make entry-exit system data available to other law enforcement officials for law enforcement purposes. Visa Waiver Permanent Program Act ( P.L. 106-396 ). Section 205 amended INA §217 to require the Attorney General (separate and apart from IIRIRA §110) to develop and implement a fully automated entry and exit control system to collect arrival and departure records for aliens traveling in and out of the United States under the Visa Waiver Program (also see "Visa Waiver Program"). Uniting and Strengthening America by Providing Appropriate Tools Required to Intercept and Obstruct Terrorism Act of 2001 (USA PATRIOT Act, P.L. 107-56 ). Section 411 encouraged the Attorney General to implement the IIRIRA entry-exit system "with all deliberate speed." The act directed the Attorney General, in the development of the system, to focus on the utilization of biometric technology and tamper-resistant documents; and it required that the system interface with law enforcement databases to identify individuals who pose a threat to national security. In addition, Section 403 required the Departments of Justice and State, working through the National Institute of Standards and Technology (NIST), to develop and certify a technology standard that can be used to verify the identity and check the backgrounds of persons applying for a U.S. visa or seeking admission at a POE. Enhanced Border Security and Visa Entry Reform Act of 2001 (EBSVERA, P.L. 107-173 ). Section 302 required the Attorney General and DOS to use the technology standard required to be developed under the PATRIOT Act at POEs and at consular posts abroad; to establish an arrival and departure database; and to make all alien admissibility security databases interoperable. Intelligence Reform and Terrorism Prevention Act of 2004 (IRTPA, P.L. 108-458 ). Among other provisions, Section 7208 reiterated Congress's finding that a biometric entry-exit system should be implemented as expeditiously as possible and required DHS to develop and report on a plan to accelerate the full implementation of such a system. The section also clarified that the entry-exit system shall include a requirement for the collection of biometric data for all categories of individuals required to provide such data, regardless of the POE. And it imposed a two year deadline for the development of a fully interoperable data system among relevant agencies within DOS, DHS, and DOJ. Implementing Recommendations of the 9/11 Commission Act of 2007 (9/11 Act, P.L. 110-53 ). Section 711 amended INA §217 (as previously amended by P.L. 106-396 ) to require DHS within one year to establish an exit system to record the departure of all air travelers participating in the Visa Waiver Program.

About 362 million travelers (citizens and non-citizens) entered the United States in FY2013, including about 102 million air passengers and crew, 18 million sea passengers and crew, and 242 million land travelers. At the same time about 205,000 aliens were denied admission at ports of entry (POEs); and about 24,000 persons were arrested at POEs on criminal warrants. Within the Department of Homeland Security (DHS), U.S. Customs and Border Protection's (CBP) Office of Field Operations (OFO) is responsible for conducting immigration inspections at America's 329 POEs. CBP's primary immigration enforcement mission at ports of entry is to confirm that travelers are eligible to enter the United States and to exclude inadmissible aliens. Yet strict enforcement is in tension with a second core mission: to facilitate the flow of lawful travelers, who are the vast majority of persons seeking admission. A fundamental question for Congress and DHS is how to balance these competing concerns. In general, DHS and CBP rely on "risk management" to strike this balance. One part of the risk management strategy is to conduct screening at multiple points in the immigration process, beginning well before travelers arrive at U.S. POEs. DHS and other departments involved in the inspections process use a number of screening tools to distinguish between known, low-risk travelers and lesser-known, higher-risk travelers. Low-risk travelers may be eligible for expedited admissions processing, while higher-risk travelers are usually subject to more extensive secondary inspections. As part of its dual mission and in support of its broader mandate to manage the U.S. immigration system, DHS also is responsible for implementing an electronic entry-exit system at POEs. Congress required DHS' predecessor to develop an entry-exit system beginning in 1996, but the implementation of a fully automated, biometric system has proven to be an elusive goal. The current system collects and stores biographic entry data (e.g., name, date of birth, travel history) from almost all non-citizens entering the United States, but only collects biometric data (e.g., fingerprints and digital photographs) from non-citizens entering at air or seaports, and from a subset of land travelers that excludes most Mexican and Canadian visitors. With respect to exit data, the current system relies on information sharing agreements with air and sea carriers and with Canada to collect biographic data from air and sea travelers and from certain non-citizens exiting through northern border land ports; but the system does not collect data from persons exiting by southern border land ports and does not collect any biometric exit data. Questions also have been raised about DHS' ability to use existing entry-exit data to identify and apprehend visa overstayers. The inspections process and entry-exit system continue to be perennial issues for Congress and a number of questions persist. Moreover, the scope of illegal migration through ports of entry, and how Congress and DHS can minimize such flows without unduly slowing legal travel continue to challenge policymakers and agency officials. The 114th Congress is considering legislation that would increase the number of port personnel as well as require the completion of the entry-exit system, a program that has been the subject of ongoing legislative activity since 1996, as summarized in the Appendix to this report.

Details of the Decision In part, the differences in the response to the NPCSC's decision may be attributed to the perceived ambiguity of its wording, which allows for differing interpretations of its content. However, the apparent ambiguity of the decision's wording might also be the result of the NPCSC's efforts to abide by the technical legal aspects of the issues addressed by the decision. Portions of the decision are unequivocal. The first sentence of the first section of the decision clearly prohibits the election of the Chief Executive by universal suffrage in 2012, and the second sentence clearly prohibits the election of Legco by universal suffrage in 2012. The second sentence also prohibits altering the 50-50 split in the Legco between members elected by geographic regions and members selected by functional constituencies in the 2012 election. Other portions of the decision are more open to interpretation. Regarding both the Chief Executive and Legco elections of 2012, the decision states that "appropriate amendments may be [emphasis added] made to the specific method" of selection. However, the original Chinese— keyi zuo chu shidang xiugai —could be construed either as the NPCSC granting Hong Kong permission to make appropriate amendments or that Hong Kong may propose appropriate amendments, without implying that the amendments would be necessarily accepted by the NPCSC. Similarly, regarding the Chief Executive election of 2017 and subsequent Legco elections, the decision states it "may be implemented by the method of universal suffrage" [ keyi shixing you puxuan chansheng de banfa ], but the language is subject to the same ambiguity of interpretation between the granting of permission or the statement of possibility. Regardless of one's interpretation of these phrases, the decision does provide a clear statement of how election changes are to be made. Amending the election process involves a six-step process. First, the Chief Executive "shall make a report" [ ti chu baogao ] to the NPCSC on the need for amendment of Hong Kong's election process. Second, the NPCSC will make a determination [ queding ] on the issue of the need for amendment, but not on specific changes. Third, the Hong Kong government shall introduce a bill of amendments to the Legco. Fourth, Legco must pass the bill of amendments by at least a two-third majority. Fifth, the Chief Executive must approve the bill passed by Legco. Sixth, the bill shall be reported to the NPCSC for its approval [ pizhun ] when amending the election of the Chief Executive, and "for the record" [ beian ], when amending the election of Legco. The decision also is clear that a nominating committee [ timing weiyuanhui ] is also a required part of any process of selecting the Chief Executive, and that the nominating committee "may be formed with reference to" [ ke canzhao ] the Election Committee that currently selects the Chief Executive. Hong Kong's Response On the day of the decision, Tsang issued an official statement, saying "The HKSAR Government and I welcome this decision, which has set a clear timetable for electing the Chief Executive and Legislative Council by universal suffrage." He also called on the people of Hong Kong to "treasure this hard-earned opportunity" and urged "everyone, with utmost sincerity, to bring an end to unnecessary contention, and to move towards reconciliation and consensus." Tsang set a goal of settling the election reforms for 2012 by the end of his second and final term in office, and hopes to "have formulated options" by the fourth quarter of 2008. To that end, he asked Hong Kong's Commission on Strategic Development "to consider the most appropriate electoral methods for the elections of the Chief Executive and the Legislative Council in 2012." Opinions among Hong Kong's political parties were mixed, generally along established ideological lines, with disagreement on the general and specific implications of the decision. According to Jackie Hung Ling-yu, a member of Hong Kong's Civil Human Rights Front (CHRF), "Beijing only tries to play with words to cheat Hong Kong people. There has not been any promise that we can have universal suffrage in 2017." Civic Party leader, Audrey Eu Yuet-mee, echoed Hung's view, maintaining that this was the second time that the NPCSC had ruled out universal suffrage in a specific election in Hong Kong. Martin Lee Chu-ming, founding chairman of Hong Kong's Democratic Party, called the decision "hollow and empty," providing neither a detailed roadmap nor a clear model for universal suffrage. In an interview on RTHK radio in Hong Kong, Tam Yiu-chung, chairman of the Democratic Alliance for the Betterment of Hong Kong (DAB), said that, in light of the NPCSC's decision, the focus should be on how the functional constituencies could work with universal suffrage. However, Yeung Sam, current Legco member from the Democratic Party, disagreed, stating that the functional constituencies were incompatible with universal suffrage. Liberal Party chairman James Tien Pei-chun took a broader view of the decision, stating, "No matter how you see it, you should try your best to ensure Hong Kong's three million-odd registered voters have a chance to elect the Chief Executive in 2017." Public opinion polls taken after the announcement of the decision have revealed a generally positive response. A telephone-based poll of over 1,000 Hong Kong residents conducted by a Hong Kong radio station on December 30 and 31, 2007, found half of the respondents were satisfied with the overall content of the decision, but 35% were dissatisfied. In a survey of 500 people done by Hong Kong University for the Hong Kong newspaper, Ming Pao , 42.7% of the respondents had welcomed the decision, 28.7% were opposed, and 23.6% were "half and half." A similar poll done by Chinese University of Hong Kong found 72.2% of the 909 respondents found the decision acceptable and 26.7% considered it unacceptable. A coalition of groups supporting universal suffrage in 2012 are organizing a public rally to be held on January 13, 2008. In support of the planned rally, members of Hong Kong's Democratic Party have pledged to continue their hunger strike—begun on December 23, 2007, the day the NPCSC opened their meeting to consider Tsang's report—until the day of the rally. International Response A spokesperson for the U.S. consulate in Hong Kong indicated that the U.S. government was disappointed that the NPCSC had ruled out election by universal suffrage in 2012, but hope that all parties would work to make election reforms possible in 2012 and 2017. British Foreign Secretary David Miliband called the prohibition of direct elections in 2012 "a disappointment to all," but then noted that "the NPC's statement clearly points towards universal suffrage for the Chief Executive election in 2017 and the Legislative Council election thereafter." Taiwanese officials were more critical of the NPCSC's decision. Tung Chen-yuan, a member of Taiwan's Mainland Affairs Council, stated that the decision indicated that "the Chinese Communist Party does not allow genuine democracy," and demonstrated that the "one country, two systems" policy would not be accepted by the people of Taiwan. Critical Issues In light of the NPCSC's decision, Hong Kong's advancement towards democracy faces three critical issues. First, the status of Legco's functional constituencies will need to be resolved. Some Hong Kong politicians and analysts maintain that the functional constituencies are incompatible with the concept of universal suffrage and they will eventually have to be eliminated. Other Hong Kong politicians and analysts—as well as the NPCSC—hold that functional constituencies are not irreconcilable with universal suffrage, and that they represent sectors of the community which are considered important to Hong Kong's economic stability and development. A wide range of proposals have already been offered on how to handle the functional constituencies (including changing the number of functional constituencies and altering their voter eligibility requirements so that every Hong Kong voter could vote for at least one functional constituency Legco member), but finding a suitable compromise may prove to be difficult. Second, the composition of the nominating committee for the Chief Executive, and the requirements necessary to officially be nominated are possibly the greatest challenges facing the direct election of the Chief Executive. Currently, to be nominated, a person must receive the support of at least 100 of the 800 members of the largely appointed Election Committee. There have been calls to increase the number of members on the committee by including more people, and, in particular, the elected members of Hong Kong's District Councils. However, adding more people to the committee would either increase the possible number of nominees (assuming the 100 votes requirement was kept) or would necessitate changing the number of votes required to be nominated. Third, possibly the greatest challenge will be finding a proposed set of amendments for the elections in 2012 and 2017 that will receive the support of at least two-thirds of Legco. A proposal in 2005 to amend the election process for the 2007 Chief Executive election and the 2008 Legco election failed when a coalition of the various "pro-democracy" parties and the Liberal Party voted against the proposed amendments because they were seen as being too modest. In 2008 and beyond, the Hong Kong government will need to develop proposed legislation that provides enough "democracy" to obtain support from a sufficient number of Legco members associated with the parties that opposed the 2005 proposal without losing too many Legco members associated with parties (such as DAB) that supported the 2005 proposal. Implications for Congress Support for the democratization of Hong Kong has been an element of U.S. foreign policy for over 15 years. The Hong Kong Policy Act of 1992 ( P.L. 102-383 ) states, "Support for democratization is a fundamental principle of United States foreign policy. As such, it naturally applies to United States policy toward Hong Kong. This will remain equally true after June 30, 1997." Congress might act to assist Hong Kong's progress towards universal suffrage and democracy by closely monitoring the development of "appropriate amendments" to the 2012 election process for both the Chief Executive and Legco. Congress might also encourage the State Department to provide greater assistance to its democracy-promotion efforts in Hong Kong. In FY2006, the State Department's Human Rights and Democracy Fund allocated $450,000 to a project in Hong Kong designed to strengthen political parties and civil society organizations. In addition, Congress could opt to pursue greater contact with Legco via provisions set out in Section 105 of the U.S.-Hong Kong Policy Act. Finally, Congress could include language in suitable legislation to reactivate the Section 301 provision of the U.S.-Hong Kong Policy Act that requires an annual report from the State Department to Congress on the status of Hong Kong.

The prospects for democratization in Hong Kong became clearer following a decision of the Standing Committee of China's National People's Congress (NPCSC) on December 29, 2007. The NPCSC's decision effectively set the year 2017 as the earliest date for the direct election of Hong Kong's Chief Executive and the year 2020 as the earliest date for the direct election of all members of Hong Kong's Legislative Council (Legco). However, ambiguities in the language used by the NPCSC have contributed to differences in interpretation of its decision. According to Hong Kong's current Chief Executive, Donald Tsang Yam-kuen, the decision sets a clear timetable for democracy in Hong Kong. However, representatives of Hong Kong's "pro-democracy" parties believe the decision includes no solid commitment to democratization in Hong Kong. The NPCSC's decision also established some guidelines for the process of election reform in Hong Kong, including what can and cannot be altered in the 2012 elections.

When and Why Was Daylight Saving Time Enacted? Daylight Saving Time (DST) is a period of the year between spring and fall when clocks in the United States are set one hour ahead of standard time. It is not a new concept. In 1784, Benjamin Franklin, Minister to France, had an idea that part of the year when the sun rises while most people are still asleep, clocks could be reset to allow an extra hour of daylight during waking hours. He calculated that French shopkeepers could save one million francs per year on candles. In 1907, William Willett, a British builder, Member of Parliament, and fellow of the Royal Astronomical Society, proposed the adoption of advanced time. The bill was reported favorably, asserting that DST would move hours of work and recreation more closely to daylight hours, reducing expenditures on artificial light. After much opposition, however, the bill was not adopted. During World War I, in an effort to conserve fuel, Germany began observing DST on May 1, 1916. As the war progressed, the rest of Europe adopted DST. The plan was not formally adopted in the United States until 1918. "An Act to preserve daylight and provide standard time for the United States" was enacted on March 19, 1918 (40 Stat 450). It both established standard time zones and set summer DST to begi n on March 31, 1918. The idea was unpopular, however, and Congress abolished DST after the war, overriding President Woodrow Wilson's veto. DST became a local option and was observed in some states until World War II, when President Franklin Roosevelt instituted year-round DST, called "War Time," on February 9, 1942. It ended on the last Sunday in September 1945. The next year, many states and localities adopted summer DST. By 1962, the transportation industry found the lack of nationwide consistency in time observance confusing enough to push for federal regulation. This drive resulted in the Uniform Time Act of 1966 (P.L. 89-387). The act mandated standard time within the established time zones and provided for advanced time: clocks would be advanced one hour beginning at 2:00 a.m. on the last Sunday in April and turned back one hour at 2:00 a.m. on the last Sunday in October. States were allowed to exempt themselves from DST as long as the entire state did so. If a state chose to observe DST, the time changes were required to begin and end on the established dates. In 1968, Arizona became the first state to exempt itself from DST. In 1972, the act was amended (P.L. 92-267), allowing those states split between time zones to exempt either the entire state or that part of the state lying within a different time zone. The newly created Department of Transportation (DOT) was given the power to enforce the law. Currently, the following states and territories do not observe DST: Arizona, Hawaii, American Samoa, Guam, the Northern Mariana Islands, Puerto Rico, and the Virgin Islands. During the 1973 oil embargo by the Organization of the Petroleum Exporting Countries (OPEC), in an effort to conserve fuel, Congress enacted a trial period of year-round DST ( P.L. 93-182 ), from January 6, 1974, to April 27, 1975. From the beginning, the trial was hotly debated. Those in favor pointed to the benefits of increased daylight hours in the winter evening: more time for recreation, reduced lighting and heating demands, reduced crime, and reduced automobile accidents. The opposition was concerned about children leaving for school in the dark. The act was amended in October 1974 ( P.L. 93-434 ) to return to standard time for the period beginning October 27, 1974, and ending February 23, 1975, when DST resumed. When the trial ended in 1975, the country returned to observing summer DST (with the aforementioned exceptions). DOT, charged with evaluating the plan of extending DST into March, reported in 1975 that "modest overall benefits might be realized by a shift from the historic six-month DST (May through October) in areas of energy conservation, overall traffic safety and reduced violent crime." However, DOT also reported that these benefits were minimal and difficult to distinguish from seasonal variations and fluctuations in energy prices. Congress then asked the National Bureau of Standards (NBS) to evaluate the DOT report. In an April 1976 report to Congress, Review and Technical Evaluation of the DOT Daylight Saving Time Study , NBS found no significant energy savings or differences in traffic fatalities. It did find statistically significant evidence of increased fatalities among school-age children in the mornings during the four-month period January-April 1974 as compared with the same period (non-DST) of 1973. NBS stated that it was impossible to determine what proportion of this increase, if any, was due to DST. When this same data was compared between 1973 and 1974 for the individual months of March and April, no significant difference was found for fatalities among school-age children in the mornings. Has the Law Been Amended Since Inception? Yes. In 1986, Congress enacted P.L. 99-359 , which amended the Uniform Time Act by changing the beginning of DST to the first Sunday in April and having the end remain the last Sunday in October. In 2005, Congress enacted P.L. 109-58 , the Energy Policy Act of 2005. Section 110 of this act amended the Uniform Time Act, by changing DST to begin the second Sunday in March and end the first Sunday in November. The act required the Secretary of the Department of Energy (DOE) to report to Congress on the impact of extended DST on energy consumption in the United States. In October 2008, DOE sent its report to Congress. After reviewing the DOE report, Congress retained the right under the law to revert DST to the 2005 time schedule. For more information on the legislation that changed DST, see CRS Report RL32860, Energy Efficiency and Renewable Energy Legislation in the 109th Congress , by [author name scrubbed]. Which States and Territories Do Not Observe DST? Arizona (except for the Navajo Nation), Hawaii, Puerto Rico, American Samoa, Guam, the Northern Mariana Islands, and the U.S. Virgin Islands do not recognize daylight saving time. What Other Countries Observe DST? DST is observed in approximately 70 countries, including most of those in North America and Europe. For a complete listing of countries that observe DST, please see Worldtimezone.com and WebExhibits .org websites . Which Federal Agency Regulates DST in the United States? The Department of Transportation, Office of the General Counsel, oversees and regulates DST. How Does an Area Move on or off DST? Under the Uniform Time Act, moving an area on or off DST is accomplished through legal action at the state level. Some states require legislation, whereas others require executive action such as a governor's executive order. Information on procedures required in a specific state may be obtained from that state's legislature or governor's office. If a state decides to observe DST, the dates of observance must comply with federal legislation. As of September 2015, 12 states were considering opting out of the Uniform Time Act of 1966. How Can States and Territories Change an Area's Time Zone? An area's time zone can only be changed by law. Under the Standard Time Act of 1918, as amended by the Uniform Time Act of 1966, moving a state or an area within a state from one time zone to another requires DOT regulation. The governor or state legislature makes the request for a state or any part of the state; the highest county-elected officials may make the request for that county. The standard for deciding whether to change the time zone is the area's convenience of commerce. The convenience of commerce is defined broadly to consider such circumstances as the shipment of goods within the community; the origin of television and radio broadcasts; the areas where most residents work, attend school, worship, or receive health care; the location of airports, railways, and bus stations; and the major elements of the community's economy. After receiving a request, DOT determines whether it meets the minimum statutory criteria before issuing a notice of proposed rulemaking, which would solicit public comment and schedule a public hearing. Usually the hearing is held in the area requesting the change so that all affected parties can be represented. After the comment period closes, comments are reviewed and appropriate final action is taken. If the Secretary agrees that the statutory requirement has been met, the change would be instituted, usually at the next changeover to or from DST. DST-Impact Studies A number of studies have been conducted on DST's impact on energy savings, health, and safety. Following are some recent examples from database searches, such as EbscoHost, ProQuest, and ScienceDirect, including a few select sample reports that discuss the impacts of DST on the listed topic. This is not a comprehensive literature review. Energy Savings and Cost Federal Studies The first national study since the 1970s was mandated by Congress and conducted by the DOE in 2006 and in 2008: U.S. Department of Energy (2006), Potential Energy-Saving Impacts of Extending Daylight Saving Time: A National Assessmen t : "Total potential electricity savings benefits of EDST are relatively small. Total potential electrical savings of 1 Tera Watt-hour (TWh) are estimated (with an uncertainty range of ± 40 percent), corresponding to 0.4 percent per day for each day of EDST or 0.03 percent of electricity use over the year. The United States consumed 3,548 TWhs in 2004. Total potential energy benefits are small. Total potential primary energy savings are estimated from 7 to 26 Trillion Btu (TBtu), or 0.01 percent to 0.03 percent of total annual U.S. energy consumption." U.S. Department of Energy's Report to Congress (2008), Impact of Extended Daylight Saving Time on National Energy Consumption : "The total electricity savings of Extended Daylight Saving Time were about 1.3 TeraWatt-hour (TWh). This corresponds to 0.5 percent per each day of Extended Daylight Saving Time, or 0.03 percent of electricity consumption over the year." Sample Scholarly Journal Articles M.B. Aries and G.R. Newsham (2008), "Effect of Daylight Saving Time on Lighting Energy Use: A Literature Review," Energy Policy , 36(6), 1858–1866. "The principal reason for introducing (and extending) daylight saving time (DST) was, and still is, projected energy savings, particularly for electric lighting. This paper presents a literature review concerning the effects of DST on energy use. Simple estimates suggest a reduction in national electricity use of around 0.5%, as a result of residential lighting reduction. Several studies have demonstrated effects of this size based on more complex simulations or on measured data. However, there are just as many studies that suggest no effect, and some studies suggest overall energy penalties, particularly if gasoline consumption is accounted for. There is general consensus that DST does contribute to an evening reduction in peak demand for electricity, though this may be offset by an increase in the morning. Nevertheless, the basic patterns of energy use, and the energy efficiency of buildings and equipment have changed since many of these studies were conducted. Therefore, we recommend that future energy policy decisions regarding changes to DST be preceded by high-quality research based on detailed analysis of prevailing energy use, and behaviours and systems that affect energy use. This would be timely, given the extension to DST underway in North America in 2007." M.J. Kotchten (2011), "Does Daylight Saving Time Save Energy? Evidence from a Natural Experiment in Indiana," The Review of Economics and Statistics , 93(4): 1172–1185. "Our main finding is that, contrary to the policy's intent, DST increases electricity demand." Safety A. Huang and D. Levinson (2010), "The Effects of Daylight Saving Time on Vehicle Crashes in Minnesota," Journal of Safety Research , 41 (6), 513-520 : "Our major finding is that the short-term effect of DST on crashes on the morning of the first DST is not statistically significant." T. Lahti et al. (2010). "Daylight Saving Time Transitions and Road Traffic Accidents," Journal of Environmental and Public Health , 657167: "Our results demonstrated that transitions into and out of daylight saving time did not increase the number of traffic road accidents." Health Y. Harrison (2013), "The Impact of Daylight Saving Time on Sleep and Related Behaviours," Sleep Medicine Reviews ,1(4), 285-292: "The start of daylight saving time in the spring is thought to lead to the relatively inconsequential loss of 1 hour of sleep on the night of the transition, but data suggest that increased sleep fragmentation and sleep latency present a cumulative effect of sleep loss, at least across the following week, perhaps longer. The autumn transition is often popularised as a gain of 1 hour of sleep but there is little evidence of extra sleep on that night. The cumulative effect of five consecutive days of earlier rise times following the autumn change again suggests a net loss of sleep across the week. Indirect evidence of an increase in traffic accident rates, and change in health and regulatory behaviours which may be related to sleep disruption suggest that adjustment to daylight saving time is neither immediate nor without consequence." MR Jiddou et al. (2013). "Incidence of Myocardial Infarction with Shifts to and From Daylight Savings Time," The American Journal of Cardiology , 111(5), 631-5: "Limited evidence suggests that Daylight Saving Time (DST) shifts have a substantial influence on the risk of acute myocardial infarction (AMI). Previous literature, however, lack proper identification necessary to vouch for causal interpretation. We exploit Daylight Saving Time shift using non-parametric regression discontinuity techniques to provide indisputable evidence that this abrupt disturbance does affect incidence of AMI." What Federal Legislation Has Been Introduced Related to DST? P.L. 109-58 , the Energy Policy Act of 2005 (introduced as H.R. 6 ), was enacted on August 8, 2005. Section 110 of this act amended the Uniform Time Act, changing the beginning of DST to the second Sunday in March and the ending date to the first Sunday in November. This is the only bill related to DST that has been enacted since 1966. Between the 95 th and 109 th Congresses, there were generally a few DST-related bills introduced each Congress. None of the bills were enacted. Illustrative examples include the following: 108th Congress H.R. 1646 —To amend the Uniform Time Act of 1966 to modify the State exemption provisions for advancement of time. 107th Congress H.R. 4212 —To direct the Secretary of Energy to conduct a study of the effects of year-round daylight saving time on fossil fuel usage. 106th Congress H.R. 3756 —To establish a standard time zone for Guam and the Commonwealth of the Northern Mariana Islands, and for other purposes. 102nd Congress S. 1999 —Daylight Savings Time Amendments Act of 1991 Amends the Uniform Time Act of 1966 to extend the period of daylight savings time from the last Sunday of October to the first Sunday in November . 95th Congress H.R. 2636 —A bill to amend the Uniform Time Act of 1966 to provide for permanent year-round daylight savings time. Where Can I Find More Information on DST? The Department of Transportation, Office of the General Counsel, oversees and regulates DST. The Naval Observatory also has useful information, as does NASA .

Daylight Saving Time (DST) is a period of the year between spring and fall when clocks in the United States are set one hour ahead of standard time. DST is currently observed in the United States from 2:00 a.m. on the second Sunday in March until 2:00 a.m. on the first Sunday in November. The following states and territories do not observe DST: Arizona (except the Navajo Nation, which does observe DST), Hawaii, American Samoa, Guam, the Northern Mariana Islands, Puerto Rico, and the Virgin Islands.

Introduction There is continued interest among Members of Congress, the Obama Administration, and Nongovernmental Organizations (NGOs) to reform U.S. foreign aid. This section provides background information concerning the history of modern U.S. foreign aid. It continues with an explanation of the 2006 creation of the State Department's "F Bureau" and the position of Director of Foreign Assistance (DFA), who heads that bureau and serves as administrator of the United States Agency for International Development (USAID). Next, the introduction discusses certain perceived problems with the so-called "F process." Finally, this section provides an overview of Congress's involvement in modern U.S. foreign aid. Brief History of Modern U.S. Foreign Aid Modern U.S. foreign assistance programs had their beginnings shortly after World War II when the United States government responded to the potential spread of communism in postwar Europe by providing aid to vulnerable populations and governments for reconstruction and economic development. Beginning in 1947, when Great Britain could no longer afford to support governments in Greece and Turkey, the United States stepped in with economic assistance to stabilize those two governments and prevent communism from taking hold. Soon thereafter, the Marshall Plan, from 1948 to 1951, provided a total of $13.3 billion for economic recovery support to 16 Western European countries to bolster their governments, stem the spread of communism to those European countries, and strengthen potential trade capabilities. Over the years since the Marshall Plan, underlying reasons for U.S. foreign assistance have varied in response to world events. After the Marshall Plan ended, U.S. assistance focused on Southeast Asia to counter Soviet and Chinese influence. Under President Kennedy, with the Alliance for Progress program in Latin America and assistance to newly independent states in Africa, foreign aid rose to its highest historic amount (measured as a percentage of national income) since the Marshall Plan. Aid spending leveled off in the 1970s, even with spending for Middle East peace initiatives, and then rose again in the 1980s to address famine in Africa, continuing peace efforts in the Middle East, and the U.S. response to insurgencies in Central America. The 1990s saw U.S. aid fall to its lowest level, averaging approximately 0.14% of national income, partly due to the end of the anti-communism rationale for U.S. foreign assistance with the end of the Cold War. After the terrorist attacks of September 11, 2001, the Bush Administration elevated the significance of foreign assistance as a foreign policy tool. President George W. Bush elevated global development as a third pillar of national security, with defense and diplomacy, as articulated in the U.S. National Security Strategy of 2002, and reiterated in 2006. In the FY2009 budget request, the Bush Administration reiterated the importance of the Department of State and U.S. Agency for International Development (USAID) by saying that the FY2009 budget "reflects the critical role of the Department of State and the U.S. Agency for International Development in implementing the National Security Strategy.... " At the same time that foreign aid is being recognized as playing an important role in U.S. foreign policy and national security, it also is coming under closer scrutiny by Congress, largely in response to a number of presidential initiatives (such as implementing the F process and creating the Millennium Challenge Account, or "MCA" ), and by critics who argue that the U.S. foreign aid infrastructure is cumbersome and fragmented, and without a coherent aid strategy. Furthermore, foreign aid experts and some lawmakers assert that Congress needs to dramatically update or rewrite completely the primary statute for U.S. foreign aid, the Foreign Assistance Act of 1961 (FAA), as amended (P.L. 87-195; 22 U.S.C. 2151 et seq.), which has not been comprehensively amended since 1985 and takes what many view to be a Cold War approach that is outdated for U.S. foreign aid in the 21 st century. Implementation of the F Bureau In January 2006, Secretary of State Rice announced the "transformational development" initiative, or "F process," to foster greater aid program coordination and to achieve specified objectives. The Secretary created a new State Department Bureau of Foreign Assistance (the F Bureau) headed by the Director of Foreign Assistance (DFA) who also serves concurrently as Administrator of the U.S. Agency for International Development. In 2006 the F Bureau developed a Strategic Framework for Foreign Assistance (FAF) to align U.S. aid programs with American strategic objectives. The FAF is designed as a tool to help policy makers with strategic choices on the distribution of funds and to ensure that U.S. foreign assistance advances the Administration's foreign policy objectives. The FAF identifies as the ultimate goal "to help build and sustain democratic, well-governed states that respond to the needs of their people, reduce widespread poverty and conduct themselves responsibly in the international system." Five transformational development objectives organize funding and programs to achieve that goal. The objectives are Peace and Security, Governing Justly and Democratically, Investing in People, Economic Growth, and Humanitarian Assistance. This Framework heavily guided the writing of the FY2008 and FY2009 budgets and the FY2010 budget request. Criticisms of the F Bureau and U.S. Foreign Aid Overall While many today say that the F process was an important first step in coordination of U.S. foreign assistance, several criticisms have surfaced. Some say that the F Bureau covers only those aid programs controlled by the Department of State and USAID with no mention of coordinating the other numerous agencies involved with foreign aid. Others claim that Congress was not involved in shaping the F process. Many assert that the process does not incorporate leveraging U.S. assistance to multilateral organizations. Some commentators also criticize the F process for emphasizing Washington decision making over relying on expertise in the field. Beyond the F process in particular, many foreign aid experts perceive a number of ongoing problems with the overall organization, effectiveness, and management of U.S. foreign aid that, they believe, need to be reformed. Problems most commonly cited include the lack of a national foreign assistance strategy; failure to elevate the importance and funding of foreign aid to be on par with diplomacy and defense as a foreign policy tool; the FAA's outdated organization and strategic goals of foreign aid programs; a lack of coordination among the large number of cabinet-level departments and agencies involved in foreign aid, as well as fragmented foreign aid funding; and a need to better leverage U.S. multilateral aid to influence country or program directions. Furthermore, some express concern that very little monitoring of aid and its effectiveness has been done over the years to determine if goals and objectives have been met and if money has been well spent. History of Modern Legislative Efforts to Reform Foreign Aid4 In general, Congress has the responsibility to authorize, appropriate funds for, and oversee U.S. foreign aid programs and related activities. Most appropriations for foreign aid are located in the provisions of annual foreign operations appropriations acts, which often have been combined with appropriations for related expenditures, such as Department of State diplomatic programs, and export financing. The Department of State, Foreign Operations, and Related Programs Appropriations, 2009 (Division H of P.L. 111-8 ), contains the most recent set of foreign aid appropriations provisions. Although Congress has passed regular legislation appropriating funds for foreign aid, it has not passed annual foreign aid authorization legislation since 1985. Instead of independent authorization legislation, Congress provides its guidance for U.S. foreign aid activities through earmarks and other directives dictating or limiting uses of funds included in the yearly foreign operations appropriations acts. Congress has nonetheless passed a number of acts providing new authorizations for foreign assistance programs since 1985, including the Freedom for Russia and Emerging Eurasian Democracies and Open Markets Support Act of 1992 (FREEDOM Support Act) ( P.L. 102-511 ), the Support for East European Democracy (SEED) Act of 1989 ( P.L. 101-179 ), the Millennium Challenge Act of 2003 (division D of P.L. 108-199 ), and recent Security Assistance Acts for 2002, 2000, and 1999 (division B of P.L. 107-228 ; P.L. 106-280 ; Title XII of H.R. 3427 , enacted by reference in P.L. 106-113 , respectively). Congress has undertaken reform of foreign assistance at various points since the authorization of the Marshall Plan through the Economic Cooperation Act in 1948. After the Marshall Plan ended in 1951, Congress passed the Mutual Security Act of 1951, which coordinated military and economic assistance with technical assistance programs. The Mutual Security Act of 1954 and its 1957 revisions contained the concepts of security and development assistance, and instituted authority central to providing loans to developing countries. These acts, however, did not create a long-term structure for U.S. foreign assistance. The historic passage of the Foreign Assistance Act of 1961 (FAA) provided the legislative vehicle for the core organization of U.S. foreign assistance that remains in effect to this day. The successful reform effort that resulted in passage and implementation of the FAA enjoyed both the ardent advocacy of President Kennedy from the time he came to office, as well as the solid support of Congress; Congress passed the legislation in the first year of the Kennedy Administration. This effort represents the most far-reaching and long-lasting reform of U.S. foreign aid, as the FAA originally organized disparate U.S. foreign aid efforts into a coherent whole, and authorized the President to choose an agency to implement the provisions of FAA. In November 1961, President Kennedy created via executive order the Agency for International Development, which later came to be known as USAID. The most recent successful major overhaul of foreign aid and the FAA occurred in 1973, when Congress passed the Foreign Assistance Act of 1973 ( P.L. 93-189 ). This Act restructured development aid programs, shifting emphasis from a "top-down" approach concentrating on aid to governments to develop infrastructure and fund large development projects, to a "basic human needs" strategy that directly targeted the poorer segments of the population in developing countries. It reorganized foreign assistance into sectors including agriculture, education, and population, and certain development activities such as energy and environment. Administrations have undertaken numerous other foreign aid reform attempts over the years, receiving various degrees of congressional support. In 1969, President Nixon formed the Task Force on International Development, chaired by Rudolph A. Peterson. The Peterson Commission, which was made up of private individuals, examined U.S. foreign assistance as a whole, and made recommendations in 1970, which were turned into legislation proposed by the Administration. Congress did not support this legislation, however, and instead focused on passage of the 1973 reforms discussed above. In 1977, Senator Hubert Humphrey pushed legislation to elevate the importance of development in U.S. foreign policy and to coordinate the efforts of the multitude of government agencies involved in foreign assistance. The proposal did not become law, but in 1979 President Carter created an overarching agency for foreign assistance coordination called the International Development Cooperation Agency (IDCA) based on Humphrey's ideas. The IDCA was under-resourced from the outset, and the Reagan Administration effectively abandoned the IDCA, providing no staff to the organization. The IDCA ultimately failed to effectively coordinate aid authorized under the FAA. The Executive Order that created the entity was not rescinded, however, and the IDCA remained a dormant part of the foreign assistance structure until it was abolished in 1999. In his first term, President Reagan formed the Commission on Security and Economic Assistance, chaired by Deputy Secretary of Defense Frank Carlucci, to examine the role of security aid in relation to development assistance, the dissatisfaction of both Congress and the executive branch with foreign aid programs, and the distrust concerning foreign aid between the two. Although the Carlucci Commission issued recommendations in 1983, the effort did not lead to legislation. In 1987 the House Foreign Affairs Committee appointed Representatives Lee Hamilton and Ben Gilman to lead an effort to rewrite foreign assistance law to reflect new international political realities and to define core objectives of U.S. foreign aid. The Hamilton-Gilman Task Force also sought to simplify foreign aid legislation and remove the maze of congressional restrictions on the administration of aid programs. It was hoped that this restructuring would improve congressional attitudes toward foreign aid programs and congressional-executive relations regarding cooperation on foreign aid. The Committee endorsed the legislation incorporating the Task Force's recommendations, but Representative Gilman and other members disagreed with many of the measures suggested, and the effort did not result in substantive reforms. President Clinton appointed Deputy Secretary of State Clifford Wharton to head a review of foreign aid that would restructure aid after the Cold War and reform USAID. Wharton resigned before his report was released, but the Clinton Administration introduced legislation based on the report in late 1993. The Peace, Prosperity, and Democracy Act ( H.R. 3765 , 103 rd Congress; S. 1856 , 103 rd Congress), however, did not move forward after being introduced in the Senate, and the Administration did not resubmit the bill after the Republicans took control of Congress in 1994. Later, the Clinton Administration proposed a reorganization of foreign affairs functions that included retaining USAID as an independent agency but placing USAID under the direct authority of the Secretary of State. Congress passed the Foreign Affairs Reform and Restructuring Act of 1998 (division G of P.L. 105-277 ), which contained the provisions extending the Secretary of State's authority over USAID. The Secretary of State subsequently delegated authority to the administrator of USAID in order for the administrator to carry out the mission of the Agency (State Department Delegation of Authority No. 145, as revised on March 31, 1999). The 111 th Congress has introduced legislation that contains elements reforming foreign aid, such as directing the President to develop and implement a national strategy for foreign aid; requiring the President to conduct a quadrennial review for diplomacy and development, similar to the Department of Defense's QDR; and identifying improvements in aid coordination and evaluation. Key Recommendations Included in Selected Foreign Aid Reform Studies While U.S. foreign assistance throughout its history often has been of keen interest to the executive branch, Congress, and NGOs, a renewed vigor in the debate on foreign aid policy and structure has surfaced in post-9/11 years regarding foreign aid's role in meeting U.S. foreign policy and national security goals. As a result, several studies have been published since 2001 that have called for reform to improve the foreign aid structure in Washington and aid effectiveness in the field. To this end, these studies have heightened congressional interest in, and encouraged a re-examination of, U.S. foreign assistance policies, programs, funding, and organizational structure. The 14 studies assessed in this report are often referred to in aid reform discussions, and deal primarily with foreign aid reform issues; they include books, Senate committee reports, think-tank studies, NGO reports, and journal articles. Most of the studies considered present comprehensive approaches for foreign aid reform. CRS could not include every study and other publication related to such reform; it believes, however, that these 14 studies contain a representative range of viewpoints and recommendations from the foreign aid community. Table 1 presents a matrix of foreign aid reform recommendations in the studies and other publications reviewed for this report. The 14 documents, listed in alphabetical order by their respective short forms (identified above and in Appendix A and Appendix B below) appear along the left side of the matrix from top to bottom. CRS identified 16 key recommendations which appear in more than one of the studies. The recommendations are located at the top of the matrix. They range from a complete replacement of the basic authority of the U.S. government to provide most types of aid, namely, the Foreign Assistance Act of 1961, to various degrees of restructuring the foreign assistance apparatus and organization within the executive branch, to new ideas and methods of funding, allocating, and evaluating the effect of foreign assistance. While recommendations have been divided into discrete categories, CRS notes that each study's support of any given recommendation may contain slight variations from the same recommendation supported by another study. A general discussion of the 16 key recommendations follows. Rewrite the Foreign Assistance Act of 1961 The Foreign Assistance Act of 1961 (FAA), as amended (P.L. 87-195), contains a multitude of goals and outdated priorities and directives, many of which have been appended piecemeal to the original Act. In addition, Congress has enacted over 20 other pieces of legislation establishing foreign aid authorities outside the FAA, adding to the diffusion of aid responsibility and initiatives within U.S. foreign policy overall. Several of the studies claim that the FAA needs to be rewritten in order to streamline and add coherence to a piece of legislation that has been amended frequently since its enactment nearly 50 years ago. Recommendations calling for rewriting the FAA include stripping foreign aid legislation of fragmentary earmarks, aid restrictions, and aid procurement rules; refocusing aid on the core mission of poverty reduction; and restructuring aid legislation to set development goals based not on outdated Cold War-era policy, but instead on the realities facing the United States in a post-9/11 environment. The Oxfam study, Smart Development, Why U.S. foreign aid demands major reform , specifically cites the need for effective congressional-executive cooperation to accomplish rewriting the FAA itself. Modernizing Foreign Assistance for the 21 st Century: An Agenda for the Next U.S. President , the study from the Center for Global Development, calls for renewing the congressional-executive relationship in foreign aid policy implementation, by passing foreign aid legislation that provides substantially greater flexibility to the executive branch for aid delivery and development activities, while at the same time beefing up accountability of the executive branch to Congress via enhanced real-time oversight mechanisms. While these studies acknowledge the need for changes to the FAA, however, they also agree that a full rewrite of the Act would be very difficult to accomplish. Elevate Development to the Level of Diplomacy and Defense The 2006 U.S. National Security Strategy endorses raising the importance of international economic development within overall U.S. foreign policy and national security: "Development reinforces diplomacy and defense, reducing long-term threats to our national security by helping to build stable, prosperous, and peaceful societies." Many commentators have taken up this newly iterated support for development to create the so-called "3D," or three pillars, approach to national security, with development elevated to equal partner status with defense and diplomacy. A majority of the studies directly recommend the establishment of co-equal status for development alongside defense and diplomacy in the U.S. national security framework. Certain studies emphasize that the government must reorganize the international affairs functions of the government to prioritize development as a principal instrument of national security, not just as a secondary tool to "reinforce" defense and diplomacy. Establish a National Strategy for U.S. Foreign Aid U.S. foreign assistance policy is not currently based on any unified national strategy document. A strategy that encompasses all foreign aid activities and guides the decisions of U.S. policy makers would provide much-needed coherence to the currently fragmented system of foreign assistance and would help link U.S. foreign assistance with U.S. foreign policy goals, several studies argue. Some of the studies suggest that such a national foreign assistance strategy could explain and integrate foreign aid goals to strengthen U.S. national security by mitigating poverty and desperation that often leads to instability and conflict, and to fulfill a moral obligation to assist those in need by providing humanitarian aid and encouraging long-term overseas development. The CSIS study, Integrating 21 st Century Development and Security Assistance , recommends an overall cross-agency strategy for security assistance in particular, to ensure proper distribution of authorities and responsibilities among defense and civilian actors, and the Oxfam study calls for a national development strategy that would balance short-term political and security goals with long-term development goals. Some of these studies place importance on national strategies that focus not just on foreign aid coherence but also on utilizing such policy coherence to meet the previously discussed goal of elevating development within overall U.S. foreign policy and national security. The CGE study, Smart Power: Building a Better, Safer World—A Policy Framework for Presidential Candidates , for instance, links creation of a coherent foreign assistance strategy with the institution of an overall national security strategy that fully integrates development with diplomacy, economic policy, defense, and intelligence. Create a Cabinet-Level Agency for Foreign Aid To address perceived shortfalls in managing foreign aid, most of the documents considered in this report call for better integration of government actors involved in providing foreign assistance. In her testimony before the Subcommittee on State, Foreign Operations, and Related Programs of the House Appropriations Committee, Lael Brainard of the Brookings Institution has asserted, "Instead of the current spread of 50 offices managing aid, we should have one capable operational agency." Half of the studies call specifically for a new cabinet-level agency to achieve this integration and ensure the importance of foreign assistance in relation to other foreign policy priorities. The joint Brookings-CSIS study, Security by Other Means: Foreign Assistance, Global Poverty, and American Leadership , for example, argues that a new cabinet-level department of global development is the only organizational reform that will meet the challenges facing the U.S. foreign assistance structure, including ensuring coherent policy, increasing aid effectiveness, and integrating foreign aid actors across the U.S. government. A cabinet-level department for foreign assistance could also encourage a balance between short-term political and security goals and long-term development objectives, the Oxfam study suggests. It argues that a new department with the requisite stature would not be overrun by State and Defense Department interests. Give Department of State Lead Authority for Foreign Aid While the State Department retains primary formal authority over U.S. foreign assistance, concerns have arisen in recent years over the perceived erosion of the Department's lead foreign aid role, especially as compared to DOD's expanding role in assistance. The two reports from the Senate Foreign Relations Committee, Embassies as Command Posts in the Anti-terror Campaign (SFRC1), and Embassies Grapple to Guide Foreign Aid (SFRC2), as well as the Department of State's Advisory Committee on Transformational Diplomacy: Final Report of the State Department in the 2025 Working Group (State), all support a strong leadership role for the State Department for U.S. foreign assistance in general. The Committee reports contain focused recommendations concerning the authority of the State Department in relation to DOD regarding security assistance. Both Committee reports support the State Department's primary authority for Function 150 and 050 foreign assistance. These reports also state that authority for the security assistance budget, including security assistance provided under Section 1206 of the National Defense Authorization Act for Fiscal Year 2006 ( P.L. 109-163 ), should remain with the State Department, with the DOD responsible only for implementation of security assistance policy and programs in limited areas. The SFRC2 report explained that State Department security-assistance authority should not be allowed to migrate from the State Department to DOD, and warned against annual State Department budget requests to Congress for security assistance that are inadequate to meet policy implementation goals. The State working group study recommends that it should have the lead authority regarding foreign aid policy. It calls for the integration of State Department and USAID functions and organizations that currently overlap, with such integration resulting in a concentration of foreign aid decision making being located in the State Department. Build on the F Process Secretary Rice's Transformational Development created within the State Department the Office of the Director of Foreign Assistance and the Foreign Assistance Framework (FAF, or F process), which is intended to provide coherence to U.S. foreign assistance policy, provide budget transparency, and allow for monitoring and evaluation of the effectiveness of foreign assistance programs. Three of the studies considered in this report endorse the enhancement and improvement of the Office of the Director of Foreign Assistance (F) within the Department of State. Gordon Adams's article, "Don't Reinvent the Foreign Assistance Wheel" (Adams), discusses several criticisms of the F process, including a fear that the F Bureau concentrates too much power within the State Department and creates a Washington-focused, non-transparent, top-down foreign aid structure. Despite these perceived shortcomings, the article claims that the alternatives to the F process are even less attractive. Among other negative consequences, restoring independent status to USAID would simply reinvigorate past USAID-State Department clashes over foreign assistance; and a new cabinet-level foreign assistance department would weaken foreign assistance overall because it would place foreign assistance in direct policy battles with the State and Defense Departments, both of which would likely remain stronger than the new foreign assistance department. The Adams article calls for improvement of the F process through increasing the importance of the DFA, which it argues should be elevated to a Second Deputy Secretary of State position; continuing to establish capabilities within USAID and the regional bureaus within the State Department to increase F process effectiveness; and requiring F to link resource needs to strategic goals in the long-term. The three studies generally commend the institution of the F process and call for the process to extend its authority to include all U.S. foreign assistance actors, programs, and policies not currently covered. These changes would promote better coherence for U.S. foreign assistance as a whole, according to these materials. In addition, the State Department should make the F process more transparent concerning both the criteria for aid eligibility and how resources are allocated, one commentator argues, in order to encourage long-term development over short-term political gains, which are more prevalent under the current FAF. Enhance Resources in Civilian Agencies There is widespread consensus, both within the U.S. government and among foreign aid experts, that overall capacity to carry out foreign assistance programs is compromised due to underfunded and understaffed civilian aid agencies. All of the studies called for an increase in resources for civilian agencies involved in foreign assistance, often as a means to effecting other reforms. Some of the studies focus on the steep decline in personnel, expertise, and capabilities of USAID in recent years, and the reliance on outsourcing stabilization and reconstruction program implementation through "megacontracts" with private contractors. They claim that increasing resources in USAID and other civilian agencies will increase expert institutional capability within government to meet foreign assistance challenges. Certain recommendations call for employment of so-called "smart power," which would make foreign assistance provided through civilian agencies central to national security strategy, requiring greater funding than is currently provided. Others cite the increasing role and authority of the Department of Defense in provision of foreign assistance, and contend that responsibility for such assistance should be returned to civilian agencies with enhanced capabilities. These recommendations focus on increasing capacity and capability in the civilian foreign assistance agencies through funding for personnel increases, training, and expertise attraction and retention; and investing in core foreign assistance competencies including management, resource planning (including one call for a new operations budgeting bureau within State), monitoring and evaluation, human resources, procurement, and emergency response. Improve Policy and Agency Coordination A majority of the studies argue that integration and coordination among foreign assistance actors within the U.S. government is essential to improving aid effectiveness. Some recommend policy and agency integration that would surpass the limited coordination of foreign assistance under the F process. Other studies, however, focus on integration between the State Department and USAID, the two primary actors currently participating in the F process. Certain studies recommend in addition that agencies involved in foreign assistance align their policy and programs with foreign trade, investment, technical assistance, debt relief, financial stabilization, and economic sanctions policy to create a seamless web of engagement with foreign countries that prevents U.S. government actors from implementing individual foreign assistance programs in isolation. Specially reserved funding structures requiring interagency cooperation prior to disbursement could incentivize such integration, some of the studies argue. Other studies focus specifically on foreign assistance related to security. These studies recommend maintaining civilian leadership for foreign assistance in the face of increased DOD involvement in aid delivery through establishing a defined, limited role for DOD foreign assistance activities; increasing State Department capacity for stabilization and reconstruction assistance; and integrating security assistance strategy government-wide. In addition to recommendations for better coordination of foreign assistance, policies and activities, many studies call for coordination among foreign assistance, trade, foreign investment, debt relief, financial stabilization, and economic sanctions policies in order to stop different agencies implementing strategies that work at cross-purposes, hindering the effectiveness of U.S. international development efforts. Lael Brainard of the Brookings Institution has testified before the Subcommittee on State, Foreign Operations, and Related Programs of the House Appropriations Committee that "[t]he United States could wield greater influence per aid dollar spent than any other nation simply by deploying its influence in trade, investment, debt, and financial policies in a deliberate manner as a force multiplier." Increase Input from the Field, Rather than in Washington There are concerns in the foreign aid community about the degree of interaction between policymakers in Washington and those implementing foreign aid programs in the field, as well as the level of feedback from the field in forming foreign aid policy. Four of the studies recommend increased input from the field concerning foreign assistance, arguing that policy formulation under the F process is centered too much in Washington. One study calls for creating a systematic, routinized structure of engagement between Washington and foreign assistance actors in the field. This structure would be based in the regional bureaus and country desks within the State Department, which would increase their foreign aid programming and budgeting expertise in order to properly evaluate and set aid priorities from reports and requests from the field. Create a Unified Budget Currently, budgeting for foreign assistance primarily resides in the foreign affairs and defense budgets (and possibly in other appropriations), and budget determinations for foreign aid are not unified across the government. Three studies call for changes to budgets the President presents to Congress regarding foreign assistance funding requests. One calls for unifying all foreign assistance spending across government agencies and assistance types, including economic, development, humanitarian, security, and military assistance. A comprehensive foreign assistance budget would disburse funds solely from the current foreign assistance accounts administered by the State Department. Another recommendation suggests creating an overall national security budget to parallel a more comprehensive national security strategy. This national security budget would integrate diplomacy, economic policy, defense, development, and intelligence spending to encourage a smart power approach to U.S. national security. Provide Greater Emphasis on Needs-Driven Aid Many observers criticize the current system of aid funding because it is based on restrictive funding categories that limit long-term development programs for developing countries. Instead of providing aid based on short-term political objectives, which results in a disproportionate percentage of aid being allocated to middle-income countries, aid recipient country needs should drive aid allocation, a majority of studies say. Many of these recommendations would place greater reliance on the unique circumstances of each country receiving aid. Assistance, they argue, should be tailored to fit the individual needs of each country, whether they be humanitarian- or development-based, short-term or long-term, in stable situations or in latent- or post-conflict situations. Levels of aid could also depend not only on needs but also on the commitment level to development that the recipient country has shown. In addition, direct aid to recipient governments should be increased when they show their ability to implement transparent, credible development strategies. Certain studies stress the importance of close, consistent coordination with the recipient country to ensure that the United States is providing the most effective combination of assistance to meet recipient country needs and also encourage local ownership of aid plus any ensuing benefits toward recipient country development. Provide Multiyear Aid Funding Congress currently approves foreign assistance budgets on a year-to-year basis and, during the George W. Bush Administration, through emergency supplemental appropriations. Four of the studies call for multiyear budgeting for foreign assistance that supports long-range strategic foreign assistance goals. Longer-term budgeting, some argue, would bring several benefits: it would ensure that an administration would define resource requirements for foreign assistance and align them with strategy and policy; it would provide aid predictability to both U.S. foreign assistance agencies and recipient countries; and it would balance long-term aid provided to countries in need of development with aid to countries with immediate humanitarian needs. One study suggests that this long-range budgeting process should be mandated by the President, and executed by the Director of Foreign Assistance at the State Department through the F process, in cooperation with the National Security Council and the Office of Management and Budget. Another calls for such multiyear budgeting to reside within a formal quadrennial foreign assistance review, which would encourage improvement of foreign assistance strategy with long-range budgeting as a key component. In general, these four studies argue that long-range aid budgeting would improve the effective allocation of U.S. foreign assistance and, hence, the likelihood of reaching overall U.S. strategic goals. Balance Long-Term Aid Against Short-Term Aid Observers of U.S. foreign assistance have described an overemphasis on short-term assistance goals that detracts from the ability of the U.S. government to undertake and sustain effective long-term development programs. Several of the studies identify balancing short-term and long-term aid as a priority in their calls for U.S. foreign aid reform. They assert that the short-term nature of national security and foreign policy imperatives, the central purviews of the Department of Defense and the Department of State, respectively, overwhelm and subsume the government's long-term development goals. Recent reliance on narrow aid initiatives, such as programs targeting HIV/AIDS, while high-profile and measurable, arguably detract from development objectives designed to bring permanent benefits to foreign societies. To remedy the problem, one study claims, the Economic Support Fund (ESF) account should be used exclusively for funding immediate economic needs, and remain separate from the Development Assistance (DA) account, whose funding for longer-horizon development programs should be isolated and protected. Different studies call for various approaches to balancing short-term and long-term aid. The 2005 OECD report, Development Assistance Committee Peer Review of the United States , argues that the U.S. government should increase long-term development aid to stable countries to counterbalance the increase in humanitarian and other short-term assistance to crisis countries. J. Brian Atwood, M. Peter McPherson, and Andrew Natsios, in an article entitled "Arrested Development, Making Foreign Aid a More Effective Tool," call as well for a balance of short-term assistance and development assistance within individual country aid plans, to address immediate needs whilst building the capacity of such countries to sustain themselves. Increase Participation in Multilateral Foreign Assistance Efforts A report from the OECD in 2005, Development Assistance Committee Peer Review of the United States , explains that the U.S. official development assistance (ODA) to multilateral organizations had fallen significantly as a percentage of total U.S. ODA. Two studies recommend an increase in funding for, and participation in, multilateral institutions that provide foreign assistance, and call for multilateral forms of aid to rise in priority within U.S. foreign assistance strategy. These studies claim the United States is missing a prime opportunity to shape global foreign assistance activities and strategies, as it wields more influence than any other country in multilateral institutions, and encourages greater aid contributions from other countries through its participation in such institutions. They state that the United States can better leverage the effectiveness of its foreign assistance funds by utilizing existing aid delivery and system capacity possessed by multilateral organizations and by pooling funds with other donor nations. One study suggests that increased U.S. participation in multilateral aid organizations would reduce the burden on recipient countries of meeting different aid eligibility requirements by reducing the number of donors. Monitor Aid Impact Many foreign aid experts view the U.S. government evaluation of the effectiveness of foreign aid programs to be inadequate. Eight of the reports call for better monitoring and evaluation of U.S. foreign assistance. These authors argue that assessment of foreign assistance should be based not on outputs, but on measurable impact affecting strategic goals and aid recipients. They recommend that any new system of assessment should be comprehensive and unified across foreign assistance programs and agencies to provide a results-based evaluation of the connection between strategic aid goals and aid funding. Two studies suggest adopting international standards evaluating aid, including those of the International Initiative for Impact Evaluation and the Paris Declaration on Aid Effectiveness. Others suggest involving Congress specifically in the evaluation process, by linking benchmarks and metrics measuring programs' recent effectiveness to subsequent budget requests in the case of security assistance, and by requiring biennial strategic planning and annual state-of-affairs reports to Congress concerning humanitarian aid. One report calls for increased assessment training for USAID and State Department personnel. Address Role of Congress in Foreign Aid Policy Congress's role in foreign aid is exercised primarily through the power of the purse. Half of the 14 studies recommend increasing the role of Congress in U.S. foreign assistance decision making. In general, these studies call for a more robust role for Congress through a renewed relationship with the executive branch on foreign assistance issues, increased oversight powers in exchange for greater flexibility for the executive branch, and consistent, sustained involvement in guiding foreign assistance strategies and spending. Recommendations include resuming the passage of annual foreign assistance authorization legislation, with new foreign assistance appropriations tied directly to current authorizations, abolishing restrictive agency operating accounts, restoring a presidential foreign aid contingency fund, and improving efficiency and accountability of reprogramming for foreign aid funds. Some studies recommend greater oversight through requiring comprehensive cross-agency foreign assistance budgets to be submitted to Congress, as well as through creating congressional select committees on national security, with membership from all committees involved in foreign assistance, to promote an all-inclusive assessment of foreign assistance programs. Others call for establishing new permanent funds for humanitarian aid and for aid in response to sudden crises. Conclusions Most development and foreign policy experts view U.S. foreign assistance as a valuable activity that addresses many important policy goals, including alleviating poverty and hunger overseas, acquiring a sense of self-worth by the American people, attaining a favorable image around the world, and promoting broader U.S. foreign policy and national security goals. While the 14 studies surveyed by CRS emphasize different aspects of the importance of U.S. foreign assistance, all agree that foreign assistance must be reformed to improve its effectiveness. Only one of the recommendation categories—enhancing civilian agency resources—has the support of all of the studies covered in this report. The next two most-often cited recommendations are (1) raising development to equal status with diplomacy and defense; and (2) increasing the emphasis of U.S. foreign aid to be more needs-based, with recipient governments taking ownership of both identifying needs and taking responsibility for using aid to meet them. While these 14 studies do not heavily dwell on DOD's growing role in U.S. foreign assistance, many of them refer to that issue, which some see as an undesirable "militarization of foreign aid." The role of Congress in foreign aid should expand, according to half of the studies reviewed. In addition to holding more foreign aid hearings, holding them earlier in the legislative process, and conducting greater oversight to encourage more effective coordination of policy and programming, some say Congress should become involved early in the budget process, negotiating with the executive branch on funding levels before the budget arrives on Capitol Hill early each year. Some of the recommendations can be carried out by the executive branch with little or no congressional involvement, such as establishing a national foreign aid strategy, building on the F process, emphasizing needs-based aid, and monitoring aid impact. Most, however, would require congressional action. For example, rewriting FAA, creating a cabinet-level department for foreign aid, enhancing resources to civilian agencies, creating a unified budget, and increasing multilateral aid, among other options, would all require legislation. Some of the recommendation costs could become burdensome, such as creating a cabinet-level department for foreign assistance. Others could have minimal costs, such as increasing field versus D.C. input; and some recommendations, such as creating a unified budget and improving agency coordination, could result in savings. Still other recommendations could encourage greater aid effectiveness, such as monitoring aid impact, balancing long-term versus short-term aid, increasing needs-driven aid and local ownership of aid programs, and multiyear funding. Since these studies were written for the purpose of making recommendations to reform U.S. foreign aid, it is not surprising that none of them recommend maintaining the status quo. The 111 th Congress is considering the wide array of foreign aid reform possibilities and will decide which path it thinks U.S. foreign aid should take. It should be noted, however, that given the current economic environment and budget constraints along with the numerous other major concerns, such as two wars, health care, energy policy, and global warming, some Members in the 111 th Congress may prefer a continuation of the existing foreign aid structure with minor modifications and increased or adjusted resources where possible. Appendix A. CRS Summaries of Reports Adams —Adams, Gordon, "Don't Reinvent the Foreign Assistance Wheel," Foreign Service Journal , March 2008. Mr. Adams, Distinguished Fellow with the Henry L. Stimson Center, writes that establishing the F bureau is good and should be built upon. Adams identifies some concerns about the F process, including that 1) regional desk officers are concerned that aid funding they hope for would go somewhere else; 2) embassies feel left out of the process and demand greater transparency; 3) USAID worries that development funds would migrate to different strategic purposes in the Department of State; 4) everyone feels F bureau's creation was rushed, the system is too top-down, and transparency is inadequate; and 5) the relevant committees in Congress believe that they were not consulted early on in the creation of the F bureau and have had to figure out how the new structure fit the budget accounts established by legislation. He critiques some recommendations of others. For example, he states that reviving and beefing up USAID would just take us back to those days when USAID and State bickered on a regular basis. One side doesn't understand development; the other side doesn't understand strategic purposes, he writes. In addition, a cabinet-level Department of Development would worsen the problem by elevating disputes about assistance to senior policymakers, with State and Defense likely to carry more weight—the new agency would further disperse the civilian tools of our overseas engagement, as more entities vie to have input on policy direction and control resources; and foreign aid programs that have no or only partial development component, such as Economic Support Funds (ESF), targeted assistance to the Former Soviet Union, counternarcotics programs, counterterrorism, HIV/AIDS prevention and treatment, and peacekeeping training. Furthermore, development assistance does not have the heft and popularity among constituents and U.S. taxpayers. The result of creating a separate department could be the exact opposite of the goal—a dwindling away of development assistance, rather that its growth, according to Adams. The author asserts that implementing no reform could lead us backward and lead, instead, to enhancing the role of the DOD in delivering foreign assistance. He says there is a need for more integrated, long-term strategic vision for our diplomacy and foreign assistance. His recommendations follow: The State Department's best option is to build on F; State and USAID need to focus on making the process work better by assigning personnel who think strategically to the Office of Civil and Foreign Service and giving them training in planning, budgeting, and program management and evaluation; There needs to be structured, systematic engagement between Washington and the field with regional bureaus and country desks exercising their skills in programming and budgeting to review requests and set priorities. This could include a pilot project; and State and USAID need to work with Congress before submitting budgets. The State Department needs to take further steps to: Make the Director of Foreign Assistance a second Deputy Secretary of State, conferring clout to the position. The authority to implement this already exists in law, Adams says, but the State Department has not acted on it; Transfer responsibility for operational budgeting to one who can be a Deputy Secretary of State for Operations. This move would give Congress better oversight and accountability, increasing its confidence and willingness for cooperation. (This responsibility is currently divided between the Under Secretary for Management and the Resource Management Bureau, which lost its assistance budget function when F was created); Begin a pilot project in long-range strategic planning and budgeting, looking out over five years or more and defining resource requirements connected to long-term strategic objectives, something the F bureau does not do now. The White House should mandate a foreign assistance strategic planning and budget planning process, based in F and connected to senior officials at the National Security Council (NSC) and the Office of Management and Budget (OMB); and Beef up the resource planning capabilities inside the regional bureaus so that each has a robust capability to interact with the F process. Such steps will help State become a more effective foreign relations department, one in which development, public diplomacy, and humanitarian assistance all have equal standing with political and strategic relations as tools with which to engage the world. AMN —Atwood, J. Brian, M. Peter McPherson, and Andrew Natsios. "Arrested Development, Making Foreign Aid a More Effective Tool." Foreign Affairs , Vol. 87, no. 6 (November/December 2008), pp. 123-132. This journal article by three former USAID Administrators argues that while U.S. foreign aid has increased from $10 billion in 2000 to $22 billion in 2008, the organizational structure and statutes governing U.S. foreign aid policy have become "chaotic and incoherent due to 20 years of neglect." The article emphasizes the need to either create a cabinet-level agency for U.S. foreign aid or restore USAID's autonomy. Either measure would afford greater stature to the U.S. foreign assistance structure in order to influence U.S. trade, investment, and environmental policy, and budgetary independence. Woven throughout, the article suggests: possibly using the provisions of the Millennium Challenge Act of 2003 as a basis for broader aid eligibility provisions, and rewriting the Foreign Assistance Act of 1961, as it is a "Cold War artifact that has become obsolete"; there is value in having development raised to the level of defense and diplomacy, which the Bush Administration did theoretically, but not in practice; creating a cabinet-level agency for development or recreating such stature in USAID, via increased authority and resources; giving USAID the authority to devise overall strategy on humanitarian and development assistance and coordinate activities of other agencies; increasing field office input rather than centralizing aid programs in Washington will improve effectiveness of aid programs; customizing aid to the recipient countries to improve potential for success; preventing funding of narrow, short-term aid programs at the expense of long-term development aid; and increasing Congress's role to include a mandate to establish a new USAID, make the executive branch accountable for results, and provide a new framework for legislators to earmark funds for specific purposes. BRK —Brookings Institution, Foreign Assistance: Reinventing Aid for the 21 st Century , Testimony by Lael Brainard, Senior Fellow and Vice President and Director, Global Economy and Development, before the House Subcommittee on State, Foreign Operations, and Related Programs, January 23, 2008. Ms. Brainard's testimony states that U.S. foreign aid is a critical tool for not only helping the world's poor, but also promoting U.S. national security, interests, and values. The witness describes the outdated aid infrastructure and how it is based on Cold War thinking. The more than "fifty separate units sharing responsibility for aid planning and delivery in the executive branch, fifty objectives, along with poor communication and coordination," Ms. Brainard argues, produce inefficiencies, overlap, and result in units working at cross-purposes. The witness provides the following recommendations to reform U.S. foreign aid and concludes that conditions are favorable now for fundamental aid reform. elevate the development mission; invest in civilian capabilities; support country ownership; achieve coherence across policies (similar to that of U.K.'s cabinet-level Department for International Development); reduce the number of agencies involved in foreign aid and clarify the remaining agencies' missions; create a cabinet-level voice for development (merging USAID into State would subordinate development to diplomacy). She also asserts that Congress has an integral role to play in holding hearings, mandating independent analysis of current operations, and seeking expert input on alternative organizational structures. BRK-CSIS— Brookings-CSIS Task Force. Security by Other Means: Foreign Assistance, Global Poverty, and American Leadership edited by Lael Brainard, 2007. Security by Other Means contains 11 chapters that together provide an overall review of the current state and the history of U.S. foreign assistance from multiple authors and through several different analytical approaches. Chapter topics include organizing and unifying U.S. foreign assistance efforts, strengthening development assistance, examining humanitarian and HIV/AIDS assistance and the U.S. assistance role, providing assistance in areas of current or potential conflict, analyzing security and strategic assistance, creating a more effective congressional-executive relationship for U.S. foreign assistance, and providing historical analysis of previous U.S. attempts at foreign aid reform, as well as the experience of reform in the United Kingdom. The book closes with a chapter containing conclusions and recommendations. The chapter states that U.S. hard power assets are currently stretched thin, requiring the use of soft power and foreign assistance to meet the security challenges facing the country. The foreign assistance structure, however, lacks effectiveness due to fragmentation and incoherence, according to the author, despite massive increases in overall foreign assistance funding largely due to the wars and reconstruction in Iraq and Afghanistan. In this last chapter, the Brookings-CSIS Task Force makes several recommendations to create a unified framework for U.S. foreign assistance and to organize it for effectiveness. It first calls for a unified framework that combines two concepts of foreign assistance across pertinent government actors, policy, and aid delivery: (1) a soft power tool to meet diplomatic and strategic ends, and (2) a development tool allocated according to policy effectiveness and human needs. This framework would integrate different types of assistance—including aid to deal with security threats, development goals, humanitarian needs, and transnational threats such as the global HIV/AIDS epidemic—to ensure that they are not implemented in isolation, but are provided as a coherent whole, tailored to the needs and objectives in each recipient country. Necessary support for repressive regimes in order to combat security threats would be integrated within a comprehensive country assistance package that also addresses economic and political issues. Foreign assistance policy and programs would be carried out through coordinated interagency action, with a fully funded and operational Office of the Coordinator for Stability and Reconstruction, and an engaged National Security Council, leading the multi-agency effort. Under the framework, Congress would integrate its committees that deal with the armed forces and foreign aid through joint hearings and other vehicles to allow for coherent policy and funding. It would also extend oversight over foreign assistance programs in exchange for greater flexibility for State, DOD, and USAID to adapt aid to changing conditions in the field. The book next provides recommendations for improving effectiveness of U.S. foreign assistance through better governmental organization of foreign assistance agencies and authorities, and an effective executive branch relationship with Congress. The final chapter identifies six central challenges to organizing foreign assistance within the executive branch: Proliferation of stand-alone initiatives and foreign aid authority resting with over 50 separate government units requires rationalization of agencies, improved coordination, and mission clarification. Restructuring program design must be driven by objectives and needs, not restrictive funding categories. The United States must speak with one voice on foreign aid. Government must incentivize interagency cooperation and create a seamless web of foreign assistance, trade and investment, technical assistance, debt relief, and financial stabilization for coherence across all policies affecting poor countries. The United States must invest in core foreign assistance competencies, including infrastructure and stabilization and reconstruction, rather than relying on megacontracts with private companies that fail to draw on institutional knowledge and experience. The United States must truly elevate development alongside defense and diplomacy. This chapter lays out four possible options for reorganizing U.S. foreign assistance: improving coordination while retaining decentralization, positioning USAID as an implementing arm of the State Department, merging USAID into State, or creating a new department for global development. This chapter recommends: Creating a new department, as it is the only solution that can meet all the challenges identified for aid reform, the Task Force argues. Congress pass annual foreign assistance authorization legislation instead of relying on narrow earmarks, and tie detailed, transparent appropriations to authorizations or recommendations from authorizing committees. Increasing flexibility for the use of appropriated funds, by abolishing restrictive operating accounts, restoring a small presidential contingency fund, and rationalizing the funds reprogramming process to make it accountable and efficient. CGD— Center for Global Development. Modernizing Foreign Assistance for the 21 st Century: An Agenda for the Next U.S. President . March 2008. This article by the Center for Global Development, a think-tank established in 2001 with a mission to reduce global poverty and inequality, states that the world has undergone significant changes since the post-World War II era, when modern foreign assistance programs first emerged as a foreign policy tool. It says that while the George W. Bush Administration took several steps toward increasing foreign assistance funding and establishing new programs, such as the President's Emergency Plan for AIDS Relief (PEPFAR) and the Millennium Challenge Account (MCA), these changes are not enough. The author recommends that the next President: Develop a national foreign assistance strategy that elevates global development as critical to our national interest and lays out the principal missions and mandates for foreign assistance; Reform the organizational structure by merging most foreign assistance programs and related development policy instruments into a new cabinet-level department and strengthen the organization by expanding and deepening the professional staff, revamping delivery mechanisms, and building a serious monitoring and evaluation system; Rewrite the Foreign Assistance Act of 1961 to streamline procurement rules, earmarks, and restrictions, and to re-establish a strong partnership between the executive branch and Congress that allows greater flexibility to executive aid agencies provided there is greater accountability and responsiveness to Congress; Place a higher priority on multilateral channels of assistance; and Increase the quantity and improve the allocation of assistance, because, even with recent increases, U.S. foreign assistance is not great enough or unencumbered enough to meet our foreign policy goals. The article goes on to assert that U.S. foreign assistance can be strengthened by improving the allocation of funding. The study says that typically 44% of U.S. foreign assistance goes to just six countries, all allies in the war on terror or the war on drugs. The other 56% of U.S. foreign aid goes to nearly 100 other countries, according to the author. "One of the most striking patterns is that the United States provides 40% of its assistance to middle-income countries and just 34% to low-income countries. On average other donors do the reverse.... " CGE— Center for U.S. Global Engagement. Smart Power: Building a Better, Safer World—A Policy Framework for Presidential Candidates . July 2007. This policy framework, intended for presidential candidates, asserts that the United States must work to build a "better, safer world" because U.S. national security, economic growth, and moral leadership are directly tied to conditions in developing countries and countries in crisis. The United States must employ an integrated, "smart power" approach that would include all the tools of statecraft, including diplomacy, development, economic policy, defense, and intelligence capabilities. CGE explains that the United States first must invest in the smart power approach, which foremost involves increasing diplomacy and foreign assistance capacity and resources. It asserts that current smaller investments in diplomacy and foreign assistance have already yielded important benefits, and that with increased resources and capabilities these benefits would grow. The smart power framework proposes that the United States use an improved diplomatic capacity to develop more highly integrated relationships with other countries and institutions to effectively meet challenges of development and security, while at the same time placing the United States in a strong position of leadership on these issues. Cultural and exchange programs, as well as the Peace Corps, should be expanded, and cooperation with non-governmental organizations (NGOs), universities, and the private sector should be strengthened. CGE recommends that the Administration: reorganize national foreign policy that currently is not integrated, and the pieces of which often either act at cross purposes or duplicate work; authorize the President to develop a national security strategy that integrates diplomacy, development, economic policy, defense, and intelligence capabilities. An overall national security budget should reflect this new integration in yearly appropriations requests; elevate development to the level of defense and diplomacy in policy priority, and create a coherent foreign assistance strategy under the control of a new cabinet-level department, or other unifying innovation; create a flexible and agile diplomatic and foreign assistance corps that possesses the language, technical, cultural, and managerial skills needed to implement programs and build alliances effectively in the field; restructure the Foreign Service to align and cooperate better with regional military commands; increase foreign assistance funding to address stability in latent- and post-conflict states and other concerns, including health, education, and democracy-building; streamline the foreign assistance bureaucracy to make it flexible and able to meet challenges and crises as they arise; amendments to the Foreign Assistance Act should be made to implement this goal; align trade and agricultural subsidy policies with foreign assistance strategies to avoid conflicts and inefficiencies; and institute a quadrennial foreign assistance strategy review to articulate objectives and align them with budgets. CSIS —Center for Strategic and International Studies. Integrating 21 st Century Development and Security Assistance . January 2008. This final report of the CSIS Task Force on Nontraditional Security Assistance analyzes recent increased Department of Defense involvement in the provision of foreign assistance, specifically nontraditional security assistance including counter-terrorism capacity building, post-conflict reconstruction and stabilization, and humanitarian assistance. The Task Force discusses DOD's authority to provide foreign assistance, and the role of the new United States Africa Command (AFRICOM) in providing an opportunity for a new approach to the military's role in foreign assistance. The report finds primarily that DOD's involvement in nontraditional security assistance has skyrocketed while the Department of State's and USAID's abilities to provide foreign assistance have eroded. The Task Force recommends: An overall strategy—that DOD continue to provide assistance for short-term contingency situations, but that an overall cross-agency strategy for security assistance be led by the State Department (namely, a fully-funded Coordinator for Reconstruction and Stabilization in the Office of the Secretary of State (S/CRS)) with the DOD role clearly defined and closely integrated into this overall strategy; Increased funding—as part of the overall strategy, State and USAID capabilities would be built up through increased funding to restore a balance among DOD, the State Department, and USAID; and Transparent plans and budgeting—providing cross-agency security assistance plans to Congress in order to ensure effective oversight and development of efficient budgeting models for comprehensive assistance funding, as well as benchmarks and metrics for assessment of assistance programs. HELP— The HELP Commission Report on Foreign Assistance Reform , Beyond Assistance , December 7, 2007. This bipartisan, congressionally mandated commission interviewed many of the world's foremost experts on foreign assistance. "Not one person appeared before this Commission to defend the status quo," according to the report. The Commission states that it is in America's best interest to provide foreign aid, but it says the U.S. foreign assistance system is broken. Along with emphasizing long-term development as a valuable objective, the HELP Commission recommends: Congress and the White House should work together to rewrite the Foreign Assistance Act of 1961, reflecting new development goals and programs and aligning it with the post-9/11 world; More assistance targeted to private sectors in developing countries, because business should be the engine of growth in the developing world; A new business model to engage new non-governmental partners—U.S. foreign aid should be conducted in concert with local private or public partners that are committed to development; Alignment of America's trade and development policies, which often conflict. For example, countries that are eligible for Millennium Challenge Corporation funding often pay more in tariffs than they receive in aid; Strengthened management capacity of U.S. assistance agencies. The United States should improve monitoring and evaluation, human resources, and procurement and contracting capabilities of agencies involved with foreign aid to improve the effectiveness of taxpayer dollars. Also, while the workload of foreign aid agencies has gone up, the staff has been cut, which hurts effectiveness of the programs; Reorganization of all U.S. international affairs functions to elevate foreign aid and development to equal status with defense and diplomacy. A new department would include USAID and all other U.S. development agencies, or a newly reorganized Department of State could include USAID; and Funding from the bottom up, based on the needs and commitment of developing countries and on the national and security interests of the United States. To support its key findings, the Commission also urges: forging a new executive/legislative branch relationship acknowledging the need for flexibility and accountability; bolstering humanitarian efforts and establishing a $500 million humanitarian fund as a permanent facility; creating a permanent $500 million foreign crisis fund; simplifying the funding account structure for more clearly defined responsibility and authority; clarifying DOD's role in development assistance; using public diplomacy and branding more effectively; and emphasizing the importance of local infrastructure and agriculture. InterAction — Why the U.S. Needs a Cabinet-level Department for Global and Human Development , InterAction Policy Paper, June 2008. This policy paper discusses the haphazard evolution of U.S. foreign assistance and asserts that nearly five decades after the beginning of modern U.S. foreign aid, it is badly broken and needs to be repaired. Within the context of its primary recommendation to create a Cabinet-level Department for Global and Human Development that would elevate development to the level of defense and diplomacy, the report weaves other recommendations in, such as: emphasis on collaboration and cooperation, both with the recipient country, but also among other U.S. government foreign aid agencies and programs; achievement of long-term objectives, which should not be sidetracked for short-term political agendas; a rewriting of the Foreign Assistance Act of 1961 to re-emphasize poverty reduction; promotion of local self-sufficiency by providing needs-based aid and building local capacity; and an increase in recruiting and training human resources to meet shortages, particularly in USAID. OECD— Organization for Economic Co-Operation and Development. Development Assistance Committee Peer Review of the United States . December 2006. This OECD report provides an overview of U.S. foreign assistance, noting new initiatives such as the "3D" concept for U.S. foreign policy, Transformational Diplomacy at the State Department, the new Director of Foreign Assistance (DFA) position and Foreign Assistance Framework (FAF), and the growing role of the Defense Department in providing foreign aid. The report commends U.S. increases in overall official development assistance (ODA) and the U.S. status as the largest donor of official humanitarian assistance. The report notes the increase in ODA, however, has been concentrated in assistance to Iraq and Afghanistan, and does not represent growing predictability in U.S. aid. The OECD Development Assistance Committee (DAC) also finds deficiencies in many areas of the U.S. foreign assistance framework and strategy, including continuing organizational fragmentation and a lack of development policy coherence, as well as underutilization of multilateral avenues for delivery of assistance and coordination of development efforts. A reduction in the prominence of USAID in the provision of ODA, the diminishing importance of funding for economic development, and insufficient reliance upon results-based monitoring also figure among the report's concerns. With regard to the role of Congress, the report criticizes the current legislative web of earmarks and other directives, such as requiring use of U.S. products and services for aid (so-called "tied aid"), which reduce assistance flexibility and the ability to cooperate with multilateral institutions and international assistance partners. The DAC recommends several steps to improve U.S. foreign assistance overall: raise development to an equal level with diplomacy and defense within U.S. foreign policy; broaden the Foreign Assistance Framework and the role of the DFA to oversee all government development actors, and improve public awareness of the importance of development programs; improve U.S. aid volume and distribution efforts by creating a long-term plan for ODA creating predictability and strategic allocation; balance aid for crisis countries and countries requiring long-term development assistance; play a stronger role in the multilateral assistance sphere; adopt a long-term plan for humanitarian assistance, increasing coherence in humanitarian aid policy, reforming food aid, and integrating humanitarian aid with longer-term development activities; and adopt a unified, results-based management approach, based on principles of the Paris Declaration on Aid Effectiveness for improved aid effectiveness. Oxfam —Oxfam America, Smart Development, Why U.S. foreign aid demands major reform, February 2008. This report asserts that reform is necessary for two primary reasons. First, as development has become part of U.S. national security strategy, it has been increasingly integrated under military control in order to achieve short-term political and security goals. Short-term policy interests often are at the expense of longer-term development of the recipient country. Second, revamping U.S. foreign aid to strengthen recipient states and empower their citizens to free themselves from poverty and injustice will, in turn, make America safer. "A more prosperous world with effective states accountable to their citizens is likely to be safer." The report discusses "the securitization of aid" saying, "The new U.S. Army/Marine Corps Counterinsurgency Field Manual argues for a radical shift in strategy where the primary objective of any counterinsurgency operation 'is to foster development of effective governance by a legitimate government.'" The report discusses the increasingly military organization of aid, such as AFRICOM, and the heightened emphasis on security assistance in the budget, reflecting the increasing imbalance between short-term security and long-term development goals. The study recommends the following reform actions: prioritize development as a principal, rather than subordinate, element of our national security alongside defense and diplomacy; enact a new Foreign Assistance Act; create a new Department of Foreign Assistance; create a national development strategy; rebuild USAID or create a new foreign aid agency; increase nonproject aid to developing country governments that have credible and transparent and coherent development strategies; allow for multiyear U.S. foreign aid commitments so countries can make plans for future; and untie U.S. foreign aid. SFRC1 —Senate Foreign Relations Committee, Embassies as Command Posts in the Anti-terror Campaign, December 15, 2006. Points made in this committee report include: Among other measures to strengthen U.S. Embassies around the world, this report recommends that Ambassadors should be charged with the decision whether to approve all humanitarian and development assistance, and other related programs, as well as all military-related programs implemented in-country, including assistance provided under the enlarged authority in Section 1206 of the National Defense Authorization Act for Fiscal Year 2006 ( P.L. 109-163 ) for DOD to provide security assistance. Some countries receive between a quarter and half of their U.S. assistance in the form of security assistance, and Section 1206 does not address immediate threats to the United States that cannot be included in the normal budget process. Therefore, the Secretary of State should insist that all security assistance, including Section 1206 funding, be included under the Secretary of State's authority in the new process for rationalizing and prioritizing foreign assistance. Country team meetings organized by the Director of Foreign Assistance should include military representatives in cases where the country is a recipient or potential recipient of military funding in order to get the civilian/military balance. Congress should fund the civilian foreign affairs agencies (DOS and USAID, in particular) at a minimum to the level requested by the President. The current 12:1 ratio of military to civilian foreign aid agencies risks the further encroachment of the military into areas where civilian leadership is more experienced. The Administration should develop a comprehensive budget for foreign assistance that incorporates economic, development, humanitarian, security and military assistance. All foreign assistance programs should be funded through the foreign assistance accounts, as administered by the Department of State. The Secretary of State should retain primary authority over its planning and implementation of both Function 150 and Function 050 assistance. SFRC2 —Senate Foreign Relations Committee, Embassies Grapple to Guide Foreign Aid , November 16, 2007. This report finds that the United States has failed as a government to agree on the importance or strategy of U.S. foreign assistance. It claims that overall agreement on foreign assistance between Washington and overseas posts is lacking, and field complaints on the F process center on a lack of transparency, extra paperwork, differing priorities, and inconsistent demands with an underlying problem about money. Despite these concerns, embassy officials believe they are coping well and welcome new programs that bring additional funding to the host country. The report recommends: The President should design a national foreign assistance strategy that explains both the national security requirement and the humanitarian imperative that drive the U.S. government's investment in foreign aid; The President should task the Secretary of State to work closely with the Administrator of USAID to implement the President's foreign assistance strategy, giving the Secretary of State explicit authority to ensure that all foreign aid is in the foreign policy interest of the United States; The Secretary of State, working with the USAID Administrator, should garner the foreign assistance funds necessary to carry out the President's strategy; The Secretary of State should provide strategic direction, transparency, and overall accountability to foreign assistance. The report states that her efforts to do so through the "F" process have been flawed in implementation; USAID should be recognized for the indispensable role it plays in the effectiveness of U.S. development policy and should be strengthened and given resources to attract the world's best development experts; Ambassadors should take responsibility for the implementation of the President's foreign aid strategy, making certain that assistance is balanced and spent effectively in coordination with the host country and other donors; The President should continue to request and Congress should continue to provide funding for security assistance in the foreign affairs budget with some implementation by DOD; foreign assistance functions and authorities should not be migrated to DOD due to inadequate budget requests for funding in the proper account; and Congress should play an important role in ensuring that foreign aid is well spent. State —Department of State, Advisory Committee on Transformational Diplomacy: Final Report of the State Department in the 2025 Working Group , January 28, 2008. The State 2025 Working Group expects that the world will radically change in the coming years and will require U.S. overseas presence, skilled personnel, knowledge, and policy insights as never before from the Department of State. The scale and complexity of anticipated global challenges and opportunities will demand a Department that is significantly more robust, better resourced, and more strategically focused. Among the 10 recommendations in the report, those regarding U.S. foreign aid include: The State Department should work with the USAID and other U.S. government agencies, other nations, and multilateral organizations. Specifically, it should integrate planning offices and technology infrastructures of State and USAID, merge overlapping bureaus and functions, and co-locate related offices and personnel in Washington, D.C. to bring strategies and operations into alignment. Further, State should establish a senior-level responsibility and interagency authority for reconstruction and stabilization activities and fully develop State's planning and execution capacities in these areas. Both State and USAID should expand U.S. global presence, critical training and rotations, and improve their capacity to deploy integrated teams on short notice for short-term assignments. Specifically, among other things, the report recommends increasing the number of State's Foreign Service and Civil Service staff by 100% over 10 years, and increasing USAID's deployable staff resources by 100% in 3 years. Appendix B. Bibliography (Adams) Adams, Gordon, "Don't Reinvent the Foreign Assistance Wheel." Foreign Service Journal , vol. 85, no. 3 (March 2008), pp. 41-50. (AMN) Atwood, J. Brian, M. Peter McPherson, and Andrew Natsios. "Arrested Development, Making Foreign Aid a More Effective Tool." Foreign Affairs , vol. 87, no. 6 (November/December 2008), pp. 123-132. (BRK) Witness statement of Lael Brainard, Brookings Institution. U.S. Congress. House. Committee on Appropriations. Subcommittee on State, Foreign Operations, and Related Programs. Hearing on Foreign Aid Reform . 110 th Congress, 2 nd session, January 23, 2008. At http://www.cq.com/display.do?dockey=/cqonline/prod/data/docs/html/testimonychild/110/testimonychild110-000002661004.html@allchild&metapub=CQ-TESTIMONYCHILD&searchIndex=1&seqNum=4 . (BRK-CSIS) Brainard, Lael, ed. Security by Other Means: Foreign Assistance, Global Poverty, and American Leadership . Washington: Brookings Institution Press and Center for Security and International Studies, 2006. (CGD) Center for Global Development. Modernizing Foreign Assistance for the 21 st Century: An Agenda for the Next U.S. President . March 2008. At http://www.cgdev.org/content/publications/detail/15561/ . (CGE) Center for U.S. Global Engagement. Smart Power: Building a Better, Safer World—A Policy Framework for Presidential Candidates . July 2007. At http://www.usglobalengagement.org/portals/16/ftp/Center_for_US_Global_Engagement_Policy%20Framework.pdf . (CSIS) Center for Strategic and International Studies. Integrating 21 st Century Development and Security Assistance . January 2008. At http://www.csis.org/media/csis/pubs/080118-andrews-integrating21stcentury.pdf . (HELP) United States Commission on Helping to Enhance the Livelihood of People Around the Globe. Beyond Assistance: the HELP Commission Report on Foreign Assistance Reform . December 7, 2007. At http://www.helpcommission.gov/portals/0/Beyond%20Assistance_HELP_Commission_Report.pdf . (InterAction) American Council for Voluntary International Action (InterAction). Why the U.S. Needs a Cabinet-level Department for Global and Human Development . InterAction Policy Paper. June 2008. At http://www.interaction.org/files.cgi/6305_Cabinet-level_rationale_paper.pdf . (OECD) Organization for Economic Co-Operation and Development. Development Assistance Committee Peer Review of the United States . December 2006. At http://www.oecd.org/dataoecd/61/57/37885999.pdf . (Oxfam) Oxfam America. Smart Development, Why U.S. foreign aid demands major reform . February 2008. At http://www.oxfamamerica.orgnewsandpublications/publications/briefing_papers/smart-development/smart-development-may2008.pdf . (SFRC1) U.S. Congress. Senate. Committee on Foreign Relations. Embassies as Command Posts in the Anti-terror Campaign . Committee print. 109 th Congress, 2 nd session, December 15, 2006. S.Prt. 109-52. Washington: GPO, 2006. (SFRC2) U.S. Congress. Senate. Committee on Foreign Relations. Embassies Grapple to Guide Foreign Aid . Committee print. 110 th Congress, 1 st session, November 16, 2007. S.Prt. 110-33. Washington: GPO, 2007. (State) Department of State, Advisory Committee on Transformational Diplomacy: Final Report of the State Department in the 2025 Working Group , January 28, 2008. At http://www.state.gov/documents/organization/99879.pdf .

Both the 111th Congress and the Obama Administration have expressed interest in foreign aid reform and are looking at ways to improve and strengthen the U.S. Agency for International Development (USAID), coordination among implementing agencies, and monitoring effectiveness of aid activities. Legislation containing elements of reform includes H.R. 2410, the Foreign Relations Act for Fiscal Years 2010 and 2011; H.R. 2139, the Initiating Foreign Assistance Reform Act of 2009; and S. 1524, the Foreign Assistance Revitalization Accountability Act of 2009. Since the terrorist attacks of September 11, 2001, the role of foreign assistance as a tool of U.S. foreign policy has come into sharper focus. President George W. Bush elevated global development as a third pillar of national security, with defense and diplomacy, as articulated in the U.S. National Security Strategy of 2002, and reiterated in 2006. In January 2006, Secretary of State Rice announced the "transformational development" initiative to bring coordination and coherence to U.S. aid programs. She created a new Bureau of Foreign Assistance (F Bureau), led by the Director of Foreign Assistance (DFA), who also serves as Administrator of the U.S. Agency for International Development. F Bureau developed a Strategic Framework for Foreign Assistance (Framework, or F process) to align aid programs with strategic objectives. The Framework became a guiding force in the FY2008 and FY2009 budgets, as well as the FY2010 budget request. In recent years, numerous studies have addressed various concerns and provided recommendations regarding U.S. foreign aid policy, funding, and structure. Views range from general approval of the F process as a first step toward better coordination of aid programs and the need to build on it, to strong criticism of the creation of the F Bureau, its inadequacy in coordinating or reforming much of what is wrong with foreign aid, and the need to replace it with a cabinet-level department of foreign aid. While the 14 studies surveyed by the Congressional Research Service (CRS) emphasize different aspects of the importance of U.S. foreign assistance, all agree that foreign assistance must be reformed to improve its effectiveness. Of the 16 recommendation categories CRS identifies, only enhancing civilian agency resources has the support of all of the studies covered in this report. The next two most-often cited recommendations are raising development to equal status with diplomacy and defense, and increasing needs-based foreign aid, while encouraging recipient-government ownership of aid effectiveness. Half of the studies urge a greater congressional role in foreign aid budgeting and policy formulation. Because these studies were written for the purpose of reforming U.S. foreign aid, it is not surprising that none of them recommends maintaining the status quo. Given the current economic crisis and budget constraints along with other major concerns, such as health care, energy policy, and global warming, however, some Members of Congress may prefer a continuation of the existing foreign aid structure. This report is a review of selected studies written between 2001 and 2008. For related information on foreign aid and foreign affairs budgets, see CRS Report R40693, State, Foreign Operations, and Related Programs: FY2010 Budget and Appropriations, by [author name scrubbed], [author name scrubbed], and Marian Leonardo Lawson.

Introduction1 In May 2012, TransCanada (a Canadian company) submitted to the U.S. Department of State an application for a Presidential Permit authorizing construction and operation of pipeline facilities for the importation of crude oil at the U.S.-Canada border. The Keystone XL Pipeline would transport Canadian oil sands crude extracted in Alberta, Canada, and crude produced from the Bakken region in North Dakota and Montana to a market hub in Nebraska for further delivery to Gulf Coast refineries. A decision to issue the Presidential Permit would be conditioned on a State Department determination that the pipeline project would serve the national interest. Members of Congress remain divided on the merits of the project, as some have expressed support for the potential energy security and economic benefits, while others have reservations about its potential environmental impacts. There is also concern over how much crude oil, or petroleum products refined from Keystone XL crude, would be exported overseas. Though Congress, to date, has had no direct role in permitting the pipeline's construction, it has oversight stemming from federal environmental statutes that govern the review. Further, Congress may seek to influence the State Department's process or to assert direct congressional authority over approval through new legislation. This report describes the Keystone XL Pipeline Project and the process that the State Department must complete to decide whether it will approve or deny TransCanada's permit application. The report also discusses key energy security, economic, and environmental issues relevant to the State Department's national interest determination. Some of these issues include perspectives among various stakeholders both in favor of and opposed to the construction of the pipeline. Finally, the report discusses the constitutional basis for the State Department's authority to issue a Presidential Permit, and opponents' possible challenges to this authority. Description of the Keystone XL Pipeline In recent decades, the natural bitumen in oil sands, particularly deposits in Alberta, Canada, has been extracted to generate substantial quantities of crude oil. The Alberta deposits are estimated to be one of the largest accumulations of oil in the world, contributing to Canada's third-place ranking for estimated proven oil reserves (behind Venezuela and Saudi Arabia). In 2005, TransCanada announced a plan to address expected increases in Alberta oil production by constructing the Keystone Pipeline system. When complete, the system would transport crude oil from Alberta to U.S. markets in the Midwest and Gulf Coast. The pipeline system was proposed as two distinct phases—the Keystone Pipeline (now constructed and in service) and the Keystone XL Pipeline. The Keystone XL Pipeline Project would consist of 875 miles of 36-inch pipeline and associated facilities linking Hardisty, Alberta, to Steele City, NE. The pipeline would also include the Bakken Marketlink in Baker, MT—a pipeline lateral that could transport crude oil from the Bakken oil fields into Steele City (further discussed below). From Steele City, crude oil could be transported to the Gulf Coast via previously constructed TransCanada pipelines—the Cushing Extension and the Gulf Coast pipeline, both already operating ( Figure 1 ). Both the Keystone XL and Gulf Coast pipelines would ultimately have a capacity of 830,000 bpd. In 2012, TransCanada estimated the capital cost of the U.S. portion of the Keystone XL Project would be $5.3 billion. However, this figure has reportedly risen to $8 billion during the permit review. Currency swings, changing regulatory requirements, the cost of materials, and legal expenses could be factors contributing to the increase in project cost. Marketlink for Bakken Oil Production7 The Bakken Formation is a large shale oil and natural gas resource underlying parts of North Dakota, Montana, and the Canadian provinces of Saskatchewan and Manitoba. Although the region has been producing oil since 1951, it is only since 2006 that prices and technology (e.g., hydraulic fracturing and directional drilling) have made it economic for industry to increase production. In March 2012, Bakken production exceeded 500,000 bpd the first time and continues to increase steadily. Average daily output in August 2014 exceeded 1,100,000 bpd. To date, infrastructure to transport oil produced from the Bakken Formation has not kept up with the increased production. Bakken crude oil is transported to refineries by rail and truck, in addition to more economical transport by pipeline. As stated earlier, the proposed Keystone XL Project would include a lateral pipeline, the Bakken Marketlink, to provide crude oil transportation service ultimately to Texas via the Gulf Coast Pipeline. Up to 12% of the Keystone XL Pipeline's capacity has been set aside to transport Bakken crude. The Bakken transportation contracts improve the economics for the Keystone XL Pipeline, raising the amount of oil slated to flow through the pipeline. Lower transportation costs and access to new markets may support further investment in the Bakken. However, TransCanada is not the only company adding pipeline capacity in the region. Rail transport capacity has also been expanding. Presidential Permit Applications Federal agencies ordinarily have no authority to site oil pipelines, even interstate pipelines. This authority generally would be established under state law. However, the construction of a pipeline that connects the United States with a foreign country requires executive permission conveyed through a Presidential Permit. Executive Order 11423, as amended by Executive Order 13337, delegates to the Secretary of State the President's authority to receive applications for Presidential Permits. Issuance of a Presidential Permit requires a State Department determination that the project would serve the "national interest." The term is not defined in the executive orders or elsewhere. The State Department has asserted that, consistent with the President's broad discretion in the conduct of foreign affairs, it has discretion in deciding the factors it will examine in making a national interest determination. Consideration of Environmental Impacts Under NEPA As part of its Presidential Permit application review, the State Department must identify and consider environmental impacts within the context of the National Environmental Policy Act (NEPA). NEPA requires federal agencies to consider the environmental impacts of a proposed action, such as issuing a permit, before proceeding with them and to inform the public of those potential impacts. To ensure that environmental impacts are considered before final agency decisions are made, an environmental impact statement (EIS) must be prepared for every major federal action that may have a "significant" impact upon the environment. With respect to the Presidential Permit application submitted by TransCanada for Keystone XL, the State Department has concluded that approval of a permit requires the preparation of an EIS. Preparing an EIS requires the State Department to obtain input from "cooperating agencies," which include any agency with jurisdiction by law or with special expertise regarding any environmental impact associated with the project. Cooperating agencies for the Keystone XL Project include the Environmental Protection Agency (EPA); the Department of Transportation's Pipeline and Hazardous Materials Safety Administration (PHMSA); the Department of the Interior's Bureau of Land Management, Fish and Wildlife Service, and National Park Service; the Army Corps of Engineers; the Department of Agriculture's Farm Service Agency, Natural Resources Conservation Service, and Rural Utilities Service; the Department of Energy's Western Area Power Administration; and state environmental agencies. On January 31, 2014, the State Department released the final EIS for the proposed Keystone XL project. In a fact sheet released with the EIS, the State Department noted that the final EIS was not a decisional document about whether to approve or deny the project. Instead, it is a technical assessment of the potential environmental impacts related to the proposed pipeline intended to inform the NID. The EIS also responds to 1.9 million public and agency comments received on the project. The State Department asserted that the final EIS reflects the most current information on the proposed project as well as its discussions with both state and federal agencies. After a final EIS is issued, a federal agency may issue a final record of decision (ROD) regarding a proposed action. For actions requiring a Presidential Permit, however, issuance of the final EIS represents the final stages of the State Department's National Interest Determination (NID), completed in accordance with Executive Orders 11423 and 13337. Analysis in an EIS is intended to inform the NID process. The State Department generally issues its final decision in a combined "Record of Decision and National Interest Determination." That is, it is a document issued in accordance with requirements established under both NEPA and the Executive Orders. The National Interest Determination As noted above, Executive Order 11423, as amended by Executive Order 13337, directs the State Department to issue a Presidential Permit for a project that "serves the national interest." The orders do not define "national interest" or direct the State Department to evaluate specific factors before issuing a Presidential Permit. In its interpretation of the Executive Order, 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 its NID. Executive Order 13337 does, however, 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, and 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). With the release of the final EIS for the Keystone XL pipeline project, the State Department stated that it would consider many factors, including the proposal's potential effect on energy security; environmental and cultural resources; the economy; and foreign policy. The State Department also noted that, with the release of the final EIS, it would seek input from the eight federal agencies identified in Executive Order 13337. In accordance with that Executive Order, those agencies had 90 days to provide their views to the State Department. Executive Order 13337 also specifies that the State Department may, but is not required to, consult with state, tribal, and local government officials and foreign governments during the NID process. (Those stakeholders are given an opportunity to comment on the project during the NEPA process.) However, given the level of interest expressed by various stakeholders in support of and opposition to the proposed Keystone XL Pipeline project, the State Department announced a 30-day public comment period that ended on March 7, 2014. In April 2014, the Department of State notified the eight federal agencies that it would provide an unspecified amount of additional time beyond the 90-day deadline for their input due to ongoing litigation in the Nebraska Supreme Court challenging the state's approval of the altered pipeline route, discussed later in this report. That litigation was resolved in January 2015 in favor of the existing state approval. With the Nebraska case decided, the State Department asked the cooperating federal agencies to submit their input regarding the Keystone XL Pipeline by February 2, 2015. The department has not publicly released details of these submissions. If all public and agency input that the State Department must consider has been received, the Department must consider that input, as well as any relevant project information (e.g., analyses provided in the final EIS) to determine whether the project would serve the national interest. The State Department has not committed to a time frame to issue a final Record of Decision and National Interest Determination. In January 2014, when asked about the potential timeline in which Secretary Kerry may make a final decision, a State Department representative stated that the only timeline given in Executive Order 13337 pertains to the 90-day limit within which outside agencies must provide comments on the proposal to the State Department. The Executive Order specifies no timeline for reaching its determination. Since then, the State Department has not committed to a time frame to issue its decision. State Siting and Additional Construction Requirements As noted above, the federal government does not currently exercise siting authority over oil pipelines within the United States. Instead, pipeline siting for the Keystone XL Project must comply with any applicable state law—which varies from state to state. South Dakota, for example, required TransCanada to apply for a permit for the Keystone XL Project from the state public utility commission, which issued the permit on April 25, 2010. At the time of TransCanada's initial application for a Presidential Permit, Nebraska did not have any permitting requirements that applied specifically to the construction and operation of oil pipelines, although a state statute did include a provision to grant eminent domain authority to oil pipeline companies unable to obtain the necessary property rights from landowners. However, due to the controversy surrounding the Keystone XL Project, Nebraska held a special session of its legislature in 2012 to enact legislation authorizing the governor to approve oil pipeline siting. The governor approved Keystone XL's route through the state in 2013. In addition to state siting requirements, there are numerous local, state, tribal, and federal requirements applicable to oil pipeline construction, operation, and maintenance . For example, the 2014 final EIS for Keystone XL lists major permits, licenses, approvals, and consultation requirements for the proposed project that would be required by federal, state, and local agencies prior to its implementation. These include water and wetlands-related permits from the Army Corps of Engineers; Environmental Protection Agency review and issue of National Pollutant Discharge Elimination System permits; Bureau of Land Management temporary use permits on federal lands; Fish and Wildlife Service consideration of impacts to endangered species; and multiple state/county agency consultations or permits for projects that cross navigable waters or state highways, or involve work potentially affecting state streams, cultural resources, or natural resources. Legislative Efforts to Change Permitting Authority33 In light of what they perceive as excessive delays in the State Department's review of permit application for Keystone XL, some in Congress have sought alternative means to support the pipeline's development. There were a number of legislative proposals in the 112 th Congress to change the federal permitting authority for the pipeline. H.R. 3548 would have transferred the permitting authority over the Keystone XL Project from the State Department to the Federal Energy Regulatory Commission (FERC), requiring the commission to issue a permit for the project within 30 days of enactment. Other proposals, such as H.R. 3811 and S. 3445 , would have directly shifted permitting authority to Congress, effectively approving upon enactment the permit applications filed by TransCanada. Similar legislation was proposed in the 113 th Congress, including legislative proposals from the prior Congress that were reintroduced. The Energy Production and Project Delivery Act of 2013 ( S. 17 ) and the American Energy Solutions for Lower Costs and More American Jobs Act ( H.R. 2 ) would have eliminated the Presidential Permit requirement for Keystone XL. The Keystone for a Secure Tomorrow Act ( H.R. 334 ) and a Senate bill to approve the Keystone XL Project ( S. 582 ) sought to directly approve the Keystone XL Pipeline under the constitutional 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, requiring issuance of permits for water crossings by the Army Corps of Engineers within 90 days of an application, among other provisions. The Senate passed an amendment to the Fiscal 2014 Senate Budget Resolution ( S.Con.Res. 8 ) that would have provided for the approval and construction of the Keystone XL Pipeline ( 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; would have 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 would have 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. Legislative Proposals in the 114th Congress After the November 2014 congressional elections, President Obama reaffirmed his intention to let the current State Department permit review process "play out." However, 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. The Keystone XL Pipeline Act ( S. 1 and H.R. 3 ), the Keystone XL Pipeline Approval Act ( S. 147 ), and the Keystone for a Secure Tomorrow Act ( H.R. 28 ) would all directly approve Keystone XL and put an end to any further environmental review under NEPA or other federal environmental statutes. The Strategic Petroleum Supplies Act ( S. 82 ) would suspend sales of petroleum products from the Strategic Petroleum Reserve until permits for the Keystone XL Pipeline were issued. Only one legislative proposal, S. 188 , sought to condition approval of the pipeline, prohibiting the export from the United States of any Canadian crude oil transported by Keystone XL, or any refined petroleum fuel products derived from that crude oil, subject to waivers by the President. On January 29, 2015, the Senate passed the renamed Keystone XL Pipeline Approval Act ( S. 1 ), as amended, by a vote of 62 to 36. The bill was passed in the House on February 11 by a vote of 270 to 152. S. 1 was sent to President Obama on February 24 th 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, however the override measure failed by a vote of 62 to 37. No further action on S. 1 was taken in the House. Notwithstanding the failure of S. 1 to be enacted, congressional leaders have not ruled out further legislative proposals to authorize the Keystone XL Pipeline. Congressional efforts to change or eliminate altogether the State Department's role in issuing cross-border infrastructure permits may raise questions about the President's executive authority (further discussed in the Appendix ). Such proposals may also raise some administrative and legal challenges for FERC or other federal agencies. Key Factors Relevant to the National Interest There are numerous policy considerations potentially relevant to the national interest determination for Keystone XL. The following are brief introductions to key issues in ongoing congressional debate: energy security, environmental impacts, economic impacts, the Canada-U.S. relationship, and Keystone XL in the context of U.S. energy policy, broadly. Energy Security The United States and Canada maintain extensive trade in crude oil and petroleum products. Canada is the single largest foreign supplier of crude oil and petroleum products to the United States—and the United States is the dominant consumer of Canada's exports. Of the 9.2 million barrels per day (Mbpd) the United States imported in 2014, Canada supplied 3.4 Mbpd (37%), more than the combined imports from the next two largest suppliers—Mexico and Saudi Arabia. Keystone XL would bring Canada's total petroleum export capacity to the United States via pipeline to over 4.1 Mbpd, enough capacity to carry more than 45% of U.S. crude petroleum imports in 2014. Given that Canada actually supplied the United States with 3.4 Mbpd in 2014, large increases in Canadian supply via pipeline could ultimately be possible, although much of the increased crude supply, while refined domestically, could be destined for foreign markets in the form of refined petroleum products such as diesel fuel. Increased energy trade between the United States and Canada is viewed by some pipeline proponents as a major contributor to U.S. energy security. Most notably, TransCanada's Presidential Permit application argues that the pipeline will allow U.S. refiners to substitute supply from Canada—a stable, friendly neighbor—for other foreign crude supply and to obtain direct pipeline access to growing Canadian crude output. Such energy security arguments have taken on additional weight for some proponents in light of the recent geopolitical tensions in Venezuela, as well as in other oil-producing countries in the Middle East and North Africa. With expanded pipeline capacity extending to the U.S. Gulf Coast, Alberta crude may compete with other heavy crudes such as those from Mexico, Venezuela, and elsewhere. It is difficult to predict precisely how this competition would play out, but it could take place through shifting discounts or premiums on crude oils from various sources. Thus, it could be possible for Canadian oil supplies to effectively "push out" waterborne shipments from other countries, although this would depend on a wide range of market conditions. If Keystone XL is not permitted, the absence of the pipeline may encourage Alberta producers to increase shipments by rail and to find an alternate pipeline export route through either the Canadian East or West Coast. Thus, Canadian supplies may displace heavy oil supplies in overseas markets and potentially lead to relatively more overseas imports coming into the U.S. Gulf Coast. During a press conference on November 14, 2014, President Obama appeared to express skepticism about the potential benefits of the Keystone XL pipeline with respect to domestic crude supplies, stating: "Understand what this project is. It is providing the ability of Canada to pump their oil, send it through our land, down to the Gulf, where it will be sold everywhere else." However the Keystone XL Pipeline's developer, and a number of industry analysts disagree with the President's assertion. They argue that, when accounting for crude oil prices, marine transportation costs, and refinery configurations, "American refineries would be the primary buyers of crude oil transported through the Keystone XL pipeline, by a vast margin." In addition to the disagreement about the amount of crude oil carried on Keystone XL that would be exported to foreign refineries, there is ongoing debate about the volumes of petroleum products refined from Keystone XL crude that would be shipped overseas. For example, one prominent industry analysis has concluded that "about 70 percent" of products refined from Keystone XL crude oil would be consumed in the United States. Pipeline opponents have disputed such conclusions, arguing that recent market data from Gulf Coast refineries suggest much higher exports of refined products from crude carried on Keystone XL. The volume of Keystone XL crude oil—or derived refined products—that may ultimately be exported is dependent upon many constantly changing economic and operational factors. Thus, predicting domestic versus export volumes over the life of the pipeline is highly uncertain. However, whether Keystone XL is viewed as primarily serving domestic or export markets may continue to be a factor in debate about whether the pipeline is in the national interest. Uncertainties About Energy Security Refineries in the Gulf Coast region have been increasingly optimized to process heavy crude oils, with a particular focus on crudes from Alberta given the growing supplies there. Increasing the share of supply from Canada could be viewed as concentrating, rather than diversifying, the U.S. crude oil supply portfolio, and thus exposing the refining sector to greater supply risk associated with any problems with Canadian supply. It is worth noting that even if Keystone XL is built, prices for the oil it carries as well as for domestically produced oil will continue to be affected by international events. Furthermore, as refineries continue to upgrade for the processing of heavy crude, additional heavy crude supplies from Canada may serve to augment, rather than displace, historic crude supplies from countries like Venezuela. Thus U.S. refinery exposure to market volatility or supply disruptions from key non-Canadian suppliers may remain whether or not Keystone XL is constructed. The energy security implications of increased Canadian crude supplies in a global market are, therefore, somewhat unpredictable. Economic Impacts of the Pipeline The economic impacts of the Keystone XL pipeline have been the subject of considerable debate. In light of the ongoing recovery from the recent U.S. economic recession, a particular focus has been the prospect of new jobs directly associated with the pipeline's construction and operation, as well as jobs that may be created indirectly or otherwise induced due to the pipeline's construction or due to an increase in crude oil supplies. Other economic considerations include property tax revenues to local jurisdictions, although they are more straightforward. Regarding economic impact, the State Department's Final EIS for the Keystone XL Project application concludes: During construction, proposed Project spending would support approximately 42,100 jobs (direct, indirect, and induced), and approximately $2 billion in earnings throughout the United States.... Construction of the proposed Project would contribute approximately $3.4 billion (or 0.02 percent) to the U.S. gross domestic product (GDP). The proposed Project would generate approximately 50 jobs during operations. Property tax revenue during operations would be substantial for many counties, with an increase of 10 percent or more in 17 of the 27 counties with proposed Project facilities. Because job projections, in particular, involve numerous assumptions and estimates, the State Department's job estimates for Keystone XL have been a source of disagreement. One challenge to State's analysis is that different definitions (e.g., for temporary jobs) and interpretations can lead to different numerical estimates and "fundamental confusion" about the Final EIS numbers. Consequently, it may be difficult to determine what overall economic and employment impacts may ultimately be attributable to the Keystone XL pipeline or to the various alternative transport scenarios if the pipeline is not constructed. It is beyond the scope of this report to try to evaluate specific job calculations and methodology. Nonetheless, stakeholders and analysts have asserted lower and higher job estimates in support of their positions regarding the pipeline. Skepticism About Job Creation In a July 2013 interview, President Obama stated considerably lower job estimates for the Keystone XL Pipeline than those presented by the State Department's Final EIS: My hope would be that any reporter who is looking at the facts would take the time to confirm that the most realistic estimates are this might create maybe 2,000 jobs during the construction of the pipeline—which might take a year or two—and then after that we're talking about somewhere between 50 and 100 jobs in an economy of 150 million working people President Obama's remarks appeared to focus on a subset of direct jobs, although the specific source for the Presidents' estimates is unclear. A White House spokesperson subsequently acknowledged that "there are a range of estimates out there about the economic impact of the pipeline." Nonetheless, the President's remarks were interpreted by some as minimizing the job potential creation of the project. (A low job estimate would be consistent with President Obama's other statements that greenhouse gas emissions would be a key factor on which he would base his decision regarding the pipeline permit.) Other groups and studies have similarly downplayed or otherwise disputed the pipeline's potential job benefits, some assuming that potential job creation would simply take place within the alternative transport scenarios cited in the State Department's market analysis (e.g., the freight rail and tanker sectors), and others even arguing that the pipeline could destroy jobs. The general thrust of these arguments has been that purported job benefits, particularly the limited number of "permanent" jobs, do not justify other costs and risks associated with the Keystone XL Pipeline's development. Support for the Keystone XL Jobs Argument Many Keystone XL pipeline proponents support the project based on its economic benefits, and specifically jobs, often citing much higher job estimates than those in the Final EIS. A 2010 study by the Energy Policy Research Foundation, for example, concluded that "the Keystone expansion would provide net economic benefits from improved efficiencies in both the transportation and processing of crude oil of $100 million-$600 million annually, in addition to an immediate boost in construction employment." A 2009 report from the Canadian Energy Research Institute (CERI) commissioned by the American Petroleum Institute similarly concluded that As investment and production in oil sands ramps up in Canada, the pace of economic activity quickens and demand for US goods and services increase rapidly, resulting in an estimated 343 thousand new U.S. jobs between 2011 and 2015. Demand for U.S. goods and services continues to climb throughout the period, adding an estimated $34 billion to US GDP in 2015, $40.4 billion in 2020, and $42.2 billion in 2025. These CERI estimates apply to the entire oil sands industry, however, not only the Keystone XL project, and they are derived from a proprietary economic analysis which has not been subject to external review. Nonetheless, studies such as these, as well as the State Department's analysis, have been used by pipeline proponents to emphasize the purported employment benefits of Keystone XL. Proponents generally argue that thousands of jobs created by Keystone XL, even if they are temporary jobs, will indeed be significant at a time of relatively high national unemployment. Global and Regional Environmental Impacts Debate about the environmental impacts of the Keystone XL pipeline have focused largely on its potential to induce greater oil sands crude production and associated emissions of greenhouse gases. However, concerns about oil spills from the pipeline, and the impact of pipeline construction in environmentally sensitive areas along the route, have also been important considerations. Climate Change and Greenhouse Gas Emissions58 On June 25, 2013, President Obama announced a national "Climate Action Plan" to reduce emissions of carbon dioxide (CO 2 ) and other greenhouse gases (GHG), as well as to encourage adaptation to expected climate change. During his speech, the President made reference to the proposed Keystone XL Pipeline and stated that the "net effects of the pipeline's impact on our climate" would factor into the State Department's national interest determination, examining whether the project would "significantly exacerbate the problem of carbon pollution." Among the various impacts identified in the project's environmental impact statement are those involving GHG emissions. As required under NEPA, the Final EIS identifies anticipated direct and indirect impacts of the project as proposed by TransCanada as well as various project alternatives, including analysis of the "no action alternative" (i.e., an assessment of the impacts associated with denying TransCanada's permit application). The Final EIS finds: the GHG emissions released during the construction period for the project would be approximately 0.24 million metric tons of carbon dioxide equivalents (MMTCO 2 e) due to land use changes, electricity use, and fuels for construction vehicles (equivalent to 0.004% of U.S. annual GHG emissions) ; the GHG emissions released during normal operations would be approximately 1.44 MMTCO 2 e/year due to electricity use for pumping stations, fuels for maintenance and inspection vehicles, and fugitive emissions (equivalent to 0.2% of U.S. annual GHG emissions); the total, or gross, life-cycle GHG emissions (i.e., the aggregate GHG emissions released by all activities from the extraction of the resource to the refining, transportation, and end-use combustion of refined fuels) attributable to the oil sands crude transported through the proposed pipeline would be approximately 147 to 168 MMTCO 2 e per year (equivalent to 2.2% to 2.6% of U.S. annual GHG emissions); the incremental, or net, life-cycle GHG emissions (i.e., GHG emissions over-and-above those from the crude oils expected to be displaced in U.S. refineries) is estimated to be 1.3 to 27.4 MMTCO 2 e per year (equivalent to 0.02% to 0.4% of U.S. annual GHG emissions); but according to the State Department's market analysis, "approval or denial of any one crude oil transport project, including the proposed project, is unlikely to significantly impact the rate of extraction in the oil sands or the continued demand for heavy crude oil at refineries in the United States based on expected oil prices, oil-sands supply costs, transport costs, and supply-demand scenarios." The crude oil market analysis in the Final EIS is presented separately from the GHG emissions assessment. By determining that the most likely scenario is one in which oil sands production would be unaffected by expected market conditions, the Final EIS implies that the "incremental" life-cycle GHG emissions attributable to the oil sands crudes transported through the proposed pipeline are negligible. With this determination, the only difference in estimates between competing scenarios would be attributable to the operational GHG emissions of the alternative modes of transportation (e.g., GHG emissions from rail cars, trucks, or tankers). The Final EIS reports that the annual operational emissions attributed to the "no action" alternatives range from 4.0 to 4.4 MMTCO 2 e per year (an increase of 29%-42% over the 3.1 MMTCO 2 e per year in operational emissions for the proposed project inclusive of the existing southern leg). Debate About the Final EIS Some stakeholders have questioned many of the conclusions in the Final EIS and argue that the project may have greater climate change impacts than projected by the State Department. They contend that there is nothing presumed or inevitable about the rate of expansion for the Canadian oil sands. Current oil sands projects face a challenging financial environment, and up-front production costs and price differentials are comparatively higher for oil sands crudes, making new investment sensitive to changes in supply costs and global prices. Opponents stress that oil market projections and transportation options are rife with uncertainty, and that the proposed Keystone XL Pipeline could have a much more significant impact on oil sands expansion if a number of key variables differ from the State Department's assumptions. Proponents of the proposed pipeline support a market analysis as outlined in the Final EIS. They argue that as long as there is strong global demand for petroleum products, resources such as the Canadian oil sands will be produced and shipped to markets using whatever route necessary. Furthermore, they estimate that GHG emissions intensities for the Canadian oil sands are currently within the range of many other heavy crude oils, and that in the future Canadian oil sands emissions intensities will only decrease (due to efficiency improvement and technological advances), while those of other crudes around the world will likely increase (due to a heavier resource base). Oil Spill Concerns and Potential Trade-Offs Each mode of oil transportation involves some risk, and each has historically resulted in oil spills. Although pipelines and oil tankers transport the vast majority of oil within the United States, other modes of transportation have increased in recent years. In particular, the volume of crude oil carried by rail increased from approximately 4 million barrels in 2010 to approximately 87 million barrels in 2013, a 20-fold increase. Some portion of the recent increase is related to the increase in Canadian oil sands crude production and pending status of the Keystone XL pipeline. In its Final EIS for Keystone XL, the State Department used Pipeline and Hazardous Material Safety Administration as well as Coast Guard data to compare oil spill frequency and volume by mode of transportation. Between 2002 and 2009, the State Department found: pipeline transport has the highest number of barrels released per ton-mile compared to rail and marine transport; and rail transport has the highest number of reported releases per ton-mile compared to pipeline and marine transport. Although the capacity of an individual rail car is relatively small, around 700 barrels (29,400 gallons), a major derailment could involve releases from multiple tank cars, resulting in a substantial spill. For example, in 2013, train derailments in Aliceville, AL, and Casselton, ND, each spilled over 10,000 barrels (420,000 gallons) of crude oil. By comparison, the 1989 grounding of the Exxon Valdez oil tanker in Prince William Sound, Alaska released 260,000 barrels (10.9 million gallons) of crude oil. The largest U.S. pipeline oil spill (that CRS can document) discharged approximately 40,000 barrels (1.7 million gallons) in 1991 near Grand Rapids, MN. Nonetheless, spill volume is arguably a relatively unimportant factor in terms of impacts and cleanup costs. Location matters more: a major spill away from shore will likely cost considerably less to abate than a minor spill in a populated location or sensitive ecosystem. Depending on timing and location, even a small spill can cause significant harm to individual organisms and entire populations. Although some might equate rejection of the Keystone XL permit with avoiding oil spills, a more accurate tradeoff would be the risk of spills from this particular pipeline compared to spills from other modes of oil transportation which may be used as alternatives. Keystone XL Pipeline proponents and opponents, including those in the rail industry, have cited their own interpretations of spill data to argue that one transportation mode is significantly riskier than others. However, any such conclusion is open to debate. Spill Concerns Specific to Oil Sands Crude During the first Keystone XL permit and EIS process, a primary topic of debate among stakeholders was whether particular properties of oil sands crude would impose a greater risk of a pipeline oil spill than other crude oil pipelines. To examine these issues, Congress enacted P.L. 112-90 , which ultimately resulted in a 2013 report from the National Research Council (NRC). The central findings of the report included the following: The committee does not find any causes of pipeline failure unique to the transportation of diluted bitumen [oil sands crude]. Furthermore, the committee does not find evidence of chemical or physical properties of diluted bitumen that are outside the range of other crude oils or any other aspect of its transportation by transmission pipeline that would make diluted bitumen more likely than other crude oils to cause releases. However, the NRC report did not examine how spills of oil sands crude may differ from spills of conventional crude oil. CRS is not aware of an authoritative study that has assessed this topic, but the recent oil sand crude spills may offer some insights. The 2010 pipeline spill (850,000 gallons) that reached Michigan's Kalamazoo River has demonstrated particular cleanup challenges. According to EPA, the oil will not appreciably degrade and it has mixed with sediment on the river bottom. The pipeline owner, Enbridge, estimated cleanup costs would be approximately $1.2 billion, substantially higher than the average cost of cleaning up a similar amount of conventional oil. Issues with the Pipeline Route Across Nebraska During the national interest determination period for the 2008 Presidential Permit application, it became clear that changes to Nebraska law would require the selection of a pipeline route that would avoid the Sand Hills region of Nebraska. The region is unique due to its high concentration of wetlands, extensive areas of very shallow groundwater, and its sensitive ecosystem. The highly porous soil of the Sand Hills makes it a significant recharge zone in the northern Ogallala Aquifer. That is, the sandy, porous soil of the Sand Hills allows a significant amount of surface water to enter (recharge) the aquifer system. Water from the aquifer also accounts for a significant amount of water use—78% of the region's public water, 83% of irrigation water in Nebraska, and 30% of water used in the United States for irrigation and agriculture. Along the preferred route of the originally proposed pipeline configuration, areas in the Sand Hills region were identified as locations where the water table may be close to the surface. The depth to groundwater is less than 10 feet for approximately 65 miles of the preferred pipeline route in Nebraska. Both the soil porosity and the close proximity of groundwater to the surface increase the potential that a release of oil from the pipeline could contaminate groundwater in the region. When the 2008 permit application was denied, TransCanada announced it would work with the Nebraska DEQ to identify a potential pipeline route that would avoid the Sand Hills. On January 13, 2013, the governor of Nebraska approved a proposed reroute of the Keystone XL pipeline through Nebraska, as noted above. However, as stated earlier, a Nebraska District Court ruled that the 2012 state law authorizing the governor to approve TransCanada's pipeline route violated the Nebraska Constitution. Prior to the passage of the 2012 law, that authority rested exclusively with the state's Public Service Commission (PSC). As a result of the court's decision, the governor's approval of the pipeline siting in 2013 was temporarily declared null and void pending appeal. However, on January 9, 2015, the Nebraska Supreme Court vacated the lower court's ruling, effectively clearing the way for the Keystone XL Pipeline to be constructed through the state on the route already authorized by the governor. Canada-U.S. Relationship Oil production and exports are a major source of economic development and revenue for Canada. Continued expansion of Canada's oil production is, therefore, a high national priority for Prime Minister Stephen Harper's government (see below), although not all Canadians share this view. As Canada's largest crude oil customer, the United States has anchored Canada's energy trade. Historically, the energy relationship between the United States and Canada, while intertwined, has been straightforward—taking the form of a steadily growing southward flow of crude oil to U.S. refineries. Energy products have been traded freely back and forth between the two countries under the North American Free Trade Agreement (NAFTA) and energy transportation infrastructure generally has been constructed as needed with little fanfare. But the U.S. permitting process for the Keystone XL Pipeline has greatly complicated that energy relationship, creating new tensions between the U.S. and Canadian governments as well as within Canada. Other Pipelines in Canada Partly as a result of delays in the Keystone XL permit process, the Canadian federal government has been advocating the construction of the Northern Gateway pipeline through British Columbia to export oil to Asia, as well as the Energy East pipeline for export or domestic consumption in eastern Canada. Like the Keystone XL, these routes have drawn opposition from environmentalists; however, First Nations tribes, over whose land much of the Northern Gateway pipeline would be constructed, also generally oppose the pipelines. On October 29, 2014, Trans-Canada submitted its application for the Energy East Pipeline. This proposal would repurpose portions of an existing, yet unused, natural gas pipeline along with some new construction into a cross-country oil artery that could potentially ship 1.1 million bpd eastward. It would supply eastern Canadian refineries with crude that is currently imported from the United States or elsewhere, and could allow for seaborne exports from its terminus at the port of Saint John, New Brunswick. On June 14, 2014, the Canadian Federal Government approved the Northern Gateway Pipeline, conditioned on obtaining provincial permits and consultation with the First Nations tribes, through whose land the pipeline would traverse. The governments of British Columbia (B.C.) and Alberta have quarreled over the pipeline. B.C. Premier Christy Clark had laid out five conditions for B.C.'s assent to construction of the pipeline: successful completion of an environmental review; "world-leading" marine spill response and land oil-spill prevention; addressing aboriginal legal requirements; treaty rights and opportunities; and a "fair share" of economic benefits. Many in British Columbia believe that the province would be subject to most of the risks associated with the pipeline, but the monetary benefit would flow primarily to Alberta. In November 2013, after months of negotiations between the two provinces, the premiers of both provinces announced a framework agreement on inter-provincial energy movement. However, this agreement does not represent approval of Northern Gateway by the B.C. provincial government. Whether or not the Keystone XL is approved, it appears Canadian federal government officials will also continue to argue for the approval of the cross-Canada pipelines. Keystone XL and U.S. Energy Policy Beyond the debates about the proposed Keystone XL Pipeline's impacts on oil sands production and greenhouse gases, some stakeholders have expressed a broader concern about whether the approval or denial of the project could set a precedent for U.S. energy policy. They argue that while many of the decisions that may affect the development of the oil sands will ultimately be made by the market and the national and provincial governments of Canada, the choice of whether or not to approve the permit for the project is an opportunity for the U.S. government to signal its future direction. Some stakeholders have pushed for a national energy policy that moves the United States away from a reliance on fossil fuels. They see the decision to build the proposed pipeline as a 50-year-long commitment to a carbon-based economy and its resulting GHG emissions. Some observers contend that with meaningful action on climate policy slowed or stalled in Congress, the courts, and, to some extent, the regulatory agencies (i.e., local, state, and federal environmental and land-use agencies), the sole remaining outlet to leverage a low-carbon energy policy is case-by-case action on such items as infrastructure permits. Some of these stakeholders have actively opposed the permit for the project believing that it may set a precedent. If the pipeline is allowed to go forward, they say, it may be the case that no future infrastructure project would be held accountable for its incremental contribution to cumulative GHG emissions. Others recognize that the project could affect U.S. energy policy by setting a precedent and sending a signal, but they reach a different conclusion. Many regard the project as one element of a revitalized energy production sector in North America and urge that U.S. policy should support investment in such infrastructure for economic and national security reasons. In this view, since Canadian oil sands will be developed regardless of the transportation mode used, the public policy interest lies in supporting North American energy suppliers rather than those overseas. Appendix. Presidential Permitting Authority86 The executive branch has exercised permitting authority over the construction and operation of "pipelines, conveyor belts, and similar facilities for the exportation or importation of petroleum, petroleum products" and other products at least since the promulgation of Executive Order 11423 in 1968. Executive Order 13337 amended this authority and the procedures associated with the review, but did not substantially alter the exercise of authority or the delegation to the Secretary of State in E.O. 11423. However, the source of the executive branch's permitting authority is not entirely clear from the text of these executive orders. Generally, powers exercised by the executive branch are authorized by legislation or are inherent presidential powers based in the Constitution. E.O. 11423 makes no mention of any authority, and E.O. 13337 refers only to the "Constitution and the Laws of the United States of America, including Section 301 of title 3, United States Code." Section 301 simply provides that the President is empowered to delegate authority to the head of any department or agency of the executive branch. The legitimacy of this permitting authority has been addressed by federal courts. In Sisseton v. United States Department of State , the plaintiff tribes filed suit and asked the court to suspend or revoke the Presidential Permit issued under E.O. 13337 for the TransCanada Keystone Pipeline. The U.S. District Court for the District of South Dakota found that the plaintiffs lacked standing because they would be unable to prove their injury could be redressed by a favorable decision. The court determined that even if the plaintiff's injury could be redressed, "the President would be free to disregard the court's judgment," as the case concerned the President's "inherent Constitutional authority to conduct foreign policy," as opposed to statutory authority granted to the President by Congress. The court further found that even if the tribes had standing, the issuance of the Presidential Permit was a presidential action, not an agency action subject to judicial review under the Administrative Procedure Act (APA). The court stated that the authority to regulate the cross-border pipeline lies with either Congress or the President. The court found that "Congress has failed to create a federal regulatory scheme for the construction of oil pipelines, and has delegated this authority to the states. Therefore, the President has the sole authority to allow oil pipeline border crossings under his inherent constitutional authority to conduct foreign affairs." The President could delegate his permitting authority to the U.S. Department of State, but delegation did not transform the permit's issuance into an agency action reviewable under the APA. In Sierra Club v. Clinton , the plaintiff Sierra Club challenged the Secretary's decision to issue a Presidential Permit authorizing the Alberta Clipper pipeline. Among the plaintiff's claims was an allegation that issuance of the permit was unconstitutional because the President had no authority to issue the permits referenced in E.O. 13337 (in this case, for the importation of crude oil from Canada via pipeline). The defendant responded that the authority to issue Presidential Permits for these border-crossing facilities "does not derive from a delegation of congressional authority ... but rather from the President's constitutional authority over foreign affairs and his authority as Commander in Chief." The U.S. District Court for the District of Minnesota agreed, noting that the defendant's assertion regarding the source of the President's authority has been "well recognized" in a series of Attorney General opinions, as well as a 2009 judicial opinion. The court also noted that these permits had been issued many times before and that "Congress has not attempted to exercise any exclusive authority over the permitting process. Congress's inaction suggests that Congress has accepted the authority of the President to issue cross-border permits." Based on the historical recognition of the President's authority to issue these permits and Congress's implied approval through inaction, the court found the Presidential Permit requirement for border facilities constitutional.

TransCanada's proposed Keystone XL Pipeline would transport oil sands crude from Canada and shale oil produced in North Dakota and Montana to a market hub in Nebraska for further delivery to Gulf Coast refineries. The pipeline would consist of 875 miles of 36-inch pipe with the capacity to transport 830,000 barrels per day. Because it would cross the Canadian-U.S. border, Keystone XL requires a Presidential Permit from the State Department based on a determination that the pipeline would "serve the national interest." To make its national interest determination (NID), the department considers potential effects on energy security; environmental and cultural resources; the economy; foreign policy, and other factors. Effects on environmental and cultural resources are determined by preparing an Environmental Impact Statement (EIS) pursuant to the National Environmental Policy Act (NEPA). The NID process also provides for public comment and requires the State Department to consult with specific federal agencies. TransCanada originally applied for a Presidential Permit for the Keystone XL Pipeline in 2008. Since then various issues have affected the completion of both the NEPA and NID processes for the project. In particular, during the NID process for the 2008 application, concerns over environmental impacts in the Sand Hills of Nebraska led the state to enact new requirements that would change the pipeline route. Facing a 60-day decision deadline imposed by Congress, the State Department denied the 2008 permit application on the grounds that it lacked information about the new Nebraska route. In May 2012, TransCanada submitted a new application with a modified route through Nebraska, thus beginning a new NEPA and NID process. With the release of the final EIS for the new pipeline route in January 2014, the State Department began the current NID process. Public comment on the project, allowed under the Executive Order, ended on March 2014. Federal agency comment on the project was interrupted by state court action in Nebraska, but this litigation was resolved. The department subsequently told federal agencies to provide their input by February 2, 2015. The State Department has not committed to a deadline for issuing its final NID or making a Presidential Permit decision. Development of Keystone XL has been controversial. Proponents base their arguments primarily on increasing the diversity of the U.S. petroleum supply and economic benefits, especially jobs. Pipeline opposition stems in part from concern regarding the greenhouse gas emissions from the development of Canadian oil sands, continued U.S. dependency on fossil fuels, and the risk of a potential release of heavy crude. There is also debate about how much Keystone XL crude oil, or petroleum products refined from it, would be exported overseas. Relations between the U.S. and Canadian governments have also been an issue. With the fate of Keystone XL uncertain, Canadian oil producers have pursued other shipment options, including other pipelines and rail. In light of what some consider excessive delays in the State Department's permit review, Congress has sought other means to support development of the pipeline. In the 114th Congress, the most significant legislative proposal has been the Keystone XL Pipeline Approval Act (S. 1), which would have directly approved Keystone XL and put an end to any further review under federal environmental statutes. On January 29, 2015, the Senate passed S. 1 by a vote of 62 to 36. On February 11, the House passed S. 1 by a vote of 270 to 152. The bill was sent to President Obama on February 24th and vetoed the same day. The Senate attempted to override the President's veto on March 4; however; the override measure failed by a vote of 62 to 37. No further action on S. 1 was taken in the House.

The Federal Minimum Wage The Fair Labor Standards Act (FLSA), enacted in 1938, is the federal legislation that establishes the general minimum wage rate that must be paid to all covered workers. In general, the FLSA mandates broad minimum wage coverage. It also specifies certain categories of workers who may be covered by other FLSA wage standards, such as workers with disabilities or certain youth workers. The FLSA was enacted because its provisions were meant both to protect workers and stimulate the economy. The act also created the Wage and Hour Division (WHD), within the Department of Labor (DOL), to administer and enforce its provisions. In 1938, the FLSA established a minimum wage of $0.25 per hour. The minimum wage provisions of the FLSA have been amended numerous times since then, typically for the purpose of expanding coverage or raising the wage rate. Since its establishment, the minimum wage rate has been raised 22 separate times, through 10 separate amendments to the FLSA. The most recent change was enacted in 2007 ( P.L. 110-28 ) and increased the minimum wage from $5.15 per hour to its current rate of $7.25 per hour in three steps. For employees working in states with a minimum wage different from that of the federal minimum wage, the employee is entitled to the higher of the two wage rates. The minimum wage—at the federal, state, and local levels—has been the source of a voluminous literature in labor economics and the subject of much congressional debate over time. Most of the debate in the literature focuses on the impacts of minimum wages on labor market outcomes, such as employment, earnings, poverty, and hours worked. A full discussion of the wide range of issues related to minimum wages is beyond the scope of this report, which focuses on indexation of the federal minimum wage. That is, this report addresses the issue of indexing, or linking, the minimum wage to an economic measure so that the rate would adjust automatically with changes in that economic measure. Indexation and the Minimum Wage Generally, indexation is linking one variable's (e.g., a minimum wage, a benefit) value to changes in another, independent variable (e.g., an average wage, cost of living). For example, a price index is constructed by dividing the price of a market basket of goods and services in a given year by that same basket's prices in a base year. In the case of the minimum wage, indexation would mean the minimum wage rate changes when the index (e.g., prices, wages, costs) changes. If a minimum wage rate is established as a fixed nominal amount and not increased (through either legislative action or indexation), its real value will erode over time due to the tendency of prices and wages to increase over time. That is, relative to other economic indices that may be increasing (e.g., prices, wages, productivity), a nominal wage loses value unless it too is adjusted. In general, to maintain the relative value of a wage over time, that wage may be indexed to some measure in the economy. For this reason, several states, but not the federal government, have attempted to maintain the value of their minimum wage rates by indexing the rate to some measure of inflation. This mechanism provides for automatic changes in the minimum wage over time as the index changes and does not require legislative action to make periodic adjustments. Finally, as will be discussed further in the remainder of this report, most indices that have been operationally tied to minimum wages at the state level aim to keep pace with consumer prices. There have been recent proposals, however, that aim to tie the minimum wage to changes in average or median wage levels. As an illustration of indexation, Figure 1 shows the nominal and inflation-adjusted value (in 2016 dollars) of the federal minimum wage since it was enacted in 1938. As will be discussed in greater detail later in the report, there are several possible indices for the minimum wage; the data in Figure 1 illustrate the concept behind indexation using the Consumer Price Index for All Urban Consumers (CPI-U). As noted, Congress has increased the minimum wage rate 22 times since it was enacted in 1938, from an initial value of $0.25 per hour to its current level of $7.25 per hour. In constant (inflation-adjusted) 2016 dollars, however, the value of the minimum wage has varied from $3.96 (1948) to $10.98 (1968). To Index or Not—Considerations The issue of indexing the federal minimum wage has been a part of the discussion since the FLSA was enacted in 1938. For example, during debates on the passage of the FLSA in 1938 at least one amendment was made that would have indexed the original minimum wage to a DOL measure of inflation. Since that time there have been numerous congressional proposals to index the minimum wage. These proposals have included linking the federal minimum wage to indices of consumer prices, productivity, earnings, poverty, Social Security, and salaries of Members of Congress. Despite numerous proposals in the past, the federal minimum wage rate is not indexed and changes only when Congress amends the FLSA. Since its enactment in 1938, the minimum wage rate has been increased 22 times through 10 separate laws. Indexation is used in some federal entitlement programs, such as Social Security and Supplemental Nutrition Assistance Program (SNAP) benefits, as well as in other federal wage regulations, such as the minimum wage for employees on certain federal contracts. Indexing the minimum wage, like indexing any labor standard, is ultimately a policy choice about how a federally established standard should be structured and maintained. This section highlights some of the issues associated with indexing the minimum wage. Frequency and Rate of Change Indexation would provide relatively less volatile, more uniform changes in the minimum wage, given that the values of the possible indices that could be used tend not to vary widely from year to year. On the other hand, indexation would deemphasize congressional consideration of the minimum wage rate because changes would become automatic. As noted previously, the minimum wage rate has increased 22 times since 1938, with periods between rate increases ranging from 1 to 10 years. However, this does not mean the FLSA was amended 22 individual times for purposes of a rate change, nor does it mean that the rate was increased about every four years. Rather, in many instances Congress amended the FLSA and included multiple increases in the minimum wage rate, phased in over a number of years. The frequency of adjustment has not been even in this period. From 1938 to 1978, Congress amended the FLSA (with regard to the minimum wage rate) seven times for a total of 15 rate changes. From 1978 through 2016, Congress amended the FLSA (with regard to the minimum wage rate) three times for a total of seven rate changes. Even within these periods, congressional action has varied. For example, in three FLSA wage rate amendments over 11 years (1966-1977), Congress enacted nearly half (9 of 22) of all the minimum wage rate changes since 1938. In part due to the irregular pattern of rate changes, minimum wage increases may represent sizeable percentage increases in a short period of time, especially compared to the changes in the values of the indices that might be used to adjust the minimum wage rate. Those same increases, however, would have been lower on an annual basis had they been spread across multiple years. For example, the minimum wage rate increased from $5.15 to $7.25, or 41%, in the 2007 to 2009 period, compared to a change in the Consumer Price Index for Urban Wage Earners and Clerical Workers (CPI-W) in that period of 6.4%. However, between 1997 (the previous time the minimum wage rate was increased) and 2007 the CPI-W increased 33%, much closer to the 41% increase in three years for the minimum wage. Relative Value of the Minimum Wage One of the goals of the FLSA in general, and the minimum wage specifically, is to "correct and as rapidly as practicable to eliminate" labor conditions "detrimental to the maintenance of the minimum standard of living necessary for health, efficiency, and general well-being of workers." Determining what constitutes a "minimum standard" and what minimum wage rate supports that standard is a policy choice. That said, a minimum wage rate is one variable among many that affect the standard of living, such as housing costs, food prices, educational opportunities, wage growth, and productivity increases, to name a few. Over time the price of goods and services tends to rise. Thus if the minimum wage rate remains fixed, the real value of the minimum wage will decline over time. Indexation is one method of maintaining the relative value of the federal minimum wage to the price of other goods and services in the economy, while not indexing or increasing it implicitly lowers its relative value over time due to rising prices or wages. On the other hand, requiring congressional action to change the minimum wage rate allows for the role of the minimum wage in the larger context of the economy (e.g., its relationship to poverty) to be considered with each rate change. Relationship to Other Policy Considerations Prior to the 1996 amendments, the amendments to the FLSA that increased the minimum wage were narrowly targeted on increasing the rate (e.g., 1955 amendments); more broadly focused on increasing the rate along with the scope of coverage (e.g., 1966 amendments); focused on the wage rate and various exemptions, such as the tip credit (e.g., 1989 amendments); or some combination of all of these. The 1996 and 2007 amendments, however, included minimum wage rate increases as part of broader legislation that dealt with tax policy, pension rules, and trade policy (1996 amendments) or as part of supplemental appropriations legislation (2007 amendments). In the case of the 1996 and 2007 amendments, the minimum wage increases were explicitly tied to tax provisions for smaller businesses. Indexation of the minimum wage would generally decouple rate setting from other policy considerations related to wage setting. If the minimum wage were indexed, the rate itself would adjust periodically rather than being considered on its own as part of a larger legislative vehicle. While indexation could decrease legislative consideration of the minimum wage and would require no congressional action to change the rate, it would also ensure that the rate itself changes without it being tied to unrelated policy. Elements of Indexation Before discussing possible indexation options, it is worthwhile to note briefly the main elements of minimum wage indexation. While the most important element of indexing a minimum wage is the index itself, there are additional elements that may affect the performance of a minimum wage index. Index. The index itself determines the changing value over time of the minimum wage; different indices may vary in growth and volatility. The index also reflects the underlying purpose of an index. That is, should an indexed minimum wage reflect changes in consumer prices, productivity, earnings, economic growth, or some other variable? Initial value . The starting point of indexation affects future values, regardless of the index used. Because there is a tendency for any index (e.g., inflation, wages, growth) to increase over time, the initial value of a minimum wage "locks in" past growth. For example, if a minimum wage is set at one point in time and not increased through a period of high consumer price inflation, then it loses real value (i.e., purchasing power in the case of consumer price increases) despite having the same nominal value. If indexation begins after a period of inflation without an adjustment to its initial value, then it locks in the erosion associated with the high inflation, compared to raising the nominal rate and then indexing it going forward. Limits . An indexed minimum wage is by definition tied to changes in another variable. Depending on other considerations (e.g., consumer prices may increase but wages may stagnate), limits may be placed on changes in the index such that a minimum wage is not adjusted downward despite a decline in the index (a "hold harmless" provision) or a minimum wage is not allowed to exceed a certain level (e.g., an increase may be the lesser of the change in the index or some other percentage). Triggers . Because an indexed minimum wage reflects changes in one variable, as opposed to multiple variables, indexation policies may include triggers that allow for the consideration of other factors not explicitly in the index. For example, an indexation policy may indicate that if the unemployment rate is above a certain threshold or economic growth below a certain level, then the minimum wage rate will not increase regardless of the change in the index value. Periodicity . Indexation of state minimum wages is typically structured on an annual basis. It is possible, however, to structure adjustment over different periods of times. For example, the recent DOL rule on the overtime exemptions for executive, administrative, and professional employees includes an automatic adjustment mechanism for the salary threshold that occurs every three years. Federal Minimum Wage Index Options This section provides an overview of seven possible minimum wage indices, each of which is discussed in more detail below. Consumer Price Index for Urban Wage Earners and Clerical Workers (CPI-W), Consumer Price Index for All Urban Consumers (CPI-U), Consumer Price Index Research Series Using Current Methods (CPI-U-RS), Personal Consumption Expenditures (PCE), Employment Cost Index (ECI), Average Hourly Earnings for Manufacturing Workers (AHE-Manufacturing), and Average Hourly Earnings for Production and Nonsupervisory Workers (AHE-Production). This is not an exhaustive list; it reflects indices used in the states (see Table A-1 ) or proposed in past or recent legislation (see Table 2 ). Indices used by states are considered first. These include versions of the CPI or the PCE. Specifically, indices comprised of the CPI—the CPI-W, the CPI-U, and the CPI-U-RS—or the PCE are discussed below. Recent congressional proposals have included indexing the federal minimum wage to measures of hourly earnings. To examine this concept of linking the minimum wage to measures of wages rather than measures of prices, average hourly earnings for manufacturing workers and for production and nonsupervisory workers are also considered as indices. For each index in this section, a brief description is provided, followed by estimates of the federal minimum wage if it had been indexed to that measure at each statutorily set increase since it was enacted (or at each point from which the index is available). Data in Table 1 show the indexed values of the federal minimum wage using the seven indices discussed in this section. The first two columns show the effective date and the nominal rate (not indexed) of the federal minimum wage for the original rate and the 22 increases that have occurred since 1938. The remaining seven columns show the 2016 value, by index, of the minimum wage had the nominal wage been indexed at the time it was first enacted. For example, if the 1938 minimum wage of $0.25 per hour had been indexed to the CPI-U upon enactment, the federal minimum wage in 2016 would be $4.23 per hour; if it had been indexed from its nominal rate of $1.60 in 1968, it would be $10.98 in 2016. Each value in the index columns assumes that the minimum wage rates were not subsequently changed after enactment, but only increased due to inflation. As the data in Table 1 and the figures below show, the inflation-adjusted value of the minimum wage would have varied greatly by 2016 depending on the choice of index and, importantly, the starting point of indexation. The following figures present indexation of the minimum wage in ways slightly different from traditional presentations. Each figure shows the hypothetical value of the minimum wage in 2016 had the minimum wage been indexed to the relevant economic indicator from each of the 23 times its value was adjusted by Congress. For example, had the minimum wage been indexed to the CPI-W from its statutorily set 1938, 1968, or 1990 rates of $0.25 per hour, $1.60 per hour, and $3.80 per hour, respectively, in 2016 it would be $4.10 per hour, $10.65 per hour, and $6.86 per hour. Thus, the method of presentation shows the hypothetical effects of index choice and timing. Consumer Price Index for Urban Wage Earners and Clerical Workers (CPI-W) The CPI is a measure of the average change over time in prices paid by consumers for a market basket of goods and services. Different consumer price indices reflect spending patterns for different populations. Households in the CPI-W, which is a subset of the CPI-U population (see " Consumer Price Index for All Urban Consumers (CPI-U) ") must meet two requirements: at least half of the household's income is from wage or clerical workers' earnings and at least one household earner must have been employed in an eligible occupation for at least 37 weeks during the previous 12 months. The CPI-W covers approximately 28% of the total population, and, as the name implies, focuses on wage earners rather than the population as a whole. The CPI-W is published monthly. The Bureau of Labor Statistics (BLS) started regular publication of a national index (the U.S. city average) in 1921 and estimated the index back to 1913. Similar to the CPI-U, the CPI-W is used as an index for several state minimum wages. In addition, the CPI-W is the index for the federal minimum wage for certain contract workers, and is the basis for the annual cost-of-living adjustment for Social Security payments. Figure 2 shows the hypothetical effects of indexing the federal minimum wage that was in place during the year shown on the horizontal axis (x-axis) to the CPI-W until 2016, while providing a comparison to the current rate of $7.25 per hour. For example, had the minimum wage of $1.60 per hour enacted in 1968 been indexed to the CPI-W at that time, it would be $10.65 per hour in 2016. The highest and lowest values are labeled on the figures. Overall, if the federal minimum wage had been indexed to the CPI-W at each point a new statutorily established minimum wage level was enacted since 1938, its value in 2016 would range from $4.10 per hour to $10.65 per hour depending on the base year. Data from Figure 2 show the following for the 23 possible starting points for indexation to the CPI-W: For 8 of the 23 enacted minimum wage rates, if the rate had been tied to CPI-W and not adjusted further, the minimum wage would be below $7.25 today, ranging from $0.02 below (2008) to $3.15 below (1938). For 15 of the 23 enacted minimum wage rates, if the rate had been tied to CPI-W and not adjusted further, the minimum wage would be above $7.25 today, ranging from $0.12 above (1991) to $3.40 above (1968). Had indexation to the CPI-W started at any of the 12 increases occurring between 1956 and 1981, the 2016 value of the federal minimum wage would be between $1.28 (1956) and $3.40 (1968) higher than the current rate of $7.25 per hour. On the other hand, indexation starting prior to 1956 or after 1990 would have resulted in a minimum wage near or below $7.25 in 2016. Consumer Price Index for All Urban Consumers (CPI-U) The Bureau of Labor Statistics (BLS) publishes the Consumer Price Index for All Urban Consumers (CPI-U), which is a measure of the average change over time in prices paid by consumers for a market basket of goods and services. The CPI-U covers all urban or metropolitan area households, which represents approximately 88% of the total population. The CPI-U is published monthly. While BLS first published the CPI-U in January 1978, estimates for the CPI-U are available back to 1913. In addition to being the index for several state minimum wages, the CPI-U is used to index some federal benefit programs, including some services in Medicare and Medicaid and certain parameters in the Earned Income Tax Credit (EITC). Figure 3 shows the hypothetical effects of indexing the federal minimum wage that was in place during the year shown on the horizontal axis (x-axis) to the CPI-U until 2016, while providing a comparison to the current rate of $7.25 per hour. Thus, for example, had the minimum wage of $1.60 per hour enacted in 1968 been indexed to the CPI-U starting in 1968, it would now be $10.98 per hour. The highest and lowest values are labeled in the figure. Overall, if the federal minimum wage had been indexed to the CPI-U at each point a new statutorily established minimum wage level was enacted since 1938, its value in 2016 would range from $4.23 per hour to $10.98 per hour depending on the base year. Data from Figure 3 show that of the 23 possible starting points for indexation to the CPI-U: For 6 of the 23 enacted minimum wage rates, if the rate had been tied to CPI-U and not adjusted further, the minimum wage would be below $7.25 today, ranging from $0.02 below (1996) to $3.02 below (1938); For 17 of the 23 enacted minimum wage rates, if the rate had been tied to CPI-U and not adjusted further, the minimum wage would be above $7.25 today, ranging from $0.01 above (2008) to $3.73 above (1968); and Had indexation to the CPI-U started at any of the 13 increases occurring between 1950 and 1981, the 2016 value of the federal minimum wage would be between $0.18 (1950) and $3.73 (1968) higher than the current rate of $7.25 per hour. On the other hand, as with CPI-W, indexation starting prior to 1950 or after 1990 would have resulted in a minimum wage near or below $7.25 in 2016. Consumer Price Index Research Series Using Current Methods (CPI-U-RS) Over several years, BLS has made a series of methodological improvements (e.g., using rental equivalence to measure changes in homeowner costs, quality adjustment of used-car prices) to the CPI-U. The CPI-U-RS adjusts the CPI-U to incorporate most of these improvements. BLS used them to estimate the rate of inflation in the CPI-U as if they had been incorporated since the original publication of the CPI-U in 1978. Figure 4 shows the hypothetical effects of indexing the federal minimum wage that was in place during the year shown on the horizontal axis (x-axis) to the CPI-U-RS until 2015, while providing a comparison to the current rate of $7.25 per hour. For example, had the minimum wage of $1.60 per hour enacted in 1968 been indexed to the CPI-U-RS at that time, it would be $9.56 per hour in 2016. The highest and lowest values are labeled in the figure. Overall, if the federal minimum wage had been indexed to the CPI-U-RS at each point a new statutorily established minimum wage level was enacted since 1950, its value in 2015 would range from $6.45 per hour to $9.56 per hour depending on the base year. Data from Figure 4 show the following for the 20 possible starting points for indexation to the CPI-U-RS: For 6 of the 20 enacted minimum wage rates, if the rate had been tied to CPI-U-RS and not adjusted further, the minimum wage would be below $7.25 today, ranging from $0.03 below (1991) to $0.80 below (1950). For 14 of the 20 enacted minimum wage rates, if the rate had been tied to CPI-U-RS and not adjusted further, the minimum wage would be above $7.25 today, ranging from $0.34 above (1997) to $2.31 above (1968). Had indexation to the CPI-U-RS started at any of the 12 increases occurring between 1956 and 1981, the 2015 value of the federal minimum wage would be between $0.37 (1956) and $2.31 (1968) higher than the current rate of $7.25 per hour. On the other hand, indexation starting after 1990 would have resulted in a minimum wage near or below $7.25 in 2015. Personal Consumption Expenditures (PCE) The PCE is a chain-type price index published by the Bureau of Economic Analysis (BEA) that measures changes in goods and services consumed by all households and by nonprofit institutions serving households. The PCE is similar to the CPI in that both measure consumer prices, but the two differ particularly in the relative weight and scope of items in the consumption baskets. Briefly, the weights of items in the PCE change more frequently (thus more quickly capturing changes in consumer spending) and the PCE includes items that are spent on behalf of consumers, such as the employer's portion of health insurance. Minnesota uses the PCE to index its state minimum wage. In addition, the Federal Reserve's Open Market Committee (FOMC) has established a long-run objective of 2% inflation, as measured by the price index of the PCE. Figure 5 shows the hypothetical effects of indexing the federal minimum wage that was in place during the year shown on the horizontal axis (x-axis) to the PCE until 2016, while providing a comparison to the current rate of $7.25 per hour. For example, had the minimum wage of $1.60 per hour enacted in 1968 been indexed to the PCE at that time, it would now be $8.67 per hour. The highest and lowest values are labeled in the figure. Overall, if the federal minimum wage had been indexed to the PCE at each point a new statutorily established minimum wage level was enacted since 1938, its value in 2016 would range from $3.53 per hour to $8.67 per hour depending on the base year. Data from Figure 5 show the following for the 23 possible starting points for indexation to the PCE: For 12 of the 23 enacted minimum wage rates, if the rate had been tied to PCE and not adjusted further, the minimum wage would be below $7.25 today, ranging from $0.01 below (2008) to $3.72 below (1938). For 11 of the 23 enacted minimum wage rates, if the rate had been tied to PCE and not adjusted further, the minimum wage would be above $7.25 today, ranging from $0.25 above (1963) to $1.42 above (1968). Indexation of the federal minimum wage to PCE would have resulted in the lowest minimum wage rates compared to any of the other indices. That is, compared to other indices, the PCE index would have produced minimum wage rates from $1.42 above to $3.72 below the actual 2016 rate. The high rate ($1.42) from the PCE index is nearly $1 below the next lowest (from the CPI-U-RS). Employment Cost Index (ECI) The ECI for wages and salaries is a labor cost measure produced by BLS as part of its establishment-based National Compensation Survey (NCS). The ECI series on wages and salaries covers establishments in the nonfarm private sector and state and local governments representing about 96% of total civilian employment and measures changes in the hourly costs of labor. The ECI is used in some federal programs, such as certain Medicare reimbursements, and as the measure of adjustment for pay for Members of Congress. Figure 6 shows the hypothetical effects of indexing the federal minimum wage that was in place during the year shown on the horizontal axis (x-axis) to the ECI until 2016, while providing a comparison to the current rate of $7.25 per hour. For example, had the minimum wage of $3.35 per hour enacted in 1981 been indexed to the ECI at that time, it would now be $10.10 per hour. The highest and lowest values are labeled in the figure. Because the ECI series is only available from 1981, there are fewer data points than for other indicators. Nonetheless, the ECI would have created minimum wage rates generally in the range of CPI-U-RS indexed rates. Overall, if the federal minimum wage had been indexed to the ECI at each point a new statutorily established minimum wage level was enacted since 1981 (the first year of data for the ECI), its value in 2016 would range from $6.82 per hour to $10.10 per hour depending on the base year. Data from Figure 6 show the following for the eight possible starting points for indexation to the ECI: For seven of the eight enacted minimum wage rates, if the rate had been tied to the ECI and not adjusted further, the minimum wage would be above $7.25 today, ranging from $0.15 above (2008) to $2.85 above (1981). Indexation of the federal minimum wage to ECI would have resulted in a range similar to rates generated by indexing to the CPI-U-RS. Average Hourly Earnings (AHE) The BLS Current Employment Statistics (CES) survey is a monthly survey of approximately 146,000 business establishments (representing 623,000 individual worksites) that collects data on employment, hours, and earnings by industry and geography. Data on average hourly earnings are computed for all private nonfarm employees and for multiple subcategories, including manufacturing employees and multiple types of service sector employees. Hourly earnings reflect the return to the worker from an hour of labor and exclude employer costs on behalf of the employee, such as benefits and payroll taxes. Earnings data for manufacturing workers are available starting in 1939, while comparable data on production and nonsupervisory workers start in 1964. Figure 7 and Figure 8 show the hypothetical effects of indexing the federal minimum wage that was in place during the year shown on the horizontal axis (x-axis) to the AHE both for manufacturing workers (AHE-Manufacturing) and production and nonsupervisory workers (AHE-Production and Nonsupervisory Workers) until 2016, while providing a comparison to the current rate of $7.25 per hour. For example, had the minimum wage of $0.30 per hour enacted in 1939 been indexed to the AHE-Manufacturing at that time, it would now be $12.51 per hour. The highest and lowest values are labeled in the figure. If the federal minimum wage had been indexed to average hourly earnings in manufacturing at each point a new statutorily established minimum wage level was enacted since 1938, the minimum wage in 2016 would have been higher in all but two cases—1990 and 2007. Indexation of the federal minimum wage to average hourly earnings in manufacturing would have resulted in the highest minimum wage rates compared to any of the other indices. That is, compared to other indices, the AHE-Manufacturing index would have produced minimum wage rates from $5.26 above to $0.34 below the actual 2016 rate. Similar to the average hourly earnings in manufacturing index, if the federal minimum wage had been indexed to average hourly earnings for production and nonsupervisory workers at each point a new statutorily established minimum wage level was enacted since 1964 (the earliest date available), the minimum wage in 2016 would have been higher in all years except 2007. Indexation of the federal minimum wage to average hourly earnings for production and nonsupervisory workers would have resulted in the second-highest minimum wage rates compared to any of the other indices, ranging from $4.19 above to $0.02 below the actual 2016 rate. Minimum Wage Indexation—State Policy and Federal Proposals This section briefly reviews minimum wage indexation policies in states and recent congressional indexation proposals. State Minimum Wage Indexation Policies It is worth noting that as federal changes to the minimum wage rate have become less frequent over time, several states have enacted minimum wage rates above the federal rate and many of these states have indexed their state minimum wage rates to some measure of inflation. For example, between the federal minimum wage increases from 1997 to 2007, the number of states with minimum wages above the federal rate rose from 8 to 22. Since the final step increase in the federal minimum wage in 2009, the number of states with minimum wage rates above the federal rate has increased to 30 (29 states and DC). Of the 29 states and DC that have minimum wage rates above the federal rate, a total of 17 states and DC currently, or will in a future year, index state minimum wage rates to a measure of inflation (see Table A-1 for additional information on state indexation policies). Specifically, four states—Arizona, Montana, Nevada, and South Dakota—index the state minimum wage to the CPI-U, U.S. City Average; three states—New York, Oregon, and Vermont—will begin indexing to the CPI-U, U.S. City Average in the future; two states—Alaska and Colorado—use a sub-national version of the CPI-U to index the state minimum wage, while Michigan and DC will use regional CPI-U indices in the future; four states—Missouri, New Jersey, Ohio, and Washington—index the state minimum wage to the national Consumer Price Index for Urban Wage Earners and Clerical Workers (CPI-W), with California scheduled to start using CPI-W in the future; one state (Florida) uses a regional version of the CPI-W to index the minimum wage; and one state (Minnesota) will use the implicit price deflator for the PCE to index the minimum wage. It is notable that of the 11 states with inflation indexation in place as of 2016, only 2—Colorado and South Dakota—had adjustments to their minimum wage rates from 2015 to 2016. The other states either had no change in inflation or not enough to trigger an increase in the minimum wage rate (e.g., some states require increases to be rounded to the nearest $0.05, which could result in no rate increase despite a low level of inflation). Regarding other features of state minimum wage indexation policies, Nevada limits annual minimum wage increases to the lesser of the CPI-U or 3%. In addition, four states that will begin using indexation in the future—California, Michigan, Minnesota, and Vermont—use caps that limit increases to the lesser of the index change or a statutory percentage increase. Also, California's and Michigan's indexation policies include triggers that prevent increases in the minimum wage rate based on changes in other economic characteristics (e.g., unemployment in excess of a certain percentage). Finally, it is also worth noting that of the approximately 39 localities (cities and counties) with minimum wages above the federal rate, 24 localities currently index the local minimum wage and an additional 11 will begin indexation in the future. Of these 35 localities that currently do, or will in the future, index the minimum wage, all use a version of the CPI. Federal Minimum Wage Indexation Proposals Table 2 provides information on proposals to index the federal minimum wage from the 112 th through 114 th Congresses. Of the 18 proposals in the past three Congresses, 12 have proposed using the CPI-W, 2 have proposed using the CPI-U, and 4 have proposed using median hourly earnings as the index. As demonstrated in the analysis in this report, the proposals using median hourly earnings would likely increase the minimum wage at a greater rate than the proposals using a CPI measure. Finally, all of the indexation proposals in the past three Congresses would have provided step increases in the minimum wage rate before starting indexing, rather than starting from the current rate of $7.25 per hour. Appendix. Indexation of State Minimum Wages

In 1938, the Fair Labor Standards Act (FLSA) established a federal minimum wage of $0.25 per hour. The minimum wage provisions of the FLSA have been amended numerous times since then, typically for the purpose of expanding coverage or raising the wage rate. Since its establishment, the minimum wage rate has been raised 22 separate times, most recently in 2007-2009 when it was increased from $5.15 per hour to its current rate of $7.25 per hour in three steps. The federal minimum wage changes only when Congress amends the FLSA. Since 1938, Congress has amended the FLSA to raise the minimum wage 10 times for a total of 22 rate increases, with periods between increases ranging from 1 to 10 years. An alternative to periodically amending the FLSA to increase the minimum wage would be to index, or link, the federal minimum wage to another variable so that the minimum wage changes automatically when the other variable changes. Indexing the minimum wage provides regular adjustments to and reduces the volatility of minimum wage rates, maintains the relative value of the minimum wage to other economic indicators (e.g., prices), and decouples rate changes from other policy considerations. On the other hand, indexation may also reduce regular oversight of minimum wage changes because it automatically adjusts the rate and changes one part of the FLSA while leaving other parts of the act unchanged subject to congressional action. Although Congress has considered indexing the federal minimum wage at various points, it has not done so. The most common proposed indices for the minimum wage include different versions of the Consumer Price Index, personal consumption expenditures, employment costs, and hourly earnings. Based on a review of seven possible indices and a simulation of federal minimum wage rates under different indices, the minimum wage in 2016 would have been highest had it been indexed to average hourly earnings and lowest had it been indexed to personal consumption expenditures. Linking the value of the federal minimum wage to consumer prices would have generally resulted in minimum wages higher than the current rate, depending on the starting point. Currently, 17 states and the District of Columbia index (or have enacted laws that will in the future) their state minimum wages to some economic measure. In addition, indexation is used in some federal entitlement programs, such as Social Security and Supplemental Nutrition Assistance Program (SNAP) benefits, as well as in other federal wage regulations, such as the minimum wage for employees on certain federal contracts. Most of the numerous proposals in recent Congresses to increase the minimum wage would combine a series of nominal rate increases, followed by indexation to a consumer price index.

Introduction The debate over the size and scope of federal spending has raised interest in how federal dollars are spent. This report focuses on federal outlays for major "need-tested" programs—programs targeted toward families and individuals with limited income. The major need-tested programs discussed in this report provide cash, food, housing, and educational and medical assistance to families and individuals with limited financial resources, and they had collective FY2013 federal outlays of $606 billion. These programs represented 17.6% of all federal outlays and 3.7% of the gross domestic product (GDP). This report provides perspective on current federal outlays for these programs, examining historical trends in the outlays as well as showing the Congressional Budget Office's (CBO's) April 2014 baseline budget projections for them. The baseline projections cover the period from FY2014 through FY2024, indicating what spending would be if current law were continued. Additional perspective is provided by showing their trends as a percentage of all federal outlays as well as a percent of GDP. Need-Tested Programs The common feature of need-tested programs is that they provide benefits, services, or funding based on a measure of low financial resources (income and sometimes assets). However, beyond that the programs differ considerably in their target populations, benefits, services, and focus. That is, aid from these programs is not provided to one common group of people or families, nor do these programs address the same purposes. Some address basic needs (food, housing, and medical care); others (e.g., student financial assistance) seek to enable recipients to overcome financial need in order to engage in an activity. Moreover, need-tested programs are not the only programs that benefit low-income persons and families. More universally available social programs—such as the social insurance programs of Social Security, Medicare, and Unemployment Insurance—also benefit low-income persons and families. These programs also tend to be substantially larger (in spending) than need-tested programs. To simplify the analysis, this report focuses on nine of the largest need-tested programs based on federal spending, plus subsidies for health care that were created in the 2010 health reform law, and are available to lower-income families and persons. The need-tested programs discussed in this report are the following: Medicaid/CHIP. Medicaid provides medical assistance to needy families with dependent children and the aged, blind, and disabled who have low incomes. Beginning in 2014, states have the option to expand coverage to able-bodied individuals under age 65 with incomes below 133% of the federal poverty guidelines. A large share of Medicaid expenditures pays for nursing home care for the elderly and disabled. The State Children's Health Insurance Program (CHIP) allows states to cover targeted low-income children with no health insurance in families with income above Medicaid eligibility levels. In addition, when certain conditions are met, states may extend CHIP coverage to pregnant women and parents of Medicaid- and CHIP-eligible children. In FY2013, Medicaid/CHIP outlays of $275 billion accounted for 8.0% of all federal outlays and 1.7% of GDP. The health insurance tax credit , created by the 2010 health care reform law, helps certain individuals and families purchase health insurance beginning in 2014. Under the 2010 law, individuals and families not otherwise covered are able to purchase health insurance from state-based "exchanges." Families with incomes below 400% of the poverty line have their out-of-pocket premium payments capped at a certain percentage of their incomes. The remainder of the premium cost is paid for through an advance-payable, refundable tax credit. The refundable portion of that tax credit is considered a federal outlay. The Supplemental Nutrition Assistance Program (S NAP, formerly known as food stamps) provides low-income families with an income supplement to enable them to purchase a minimal cost, nutritious diet. SNAP is available to all low-income households regardless of their demographic composition, though benefits for able-bodied adults without dependents and who are not working is time-limited and certain noncitizens are excluded. SNAP benefits are uniform nationwide for families of a given size except in Alaska, Hawaii, and the territories. In FY2013, SNAP outlays of $83 billion accounted for 2.4% of all federal outlays and 0.5% of GDP. Student Financial Assistance provides funds (mostly through Pell Grants) to students from low-income families to help meet the cost of post-secondary education. Awards are based on a need analysis that considers both the cost of education and the financial resources of the student's family. In FY2013, outlays for student financial assistance of $34 billion accounted for 1.0% of all federal outlays and 0.2% of GDP. Compensatory Education (Title I-A of the Elementary and Secondary Education Act) provides aid to school districts based on their number and percentage of economically disadvantaged children. The purpose of this aid is to ensure that each child has a high-quality education and reaches, at a minimum, proficiency on state academic achievement standards and assessments under the No Child Left Behind Act. In FY2013, total outlays for compensatory education grants of $16.8 billion accounted for 0.5% of all federal outlays and 0.1% of GDP. Housing Assistance , as categorized for this report, includes federal outlays for project-based rental assistance and tenant-based vouchers (under the Section 8 program); other support for public housing; and housing assistance for the elderly, the disabled, and American Indians. In FY2013, housing assistance outlays of $36 billion accounted for 1.1% of all federal outlays and 0.2% of GDP. The Earned Income Tax Credit (EITC) represents the refundable portion of the earned income tax credit. It provides an earnings supplement for low-wage earners, with the size of the credit dependent on family type and earnings. The bulk of EITC dollars was historically delivered through tax refund checks and goes to families with children. Beginning in 2012, all "advance payments" of EITC benefits were ended, and all refundable EITC dollars are paid through refund checks. In FY2013, EITC outlays of $57 billion accounted for 1.7% of all federal outlays and 0.4% of GDP. The Additional Child Tax Credit (ACTC) represents the refundable portion of the child tax credit. It assists eligible parents of children who have earned income above a certain threshold but whose tax liability is too small to fully benefit from the regular nonrefundable child tax credit. It is delivered to families through refund checks when they file their taxes. In FY2013, ACTC outlays of $22 billion accounted for 0.6% of all federal outlays and 0.1% of GDP. Supplemental Security Income (SSI) provides a federally funded cash income floor for low-income persons or couples who are aged, blind, or disabled. Federal SSI benefits are based on uniform nationwide eligibility and benefit rules, and they are paid with federal funds. States may supplement SSI with their own funds. In FY2013, SSI outlays of $57 billion accounted for 1.6% of all federal outlays and 0.3% of GDP. Family Support, as categorized for this report, includes outlays for the Temporary Assistance for Needy Families (TANF) block grant, the Child Support Enforcement (CSE) program, and federal grants to help support state child care subsidy programs. In FY2013, family support outlays of $26 billion accounted for 0.8% of all federal outlays and 0.2% of GDP. This report focuses only on federal outlays. A number of programs (Medicaid, SNAP, housing assistance, and family support) are actually administered at the state or local level. States also contribute financially to Medicaid, SNAP (administrative and employment and training costs), and family support. Further, the bulk of financing for elementary and secondary education represents state and local dollars. Additionally, this report focuses on programs classified as "major" by their current spending level. This focus might leave out some programs that historically comprised a greater share of aid to low-income persons. For example, employment and training programs had much higher spending levels in the 1970s than they do today. Excluding such programs has the effect of somewhat depressing historical spending levels (in the late 1970s) and overstating growth since then. It also leaves out the part of the story regarding low-income assistance: training and employment, particularly public service employment in the late 1970s, were once a greater part of low-income aid. Low-Income Assistance Spending Trends Federal outlays for low-income assistance have generally increased over the past five decades. In total, spending for low-income assistance in inflation-adjusted terms has been higher at the end of each decade. Though there have been some declines in spending immediately following recessions, the long-term trend in federal outlays for low-income assistance is one of increasing spending during both economic downturns and periods of economic growth. Figure 1 shows federal outlays for the major low-income assistance programs in inflation-adjusted terms for FY1962 through FY2013, and shows CBO-projected outlays under current law for FY2014 through FY2024. The figure shows several periods of pronounced growth, with the most recent occurring from FY2007 through FY2011. This represents spending, both automatic (through increased enrollment) as well as legislated (e.g., benefit and funding increases through the American Recovery and Reinvestment Act of 2009 (ARRA, P.L. 111-5 )), in response to the deep recession from 2007 to 2009. Federal outlays for selected programs declined from FY2011 to FY2012. The temporary increases in funding for these programs under ARRA expired during this period. Total federal outlays for these programs again increased from FY2012 to FY2013. Rates of Growth: Health Programs and Non-health Programs Historically, spending for health care (mostly Medicaid) has grown faster than the other categories of low-income assistance spending. Over the entire FY1962 through FY2013 period, federal outlays for low-income health programs have increased, in inflation-adjusted terms, at a rate of 12.7% per year versus 6.2% for other spending. Some of this is attributable to high rates of growth early in the period, as Medicaid was established. As shown in Table 1 , the growth of inflation-adjusted spending for health care generally outpaced the growth for other low-income assistance programs. The major exceptions were in the 1970s, when rates of growth were equivalent between health and non-health programs; and during the recent recessionary period, which saw more rapid growth for non-health programs than for health programs. In FY2013, federal outlays for both health and non-health programs were below their FY2011 levels. The temporary increase in the Medicaid matching rate for states expired during this period, reducing federal Medicaid spending. Table 1 shows that under current policies, CBO projects that health outlays would grow at an average annual rate of 6.9% in the upcoming decade; whereas real spending for other low-income assistance will decline at an average annual rate of 1.2% for that same period. The factors affecting spending for low-income health care (primarily through Medicaid) are complex. However, two major factors are health care cost increases that are greater than the rate of general price inflation; and the growth in Medicaid enrollment. Originally, Medicaid eligibility was tied to the receipt of cash assistance from programs for the elderly, blind, and disabled and families with dependent children. Growth in the enrollment of these programs—particularly in two periods (the late 1960s through the 1970s, and the late 1980s through the early 1990s)—contributed to Medicaid spending increases. However, Medicaid enrollment also increased as a result of legislated expansions of coverage for children beyond those in families receiving cash assistance, as well as pregnant women with incomes below 133% of the federal poverty level. The much faster rate of growth in health care than in other forms of need-tested aid means that health has been an increasing share of total federal outlays for need-tested programs. Figure 2 shows the composition of federal outlays on major low-income assistance programs for FY1962 through FY2024. In FY1962, most need-tested aid was in the form of cash public assistance through grants to states for families with children and the aged, blind, and disabled. This has changed dramatically over time. Non-cash benefits or services, particularly health care, began to account for an increasing share of aid to low-income families and persons. In FY2013, federal outlays for Medicaid and CHIP alone accounted for almost half (48%) of all federal outlays for major low-income assistance programs. As projected under current policies by CBO, federal outlays for health will account for a growing share of need-tested aid in the coming decade. By FY2024, health would account for two-thirds of all dollars spent on major low-income assistance programs. The projected health outlays include the estimated costs of the expansions made in the 2010 health reform law, such as the expansion of Medicaid coverage for currently uncovered persons under age 65 with incomes below 133% of the federal poverty level and the refundable portion of the health tax credit that subsidizes health insurance purchased through state exchanges for those with incomes under 400% of the federal poverty level. Trends in Non-health Spending The large growth in health spending obscures some of the trends in the non-health portion of aid to low-income families and persons. As discussed above, inflation-adjusted outlays for the major non-health low-income assistance programs also grew over the past five decades, albeit at a slower rate than health spending. Figure 3 shows the trends for inflation-adjusted outlays of the selected non-health programs that provide low-income assistance. Historically, aggregate outlays for the non-health need-tested programs increased during periods of both economic downturn and economic growth. However, CBO projects that, under current law, spending for all of these programs except SSI will decline in real terms over the next few years as the economy continues to recover from the 2007-2009 recession. Trends through the Late 1980s As discussed above, cash benefits (in the family support category) dominated spending in the early years. Supplemental Security Income (SSI) represented a federalization of cash benefits for the aged, blind, and disabled beginning in FY1974. However, from the mid-1970s through the end of the 1980s, cash benefits as represented by the family support and SSI categories increased only slightly. The largest growth in spending through the late 1980s was in noncash benefits and services: Elementary and Secondary Education Aid . Compensatory education grants to school districts (Title I-A of the Elementary and Secondary Education Act), based on their number and percentage of disadvantaged children, date back to President Lyndon Johnson's Great Society. Higher Education Aid . The Basic Educational Opportunity Grants (BEOG), the predecessor to Pell Grants, was created in the Education Amendments of 1972. SNAP (the program formerly known as food stamps). A Food Stamp pilot program began in 1961 and legislation in 1964 made the program permanent. However, it did not operate nationwide until 1974. Housing A ssistance. Federal housing aid dates back to the Great Depression. Until the Housing Act of 1974, federal policy emphasized supporting the construction of public housing for low-income persons. The 1974 act established the Section 8 program, which changed the emphasis of housing assistance policies toward providing rent subsidies for lower-income households in private market housing. The 1990s The 1990s was the decade of welfare reform. In that decade, total spending on non-health low-income assistance programs increased. However, aid was substantially restructured during the period. For low-income families with children, policies were shifted away from providing a safety net for families without earnings toward a policy to support work among low-income parents. The 1996 welfare reform law converted the cash assistance entitlement for families with dependent children into the Temporary Assistance for Needy Families (TANF) block grant, with recipients of cash aid subject to work requirements and time limits for federal aid. The 1996 law also curtailed aid to noncitizens. However, aid to working poor families with children was increased during the 1990s through other programs. Earnings supplements for working parents through the EITC were substantially expanded through legislation in 1990, with a major increase in the amount of the credit enacted in 1993. A child tax credit of $500 per child was established by tax legislation in 1997. The 1996 welfare reform law also substantially expanded funding to help states pay for child care subsidies for working parents. 2000-2007 The major legislated expansions in aid in the 2000s before the onset of the recession were in the EITC and child tax credit. Several pieces of legislation increased the size of the child tax credit (to $1,000 beginning in 2003). In addition, tax legislation through this period made the credit refundable to more families. Substantial changes were also made to Pell Grants in 2007 amendments (and again in 2010). Recent Years There were large increases in spending for low-income aid in recent years in response to the 2007-2009 recession. This resulted from both automatic factors (increases in enrollments in the entitlement programs) as well as legislated changes. The American Recovery and Reinvestment Act of 2009 ( P.L. 111-5 ) provided an increase in the EITC for families with three or more children; further expanded the availability of the refundable portion of the child tax credit; increased the average SNAP benefit by 15%; increased the maximum Pell Grant; and provided extra funding for both compensatory education and TANF. Many of the ARRA provisions were temporary and have expired. However, ARRA changes to the two refundable tax credits (EITC and the child credit) have been extended. Under current law, the child credit and the EITC would revert back to pre-2009 rules after 2017. CBO's April 2014 baseline projects that enrollment in SNAP will gradually decline as the economy recovers over the next 10 years. Thus, federal outlays for the major non-health need-tested programs are projected to decline, in real terms, over the coming decade. Federal Outlays for Low-Income Assistance Programs as a Percentage of the Gross Domestic Product Federal outlays for major low-income assistance programs measured as a percentage of gross domestic product (GDP) provide a sense of how large these programs are relative to the size of the national economy. These programs have grown as a share of GDP over the past five decades, ending each decade at a higher level as a percentage of GDP. Figure 4 shows federal outlays for major low-income assistance programs as a percentage of GDP for FY1962 through FY2013, and as projected under the CBO baseline for FY2014 through FY2024. Outlays for these programs—both the non-health and health programs—generally increased as a share of GDP, with some fluctuations due mostly to the economic cycle (e.g., increasing as a share of GDP during economic slumps, decreasing during periods of growth). The longest period of decline as a percentage of GDP was in the late 1990s. Federal outlays for major low-income assistance programs as a percentage of GDP decreased for four consecutive years. During this period, outlay growth for these programs increased, but at a rate slower than overall economic growth. In FY2011, federal outlays on the selected low-income assistance programs as a percentage of GDP reached 4.1%. They have since fallen back to 3.7% of GDP. However, total federal outlays for the selected low-income assistance programs would again rise, to 4.1%, in FY2017 and remain in the neighborhood of 4% of GDP thereafter. All of that increase reflects the growth of health care spending. Federal outlays for the major non-health programs as a percentage of GDP would drop from their peak of 2.2% in FY2011 to below their pre-recession levels by FY2020, with continued declines thereafter. Federal Outlays for Low-Income Assistance Programs as a Percentage of the Federal Budget Though federal spending for major low-income assistance programs has increased by almost any measure, so has total federal spending. Figure 5 shows total federal outlays for major need-tested programs as a percentage of total federal spending. Though the long-term trend has been for the major need-tested programs to account for a greater share of total federal spending, the largest jumps in this measure occurred from the mid-1980s to the mid-1990s, when spending for them jumped from about 8% to 14% of total federal outlays. Aggregate federal outlays for these programs increased again, to about 16% of total federal outlays, by FY2004; fell before the recession; and then increased to 17.4% of total outlays in FY2010. In FY2013, federal outlays for the selected low-income assistance programs were 17.6% of total outlays. Under CBO's April 2014 baseline, federal outlays for the selected programs would peak as a percentage of total federal outlays in FY2016 and FY2017 at 19.6%, with declines thereafter. Conclusion At the beginning of the period examined in this report (FY1962), federal aid to address low income was dominated by grants to the states to provide public assistance for the aged, blind, and disabled and families with dependent children. Grant-in-aid programs for the low-income aged, blind, and families with dependent children were established by the Social Security Act of 1935 and focused on groups that, during that era, were not expected to work. A grant-in-aid program for low-income disabled persons was added in 1950. The period since the 1960s saw large changes in programs that assist low-income families. First, there were large expansions in noncash medical, food, and housing assistance. The Great Society era also produced expanded educational aid for elementary and secondary education for school districts with large concentrations of low-income children, and the early 1970s saw the establishment of grants to help students from low-income families attend college. Second, there was the increasing dominance of medical assistance in spending for low-income families. By FY2013, Medicaid and the State Children's Health Insurance Program (CHIP) accounted for almost half of all spending on major low-income assistance programs. Third, low-income aid became increasingly federalized. In the 1970s, the federal government assumed the costs of providing a cash income floor for the aged, blind, and disabled; by mid-decade, the expanded food stamp program provided 100% federally funded benefits nationwide using uniform benefit and eligibility rules; and housing aid shifted to 100% federally financed vouchers. In the last two decades (the 1990s and the 2000s), the major expansion of aid was done through refundable tax credits for families with children, 100% federally financed and administered through the tax code. The exception to the rule of increasing federalization—and it is a major exception—is that the costs of Medicaid and CHIP are shared with the states. Fourth, for families with children, expansions of aid went to the working poor rather than the nonworking poor. The Medicaid expansions of the 1980s and early 1990s were for children who were not on cash assistance and thus targeted families with earnings. The Earned Income Tax Credit (EITC) and the refundable portion of the child credit require earnings to qualify for them. Food and housing assistance programs benefit families with and without earned income, and increasingly assist those who work. Looking at CBO's budget projections of current policies, low-income aid would become increasingly dominated by health care. Medicaid, CHIP, and the new health care tax credit established in the 2010 health law would account for two-thirds of all dollars spent on low-income aid through the selected programs by 2024. Non-health programs would see their aggregate spending decline. Additional Reading CRS Report R41625, Federal Benefits and Services for People with Low Income: Programs, Policy, and Spending, FY2008-FY2009 , by [author name scrubbed]. CRS Report R43357, Medicaid: An Overview , coordinated by [author name scrubbed]. CRS Report R42663, Health Insurance Exchanges Under the Patient Protection and Affordable Care Act (ACA) , by [author name scrubbed] and [author name scrubbed]. CRS Report R42446, Federal Pell Grant Program of the Higher Education Act: How the Program Works, Recent Legislative Changes, and Current Issues , by [author name scrubbed]. CRS Report RL33960, The Elementary and Secondary Education Act, as Amended by the No Child Left Behind Act: A Primer , by [author name scrubbed]. CRS Report RL34591, Overview of Federal Housing Assistance Programs and Policy , by [author name scrubbed], [author name scrubbed], and [author name scrubbed]. CRS Report RL31768, The Earned Income Tax Credit (EITC): An Overview , by [author name scrubbed] and [author name scrubbed]. CRS Report R41873, The Child Tax Credit: Current Law and Legislative History , by [author name scrubbed]. CRS Report R42505, Supplemental Nutrition Assistance Program (SNAP): A Primer on Eligibility and Benefits , by [author name scrubbed]. CRS Report R40946, The Temporary Assistance for Needy Families Block Grant: An Introduction , by [author name scrubbed]. CRS Report R41917, Welfare, Work, and Poverty Status of Female-Headed Families with Children: 1987-2012 (pdf), by [author name scrubbed]. Appendix. The spending trends shown in this report are based on spending for 9 of the 10 largest programs (in terms of spending) providing low-income assistance catalogued in CRS Report R41625, Federal Benefits and Services for People with Low Income: Programs, Policy, and Spending, FY2008-FY2009 , by [author name scrubbed]. That report provides a "snapshot" of federal or federally assisted need-based programs with $100 million or more in obligations in FY2008 or FY2009. This report intends to complement the material in CRS Report R41625 by providing information on long-term spending trends. The 10 largest need-tested programs discussed in CRS Report R41625 were (1) Medicaid; (2) SNAP; (3) SSI; (4) EITC; (5) Pell Grants; (6) the ACTC (the refundable portion of the child tax credit); (7) Title I-A Education for the Disadvantaged; (8) Medicare Part D, the Prescription Drug Low-Income Subsidy; (9) TANF; and (10) Section 8 Housing Choice Vouchers. CRS Report R41625 used federal obligations as its measure of spending for a program because they are the most consistent measure at the level of detail (program-level) used in that report. However, as mentioned in that report, obligations are difficult to track in a consistent manner over time. The most consistent measure of federal spending available over time is outlays, which represent actual payments from the federal government, usually in the form of checks or electronic transfers of funds. Each year, the Office of Management and Budget (OMB) releases a database that shows historical outlays for each budget account for each fiscal year from FY1962 and later. Additionally, the Congressional Budget Office (CBO) makes its baseline budget projections in terms of outlays for each budget account. The tradeoff here is that budget account outlays do not necessarily represent program-level activity. Some programs represent spending within only a part of an account. Moreover, the composition of accounts sometimes changes over time, which necessitates combining multiple accounts to provide consistent measures of spending over time. Table A-1 shows the federal outlays for the selected major income assistance programs by budget account. It shows that three of the categories represent combinations of accounts. Medicaid (the largest program) is combined in this report with the State Children's Health Insurance program (CHIP) because some CHIP programs are expansions of Medicaid. Housing assistance combines many accounts and represents far more spending than the Section 8 Housing Choice Vouchers discussed in CRS Report R41625. The account composition of housing aid has changed many times over the years, and a consistent measure of "housing assistance" requires combining both rent vouchers and support for families in public housing. Finally, the "Family Support" account comprises more than TANF. In the federal budget, TANF's predecessor (Aid to Families with Dependent Children) was included in the same account as the Child Support Enforcement (CSE) program and child care for families receiving, transitioning from, or at-risk of receiving cash assistance. Therefore, the "Family Support" category covers TANF, CSE, and today's child care subsidy programs. TANF also consolidated funding in the pre-1996 program to provide employment services, education, and training for cash assistance recipients (the Job Opportunity and Basic Skills Training, or JOBS, program); funding for that program is included in the historical outlays of the "Family Support" category. In addition, Pell Grants are the major component of the "Student Financial Assistance" account. Also included in the "Student Financial Assistance" account are federal supplemental educational opportunity grants (SEOGs) and college work study programs. The largest component of the "Compensatory Education" account (currently named "Accelerating Achievement and Ensuring Equity") is the Title I-A grants to school districts with low-income children, but it also includes School Improvement Grants, Even Start, and the High School Graduation initiative, among other activities. The Medicare Part D (prescription drug) low-income subsidy is not included in this report because it is not separately accounted for in the federal budget, but instead is subsumed in the much larger budget account that finances the Medicare prescription drug program. Unlike it did for other programs, CRS Report R41625 did not use federal budget information to capture spending for this program. Rather, it used information from the annual report of the Medicare trustees.

This report examines the spending trends of 10 major need-tested benefit programs or groups of programs: (1) health care from Medicaid and the Children's Health Insurance Program (CHIP); (2) the refundable portion of the health insurance tax credit enacted in the 2010 health care reform law; (3) the Supplemental Nutrition Assistance Program (SNAP); (4) assisted housing; (5) financial assistance for post-secondary students (Pell Grants); (6) compensatory education grants to school districts; (7) the Earned Income Tax Credit (EITC); (8) the Additional Child Tax Credit (ACTC); (9) Supplemental Security Income (SSI); and (10) Family Support Payments. The common feature of need-tested programs is that they provide benefits, services, or funding based on a measure of limited financial resources (income and sometimes assets). However, other than that common feature, the programs differ considerably in their target populations, services, and focus. In total and in inflation-adjusted terms, federal outlays for major need-tested programs increased in each decade examined in this report, from the 1960s to the present. There were particularly large increases in need-tested outlays during the FY2007 through FY2011 period, attributable to the effects of the recent deep recession (which increased the number of people eligible for aid) and policy responses to it that increased federal funding and benefits for certain programs. Spending for these programs declined from FY2011 to FY2012, as the effects of many of the temporary funding increases for these programs made in response to the recession expired. Total outlays for these programs began to rise again from FY2012 to FY2013. The Congressional Budget Office (CBO) forecasts that under current law, federal outlays for need-tested programs would increase, even in inflation-adjusted terms, in the upcoming decade. However, that increase is attributable to health care programs. For programs other than health care, total inflation-adjusted spending is projected to decrease over the period from FY2013 through FY2024. Different programs also have different spending trends. Cash benefits—to the aged, blind, and disabled and needy families with dependent children—comprised most aid to low-income families in the early 1960s. However, over the period from the 1960s through the end of the 1980s, most of the growth in aid was for non-cash benefits in the form of education, food, housing, and medical assistance. The 1990s was the decade of "welfare reform." The policies affecting low-income families with children, in particular, were substantially altered, with less emphasis on providing a "safety net" for families without a worker and more emphasis on aiding low-income workers in a system geared to "make work pay." Federal funding for cash assistance for needy families with children fell, but this was far more than offset by increases in the EITC, which supplements the earnings of lower-income families, as well as federal funding for other programs that support lower-earning families (e.g., child care subsidies). Outlays for major low-income assistance programs continued to increase in the 2000s even before the onset of the recent recession. This increase stemmed from increased spending on the refundable EITC and child tax credits, SNAP, education programs, and Medicaid.

Introduction In the late 1960s and 1970s, advancements in telecommunications technologies enabled the creation of a large-scale, interconnected network called ARPANET ("Advanced Research Projects Agency Network"). ARPANET was created by the Defense Advanced Research Projects Agency as a government-funded enterprise until the mid-1990s, when it began commercialization. Today's Internet is a direct outgrowth of the technologies developed and lessons learned from ARPANET. During the late 1990s, the Internet began having a significant impact on culture and commerce, including the exponential increase of near instant communication by electronic mail (e-mail), text-based discussion forums, and the graphical World Wide Web. Today, the Internet has evolved even further and many people are using newer tools, such as blogs, social networks, video sharing sites, and other aspects of today's communications technology to express their political ideals, many times in conflict with the political opinions and outlook espoused by their governments. In this way, the Internet has proven to be an unprecedented and often disruptive force in some closed societies, as the governments seek to maintain their authority and control the ideas and information their citizens receive. These regimes are often caught in a dilemma: they need the Internet to participate in commerce in the global market and for economic growth and technological development, but they also seek to restrict the Internet in order to maintain the government's control. Figure 3 illustrates an assessment by Freedom House of the extent to which selected countries restrict freedom on the Internet. In Burma during the 2007 Saffron Revolution, YouTube footage, often filmed with cell phone cameras, conveyed to the world the human rights violations against the monks and generated international awareness and reaction. Demonstrations in Tehran following the June 12, 2009, presidential elections were often organized through Twitter and text messages over cell phones. The Iranian government's violent response to the demonstrations was spread around the world through live cell phone pictures, e-mails, and phone calls. The Voice of America (VOA) reported that during the demonstrations, Iranians sent VOA over 300 videos a day, along with thousands of still pictures, e-mails, and telephone calls to the agency. A variety of control mechanisms are employed by regimes seeking to limit the ways the Internet is used, ranging from sophisticated surveillance and censorship to threats of retaliation (which foster self-censorship) and actual harassment and arrests of Internet users. Such regimes often require the assistance of foreign Internet companies operating in their countries. These global technology companies find themselves in a dilemma. They often must choose between following the laws and the requests of authorities of the host country, or refusing to do so and risking the loss of business licenses or the ability to sell services in that country. Human rights groups have protested that Yahoo! and Google censor and remove material deemed sensitive by host governments on country-specific search engines. Microsoft is said to censor Chinese versions of its blog platforms. Human rights groups also charge that Yahoo! has provided Chinese authorities personal identifying information about users that has allowed the government to identify and arrest individuals for statements made on the Web. A representative of Google, Inc. acknowledged the problem of government involvement, noting As our ... Burma experiences indicate, our products are platforms for free expression, transparency, and accountability. Because of this, we often face efforts by governments throughout the world to restrict or deny access to our products. The Global Online Freedom Act of 2009 (GOFA) ( H.R. 2271 ), introduced by Representative Christopher Smith, would mandate that companies selling Internet technologies and services to repressive countries take actions to combat censorship and protect personally identifiable information. Some believe, however, that technology can offer a complementary and, in some cases, better and more easily implemented solution to prevent government censorship. Hardware and Internet services, in and of themselves, are neutral elements of the Internet; it is how they are implemented by various countries that makes Internet access "repressive." For example, hardware, such as routers, is needed to provide Internet service everywhere. However, hardware features intended for day-to-day Internet traffic management, conducted by Internet service providers (ISPs) and governments for benign purposes, can be misused. Repressive governments are able to use these features to censor traffic and monitor use—sometimes using them to identify specific individuals for prosecution. It is not currently feasible to remove those features from the product, even when sold to countries that use those features to repress political speech. On the other hand, Internet services, such as Google, are often tailored for deployment to specific countries. Such tailoring is done to bring the company's products and services in line with the laws of that country, and not with the end goal of allowing the country to repress and censor its citizenry. In many cases, tailoring does not raise many questions about free speech and political repression because the country is not considered to be a repressive regime. Under Canadian human rights law, for example, it is illegal to promote violence against protected groups; therefore, when reported, Google.ca will remove such links from search results. Internet censorship and the prosecution of individuals who attempt to circumvent that censorship are unlikely to be eliminated in some countries. However, while some governments are continually looking for new and more thorough methods to restrict or inhibit Internet use, citizens in these countries are active in developing techniques to circumvent those efforts. Case Study: China9 The organization Reporters Without Borders has listed 15 countries where Internet freedom is restricted. These countries are China, Cuba, North Korea, Belarus, Myanmar, Egypt, Ethiopia, Iran, Saudi Arabia, Syria, Tunisia, Turkmenistan, Uzbekistan, Vietnam, and Zimbabwe. This report uses China as an illustrative case study. The People's Republic of China (PRC) has the world's largest number of Internet users, estimated at 330 million people, including 70 million bloggers. It also has one of the most sophisticated and aggressive Internet censorship and control regimes in the world. According to some estimates, between 30 and 40 Chinese citizens are serving prison sentences for writing about politically sensitive topics online. In November 2009, Huang Qi, a human rights advocate, was sentenced to three years in prison for "possessing state secrets" after posting online appeals and complaints of families whose children had been killed in school buildings during the Sichuan earthquake of May 2008. Some studies show that the vast majority of Internet users in China do not view the medium as a political tool. Nonetheless, Chinese Internet users are able to access unprecedented amounts of information, despite government attempts to limit the flow, while political activists and others continue to push back against restrictions and find ways to circumvent censorship. PRC officials have argued that Internet controls are necessary for social stability and that new restrictions target pornography and other "harmful content." Chinese official commentary has suggested that the U.S. government has applied a double standard, regulating the Internet at home while calling for other countries to eliminate controls. The PRC government also has referred to U.S. criticism of Internet restrictions in China as politically motivated and an interference in China's domestic affairs. The PRC government employs a variety of methods to control online content and expression, including website blocking and keyword filtering; regulating and monitoring Internet service providers, Internet cafes, and university bulletin board systems; registering websites and blogs; and occasional arrests of high-profile "cyber dissidents" or crackdowns on Internet service providers. Some analysts argue that even though the PRC government cannot control all Internet content and use, its selective targeting creates an undercurrent of fear and promotes self-censorship. Blocked websites, social networking sites, and file sharing sites include Radio Free Asia, international human rights websites, many Taiwanese newspapers, Facebook, Twitter, and YouTube. The government reportedly has hired thousands of students to express pro-government views on websites, bulletin boards, and chat rooms. Furthermore, some analysts argue that the Internet has enhanced government propaganda and surveillance capabilities. Nonetheless, the Internet has made it impossible for the Chinese government to restrict information as fully as before; bulletin boards, comment boards, chat rooms, blogs, and other outlets have allowed for an unprecedented amount of information and public comment on social and other issues. Although the state has the capability to block news of events or to partially shut down the Internet, as it did in Xinjiang following ethnic unrest that erupted there in July 2009, it often cannot do so before such events are publicized, if only fleetingly, online. The threat of public exposure or condemnation through the Internet reportedly has compelled some government officials to conduct affairs more openly. For Chinese Internet users in search of censored information, circumventing government controls is often made possible by way of "proxy servers" or "virtual private networks" using special software. Furthermore, English language news sites, such as the New York Times and the Washington Post , are generally available. U.S. Internet Companies, China, and Human Rights Issues Some human rights activists and U.S. policy makers have expressed concern that U.S. Internet companies have sold Internet services or technologies to China that have assisted the PRC government in restricting information and communication and in monitoring and identifying Internet users. U.S. congressional committees and commissions have held hearings on the topics of global Internet freedom and the roles of U.S. Internet and technology companies in China's censorship regime. Some media watchdog groups and members of Congress have maintained that some U.S. information technology companies, including Yahoo!, Microsoft, Google, and Cisco Systems, have provided willing, direct, sustained, or comprehensive support to PRC Internet censorship and political control efforts. U.S. information technology companies have responded that they must abide by the laws of the countries in which they operate, and that they are not actively cooperating or collaborating with the PRC government or tailoring their products to suit PRC censorship requirements. These companies add that despite PRC censorship policies, they nonetheless are enlarging the volume of information available in China and other Internet-restricting countries, and can better press for freedom of expression and protection of privacy while located in these countries. They also claim that Chinese and other Asian and European competitors would fill the void in providing Internet services and technology in their absence. Furthermore, some Chinese experts have suggested that overall, the Internet, including foreign involvement, has created greater political freedom, despite the ongoing battle against growing PRC government attempts to control it. Yahoo! Yahoo! has been blamed for complicity in the arrests of at least four Chinese Internet users by providing their e-mail account information to PRC authorities. In the most high-profile case, in 2004, Yahoo!'s Hong Kong office was accused of having provided information about the identity of a Chinese journalist and Yahoo! e-mail account holder, Shi Tao. Shi reportedly had forwarded information about state policy regarding the 15 th anniversary of the Tiananmen demonstrations via his Yahoo! e-mail account to an overseas democracy group. In March 2005, a PRC court sentenced Shi to 10 years in prison for "leaking state secrets." In August 2005, Yahoo! bought a 39% stake in China's Alibaba Group, a Chinese Internet service provider, and turned over its PRC operations to the Chinese company. Microsoft In 2005, Microsoft shut down the MSN Spaces site of Chinese political blogger Zhao Jing (a.k.a. Michael Anti) at the request of the PRC government, after Zhao had expressed support in his blog for a boycott of Beijing News following the firing of one of its editors. Human rights activists also criticized Microsoft for blocking words such as "democracy" from MSN Spaces. Microsoft was China's leading blog service provider at the time and remains one of the most popular. Recently, Microsoft also has been accused of cooperating with China's censorship policies in the development of its new Bing search engine. Google Google's activities in China have reflected an attempt by the company to comply with PRC policies while limiting the company's role in censorship. Google's Chinese search engine, Google.cn, reportedly is the second-most widely used information-gathering service in China after that of Baidu , a Chinese company, and is the least censored, according to one study. Google.cn provides a message stating that a website is unavailable due to "local laws, regulations, and policies," suggesting to the user that additional information exists, but that the government has closed access to that site. In 2006, Google reportedly moved its search records outside of the PRC in order to prevent the government from accessing the data without the company's consent, and does not host Gmail and Blogger services in China as a measure to protect the privacy of Chinese account holders. Ever since it entered the China market in 2005, Google and the PRC government have clashed over censorship and other issues, although the company has complied with Chinese laws in principle. In June 2009, China's Foreign Ministry accused the Internet company of violating PRC law and enabling Chinese Internet users to access "vulgar content." Google's Chinese service was disrupted for a few days, which some analysts viewed as the Chinese government response to Google's apparent resistance to abide by new censorship edicts. Chinese writers accused Google of copyright infringement after the company began publishing their works in its online library, Google Books. In October 2009, the People's Daily, the state's premier newspaper, accused Google of blocking its stories of the dispute. In February 2010, China accused Google of breaking a "written promise" to follow filter laws regarding searches. In response, Google re-routed searches to uncensored Google Hong Kong—automatically redirecting users from "google.cn" to "google.com.hk." While that allowed Google to be free from China's censorship laws, because it doesn't host search operations on the mainland, Google acknowledged that the Chinese authorities consider the approach "unacceptable." Finally, in June 2010, the day before Google's license to do business in China was due to expire, the company resubmitted a renewal application saying it would create a new "google.cn" landing page, where users could find a link to the non-censored Hong Kong search engine. The tense relationship between China and Google is likely to continue. Cisco Systems Cicso Systems, Juniper Networks, Nortel of Canada, and Alcatel of France reportedly were involved in upgrading China's Internet infrastructure, filtering, and surveillance systems earlier this decade. According to some reports, Cisco Systems sold several thousand routers to China, which helped to facilitate the PRC government's censorship of Internet content and monitoring of Internet users. According to other reports, Cisco sold technology to China's police force that can be used in the collection and use of data regarding personal background and imaging information, Web browsing history, and e-mail. The Continuing Battle Between Censorship and Freedom of Information The PRC government has displayed a growing nervousness about the Internet's influence on Chinese society and politics, but it has been reluctant to provoke the ire of China's online population or to reduce the attractiveness of China's business environment for foreign investors. In June 2009, the PRC government issued a directive requiring "Green Dam Youth Escort" software, designed to prevent children from accessing "harmful content," such as pornography, on all Chinese computers sold after July 1, 2009, including those imported from abroad. Many Chinese Internet users, international human rights activists, foreign governments, chambers of commerce, and information technology manufacturers openly opposed the policy, arguing that the software would undermine computer operability, that it could be used to expand censorship to include political content, and that it could incorporate pirated software and weaken Internet security. On June 30, 2009, the PRC government announced that mandatory installation of the software would be delayed for an indefinite period. On August 14, 2009, Minister of Industry and Information Technology Li Yizhong stated that the directive had created misunderstandings and that, "We will listen to the public's views before issuing a new directive on Green Dam." Following the aborted launch of "Green Dam," the PRC government has continued to tighten controls over Internet content and use, but in a quieter manner. In September 2009, PRC authorities issued requirements that new users register their true identities. This regulation reportedly has not been well enforced; however, the government can still track down individuals through their IP addresses. In December 2009, new restrictions aimed at cracking down on pornography, media piracy, and threats to national security and stability resulted in the closing of hundreds of websites, many of them entertainment-oriented. Furthermore, the China Internet Network Information Center announced that individuals could no longer apply for ".cn" domain names (China's country code), which it would now limit to registered business enterprises. Some observers argued that these policies could dampen the richness and vibrancy of Internet content and activity in China, as well as provoke a public backlash. On October 15, 2009 (Internet Human Rights Day), 15 Chinese intellectuals issued a Declaration of Internet Human Rights calling for freedom of opinion, speech, and publication online. Google and Cyber Attacks In January 2010, Google threatened to cease censoring its Chinese search engine or to pull out of China. The company asserted that, in December 2009, Chinese hackers had attacked its Gmail service and corporate network as well as the computer systems of many other large U.S. corporations in the PRC. Hackers appeared to have targeted the Gmail accounts of Chinese human rights activists; the intellectual property, including "source codes" or programming languages, of Google and other companies; and information on U.S. weapons systems. In a statement, Google's chief legal officer announced that the company would no longer censor results on Google.cn, even if that meant having to shut down the search engine, and potentially its offices in China. Yahoo!, which was also hit by Chinese hackers, expressed support for Google's actions, thereby provoking an angry response by its PRC partner, Alibaba . Chinese discussion boards and micro-blog postings indicated that a small majority of China's online population—and perhaps a large majority of its most active Internet users—wanted Google to stay in China, with some supporting Google's challenge to the PRC government. A significant minority adopted a pro-government stance or interpreted Google's move as profit-oriented. According to some analysts, although China has huge potential, the company currently earns an estimated $300 million to $400 million from its China operations, a "tiny fraction" of its $22 billion in sales worldwide. While visiting Shanghai during his state visit to China in November 2009, President Barack Obama expressed support of unrestricted Internet access and disapproval of censorship. On January 21, 2010, in a policy speech on Internet freedom, Secretary of State Hillary Clinton urged U.S. Internet companies to oppose censorship in their overseas operations and announced that the Global Internet Freedom Taskforce (GIFT) would be reinvigorated. She also called upon the PRC government to conduct a thorough investigation of the December 2009 cyberattacks upon U.S. companies in China and to make its results transparent. Although Google confirmed in February that the attacks had come from mainland China, Beijing denied involvement in the attacks and defended its Internet policies. The Foreign Ministry stated that foreign companies, including Google, "should respect the laws and regulations, respect the public interest of Chinese people and China's culture and customs and shoulder due social responsibilities." Case Study: Iran38 The Iranian government has restricted Internet usage since access spread beyond universities and government agencies to the general population in the late 1990s. Today, Iran has an estimated 23 million Internet users, and watchdog groups and Internet activists claim that Iran's filtering and monitoring of usage is among the most extensive in the world. According to the U.S. Department of State's 2 009 Country Reports on Human Rights Practices : The government monitored Internet communications, especially via social networking Web sites such as Facebook, Twitter, and YouTube, with technology it purchased at the end of 2008. The government threatened, harassed, and arrested individuals who posted comments critical of the government on the Internet; in some cases it reportedly confiscated their passports or arrested their family members. Freedom House and other human rights organizations reported that authorities sometimes stopped citizens at Tehran International Airport as they arrived in the country, asked them to log into their YouTube and Facebook accounts, and in some cases forced them to delete information…. The government also imposed limits on Internet speed and technology, making it difficult to download Internet material or to circumvent government restrictions to access blocked Web sites. After the June election, there was a major drop in bandwidth, which experts posited the government may have caused in its effort to prevent activists involved in the protests from accessing the Internet and especially from uploading large video files…. During the year the government prosecuted and punished persons for peaceful expression of dissenting views via the Internet. During the "show trials," prosecutors often cited activities on the Internet or e-mails sent to foreigners as evidence of illegal activity. According to Reporters Sans Frontieres, seven bloggers remained detained at year's end. The Iranian government tracks online communication and content through a centralized location in the state's telecommunications monopoly, the Ministry of Communications and Information Technology (MCIT). In addition to its 23 million Internet users, the Persian blogosphere is among the world's most robust. The freedom of Internet sites and blogs remains contested under Iranian law, but the Press Law does require that bloggers obtain licenses, and all content on websites and blogs is subject to approval of the Ministry of Culture and Islamic Guidance (MCIG). The government also regulates access to the Internet by limiting the speed of Internet access that ISPs can provide to households and public access sites (Internet cafes) to 128 kilobytes per second, making it difficult or impossible to download multimedia content. Iran reportedly is the only country to have imposed a cap on Internet access speed for households. Iran also has arrested numerous activists, bloggers, and journalists on charges of "antigovernment publicity," "propaganda against the Islamic Republic," and "jeopardizing national security." The Nokia Siemens Network (NSN) sold communication monitoring equipment to the Iranian government in 2008. The monitoring center, installed into the MCIT gateway, was part of a larger contract with Iran that included mobile phone network technology. The Iranian government had reportedly experimented with the monitoring equipment prior to the election, but did not use it extensively until after the election. Some experts have argued that the nature of the content inspection following Iran's 2009 presidential election went beyond the censorship practices of other countries, including China. NSN maintains that it sold the technology for the purpose of "lawful intercept" of information used to track criminals and terrorists. Critics argue that in a country like Iran, where the population is heavily reliant on Internet communication with the outside world due to censorship of other communication, this technology enables the government to intensify repression. Iran's 2009 Presidential Election Prior to the 2009 Presidential election, the government had disabled the Internet altogether for brief periods, usually during elections, but some observers argue that improvements in monitoring and filtering technologies have made such measures unnecessary and even enabled the government to use the Internet to disseminate disinformation and pro-government content. Following the disputed 2009 presidential election, the Internet was reportedly slow but accessible. The number of detentions of Internet activists and bloggers increased during the post-election unrest, arguably demonstrating the extent of government filtering and monitoring of usage. The post-election crackdown on Internet freedom raised concerns that Iran's human rights abuses were being aided by Western technology companies. Others said the concerns were being overstated, asserting that Iran also develops its own filtering and monitoring technologies. In her January 2010 address on global Internet freedom, Secretary of State Hillary Clinton said of the post-election events in Iran: As in the dictatorships of the past, governments are targeting independent thinkers who use these tools. In the demonstrations that followed Iran's presidential elections, grainy cell phone footage of a young woman's bloody murder provided a digital indictment of the government's brutality. We've seen reports that when Iranians living overseas posted online criticism of their nation's leaders, their family members in Iran were singled out for retribution. And despite an intense campaign of government intimidation, brave citizen journalists in Iran continue using technology to show the world and their fellow citizens what is happening inside their country. In speaking out on behalf of their own human rights, the Iranian people have inspired the world. And their courage is redefining how technology is used to spread truth and expose injustice. Concerns about Internet freedom continue. On February 9, 2010, Iran's telecommunications agency announced what it described as a "permanent suspension" of Google Inc.'s e-mail services, adding that it planned to initiate a national e-mail system for the Iranian people. The suspension came two days before the February 11 anniversary of the establishment of the of the Iranian Republic. The announcement was widely perceived as an attempt by the government to limit the ability of anti-government protesters to organize; opposition leaders had called for counter-protests to the anniversary celebrations. Google, Inc. reported a "sharp drop in traffic" adding that they had "looked at our own networks and found that they are working properly." Access to Google e-mail services was eventually restored, but reportedly remains intermittent and unreliable in the face of broader government censorship. U.S. Initiatives to Promote Internet Freedom in Iran Since FY2008, Congress has appropriated $50 million specifically to support Internet freedom globally. According to the State Department, Internet freedom programming seeks to "preserve and expand arenas where democratic practices are permitted, as well as to support demands for a strengthened role for democratic institutions and processes and greater responsiveness to the electorate over the longer term." The State Department uses both earmarked and other foreign assistance funding to support Internet freedom, independent media, and the free flow of information in Iran. Congressional Activities Members of the 111 th Congress considered a number of Iran-specific Internet freedom measures. •     On June 24, 2010, the House passed H.Res. 1457 , "Whereas Iran's authoritarian system of government violates numerous international norms and principles of democratic governance," which, among other things, "condemns the ongoing violence and human rights abuses against the people of Iran by the Government of Iran and pro-government militias, as well as the ongoing government suppression of independent electronic communication through interference with the Internet and cell phones." On June 14, 2010, the Senate passed S.Res. 551 , "A resolution marking the one year anniversary of the June 12, 2009, presidential election in Iran, and condemning ongoing human rights abuses in Iran," which, among other things, expresses the Senate's support for "the people of Iran as they seek peaceful and free expression, free speech, free press, free assembly, and unfettered access to the Internet…." On December 22, 2009, the Senate passed S.Res. 386 , "Condemning the Government of Iran for restricting and suppressing freedom of the press, freedom of speech, freedom of expression, and freedom of assembly, and for its human rights abuses, and for other purposes," which, among other things, welcomes the decision made by the Department of State on December 15, 2009, to foster and support the free flow of information to Iranian citizens by recommending that the Department of the Treasury's Office of Foreign Assets Control (OFAC) issue a general license that would authorize downloads of free mass market software to Iran necessary for the exchange of personal communications or sharing of information or both over the Internet as deemed 'essential to the national interest of the United States.'" The FY2010 National Defense Authorization Act ( P.L. 111-84 , October 28, 2009) included the "Victims of Iranian Censorship Act" or VOICE Act which authorized to be appropriated $15,000,000 to expand Farsi language programming and to provide for the dissemination of accurate and independent information to the Iranian people through radio, television, Internet … and other communications." The act also established the "Iranian Electronic Exchange and Media Fund" to "support the development of technologies, including Internet Web sites, that will aid the ability of the Iranian people to gain access to information" and to counter Iranian efforts to "block, censor, and monitor the Internet." U.S. Law and Internet Freedom Abroad50 In response to laws and regulations of foreign countries requiring censorship and disclosure of users' personal information, some U.S. technology firms engage in Internet censoring and filtering. Some examples include China and other Internet-restricting countries such as Iran. In some cases, such as in Iran, Internet censoring and filtering reportedly involve a practice often called deep packet inspection which is under a great deal of scrutiny in the United States. Doing business in a foreign country subjects the business to the jurisdiction of that country. Nonetheless, concerns have been raised that China's Internet filtering could run afoul of world trade obligations. U.S. Policy for the Promotion of Internet Freedom Abroad54 The importance of Internet freedom to the United States was declared in 2006. During an explanation of that year's State Department 2006 Country Reports on Human Rights Practices , then-Under Secretary of State for Democracy and Global Affairs Paula J. Dobriansky explained that the 2006 reports included new, additional focus on "the extent to which internet access is available to and used by citizens in each country and ... whether governments inappropriately limit or block access to the internet or censor websites." This was added as an area of concern because the internet is playing a growing role in people's ability to freely express themselves and in the free flow of information. In discussing this new area of focus, then-Under Secretary Dobriansky said, We will continue to defend internet freedom, including by addressing internet repression directly with the foreign governments involved and seeking to persuade foreign officials that restricting internet freedom is contrary to their own interests and that of their countries. The new information in this year's reports will make an important contribution. At this same time, then-Secretary of State Condoleezza Rice also established the Global Internet Freedom Task Force (GIFT) in order to provide a U.S. foreign policy response to violations of Internet freedom by repressive regimes around the world. Secretary of State Hillary Rodham Clinton, in a January 21, 2010, speech, stated that Internet freedom is a central part of U.S. foreign policy. She stated that Internet freedom is more than a question of information freedom, it is about the nature of the world we want to inhabit. Clinton further stated: "It's about whether we live on a planet with one Internet, one global community, and a common body of knowledge that benefits and unites us all, or a fragmented planet in which access to information and opportunity is dependent on where you live and the whims of censors." In her remarks, Secretary Clinton placed the United States on the side of a single Internet where everyone has equal access to knowledge and ideas. She noted that blogs, e-mails, social networks, and text messages are opening up a new virtual town square where citizens can go to criticize their governments and exchange ideas. U.S. responsibility to support this new "town square" is not new but can be found in the First Amendment of the U.S. Bill of Rights ensuring freedom of speech, assembly, and religion. Secretary Clinton argued that these principles were reaffirmed in President Franklin Roosevelt's "The Four Freedoms" speech, and in the work of the United States and its support of the Universal Declaration of Human Rights. Secretary Clinton further explained that U.S. foreign policy is premised on the idea that no country stands to benefit more than the United States when there is cooperation among peoples and states. No country shoulders a heavier burden than the United States when conflict and misunderstanding make the international system unstable, and force people and countries apart. She stated that it is important that the United States seizes the opportunities that come with interconnectivity and work for a world in which access to networks and information brings people closer together and expands the definition of the global community. Secretary Clinton continued the GIFT and its responsibilities. The Task Force is co-chaired by the Under Secretaries of State for Democracy and Global Affairs and for Economic, Business, and Agricultural Affairs and draws on the State Department's multidisciplinary expertise in its regional and functional bureaus to work on issues such as international communications, human rights, democratization, business advocacy and corporate social responsibility, and country specific concerns. The task force supports Internet freedom by monitoring Internet freedom and reporting in its annual Country Reports on Human Rights Practices the quality of Internet freedom in each country around the world; responding in both bilateral and international fora to support Internet freedom; and expanding access to the Internet with greater technical and financial support for increasing availability of the Internet in the developing world. In advancing Internet freedom as an objective of U.S. foreign policy, Secretary Clinton proposed a number of key initiatives: Continue the work of the State Department's GIFT as it oversees U.S. efforts in more than 40 countries to help individuals circumvent politically motivated censorship by developing new tools and providing the training needed to safely access the Internet; Make Internet freedom an issue at the United Nations and the U.N. Human Rights Council in order to enlist world opinion and support for Internet Freedom; Work with new partners in industry, academia, and non-governmental organizations to establish a standing effort to advance the power of "connection technologies" that will empower citizens and leverage U.S. traditional diplomacy; Provide new, competitive grants for ideas and applications that help break down communications barriers, overcome illiteracy, and connect people to servers and information they need; Urge and work with U.S. media companies to take a proactive role in challenging foreign governments' demands for censorship and surveillance; and Encourage the voluntary work of the communications-oriented, private sector-led Global Network Initiative (GNI). The GNI brings technology companies, nongovernmental organizations, academic experts, and social investment funds together to develop responses and mechanisms to government requests for censorship. To fund U.S. efforts in support of Internet freedom, Congress in FY2008 appropriated $15 million, most of which has been spent or is obligated. Another $5 million was appropriated in FY2009. Finally, in Secretary Clinton's January 21 speech, she spoke of an additional $15 million for FY2010 that has been allocated from State Department appropriations to a range of programs that, in full or in part, support Internet freedom. Assistant Secretary for Democracy, Human Rights, and Labor Michael Posner describes these programs as "not just circumvention…. [I]t's a lot about training people…. It's some about technology. It's some about encouraging groups that are in danger. It's a lot about diplomacy, too, for us getting out there and being sure that when groups are in trouble, we provide a lifeline." The U.S. Broadcasting Board of Governors' International Broadcasting Bureau also supports counter-censorship technologies and has committed approximately $2 million per year to help enable Internet users in repressive regimes to have access to the VOA and other U.S. governmental and non-governmental websites and to receive VOA e-mail newsletters. Some observers have expressed concerns that there could be serious negative consequences for U.S. and foreign companies, and U.S. or foreign nationals working or living in countries with repressive regimes, if they follow the expanded U.S. policy supporting Internet freedom. These commenters point out that repressive governments could punish or make an example of an individual or company for not following the dictates of that country. Such actions could include harassment, lifting of business licenses, confiscation of assets, or imprisonment. These observers question what powers, beyond expressing U.S. displeasure through official demarches and public statements or through negotiations, that the United States may have to respond to such actions. Congressional Action In 2010, Congress has taken steps to address ongoing concerns about ensuring the free and secure flow of information over the Internet: On March 10, 2010, the House Committee on Foreign Affairs conducted a hearing, "The Google Predicament: Transforming U.S. Cyberspace Policy to Advance Democracy, Security, and Trade," on the December 2009 Chinese cyber attacks on Google and other U.S. companies, to consider policy tools to address Internet freedom, trade, and cyber security issues; On March 9, 2010, Representatives David Wu and Christopher Smith announced the formation of the House Global Internet Freedom Caucus; and The Senate Judiciary Committee, Subcommittee on Human Rights and the Law, held a hearing on March 2, 2010, entitled "Global Internet Freedom and the Rule of Law, Part II" to examine human rights, corporate responsibility, and other issues related to Internet censorship around the world. The Global Network Initiative: Private Sector Support of Internet Freedom64 The Global Network Initiative (GNI) was formed in October 2008 to respond to criticism of Internet service providers and computer manufacturers who had sold technology or services to Internet-restricting countries. GNI was launched by a coalition of human rights organizations, academics, investors and technology leaders. GNI adopts a self-regulatory approach to protect and advance individuals' rights to free expression and privacy on the Internet. A set of principles and supporting mechanisms provide guidance to the information and communications technology (ICT) industry and its stakeholders on how to protect and advance the human rights of freedom of expression and privacy when faced with pressures from governments to take actions that infringe upon these rights. Governments are not members of the GNI, but are encouraged to support the principles and encourage their adoption. Organizations participating in the GNI include Google Inc., Microsoft Corp., and Yahoo! Inc. Each initial participating company committed $100,000 per year over the two-year start-up period. Organizations not participating in the initiative who where involved in its development include Amnesty International and Reporters Without Borders. Reporters Without Borders remains skeptical about how much change GNI can effect, and pushed for standards that would require all government requests and takedown notices be made in writing. The GNI's Principles on Freedom of Expression and Privacy ("the Principles") are based on internationally recognized laws and standards for human rights, including the Universal Declaration of Human Rights (UDHR), the International Covenant on Civil and Political Rights (ICCPR) and the International Covenant on Economic, Social, and Cultural Rights. The GNI acknowledges that the rights of privacy and of freedom of expression should not be restricted by governments, except in narrowly defined circumstances based on internationally recognized laws or standards. The Implementation Guidelines ("The Guidelines") of the GNI provide guidance to ICT companies on how to implement the Principles, and describe the actions that constitute compliance. With respect to government demands to remove or limit access to content or restrict communications, participating companies commit to encourage governments to be specific, transparent, and consistent in the demands issued to restrict freedom of expression online; encourage government demands that are consistent with international laws and standards; require governments to follow local legal processes, interpret government demands so as to minimize the negative effect, when required to restrict communications or remove content; and interpret the governmental authority's jurisdiction to minimize the negative effect. Participating companies commit to operate in a transparent manner when required to remove content or restrict access, and must disclose to users the applicable laws and policies requiring such action, the company's policies for responding to government demands, and provide timely notice to users when access to content has been locked or communications limited due to government restrictions. With respect to privacy, participating companies commit to assess the human rights risks associated with the collection, storage, and retention of personal information and to develop mitigation strategies. A system of independent third-party assessment of company compliance with the Principles and Implementation Guidelines will be phased in over three stages: In Phase One (ends December 2010) each participating company establishes internal policies and procedures to implement the Principles, and the Board approves independence and competence criteria for the selection of independent assessors. In Phase Two (2011) independent assessors will conduct process assessments of each participating company to review and evaluate their internal systems for implementing the Principles. In Phase Three (January 2012 onwards) the Board will accredit independent assessors to review the internal systems of companies, and company responses to specific government demands implicating freedom of expression or privacy. Each participating company will submit an annual report to the Organization. The assessors will prepare reports explaining each company's responses to government demands, evaluating the effectiveness of the company's responses. Each company will be given the opportunity to respond to the assessor's draft and final report. The Board of the Organization will assess whether the company is in compliance with the Principles and its determination will be made public. The Board of the Organization will publish an annual report assessing each participating company's compliance with the Principles. Recent Legislative Action66 Public Laws H.R. 2647 , National Defense Authorization Act for Fiscal Year 2010 . Introduced by Representative Skelton (by request), referred to the House Armed Services Committee. Enacted October 28, 2009, P.L. 111-84 . Title XII: Matters Relating to Foreign Nations Subtitle D: VOICE Act — Victims of Irani an Censorship Act or VOICE Act (Sec. 1242) Expresses the sense of the Senate in support of the universal values of freedom of speech, the press, and expression as it pertains to the people of Iran, and condemns acts of censorship, intimidation, and other restrictions on such freedom in Iran. (Sec. 1243) States that it shall be the policy of the United States to (1) support freedom of the press, speech, expression, and assembly in Iran; (2) support the Iranian people as they seek, receive, and impart information and promote ideas in writing, print, and through other media; (3) discourage businesses from aiding efforts to interfere with the ability of the Iranian people to access or share information or otherwise infringe upon such freedoms; and (4) encourage the development of technologies that facilitate efforts of the Iranian people to share such information, exercise such freedoms, and engage in Internet-based education programs and other exchanges between U.S. citizens and Iranians. (Sec. 1244) Authorizes appropriations for the (1) International Broadcasting Operations Fund to expand Farsi language programming and to disseminate accurate and independent information to the Iranian people through radio, television, Internet, cellular telephone, short message service, and other communications; and (2) Broadcasting Capital Improvements Fund to expand transmissions of Farsi language programs to Iran. (Sec. 1245) Establishes in the Treasury the Iranian Electronic Education, Exchange, and Media Fund to support the development of technologies that will aid the Iranian people in exchanging information and exercising freedom of speech, expression, and assembly. Authorizes appropriations to the Fund. (Sec. 1246) Directs the President to report annually to Congress on the use of funds authorized under this Subtitle. (Sec. 1247) Requires the President to (1) direct the appropriate officials to examine claims that non-Iranian companies have provided hardware, software, or other forms of assistance to the government of Iran that has furthered its efforts to filter online political content, disrupt cell phone and Internet communications, and monitor the online activities of Iranian citizens; and (2) report study results to Congress. (Sec. 1248) Authorizes appropriations to the Secretary of State to document, collect, and disseminate information about human rights in Iran, including abuses since the Iranian presidential election on June 12, 2009. Bills and Resolutions in the House of Representatives H.R. 2271 , Global Online Freedom Act of 2009 . Introduced by Representative Christopher Smith and referred to the House Committee on Foreign Affairs; and the House Committee on Energy and Commerce. Makes it U.S. policy to (1) promote the freedom to seek, receive, and impart information and ideas through any media; (2) use all appropriate instruments of U.S. influence to support the free flow of information without interference or discrimination; and (3) deter U.S. businesses from cooperating with Internet-restricting countries in effecting online censorship. Expresses the sense of Congress that (1) the President should seek international agreements to protect Internet freedom; and (2) some U.S. businesses, in assisting foreign governments to restrict online access to U.S.-supported websites and government reports and to identify individual Internet users, are working contrary to U.S. foreign policy interests. Amends the Foreign Assistance Act of 1961 to require assessments of electronic information freedom in each foreign country. Establishes in the Department of State the Office of Global Internet Freedom (OGIF). Directs the Secretary of State to annually designate Internet-restricting countries. Prohibits, subject to waiver, U.S. businesses that provide to the public a commercial Internet search engine, communications services, or hosting services from locating, in such countries, any personally identifiable information used to establish or maintain an Internet services account. Requires U.S. businesses that collect or obtain personally identifiable information through the Internet to notify the OGIF and the Attorney General before responding to a disclosure request from an Internet-restricting country. Authorizes the Attorney General to prohibit a business from complying with the request, except for legitimate foreign law enforcement purposes. Requires U.S. businesses to report to the OGIF certain Internet censorship information involving Internet-restricting countries. Prohibits U.S. businesses that maintain Internet content hosting services from jamming U.S.-supported websites or U.S.-supported content in Internet-restricting countries. Authorizes the President to waive provisions of this act: (1) to further the purposes of this act; (2) if a country ceases restrictive activity; or (3) if it is the national interest of the United States. H.R. 4784 , Internet Freedom Act of 20 10 . Introduced by Representative Wu and referred to the House Science and Technology Committee, Subcommittee on Research and Science Education. Directs the National Science Foundation to establish the Internet Freedom Foundation governed by a board of 12 members, with equal representation from government, academia, and the private sector. The Internet Freedom Foundation shall— Award competitive, merit-reviewed grants, cooperative agreements, or contracts to private industry, universities, and other research and development organizations to develop deployable technologies to defeat Internet suppression and censorship; and Award incentive prizes to private industry, universities, and other research and development organizations that successfully develop deployable technologies to defeat Internet suppression and censorship. The Internet Freedom Foundation shall be funded by such sums as may be necessary. H.Res. 590 , Expressing grave concerns about the sweeping censorship, privacy, and cybersecurity implications of China's Green Dam filtering software, and urging U.S. high-tech companies to promote the Internet as a tool for transparency, freedom of expression, and citizen empowerment around the world. Introduced by Representative Wu and referred to the House Committee on Foreign Affairs. Expresses (1) grave concerns about the sweeping censorship, privacy, and cybersecurity implications of China's Green Dam filtering software; and (2) support for the Chinese people in their quest for Internet freedom and free expression. Calls on (1) the Chinese government to rescind its requirement for Green Dam to be preinstalled on all new computers; and (2) U.S. high-tech companies to promote the Internet as a tool for transparency, freedom of expression, and citizen empowerment around the world. H.Res. 672 , Call ing on the Government of the Socialist Republic of Vietnam to release imprisoned bloggers and respect Internet freedom . Introduced by Representative Sanchez and referred to the House Committee on Foreign Affairs. Passed on October 21, 2009. Supports the right of the citizens of the Socialist Republic of Vietnam to access websites of their choosing and to have the freedom to share and publish information over the Internet. Calls on Vietnam to (1) repeal Circular 07, Article 88, and similar statutes that restrict the Internet, so as to be in line with the International Covenant on Civil and Political Rights, to which Vietnam is a signatory; (2) become a responsible member state of the international community by respecting individuals' freedom of speech, freedom of press, and freedom of political association; and (3) release all political prisoners, including but not limited to 18 named bloggers and cyber activists. Appendix A. Technologies Used to Monitor and Censor Web Sites and Web-Based Communications Key-Word List Blocking This is a simple type of filtration where a government drops any Internet packets featuring certain keywords, such as "protest" or "proxy." Domain Name System (DNS) Poisoning DNS poisoning intentionally introduces errors into the Internet's directory service to misdirect the original request to another IP address. IP Blocking IP Blocking is one of the most basic methods that governments use for censorship, as it simply prevents all packets going to or from targeted IP addresses. This is an easy technology to implement, but it does not address the problem of individual communications between users. This method is used to block banned websites, including news sites and proxy servers that would allow access to banned content, from being viewed. Bandwidth Throttling Bandwidth throttling simply limits the amount of traffic that can be sent over the Internet. Keeping data volume low facilitates other methods of monitoring and filtering by limiting the amount of data present. Traffic Classification This is a much more sophisticated method of blocking traffic than IP blocking, as governments can halt any file sent through a certain type of protocol, such as FTP. Because the government knows that FTP transfers are most often sent through TCP port 21, they can simply limit the bandwidth available on that port and throttle transfers. This type of traffic-shaping practice is the most common one used by repressive governments today. It is not resource intensive and it is fairly easy to implement. Shallow Packet Inspection (SPI) Shallow packet inspection is a less sophisticated version of the deep packet inspection (DPI) technique (DPI is described below) that is used to block packets based on their content. Unlike DPI, which intercepts packets and inspects their fingerprints (fingerprinting is described below), headers, and payloads, SPI makes broad generalities about traffic based solely on evaluating the packet header. Although shallow packet inspection can't provide the same refined/detailed traffic assessments as DPI, it is much better at handling volume than DPI. SPI is much less refined than DPI, but it is capable of handling a greater volume of traffic much more quickly. SPI is akin to judging a book by its cover. This method is prone to exploitation by users because they can disguise their packets to look like a different kind of traffic. Packet Fingerprinting This is a slightly more refined method of throttling packets than shallow packet inspection, as it looks not only at the packet header but at its length, frequency of transmission, and other characteristics to make a rough determination of its content. In this manner, the government can better classify packets and not throttle traffic sent out by key businesses. Deep Packet Inspection (DPI) / Packet Content Filtering DPI is the most refined method that governments have for blocking Internet traffic. As mentioned above, deep packet inspectors examine not only a packet's header but also its payload. For instance, certain keywords can be both monitored and the e-mail containing them can be kept from reaching its intended destination. This gives governments the ability to filter packets at a more surgical level than any of the other techniques discussed so far. While providing the most targeted traffic monitoring and shaping capabilities, DPI is also more complicated to run and is far more labor-intensive than other traffic-shaping technologies. Appendix B. Technologies Used to Circumvent Censorship Each of the circumvention methods explained below can, in general, be considered an anonymous "proxy server." A proxy server is a computer system or an application program that acts as an intermediary for requests from a user seeking resources from other servers, allowing the user to block access to his or her identity and become anonymous. Web-Based Circumvention Systems Web-based circumvention systems are special web pages that allow users to submit a URL and have the web-based circumventor retrieve the requested web page. There is no connection between the user and the requested website as the circumventor transparently proxies the request allowing the user to browse blocked websites seamlessly. Since the web addresses of public circumventors are widely known, most Internet filtering applications already have these services on their block lists, as do many countries that filter at the national level. Examples: Proxify, StupidCensorhip, CGIProxy, psiphon, Peacefire/Circumventor. Web and Application Tunneling Software Tunneling encapsulates one form of traffic inside of other forms of traffic. Typically, insecure, unencrypted traffic is tunneled within an encrypted connection. The normal services on the user's computer are available, but run through the tunnel to the non-filtered computer which forwards the user's requests and their responses transparently. Users with contacts in a non-filtered country can set up private tunneling services while those without contacts can purchase commercial tunneling services. "Web" tunneling software restricts the tunneling to web traffic so that web browsers will function securely, but not other applications. "Application" tunneling software allows the user to tunnel multiple Internet applications, such as e-mail and instant messenger applications. Examples: Web Tunneling: UltraReach, FreeGate, Anonymizer, Ghost Surf. Examples: Application Tunneling: GPass, HTTP Tunnel, Relakks, Guardster/SSH. Anonymous Communications Systems Anonymous technologies conceal a user's IP address from the server hosting the website visited by the user. Some, but not all, anonymous technologies conceal the user's IP address from the anonymizing service itself and encrypt the traffic between the user and the service. Since users of anonymous technologies make requests for web content through a proxy service, instead of to the server hosting the content directly, anonymous technologies can be a useful way to bypass Internet censorship. However, some anonymous technologies require users to download software and can be easily blocked by authorities. Examples: Tor, JAP ANON, I2P

Modern means of communications, led by the Internet, provide a relatively inexpensive, open, easy-entry means of sharing ideas, information, pictures, and text around the world. In a political and human rights context, in closed societies when the more established, formal news media is denied access to or does not report on specified news events, the Internet has become an alternative source of media, and sometimes a means to organize politically. The openness and the freedom of expression allowed through blogs, social networks, video sharing sites, and other tools of today's communications technology has proven to be an unprecedented and often disruptive force in some closed societies. Governments that seek to maintain their authority and control the ideas and information their citizens receive are often caught in a dilemma: they feel that they need access to the Internet to participate in commerce in the global market and for economic growth and technological development, but fear that allowing open access to the Internet potentially weakens their control over their citizens. The ongoing situation of Google in China is representative of these issues. Legislation now under consideration in the 111th Congress would mandate that U.S. companies selling Internet technologies and services to repressive countries take actions to combat censorship and protect personally identifiable information. Some believe, however, that technology can offer a complementary and, in some cases, better and more easily implemented solution to some of those issues. They argue that hardware and Internet services, in and of themselves, are neutral elements of the Internet; it is how they are implemented by various countries that is repressive. Also, Internet services are often tailored for deployment to specific countries; however, such tailoring is done to bring the company in line with the laws of that country, not with the intention of allowing the country to repress and censor its citizenry. In many cases, that tailoring would not raise many questions about free speech and political repression. This report provides information regarding the role of U.S. and other foreign companies in facilitating Internet censorship by repressive regimes overseas. The report is divided into several sections: Examination of repressive policies in China and Iran, Relevant U.S. laws, U.S. policies to promote Internet freedom, Private sector initiatives, and Congressional action. Two appendixes describe technologies and mechanisms for censorship and circumvention of government restrictions.

Introduction Administered by the U.S. Department of Education (ED), the Impact Aid program is one of the oldest federal education programs, dating from 1950. Impact Aid, authorized under Title VIII of the Elementary and Secondary Education Act (ESEA, P.L. 89-10, as amended), compensates local educational agencies (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 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) or their employers, 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. The largest Impact Aid payment, Section 8003(b) payments (also known as Basic Support Payments or BSPs), 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 federal property; reside on Indian lands; reside in low-rent public housing; or reside with a parent who is a civilian working or living on federal land. For FY2014, Section 8003(b) payments accounted for $1.151 billion, approximately 89.3% of all funds appropriated for the Impact Aid program. As Section 8003(b) payments account for the majority of all Impact Aid funding, this report primarily focuses on them. The Appendix provides a brief description of other payments made under the Impact Aid program. The purpose of this report is to describe options for adjusting the timing of when Impact Aid appropriations become available for obligation to carry out Section 8003(b). At present, appropriations are often not available at the beginning of the school year. This report begins by explaining how Section 8003(b) activities are currently funded through "budget year appropriations" and the effect that period of availability has on those activities. It then discusses alternatives to providing funding through budget year appropriations, including forward funding and advance appropriations . The final section analyzes the way in which adopting an alternative period of availability such as forward funding, advance appropriations, or a combination approach ( forward funding/advance appropriations ) would affect the appropriations process once it was fully implemented. It also discusses the appropriations actions required to make these changes and the ways in which this would affect the annual appropriations process , both once the alternative period of availability was fully implemented, and also during the transition fiscal year . Overview of Impact Aid Section 8003(b) Payments Program Activities Section 8003(b) of the ESEA authorizes payments to LEAs to compensate them for the cost of serving certain groups of federally connected children. As previously mentioned, federally connected children include children living on Indian lands; children who live on federal land and whose parents are employed on federal land, are members of the Armed Forces, or are accredited foreign military officers; children with a parent in the Armed Forces living off the base; children living in low-rent public housing; and children whose parents otherwise work on federal land but do not live on federal land. The presence of these children can increase the number of children the LEA must serve without a commensurate increase in the taxes that otherwise could be collected to support public education. To be eligible for Section 8003(b) payments, an LEA must have at least 400 federally connected children, or such children must represent at least 3% of an LEA's average daily attendance (ADA). Of the more than 15,000 LEAs nationwide, 1,151 LEAs meet one of these eligibility criteria. Thus, fewer than 10% of all public school districts qualify for Section 8003(b) payments. For FY2014, $1.151 billion was appropriated for Section 8003(b) payments. These payments accounted for 89.3% of the $1.289 billion provided overall for the Impact Aid program. Section 8003(b) payments differ from funds provided by most other federal elementary and secondary education programs in that they are not limited to specified uses (such as improving the educational achievement of disadvantaged students). While Section 8003(b) funds are generally used for current local education expenditures, they may also be used for capital expenditures. In addition, funds need not be spent only on federally connected children. Finally, because Impact Aid payments are not aimed at specific educational goals, accountability requirements for the use of funds or for specific outcomes are minimal. Current Funding Approach The federal government fiscal year starts on October 1 and ends the following September 30. Funding for federal programs that is provided through the annual appropriations process is typically available at the start of the fiscal year, unless otherwise specified. In general, this period of availability most often begins on the first day of the fiscal year of the appropriations act, also referred to as the "budget year." For the purposes of this report, such periods of availability are referred to as "budget year appropriations." The Impact Aid program is funded using budget year appropriations provided in the Labor, Health and Human Services, Education, and Related Agencies (L-HHS-ED) appropriations bill. It should be noted that of the elementary and secondary education programs administered by ED that receive $1 billion or more in annual appropriations, Impact Aid Section 8003(b) is the only program that receives budget year appropriations. Under the current mechanism for funding Section 8003(b) payments and the use of continuing resolutions rather than enacting budget year appropriations acts prior to the start of the fiscal year, LEAs are generally unable to receive their full Section 8003(b) payments until sometime after October 1. Some observers have suggested that providing funding for these payments on a regular appropriations schedule has caused issues for program operations. Because of the timing of the school year, significant planning and preparation for the upcoming year tends to occur during the spring and summer months. However, the current timing of enactment and availability of federal funds provided through Impact Aid makes it difficult for LEAs to include them in their budget planning process. In addition, the full allocation of funds to LEAs is delayed in instances where the federal government is operating under a short-term continuing resolution at the beginning of the fiscal year until regular appropriations bills or a full-year continuing resolution is enacted. LEAs dependent on Impact Aid funding are also affected more quickly by any decrease in funding than LEAs receiving funds under other federal elementary and secondary education formula grant programs. For example, as a result of the FY2013 sequester, Impact Aid funding was reduced immediately during the 2012-2013 school year, while the decrease in funding for education programs receiving forward funding or advance appropriations did not affect LEAs until the following school year (2013-2014). The uncertainty that results from each of these funding scenarios can create financial difficulties for LEAs, particularly those that are heavily dependent on Impact Aid funding. Alternative Funding Approaches for Section 8003(b) Payments: Advance Appropriations and Forward Funding In contrast to regular budget year appropriations for Impact Aid that fund a school year that is already underway, funding could be provided in the appropriations act for the fiscal year that precedes the school year for which they will be used. In general, this alternative approach would provide appropriations a number of months in advance of when they would become available with budget year appropriations. Such a process would presumably allow LEAs to incorporate funding with more certainty in their planning process for the upcoming school year. In addition, because of the lag in availability, if appropriations acts were delayed in any given year, LEAs presumably would not be adversely affected for the purposes of the upcoming school year. While appropriations could be made available at any time, as specified in the appropriations act in which they are enacted, two such conventions have been used for certain other ED programs to accommodate the disconnect between the federal fiscal year and the school year—"advance appropriations" and "forward funding." The Impact Aid Section 8003(b) payment is the only K-12 program administered by ED that receives $1 billion or more through the annual appropriations process that is not provided advance appropriations, forward funding, or a combination of the two . Although t he Impact Aid programs have generally been authorized to receive funding in appropriations acts on either of these bas es since 1968, through Ti tle IV, S ection 420 (a), of the General Education Provisions Act (see below), no such appropriations are currently being provided with such timing: To the end of affording the responsible Federal, State, and local officers adequate notice of available Federal financial assistance for carrying out ongoing education activities and projects, appropriations for grants, contracts, or other payments under any applicable program are authorized to be included in the appropriations Act for the fiscal year preceding the fiscal year during which such activities and projects shall be carried out. While any or all of the Impact Aid payments could be provided through forward funding or advance appropriations (as discussed below), for the purposes of this report it is assumed that any change in appropriations would affect only the Section 8003(b) payments. Advance Appropriations Advance appropriations are enacted one or more fiscal years prior to when they become available . For example, in an appropriations act for FY2015, funds would generally become available for obligation at the start of the fiscal year— October 1, 2014. Advance appropriations in this FY2015 act, however, would not become available until the start of FY2016 —October 1, 2015— or later. Advance appropriations have been provided for a variety of programs besides the education programs mentioned above, particularly those that provide payments or services directly to individuals or states, such as the Veteran's Health Administration (Department of Veterans' Affairs) and the Tenant-Based and Project-Based Rental Assistance Programs (Department of Housing and Urban Development). The reasons such appropriations have been advocated include avoiding funding gaps or relying on continuing resolutions for funding at the beginning of the fiscal year, as well as the belief that such appropriations enable better advanced planning for those programs because they are typically enacted many months prior to the beginning of the fiscal year. O thers have argue d, however, that the ability to make such commitments may be limited by the extent to which programmatic needs can be forecasted in advan ce, and that providing alternative periods of availability for some programs makes their budgetary levels difficult to compare to programs that receive budget year appropriations. Forward Funding Forward funds are also enacted in advance, but become available during the last quarter of the budget year as opposed to a future fiscal year. For example, in an appropriations act for FY2015, budget authority that is forward funded would become available during FY2015, but not until July 1, 2015, or later, and would remain available through at least part of the following fiscal year. Forward funding is provided for many elementary and secondary education programs to allow additional time for school officials to develop budgets in advance of the beginning of the school year and to better align federal appropriations with the fiscal year used by many school districts, which runs from July 1 to June 30. Forward funding is similar to advance appropriations, in that it is enacted in advance of the school year for which it is provided. In the context of education, the distinction between the two is that forward funding becomes available during the summer months to provide for program costs that largely occur during the following fiscal year, whereas advance appropriations first become available in the fall, during that following fiscal year. At the program level, there is little difference between providing funds in July or October, as most expenditures for a standard school year occur after October 1. Using forward funding or advance appropriations, however, may have budget enforcement implications, and the choice of one approach over the other may be determined, to some extent, by those implications. Budget Enforcement Considerations Budget enforcement rules generally provide limits on the amount provided in appropriations acts for each fiscal year through both statutory and procedural mechanisms. For statutory enforcement, the Budget Control Act of 2011 imposed limits on discretionary spending that apply each fiscal year between FY2012 and FY2021. For procedural enforcement, the Congressional Budget Act of 1974 provides for allocations of budget authority under the jurisdiction of the Appropriations Committee, referred to as a "302(a) allocation," as well as the suballocation of that spending to each of the 12 Appropriations subcommittees, referred to as a "302(b) allocation." Both the 302(a) and 302(b) allocations, as well as the statutory discretionary spending limits, are enforceable during floor consideration through points of order that may be raised against any measure, including amendments, that would cause these limits to be exceeded. In addition, the statutory limits are enforceable after enactment through sequestration. The amount provided in an appropriations act for a given fiscal year, for budget enforcement purposes, is determined by its period of availability. That is, the amount provided is "scored" in the fiscal year in which it first becomes available for obligation. Forward funding becomes available during the latter part of the budget year, and so is scored against the budget year of the bill in which it is enacted. In contrast, advance appropriations are scored against the limits on appropriations that apply the first fiscal year that they are available for obligation (typically the following fiscal year), and not the budget year of the bill in which they are enacted. Consequently, budget enforcement for advance appropriations would typically occur that following fiscal year in combination with the new discretionary appropriations for that year. That is, in the following fiscal year, the appropriations process begins with a "charge" against the appropriations limits for the budget year, even before the appropriations acts for that fiscal year have been drafted. Given that budget enforcement rules generally limit discretionary spending a single fiscal year at a time, providing appropriations in advance may allow them to be considered outside the context of the spending decisions for the upcoming year. In response to concerns about the potential to avoid the budget year limits when considering advance appropriations, various House and Senate procedural limits on the amount of advance appropriations that may be provided have been imposed through the congressional budget resolution and other associated procedural mechanisms since FY2001. These limits have typically specified the accounts for which advance appropriations may be provided, and have capped the amounts for certain advance appropriations. For FY2015, for example, the Senate limits established in the Bipartisan Budget Act of 2013 ( P.L. 113-67 , §112) restricted advance appropriations enacted in FY2015 appropriations acts to a total of $28.582 billion for the following accounts: Employment and Training Administration; Job Corps; Education for the Disadvantaged; School Improvement; Special Education; Career, Technical, and Adult Education; Payment to Postal Service; Tenant-based Rental Assistance; and Project-based Rental Assistance. An unlimited amount of advance appropriations are also allowed in the Senate for the Corporation for Public Broadcasting; and the Department of Veterans Affairs for the Medical Services, Medical Support and Compliance, and Medical Facilities accounts of the Veterans Health Administration. Potential Implementation and Transition Options for Advance Appropriations and Forward Funding This section considers three different appropriations scenarios for Impact Aid Section 8003 (b) payments that are an alternative to regular budget year appropriations: (1) providing forward funding for Section 8003 (b) payments, (2) providing advance appropriations for Section 8003 (b) payments, or (3) using both forward funding and advance appropriations to provide Section 8003 (b) funding, as is done for other federal education programs such as Title I-A Grants to Local Educational Agencies authorized by the ESEA or Grants to States authorized under Part B of the Individuals with Disabilities Education Act (IDEA). This section con siders each of these scenarios in terms of how each might affect the annual appropriations process once it were fully implemented, the appropriations actions required in the transition fiscal year, and various potential budget process issues that might arise during that transition. Please note that for discussion purposes, it is assumed that budget year appropriations would be provided on October 1 of the fiscal year corresponding to the appropriations bill, forward funding would be provided on July 1 of the year corresponding to the appropriations bill, and advance appropriations would be provided on the first day of the succeeding fiscal year. As previously discussed, the ESEA would not have to be amended to permit the Section 8003(b) payments to receive forward funding or advance appropriations, as both funding mechanisms are already authorized for the Impact Aid account. Forward Funding As was previously stated, Impact Aid is currently funded using regular budget year appropriations that first become available about one month after the start of the school year. If Section 8003(b) payments were to be forward funded, however, funds would shift from being available in October to support the current school year to being available in July to support the upcoming school year. For example, if Section 8003(b) continued to be funded through budget year appropriations for FY2015, the funds would become available on October 1, 2014, and be used to support activities during the 2014-2015 school year. If appropriations for Section 8003(b) were forwarded funded in FY2015, funds would become available on July 1, 2015, and be used to support school activities during the 2015-2016 school year. More specifically, such funds would typically be made available for the next 15 months, through September 30, 2016. Likewise, the following fiscal year, if all Section 8003(b) appropriations were forward funded, funds to support activities during the 2016-2017 school year would be provided through the FY2016 appropriations act to become available on July 1, 2016. Transition Year To change the Impact Aid program to be solely forward funded starting in FY2015 would essentially require double-funding the program in the transition year through the following appropriations actions. First, the FY2015 appropriations would need to include the regular budget year appropriation that the program has historically received to fund activities in the 2014-2015 school year. These would be available for obligation as of October 1, 2014. Otherwise, under the switch to forward funding, the program would be without an appropriation until July 1, 2015, leaving little to no funding for the 2014-2015 school year. Second, funds for the 2015-2016 school year would need to be forward funded to become available in the final months of FY2015. If the intent is to completely forward fund the Section 8003(b) payment, then the full amount required to level fund the payment would need to be appropriated using a forward funding period of availability. That is, for the FY2015 appropriations process, the Section 8003 (b) payment would need to be funded through both regular budget year appropriations and forward funding appropriations, a scenario that was arguably contemplated in Title IV, Section 420 (b) of The General Education Provisions Act : In order to effect a transition to the timing of appropriation action authorized by subsection (a) of this section, the application of this section may result in the enactment, in a fiscal year, of separate appropriations for an applicable program (whether in the same appropriations Act or otherwise) for two consecutive fiscal years. The following scenario illustrates this potential transition. For FY2014, the Section 8003(b) payments were funded at $1.151 billion, so $2.302 billion would need to be provided for the program in FY2015 under this funding scenario ($1.151 for regular budget year appropriations and $1.151 billion for forward funding). In subsequent fiscal years, however, assuming the program remained forward funded (and level-funded), the annual appropriation provided solely through forward funding would be $1.151 billion. The increase in discretionary appropriations required to forward fund the Section 8003(b) payments in FY2015 would be counted against any statutory or procedural limits on discretionary spending applicable to that fiscal year. In effect, this might require that the additional appropriations to forward fund the Section 8003(b) payments during this transition period be offset by reductions to another discretionary program. Alternatively, this transition period could be addressed by enacting a provision specifying that a certain amount, such as the double funding needed to switch to forward funding, is not to be counted for the purposes of budget enforcement. Advance Appropriations In contrast to the regular budget year appropriations that are enacted to fund education activities for a school year that is already underway, advance appropriations are enacted prior to when that school year starts. For example, budget year appropriations to fund the 2015-2016 school year would be enacted in the FY2016 appropriations act and become available as of October 1, 2015. Advance appropriations to fund the 2015-2016 school year, however, would be enacted one year in advance—in the appropriations act for the fiscal year starting October 1, 2014 (FY2015)—but not become available until October 1, 2015, one full fiscal year after the budget year. The following fiscal year, advance appropriations for the 2016-2017 school year would be enacted in the FY2016 appropriations act but not become available until October 1, 2016. Transition Year Changing appropriations for payments for federally connected children from regular budget year appropriations to advance appropriations requires a different set of actions, with a different set of costs, for a given fiscal year. First, to change the Section 8003(b) payment to receive advance appropriations during the FY2015 appropriations process, the FY2015 L-HHS-ED appropriations bill would need to include the budget year appropriation that the program has historically received to cover program needs for the 2014-2015 school year. That is, funds for the 2014-2015 school year would be available for obligation as of October 1, 2014, once enacted. A switch to advance appropriations without also providing these budget year appropriations would leave the program without an appropriation until October 1, 2015, resulting in little to no funding for that school year. Second, advance appropriations for the 2015-2016 school year would also need to be provided in the FY2015 L-HHS-ED appropriations act, to become available on October 1, 2015. If the intent is to completely fund needs for the 2015-2016 school year through advance appropriations, then the full appropriation for that program year would need to be provided in this way. The budget process implications for a switch to advance appropriations also differ from those for forward funding. The funding for advance appropriations for FY2016 included in the FY2015 appropriations bill would not count against any limits on FY2015 discretionary spending and would not require any double funding of Section 8003(b) payments in a single fiscal year. Such spending would count against the FY2016 limits, however, if provided on the schedule considered in this scenario. It would also require that any procedural limit on advance appropriations, which is generally determined each year during the consideration of the congressional budget resolution, allows such appropriations for the Impact Aid account and be set at a level sufficient to accommodate appropriations for the Section 8003(b) payments. Combination Forward Funding/Advance Appropriations Approach Appropriations for Section 8003(b) payments could also be made using a combination of forward funding and advance appropriations, as has been the practice for other federal education programs such as ESEA, Title I-A and IDEA, Part B. Under this approach, only the portion of funding needed during the summer months would be forward funded, while the rest would be advance appropriated to become available after the start of the following fiscal year. For example, for the 2015-2016 school year, in the FY2015 appropriations act, a portion (e.g., 25%) of the Section 8003(b) payments would be forward funded and become available on July 1, 2015, while the rest (e.g., 75%) would be advance appropriated and become available three months later, on October 1, 2015. This combination of advance appropriations and forward funding would be appropriated each fiscal year to fund payments for the upcoming school year. Transition Year If this change were made during the FY2015 appropriations process, appropriations subject to the applicable FY2015 limits would be needed to fund both the 2014-2015 school year through budget year appropriations, as well as whatever percentage of the 2015-2016 school year was determined to be necessary through forward funding. The amount provided through forward funding could be set at any appropriate percentage of the total payment (e.g., 25%, 50%, 75%), with the remainder for the 2015-2016 school year being provided through advance appropriations. For example, if 25% of the funds were provided through forward funding and 75% were provided through advance appropriations, for FY2015 $1.439 billion would need to be provided in discretionary appropriations—$1.151 billion in budget year appropriations to support activities during the 2014-2015 school year and $288 million (25% of the budget year appropriations amount) for forward funding—and $863 million would need to be included in advance appropriations for FY2016. This combination approach involves, to a lesser degree, the same budget process implications that apply to forward funding and advance appropriations. While a combination approach would avoid the need for double funding in that transition year, a lesser one-time increase over the typical amount appropriated subject to the applicable limits would still occur. Because the portion that is forward funded would be counted against any statutory or procedural limits on discretionary spending, the additional appropriations to forward fund the Section 8003(b) payments during this transition period might need to be effectively offset by reductions in another discretionary program. In subsequent fiscal years, only the forward funding amount would need to be appropriated in the budget year, and the remainder could be advance appropriated. At the same time, any limits on advance appropriations established through the budget resolution would need to be altered to accommodate advance appropriations for the portion of Section 8003(b) payments funded in this way. As was previously mentioned, this transition period could also be addressed by enacting a provision specifying that a certain amount, such as the double funding, is not to be counted for the purposes of budget enforcement. Illustration of Alternative Funding Approach Transitions Table 1 summarizes the key elements of current law and transitions to each of the three approaches discussed above. It is assumed that the alternative funding approaches would be applied in the FY2015 appropriations act. The table details how much discretionary funding would be needed in FY2015 and the level of advance appropriations for FY2016 that would need to be included in the FY2015 appropriations act, assuming the Section 8003(b) payment remains level funded. It is also assumed that regardless of the approach taken, the FY2015 appropriations act would provide level funding for Section 8003(b) payments for the 2014-2015 school year, as well as the 2015-2016 school year. For the combination approach, it assumes a distribution of 25% forward funding and 75% advance appropriations. Appendix. Impact Aid Payment Descriptions Title VIII of the Elementary and Secondary Education Act (ESEA, P.L. 89-10, as amended) authorizes several types of Impact Aid payments. These include payments made 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 an LEA's real property. About 216 LEAs receive Section 8002 payments annually. Payments are usually used by LEAs for general operating expenses (e.g., teacher salaries, books, supplies, and utilities). For FY2014, $66.8 million was appropriated for Section 8002, and payments to LEAs are expected to range from $150 to $5.0 million. 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 federal property; reside on Indian lands; reside in low-rent public housing; or reside with a parent who is a civilian working or living on federal land. Two payments are made under Section 8003. Section 8003(b) authorizes "basic support payments" for federally connected children. In FY2014, 1,151 LEAs are eligible to receive payments under Section 8003(b). These LEAs serve about 930,000 federally connected students. In FY2014, $1.151 billion was appropriated for Section 8003(b) payments, and LEA payments are expected to range from $66 to $53.9 million. Section 8003(d) authorizes additional payments to LEAs based on the number of certain federally connected children with disabilities who are eligible to receive services under the Individuals with Disabilities Education Act (IDEA). More specifically, payments are limited to certain IDEA-eligible children, most notably those whose parents are members of the Armed Forces (residing on or off military bases) and those residing on Indian lands. In FY2014, $48.3 million was appropriated for Section 8003(d) payments from which about 888 LEAs are expected to receive payments, ranging from $512 to $1.2 million. Section 8007 Section 8007 provides funds for construction and facilities upgrading to certain LEAs serving high percentages of children living on Indian lands or children of military parents. These funds are used to make formula and competitive grants. In FY2014, per provisions included in the Consolidated Appropriations Act, 2014 ( P.L. 113-76 ), Section 8007 grants will be awarded only by formula. In FY2014, $17.4 million was provided for Section 8007 payments. It is estimated that 174 LEAs will receive formula grants, ranging from $480 to $1.8 million. Section 8008 Section 8008 provides funds for emergency repairs and comprehensive capital improvements to 12 schools that ED currently owns but LEAs operate and use to serve federally connected military dependent children. Statutory language requires ED to transfer ownership of these facilities to LEAs or other entities. In FY2014, $4.8 million was provided for Section 8008.

Administered by the U.S. Department of Education (ED), the Impact Aid program is one of the oldest federal education programs, dating from 1950. Impact Aid, authorized under Title VIII of the Elementary and Secondary Education Act (ESEA, P.L. 89-10, as amended), compensates local educational agencies (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 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) or their employers, 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. The largest Impact Aid payment, Section 8003(b) payments (also known as Basic Support Payments or BSPs), compensates LEAs for enrolling "federally connected" children. For FY2014, Section 8003(b) accounted for $1.151 billion, approximately 89.3% of all funds appropriated for the Impact Aid program. As Section 8003(b) payments account for the majority of all Impact Aid funding, this report primarily focuses on these payments. All Impact Aid payments are funded through the Labor, Health and Human Services, Education, and Related Agencies (L-HHS-ED) annual appropriations bill. Funds are provided through "budget year appropriations," meaning the funds would be available for the budget year beginning on the first day of the next fiscal year (e.g., October 1, 2013, for FY2014), unless otherwise specified. This availability may be retroactive if annual appropriations are not enacted until after the fiscal year has begun. The Impact Aid program is also authorized to receive appropriations through advance appropriations and forward funding. Advance appropriations become available one or more fiscal years after the budget year covered by a given appropriations act (e.g., for FY2015 and an FY2014 appropriations act). Forward funding becomes available during the last quarter of the budget year (e.g., July 1), but remains available through at least the following fiscal year (e.g., July 1, 2014, through September 30, 2015). Under the current mechanism for funding Section 8003(b) payments and the use of continuing resolutions rather than enacting regular appropriations acts prior to the start of the fiscal year, LEAs are generally unable to receive their full Section 8003(b) payments until sometime after October 1, because of delays in when regular appropriations or a full-year continuing resolution is enacted. This can create financial difficulties for LEAs, particularly those that are heavily dependent on Impact Aid funding. Providing funds for Section 8003(b) payments through advance appropriations or forward funding has the potential to ease some of these difficulties, but has budget enforcement implications that may complicate any attempt to transition to an alternative funding schedule. This report considers three different appropriations scenarios for Impact Aid Section 8003(b) payments that are an alternative to budget year appropriations: (1) providing forward funding for Section 8003(b) payments, (2) providing advance appropriations for Section 8003(b) payments, or (3) using both forward funding and advance appropriations to provide Section 8003(b) payments, as is done for other federal education programs such as Title I-A Grants to Local Educational Agencies authorized by the ESEA or Grants to States authorized under Part B of the Individuals with Disabilities Education Act (IDEA). Each of these scenarios has budget implications that may require at least a one-time increase in discretionary appropriations, a change in the limit set on advance appropriations, or some combination of both.

Introduction The Child and Family Services Improvement Act of 2006 ( P.L. 109-288 ) extended funding authorization for the Promoting Safe and Stable Families (PSSF) program (Title IV-B, Subpart 2 of the Social Security Act) for five years (FY2007-FY2011). The program primarily provides formula grants to states, territories, and tribes for provision of four broad categories of services to children and families: community-based family support, family preservation, time-limited reunification, and adoption promotion and support. P.L. 109-288 increased the amount of funds that will be made available to tribes for these purposes and also provides that no less than $40 million of funds provided for the program annually (through FY2011) are to be set-aside for competitive grants to eligible regional partnerships to address child welfare issues raised by parent/caretaker abuse of methamphetamine (or other substances) and for formula grants to states to support monthly caseworker visits to children in foster care. In addition, as under prior law, a part of the total funding provided for the PSSF program is reserved for certain grants under the Court Improvement Program (CIP, Section 438 of the Social Security Act). These CIP grants are distributed by formula to each eligible highest state court and are for those courts to assess and make improvements to their handling of child welfare cases. Finally, funds are also set aside for evaluation, research, and technical assistance related to the PSSF program. P.L. 109-288 provides that a portion of those set-aside funds must be used to provide evaluations, research and technical assistance related to monthly caseworker visits and grants to improve the outcomes of children affected by parent/caretaker abuse of methamphetamine or other substances. The Promoting Safe and Stable Families program was initially created as a program of "Family Preservation and Support Services" by the Omnibus Budget Reconciliation Act of 1993 ( P.L. 103-66 ). That program was reauthorized, expanded, and given its current name by the Adoption and Safe Families Act of 1997 ( P.L. 105-89 ). Subsequently, Congress passed the Promoting Safe and Stable Families Amendments of 2001 ( P.L. 107-133 ), which reauthorized the program through FY2006. More recently, the Deficit Reduction Act of 2005 ( P.L. 109-171 ) increased the authorization for mandatory PSSF appropriations by $40 million for FY2006 and, separately, appropriated funding ($20 million for each of FY2006-FY2010) for two new kinds of grants under the Court Improvement Program. The Senate Finance and House Ways and Means committees have exercised jurisdiction over the program and both committees held hearings related to reauthorization of this program during 2006. In addition to reauthorizing the Promoting Safe and Stable Families program and extending certain Court Improvement Program grants, P.L. 109-288 made significant amendments to the Child Welfare Services program (Title IV-B, Subpart 1 of the Social Security Act). That program provides formula grants to states for a wide range of services to children and families and was first authorized in 1935 by the original Social Security Act. Under prior law, that program had an "indefinite" or "no-year" funding authorization. P.L. 109-288 set the program's funding authorization to expire with FY2011 (placing it on the same reauthorization calendar as the PSSF program) and made other changes related to the program's purposes, how funds may be used under the program and what states are required to do in order to receive these funds. Finally, P.L. 109-288 extended funding authorization for the Mentoring Children of Prisoners program (Section 439 of the Social Security Act), which provides funds to eligible entities to support mentoring services for children of prisoners. In addition to extending the program's funding authorization for these site-based, competitive grants, P.L. 109-288 authorized a demonstration project to test the effectiveness of using vouchers to deliver these services more broadly. Reauthorization Activity in the 109th Congress On September 28, 2006, the President signed the Child and Family Services Improvement Act of 2006, which was enacted as P.L. 109-288 . By unanimous consent, the Senate on September 20, 2006 amended (S. Amdt 5024 and S. Amdt 5025) and passed the Child and Family Services Improvement Act of 2006 ( S. 3525 ). On September 26, 2006 the House passed identical legislation under suspension of the rules. The final legislation included significant portions of separate bills previously passed in the House and in the Senate. Senate action On June 8, 2006, a unanimous Senate Finance Committee ordered favorably reported a bill to reauthorize the PSSF program and make other changes. On June 15, that bill, the Improving Outcomes for Children Affected by Meth Act of 2006 ( S. 3525 ) was introduced by Senator Grassley and a written report from the Finance Committee was submitted on June 23 ( S.Rept. 109-269 ). On July 13, 2006, the Senate passed the legislation by unanimous consent and then sent the bill to the House for further action. Hearings Before approving this legislation, the Senate Finance Committee held two related hearings. On April 25, 2006, witnesses, including child welfare program administrators, advocates, and researchers, as well as individuals in recovery from methamphetamine, testified at a hearing titled "The Social and Economic Effects of the Methamphetamine Epidemic on America's Child Welfare System." A number of witnesses emphasized that treatment for methamphetamine abuse, especially family-based, longer-term and comprehensive residential treatment, can be effective, and that increasing access to these services could improve the lives of children and their families affected by methamphetamine abuse. On May 10, 2006, in a hearing titled "Fostering Permanence: Progress Achieved and Challenges Ahead for America's Child Welfare Systems," the Senate Finance Committee heard testimony from child welfare advocates and policy experts, federal and tribal program administrators, and a former foster care youth. These witnesses stressed the need for continued federal support of child welfare programs; the tribal administrator emphasized the limited funds available to her tribe and the many challenges it faced, including methamphetamine abuse. House action On June 20, 2006, Representatives Wally Herger and Jim McDermott, introduced the Child and Family Services Improvement Act of 2006 ( H.R. 5640 ). After amending the bill, the House Ways and Means Committee gave it unanimous approval on June 29, 2006 and the bill was reported to the House on July 12 ( H.Rept. 109-555 ). Under suspension of the rules, the House passed this legislation (renumbered as S. 3525 ) on July 25, 2006. Hearing On May 23, 2006, the House Ways and Means Subcommittee on Human Resources held a hearing to review proposals to improve child protective services. The subcommittee heard from representatives of the court, social workers, state child welfare agencies, and the Government Accountability Office (GAO) and many advocates—representing a range of viewpoints—who spoke on behalf of children served in the child welfare system. Provisions of the Child and Family Services Improvement Act of 2006 (P.L. 109-288) As enacted, the Child and Family Services Improvement Act of 2006 ( S. 3525 , P.L. 109-288 ) incorporates language approved in two earlier versions of S. 3525 . The following discussion describes provisions of the enacted legislation. (For a table comparing selected provisions from each of the predecessor bills along with prior law and current law, see Appendix A .) Funding Reauthorization and Other Changes to PSSF Under prior law, the Promoting Safe and Stable Families (PSSF) program was authorized to receive mandatory appropriations of $345 million in FY2006 and discretionary appropriations of $200 million. P.L. 109-288 extended these same funding authorization levels to each of FY2007-FY2011. Broader limitation on administrative spending The costs of the PSSF program are shared by the federal government (75%) and the states (at least 25%). Under prior law, a state was not permitted to spend more than 10% of its federal PSSF funds for administrative purposes, but there was no limit on use of the state PSSF funds (often described as "matching" funds) that could be spent for administrative purposes. Beginning with FY2008, P.L. 109-288 extends the 10% limit on spending for administrative purposes to include all funds spent under the program, both federal and non-federal (or matching). Reporting on use of funds Federal law and policy emphasize planning the use of PSSF funds (along with the Child Welfare Services and other child welfare or related programs) to ensure that a comprehensive range of child and family services is developed in each state. (See Appendix C "Planning and Reporting.") In keeping with this emphasis, states are required to annually send information to HHS on their planned use of funds under the PSSF, Child Welfare Services, and other child welfare and related programs. Beginning on June 30, 2007, P.L. 109-288 requires states to annually submit actual (in addition to planned) expenditure data on their use of funds under the PSSF and Child Welfare Services programs. (States, at their own option, may also provide data on actual use of funds for child welfare purposes in other programs.) Data on the use of funds are to be submitted on standard forms (which were previously used to report planned expenditures only) and include, for each program, spending by service, activity, or assistance provided, and the number of people served, the populations targeted for services, and the geographic areas served. The new law also requires the U.S. Department of Health and Human Services (HHS) to compile the forms showing this planned and actual use of funds and to submit them to the Senate Finance and House Ways and Means committees by September 30 of each year. Targeting the Use of New PSSF Funds The FY2006 mandatory funding authorization for the PSSF was raised from $305 million to $345 million by the Deficit Reduction Act of 2005 ( P.L. 109-171 ), but this additional $40 million was not appropriated in that law. P.L. 109-288 appropriated the newly authorized FY2006 funds and extended the $40 million annual increase in the mandatory funding authorization level through FY2011. Further, as shown in Table 1 , the law targets the use of the new funding to support monthly caseworker visits of children in foster care and to provide grants to increase the well-being of children affected by a parent or caretaker's abuse of methamphetamine (or other substances). Support for monthly caseworker visits Between FY2006 and FY2011, P.L. 109-288 provides a total of $95 million in funds for support of monthly caseworker visits of children in foster care "with a primary emphasis on activities designed to improve caseworker retention, recruitment, training and ability to access the benefits of technology." This total figure includes all of the $40 million in new FY2006 PSSF funds (which were appropriated by the law and will remain available for states to spend through FY2009), as well as $5 million in FY2008; $10 million in FY2009; and $20 million in each of FY2010 and FY2011. States are to receive these funds on essentially the same formula basis as is the case for the current PSSF program (distribution is based on a state's relative share of children receiving food stamps in the nation). States may not use these funds to supplant other federal foster care funds available (under Title IV-E of the Social Security Act) for the same purposes. Also, for FY2008-FY2011, a state's access to the full allotment of funds reserved for support of monthly caseworker visits will be contingent upon its spending no less than $1 on support of caseworker visits for every $3 in federal funds it received for that purpose. (For additional provisions in P.L. 109-288 that are related to caseworker visits of children in foster care, see the discussion under "Monthly Caseworker Visit Standards," below.) Grants to Increase the Well-Being of and Improve the Permanency for Children Affected by Methamphetamine or Other Substance Abuse Between FY2007 and FY2011, P.L. 109-288 reserves $145 million in mandatory PSSF funds to support competitive grants to regional partnerships for services and activities designed to improve the safety, permanency, and well-being of children who are in an out-of-home placement or are at-risk of such placement because of a parent or caretaker's abuse of methamphetamine or another substance. (The annual set-aside amounts are $40 million for FY2007, $35 million for FY2008, $30 million for FY2009 and $20 million in each of FY2010 and FY2011.) Use of grant funds The services and activities that may be funded under such a grant include family-based comprehensive long-term substance abuse treatment and replication of successful models for such treatment; early intervention and preventative services; counseling for children and families; mental health services; and parenting skills training. What is a regional partnership? Regional partnerships must be established by a collaborative agreement between two or more entities (for example, providers of child welfare services, including the state child welfare agency; the state agency administering federal substance abuse prevention and treatment funding; local law enforcement agencies; juvenile justice officials, judges and school or court personnel; providers of community health and mental health services and tribes, including tribal child welfare agencies). The state child welfare agency doesn't need to be the lead agency in the partnership applying for these funds, but with one exception it must be a member of each partnership. (The agency does not need to be a part of the partnership if a tribe/tribal child welfare agency is a member of the partnership.) Considerations in awarding grants HHS must first give consideration to the level of need demonstrated in the grant application of a regional partnership. Once that initial consideration is made added weight must be given to those applications from regional partnerships showing the effect of methamphetamine abuse and addiction on the child welfare system in the partnership region. Size and duration of grant awards and reports on activities Grants must extend for a minimum of two years but can not be made for more than five years; the annual funding to the grantee must be at least $500,000 but may not be more than $1 million. Finally, grantees will be required to submit annual reports on their activities and to incorporate information related to their performance on certain indicators (to be developed by HHS in consultation with representatives of states and tribes receiving funds). Further, HHS must annually send information regarding the use of this grant funding to the Senate Finance and House Ways and Means committees. Evaluation of targeted spending Prior law required HHS to annually reserve $6 million in PSSF funds to support research, technical assistance, and training related to the program and for evaluation of the program (or other programs designed to achieve the same purposes). P.L. 109-288 further stipulates that HHS must annually spend no less than $1 million of those reserved funds for research, evaluation and technical assistance related to supporting monthly caseworker visits of children in foster care and, separately, no less than $1 million annually for research, evaluation, and technical assistance related to the competitive grants to increase the well-being and improve the permanency of children affected by methamphetamine or other substance abuse. Tribal PSSF Program Funding and Access Under prior law tribal PSSF programs were funded with a 1% set-aside of the program's mandatory funding, plus a 2% set-aside of any discretionary funds provided for the program and in recent years tribes have received annual PSSF funding of roughly $5 million. Beginning with FY2007, P.L. 109-288 raises the tribal set-aside to 3% of the program's mandatory funding plus 3% of any discretionary funding provided for PSSF. (However, it would apply the 3% set-aside of mandatory funds only after the $40 million in targeted funds are reserved for the purposes described above.) Thus, the maximum funding authorized to be made available to tribes out of the PSSF would be $15.2 million (and the minimum funding would be $9.2 million). Based on these set-aside rules and the expected funding provided in the Revised Continuing Appropriations Resolution, 2007 ( P.L. 110-5 ), tribal PSSF funding in FY2007 is expected to be $11.8 million. Tribal allotment of PSSF funds are based on a tribe's relative share of individuals under the age of 21 (among all eligible tribes) and no allotment may be less than $10,000. For FY2006, about 90 tribes received PSSF funds (or less than a third of the tribes that received funds under the Child Welfare Services program). P.L. 109-288 permits a group of tribes to form a consortium and to have their PSSF allotment determined based on their combined share of children under the age of 21. The effect of this provision should be to expand access to PSSF funds by permitting tribes with smaller populations to band together (or to band with a larger tribe) to ensure their allotment amount is equal to or greater than the $10,000 threshold. Finally, P.L. 109-288 limits the prior law authority of HHS to exempt tribes from any PSSF state plan requirement that the Department determines would be inappropriate for that tribe based on the tribe's size and resources. The law now provides that HHS may continue to exempt tribes from requirements that limit the use of the federal PSSF funds for administrative purposes to no more than 10% and the requirement that provides that "significant portions" of PSSF federal funds must be spent on each of the four service categories: community-based family support, family preservation, time-limited reunification, and adoption promotion and support. However, tribes are required to comply with all other plan requirements (including assurances that the funds received will not supplant other federal or non-federal funds available for those purposes as well as other planning and reporting requirements). Amendments to the Child Welfare Services Program Under prior law, the Child Welfare Services program (Title IV-B, Subpart 1 of the Social Security Act) was authorized to receive funding of $325 million annually on an indefinite basis. P.L. 109-288 continues this same funding authorization level but limits it to five years (FY2007-FY2011)—thus placing this program on the same reauthorization calendar as the Promoting Safe and Stable Families program. For FY2006 the Child Welfare Services Program received an appropriation of $287 million; (under P.L. 110-5 , FY2007 funding for the program was expected to again be $287 million). Purposes P.L. 109-288 deleted a lengthy prior law definition of "child welfare services" along with a brief program purpose statement. However, it largely incorporated the intent of those prior provisions in a new purpose section. The law now describes the purpose of the Child Welfare Services program as "to promote State flexibility in the development and expansion of a coordinated child and family services program that utilizes community-based agencies and ensures all children are raised in safe, loving families, by—(1) protecting and promoting the welfare of all children; (2) preventing the neglect, abuse, or exploitation of children; (3) supporting at-risk families through services which allow children, where appropriate, to remain safely with their families or return to their families in a timely manner; (4) promoting the safety, permanence, and well-being of children in foster care and adoptive families; and (5) providing training, professional development and support to ensure a well-qualified child welfare workforce." New aspects of this language include both the assertion that the program is intended to promote "state flexibility in the development and expansion of a coordinated child and family services program" and the inclusion of an explicit program purpose related to providing training development and support to ensure a well-qualified child welfare workforce. Limitation on Administrative Spending The total cost of the Child Welfare Services program is shared by the federal government (75%) and the state (25%). Prior law placed no limit on the amount of program funds states could spend for administrative purposes. Beginning with FY2008, P.L. 109-288 limits the use of program funds for those purposes to no more than 10%, (which applies to both federal and non-federal program funds). The law also defines administrative costs to include CWS program-related procurement, payroll management, personnel functions (except supervision of caseworker services), management, maintenance and operation of space and property, data processing and computer services, accounting, budgeting, auditing, and certain travel expenses. (Under this definition, spending on caseworker services is not considered an administrative cost.) Revised Limitation on Use of Federal Funds Under prior law the state could not spend more of its federal program funds on those foster care maintenance payments, adoption assistance payments, or to provide child day care (that was necessary solely for the employment or employment related training of a parent/relative of a child) than the amount of federal funds it had received under this program in FY1979. (In FY1979, funding for the program was $56.5 million or roughly 20% of the FY2006 funding level.) By contract, P.L. 109-288 provides that beginning with FY2008, no state may spend any federal CWS funds for foster care maintenance payments, adoption assistance payments, or child day care unless it can demonstrate to HHS that it used federal CWS funds for at least one of these purposes in FY2005. If a state can show this, then its new annual limit on spending of federal CWS funds for these three purposes, combined, is the amount of the federal CWS funds it spent on them in FY2005. Limit on use of non-federal (matching) funds For purposes of providing their required 25% of the Child Welfare Services program cost (i.e. their matching dollars), states have been permitted to count their own spending for foster care maintenance payments without any limits. Beginning with FY2008, P.L. 109-288 prohibits states from using any foster care maintenance payment expenditures for the purpose of providing their non-federal matching dollars under the CWS program unless the state can show that it used foster care maintenance payment spending to meet the matching requirement for CWS funds in FY2005. If a state can show this, then the amount of the foster care maintenance payment spending that it counted under the program for matching purposes in FY2005 is the maximum amount of foster care maintenance payment spending it may count in the program in FY2008 and every following year. State Plan Requirements Under the Child Welfare Services program, states are required to develop a plan that assures the state will meet federal requirements. P.L. 109-288 adds several new requirements. It requires states to describe how they consult with and involve physicians or other appropriate medical professionals in assessing the health and well-being of children in foster care and in determining appropriate medical treatment for them. Further, no later than one year after the enactment of P.L. 109-288 (that is by late September 2007), states must have procedures in place to ensure continued availability of child and family services in the wake of a disaster. In addition, P.L. 109-288 requires states to describe (by the first day of FY2008), their standards for the content and frequency of caseworker visits to children in foster care, which at a minimum, must include a monthly visit by the caseworker that is "well-planned and focused on issues pertinent to case planning and service delivery to ensure the safety, permanency and well-being of the children." (Related requirements are described below, under " Monthly Caseworker Visit Standards . " ) P.L. 109-288 includes a separate requirement to clarify that for children in foster care who have a permanency goal of "another planned permanent living arrangement" such an arrangement may include placement in a residential education program. It also eliminated certain requirements that have little or no meaning today. These eliminated provisions required a state to assure that—the child care standards used in the Social Services Block Grant (SSBG) applied to any child day care services funded under CWS; it would train and use paraprofessional staff and volunteers to help with the program; and it had (as of June 1980) conducted an inventory of children in foster care. Finally, the law re-organizes much of the CWS program language and makes numerous, related conforming amendments and some technical amendments. (See Appendix A for more specific information.) Monthly Caseworker Visit Standards Beyond requiring specific caseworker visitation standards in state Child Welfare Services plans (described above), P.L. 109-288 requires each state—before it can receive any FY2008 CWS funding—to provide data to HHS that show (for FY2007) the percentage of children in its foster care caseload who were visited on a monthly basis (by their caseworkers) and the percentage of those visits that occurred in the place where the child lived. Based on these data, HHS, in consultation with the state, must outline (as of June 30, 2008) state-specific steps (including target percentages to be reached) to ensure that no later than October 1, 2011 (first day of FY2012), at least 90% of the children in foster care receive a monthly visit (and that most of these visits occur where the child lives). Further, P.L. 109-288 provides that, beginning with FY2009, if HHS determines that a state has not made the requisite progress toward meeting the monthly caseworker visitation standard, then the state must spend more of its own funds under the program in order to receive its full federal allotment. The minimum penalty is 1 percentage point (meaning the state would need to provide 26% of program funding to receive its full federal allotment) and the maximum penalty is 5 percentage points (meaning a state would need to provide 30% of the program funding to receive its full federal allotment). The amount of penalty for a state is to be determined by its degree of noncompliance with the state-specific monthly caseworker visit targets established in consultation with HHS (described above). P.L. 109-288 also requires HHS to prepare a progress report, including recommendations, on state caseworker visitation standards and to submit this report to the House Ways and Means and Senate Finance committees no later than March 31, 2010. Publication of state visitation rate Finally, P.L. 109-288 requires that beginning with the report for FY2007, the annual Child Welfare Outcomes report, which HHS is required to prepare (under Section 479A of the Social Security Act), must include state-by-state data on the percentage of children in foster care who received monthly caseworker visits and the percentage of the visits that occurred where the child lives. Mentoring Children of Prisoners Reauthorization Since it received its initial funding in FY2003, the Mentoring Children of Prisoners program (Section 439 of the Social Security Act) has provided grants to local public or private entities to establish, expand, or operate programs that provide mentoring services to children of prisoners. P.L. 109-288 expands the purpose of the program by requiring HHS to enter into a cooperative agreement with a qualified entity to demonstrate the effectiveness of using vouchers to deliver mentoring services to children of prisoners nationwide. In addition, P.L. 109-288 extended program authority for the Mentoring Children of Prisoners program, which had been scheduled to expire with FY2006, through FY2007-FY2011. It also provides that funds may be appropriated for the program in each of those years at "such sums as may be necessary." For FY2006, the program received $49.5 million in funding. Under P.L. 110-5 , the program is expected to receive this amount in FY2007 as well. P.L. 109-288 stipulates that HHS must use a competitive process to select the entity that will conduct the voucher demonstration (under a cooperative agreement with the agency). And it requires that the entity selected must 1) identify children in need of mentoring services (with priority given to Indian children, and children in areas that are rural, are not now served by the program, or that have substantial numbers of children of prisoners); 2) provide families of these identified children with vouchers (as well as a list of qualified mentoring programs in their area); 3) develop (with HHS) quality program standards for mentoring services, including criminal background checks of prospective mentors; and 4) monitor and oversee the delivery of the vouchers. Contingent on sufficient appropriated funding, the entity must agree to provide 3,000 vouchers in the first year of the cooperative agreement, 8,000 in the second year and 13,000 in the third year. The vouchers are to be valued at one-year of services and a qualified provider may receive periodic payments for a voucher by providing mentoring services to the child for whom it was issued and by demonstrating that it will be able to continue these services (with non-federal resources) after the 12-month value of the voucher is exhausted. P.L. 109-288 increased to 4% (from 2.5%) the amount of funds that are to be reserved by HHS out of the total appropriation for the Mentoring Children of Prisoners program for evaluation, research, and technical assistance (related now to both the site-based and voucher-based delivery of mentoring services). In addition to completing an evaluation of the total program, P.L. 109-288 requires HHS to fund an independent evaluation of the voucher demonstration project, and to provide a report of this evaluation to the House Ways and Means and Senate Finance committees no later than 90 days after the end of the second year of the demonstration. The new law also provides that the cooperative agreement may be extended two years beyond the initial three-year demonstration phase—but only if the entity administering the project performs satisfactorily and if an independent evaluation shows that vouchers are an effective way to deliver these services. Finally, P.L. 109-288 provides that if at least $25 million in program appropriations are made available for site-based grants (i.e. the prior law program), HHS must reserve not more than $5 million for the entity selected to demonstrate voucher service delivery in the first year of the cooperative agreement, $10 million for the second year of the agreement, and $15 million for the third year. Extension of the Court Improvement Program P.L. 109-288 extended through FY2011, the entitlement of eligible state highest courts to certain funds reserved from the PSSF program. Those funds are to be used to assess and improve court handling of child welfare proceedings. It also extends through FY2011 the requirement that a highest state court receiving these funds must provide no less than 25% of the funding for the activities supported by the Court Improvement Program (Section 438 of the Social Security Act). For more information about this program, including changes made to it by the Deficit Reduction Act of 2005 ( P.L. 109-171 ), see CRS Report RL33350, Child Welfare: The Court Improvement Program , by [author name scrubbed]. Court Consultation with Child/Youth in Permanency Review Proceedings P.L. 109-288 also amended the definition of the case review system provided in Section 475 of the Social Security Act, to assert that as part of the required annual permanency review for each child in foster care, the court or administrative body conducting the review must consult (in an age-appropriate manner) with the child whose permanency plan is the subject of the review. This includes permanency hearings that review plans for a foster youth's transition to independent living. PSSF Funding Authorizations and Distribution of Funds As noted above, P.L. 109-288 appropriated $40 million in additional FY2006 funding for the Promoting Safe and Stable Families, which brought the total FY2006 program funding to $434 million. Under the Revised Continuing Appropriation Act, 2006, ( P.L. 110-5 ), the PSSF program is expected to receive this same level of funding in FY2007. This section discusses mandatory and discretionary funding authorizations under the program, outlines statutory distribution requirements as amended by P.L. 109-288 (see Table 2 ), shows total program funding by purpose since the program's inception (see Table 3 ), and provides funding levels by state for recent years (see Table 4 ). Mandatory and Discretionary Funding Authorizations The PSSF program is authorized to receive total funding of $545 million annually through a combination of mandatory and discretionary authorization levels. The Deficit Reduction Act of 2005 (DRA, P.L. 109-171 ) raised the mandatory funding authorized for the PSSF program from $305 million to $345 million and the five-year cost of this increased mandatory funding was "scored" or "paid for" in that law. P.L. 109-288 extended the mandatory funding authorization of $345 million for the PSSF through each of FY2007-FY2011. P.L. 109-288 also continues the prior law discretionary funding authorization in the PSSF program of $200 million. The authorization of discretionary funds, at this level, was first made for FY2002 but Congress has never provided more than $99 million in any one year under this discretionary authorization. In FY2006 and FY2007, Congress provided $89 million in discretionary funding. Distribution of Funds The statute entitles eligible states to receive a portion of the fixed mandatory funding amount, as well as a portion of any discretionary funds that may be appropriated to provide certain child and family services. Before the funds are allocated to states, however, the statute provides that certain PSSF funds are to be reserved for specific purposes. P.L. 109-288 amended those set-aside provisions by requiring that $40 million of the program's mandatory funds must be reserved in each of FY2006-FY2011 to support increased frequency and better quality of caseworker visits to children in foster care and to improve the outcomes of children affected by parents or caretakers' abuse of methamphetamine or another substance. ( Table 1 above shows the split of these funds by year.) It also increased PSSF funding to tribes by (as discussed earlier) establishing a 3% set-aside of both mandatory and any discretionary funds appropriated. Finally, the law also stipulates that HHS must use a portion of the funds reserved to it for research, evaluation and technical assistance to study or support improved quality and quantity of caseworker visits to foster children ($1 million annually) and to study or support grants to improve outcomes for children affected by methamphetamine abuse or other substance abuse ($1 million annually). Table 2 outlines the PSSF funding distribution requirements by purpose, as amended by P.L. 109-288 . Program Funding History Table 3 , below, shows annual funding for the PSSF program, by purpose and since its inception. All of the court funding shown in this table is derived from a set-aside of PSSF appropriations. As noted earlier, increased funding for courts was provided in the Deficit Reduction Act, P.L. 109-171 . However, this money was separately appropriated and is not shown here as a part of PSSF funding. (The CIP as revised by P.L. 109-171 is discussed in more detail in a separate report. See CRS Report RL33350, Child Welfare: The Court Improvement Program , by [author name scrubbed]. ) Allotment of PSSF Funds to States Table 4 shows actual awards of PSSF funds by state for FY2005 and FY2006, and allotment of these funds by state for FY2007. Funds for the four authorized categories of child and family services are allotted to states based on their relative share of children (individuals under age 18) receiving food stamps. Data used to make this determination are derived from the most current three years of available food stamps data. As described earlier, beginning with FY2006, P.L. 109-288 annually targets $40 million in PSSF funding for specified purposes. For FY2006 all of this money was distributed to state or territories by formula and may only be used to support monthly caseworker visits of children in foster care. (Because these funds were not made available until the very end of the fiscal year, P.L. 109-288 provides that states may have through FY2009 to expend these funds.) For FY2007 all of the targeted funds must be distributed via competitive grants for services or activities to improve the outcomes of children affected by parent/caretaker abuse of methamphetamine or another substance. Appendix A. Selected Provisions of the Child and Family Services Act of 2006 as Compared to Prior Law and to Earlier Versions of the Bill (Section references in prior law column are to the Social Security Act, as amended prior to enactment of P.L. 109-288 ) Appendix B. Legislative History of the Promoting Safe and Stable Families Program At least since the creation of the current federal child welfare program structure by the Adoption Assistance and Child Welfare Act of 1980 ( P.L. 96-272 ), Congress has remained consistently concerned about the number of children in foster care and the lack of stability and permanence in their lives. During the 1990s, Congress created a new program ( P.L. 103-66 ), now called the Promoting Safe and Stable Families Program, which responded to some of those concerns. By the end of the 1980s, there were widespread concerns about a rapidly growing foster care caseload (believed to be spurred by the spread of crack cocaine use) and a belief that too few preventive services were resulting in too many children being unnecessarily placed in foster care. At the same time, a number of states, often with the support of private foundations, had begun to offer a model of family preservation services that provided families with short-term, intensive services; early research suggested these services would significantly reduce the number of children unnecessarily placed in foster care. In this climate, Congress began discussions about increasing federal support for preventive services, including intensive family preservation. Several years of legislative efforts lead initially to a 1992 agreement between the House and Senate on new capped entitlement funding for 1) "innovative services" to children and families (e.g., family preservation services); 2) substance abuse prevention and treatment; and 3) respite care. The agreement would have entitled states to their share of $165 million for these purposes in FY1993 rising to $575 million in FY1998, and for every succeeding year, the FY1998 amount adjusted by an inflation factor. The legislation provided specific allotment of the total funds for each purpose—with the largest share reserved for innovative services (conference agreement to accompany H.R. 11 , 102 nd Cong., H.Rept. 102-1034). Although this legislation was approved by both the Senate and the House, as part of an omnibus package, the Revenue Act of 1992, it was vetoed by President George H. W. Bush (for reasons unrelated to the child welfare provisions) and so did not become law. Original Enactment One year later, however, child welfare advocates succeeded in including new entitlement funding for family preservation and support services in the Omnibus Budget Reconciliation Act of 1993 ( P.L. 103-66 ) which created Subpart 2 of Title IV-B of the Social Security Act. Proposed by the Clinton Administration, the 1993 legislation drew much of its inspiration from the earlier legislative work but made several notable changes. Among those, it included less entitlement funding and deleted specific allotment of funds for substance abuse prevention and treatment and respite care (both of which could nonetheless be funded out of the program that was approved). As enacted, the Family Preservation and Support Services provisions of P.L. 103-66 entitled states to receive a certain portion of federal funds (rising from $60 million in FY1994 to no less than $255 million by FY1998) to enable states and territories "to develop and establish, or expand, and to operate a program of family preservation services and community-based family support services." One percent of the funds was to be reserved for support of tribal child and family services, and each state was to be allotted these new funds based on its relative share of children in the nation who receive food stamps. To receive their full formula allocation states were required to maintain at least their FY1992 level of funding for these services and to support no less than 25% of the state's total family preservation and family support services program with non-federal funding. Finally, the new law also provided that funds were to be set aside annually to allow state highest courts to assess their need for improvements to their handling of child welfare cases ($5 million for such grants in FY1995 and $10 million for each of FY1996-FY1998) and, separately, to allow HHS to evaluate programs carried out under the new subpart or others designed to achieve the same purposes and to support research, training and technical assistance related to the program ($2 million in FY1994 and $6 million in each of FY1995-FY1998). ASFA Amendments Congress returned to child welfare issues when it passed the 1997 Adoption and Safe Families Act (ASFA, P.L. 105-89 ). That legislation sought to make a child's safety the primary concern in all child welfare decisions and also to move foster children to a permanent family more quickly. With an eye toward children's development and their concept of time, Members of Congress were concerned that states maintained a goal of family reunification long after it was apparent that such a goal was inappropriate (or in cases where reunification might in fact jeopardize the child's safety). They were also troubled by reports that the number of adoptions out of foster care had remained virtually unchanged for years while the number of children in care had risen dramatically. ASFA renamed Title IV-B, Subpart 2 of the Social Security Act, the Promoting Safe and Stable Families program. In addition, as one part of ASFA's multiple amendments related to the safety of children, Congress added a requirement that the safety of children be the "paramount concern" in administering and conducting service programs under the PSSF program. As a part of its focus on expediting decisions around finding a permanent home for children in foster care (and encouraging adoption as one method of doing this), Congress defined two additional service categories for which states were required to use "significant portions" of their PSSF funding—time-limited family reunification services and adoption promotion and support. Finally, Congress set annual increases in the mandatory funding authorized for the program, raising it from $275 million in FY1999 to $305 million in FY2001. (Congress also continued the annual set-asides from these funds for tribal child and family services, court improvements, and program evaluation, research, training, and technical assistance.) The time limit for the new category of reunification services was set at within 15 months of a child's removal from his/her home. This is consistent with a separate ASFA-added requirement, which provides that states must initiate termination of parental rights (TPR) proceedings for any child who has been in foster care for 15 of the past 22 months (unless the state can show good cause why it should not do this). A child's adoption cannot be completed without termination of parental rights and courts are generally reluctant to grant TPR in cases where the family has not first been offered needed reunification services. Thus the new "time-limited reunification" funding category sought to ensure that ASFA's efforts to expedite permanency were not defeated by a lack of available or provided services. Likewise, the addition of the adoption promotion and support services category was consistent with other ASFA amendments that encouraged adoption as a way of attaining permanent family for children. 2001 Amendments Program reauthorization language introduced in 2001 largely mirrored language suggested by the Bush Administration and initially sought to raise the annual mandatory funding level of the program to $505 million. However, Congress subsequently changed this provision (and the Administration also changed its budget request) to instead authorize discretionary funds above the prior mandatory funding level. As enacted, the Promoting Safe and Stable Families Amendments of 2001 ( P.L. 107-133 ) authorized $200 million in discretionary funding for the program in each of FY2002-FY2006 and maintained the prior authorized mandatory funding level ($305 million) through FY2006. P.L. 107-133 further provided that a state was entitled to its share of any discretionary funds appropriated in the same manner (i.e., based on its relative share of children receiving food stamps) as was the case with mandatory funding. Additionally, it provided that, out of any discretionary funds appropriated (and in addition to the pre-existing set-asides of mandatory funds for these same purposes), 2% must be set aside for tribal child and family services, 3.3% for Court Improvement and 3.3% for research, evaluation, training and technical assistance. P.L. 107-133 added four findings to the statute and provided four program objectives (each linked to one of the four service categories funded by the program). It amended the definition of family preservation services (to include funding of infant "safe haven" programs) and the definition of family support services (to explicitly include funding of services that "strengthen parental relationships and promote healthy marriages"); provided for re-allotment of any unused program funds; moved the statutory authorization language for the Court Improvement Program (previously freestanding) into the Social Security Act; and provided that in implementing changes identified by an assessment, courts could use CIP funds to ensure children's safety, well-being and permanence (in accordance with standards established in ASFA) and to implement a corrective action plan identified as needed via a federal conformity review of the child welfare agency. Finally, it established research priorities and specified the kinds of technical assistance HHS may offer to tribes, territories and states regarding implementing the Promoting Safe and Stable Families program and required the Department to report to Congress biennially (beginning not later than April 2003) on the evaluations, research and technical assistance funded with money set-aside for this purpose from the PSSF. The Deficit Reduction Act of 2005 As enacted in February 2006, the Deficit Reduction Act ( P.L. 109-171 ) increased the FY2006 mandatory funding authorization for the PSSF program, for FY2006 only, to $345 million. Separately P.L. 109-171 also amended the Court Improvement Program, which had been entirely funded as a set-aside from the PSSF funding. These amendments provide for two new kinds of Court Improvement Program grants, which are related to improved training and, separately, timely achievement of safety, permanence and well-being for children; the law appropriated $20 million for each of FY2006-FY2010 (total of $100 million) to make these grants. These funds are independent of PSSF funding, and are in addition to the funds already set-aside from the PSSF for assessing and improving court performance in child welfare proceedings. The Promoting Safe and Stable Families and Court Improvement provisions of the Deficit Reduction Act were incorporated into the legislation during the conference negotiations and had not been previously acted on by the Senate or the House. However, changes to the Court Improvement Program are consistent with recommendations made in a May 2004 report by the Pew Commission on Children in Foster Care and legislation introduced in the Senate ( S. 1679 ) and House ( H.R. 3758 ) sought to make similar or related court improvement changes. The Child and Family Services Improvement Act As enacted in September 2006, the Child and Family Services Improvement Act of 2006 ( P.L. 109-288 ) extends the funding authorization of the PSSF program for five years (FY2007-FY2011) and annually targets the use of $40 million in new funds for the program for two purposes: to support monthly caseworker visits and to improve outcomes for children affected by their parent/caretaker's abuse of methamphetamine or another substance. HHS is required to use some of the research, evaluation and technical assistance funds it is provided under PSSF to evaluate or otherwise support those newly authorized PSSF activities. In addition, the law requires states to report on their actual —as opposed to simply planned —use of PSSF (and Child Welfare Services) funds and both increases the PSSF set aside for tribal child and family services, and allows access to these funds for more tribes. Appendix C. Selected Policy Issues The following section was developed prior to the reauthorization of the PSSF in 2006 to discuss the definition of service categories under the PSSF program, findings related to the effectiveness of these services, as well as requirements related to planning and reporting child and family services. The Child and Family Services Improvement Act of 2006 ( P.L. 109-288 ) did not amend the definition of services under the PSSF program, although it does require states to report information on the actual as opposed to planned spending of PSSF funds. Further it requires HHS to use some of its research set-aside to support research, evaluation, and technical assistance related to two new purposes for which some PSSF funds are targeted: improving the quality and quantity of caseworker visits of children in foster care and providing services and activities to improve the outcomes of children affected by parent/caretaker's abuse of methamphetamine (or another) substance. Service Categories Defined States are required to spend significant portions of their PSSF funding on each of four service categories: family support, family preservation, time-limited family reunification, and adoption promotion and support services. The statute (Section 431 of the Social Security Act) defines these service categories at some length. Family support —community-based services to promote the safety and well-being of children and families designed to increase the strength and stability of families (including adoptive, foster, and extended families), to increase parents' confidence and competence in their parenting abilities, to afford children a safe, stable and supportive family environment, to strengthen parental relationships and promote healthy marriages, and otherwise to enhance child development. Family preservation —services for children and families designed to help families (including adoptive and extended families) at risk or in crisis, including service programs designed to help children safely return to families from which they have been removed; or be placed for adoption or with a legal guardian (or, if adoption or legal guardianship is determined not to be safe and appropriate for the child, in some other planned, permanent living arrangement); pre-placement preventive services programs, such as intensive family preservation programs, designed to help children at risk of foster care placement remain safely with their families; service programs designed to provide follow-up care for families to whom a child has been returned after a foster care placement; respite care of children to provide temporary relief of parents and other caregivers (including foster parents); services designed to improve parenting skills (by reinforcing parents' confidence in their strengths, and helping them to identify where improvement is needed and to obtain assistance in improving those skills) with respect to matters such as child development, family budgeting coping with stress, health, and nutrition; and infant safe haven programs to provide a way for a parent to safely relinquish a newborn infant at a safe haven designated pursuant to a state law. Time-limited family reunification —services and activities provided to a child that is removed from his/her home and placed in foster care, and to the parents or primary caregiver of such a child, in order to facilitate the reunification of the child safely, appropriately and within a timely fashion, but only during the 15-month period that begins on the date that the child is considered to have entered foster care: individual, group, and family counseling; inpatient, residential, or outpatient substance abuse services; mental health services; assistance to address domestic violence; services designed to provide temporary child care and therapeutic services for families, including crisis nurseries; transportation to or from any of the services and activities described. Adoption promotion and support —services and activities designed to encourage more adoptions out of the foster care system, when adoptions promote the best interests of children, including such activities as pre- and post-adoptive services and activities designed to expedite the adoption process and support adoptive families. Service Category Overlap Even a relatively quick reading of these definitions reveals that in many cases they define a mission rather than provide a list of specific activities that are expected to achieve this mission. Further, the PSSF service categories have similar and, in some cases, even identical missions. At the same time, while the service categories can be understood as having overlapping missions or even, in certain cases as subsets of each other, each of the PSSF services categories have different target populations and, as the legislative history shows, they were created by Congress to meet separate if related goals. Family support services have the broadest target population and, in philosophy, aim to bolster the functioning of any family in a given community. Family preservation services are generally understood to serve a far narrower group of families—those where children are at imminent risk of removal to foster care, meaning in most cases that a child has already experienced abuse or neglect (and including some families where a child has been removed to foster care and reunification efforts are underway). Federal child welfare funding for family support and family preservation services was instituted at a time when Congress was particularly concerned about the burgeoning foster care caseload. The services were intended to prevent the need for foster care placement, whenever possible and the new funding for these services was the centerpiece of the child welfare legislation in which they were enacted ( P.L. 103-66 ). Time-limited reunification services may be understood as a subset of family preservation services and are explicitly meant to serve the needs of children and families who have been separated for 15 months or less (because the child is placed in foster care). Adoption promotion and support services aim to encourage families seeking to adopt from foster care and to support those who have done so. Such services might also be understood as a subset of family support services, or in the case of adoptive families in crisis, as a family preservation service. Federal funding for these services was not the central creation of the Adoption and Safe Families Act (ASFA, P.L. 105-89 ). Rather, Congress increased PSSF funding to some extent and required states to spend money on time-limited reunification and adoption promotion and support to augment ASFA's central goals of promoting safety and permanency for children. At the time, Congress remained deeply concerned about the size of the foster care caseload, but ASFA helped shift the focus of this concern from policies primarily intended to prevent entries into foster care to policies that sought to safely expedite exits from care. State Planned Spending by Category Federal statute, as interpreted in HHS policy, requires states to spend at least 20% of their PSSF funds on each of the four service categories. Collectively states reported that they intended to spend their FY2002 PSSF funds as follows—29% for family support, 30% for family preservation, 21% for time-limited reunification, and 20% for adoption promotion and support. Given that family support and family preservation have received dedicated funding the longest and that their service goals (and target populations) are more expansive, program evaluators note that the two newest services categories—time-limited family reunification and adoption promotion and support—have become "well-established in the continuum of PSSF-funded services." At the same time, because states may choose to include the same given activity in more than one service category, this spreading of resources across categories could ideally mean that states have a full range of child and family services available to those who are not yet in need of extensive child welfare services, those who need such services to ensure that children and their parents can safely live together (rather than be separated via foster care placement), those for whom the services are needed to ensure a short foster care stay and permit early reunification, and those for whom the services support successful creation and functioning of permanent adoptive families. Effectiveness of Services Congress required HHS to evaluate the effectiveness of programs funded under Title IV-B, Subpart 2 as part of its initial approval of funding for family preservation and family support services in the early 1990s. HHS used those funds to support three large-scale evaluations. One looked at overall implementation issues for the program, a second looked at the effectiveness of two particular models of family preservation services (both providing relatively intensive casework), and the third looked at the effectiveness of a very wide range of family support services. (Findings from these evaluations are discussed below.) No similar large-scale evaluations of time-limited reunification services or of adoption promotion and support services have been made. However, these services may in part be subsets of some kinds of family preservation and family support programs. Further, Congress amended the statutory language on evaluations in 2001 ( P.L. 107-133 ) to include specific research priorities. Among these are "promising program models in the [PSSF] service categories ... particularly time-limited reunification services and post-adoption services." As noted earlier, the 2006 amendments ( P.L. 109-288 ) require HHS to use some of its set-aside funds to fund research, evaluation and technical assistance related to supporting improved quality and quantity of caseworker visits of foster children ($1 million annually) and to providing services or activities to improve the outcome of children affected by their parents' (or other caretakers') abuse of methamphetamine or other substance. Intensive Family Preservation Services When Congress began discussion of funding these services in the early 1990s, a great deal of optimism existed about the ability of intensive family preservation services to cost-effectively reduce the number of placements in foster care. Since that time, multiple program evaluations have not shown that intensive family preservation services lower placement risk for the children and families they serve (when compared to children and families receiving standard in-home casework services). In addition, both children and families who received standard in-home casework services and those receiving intensive family preservation services were found to have similar (relatively low) levels of maltreatment recurrence (after initiation of the services) and to exhibit similar levels of family functioning. In other words, receipt of intensive family preservation services did not reduce out-of-home placement or maltreatment recurrence, and did not improve family functioning beyond what normal casework services achieved. These evaluations did not compare—nor were they designed to compare—the placement outcomes for families receiving no services versus outcomes for those who received services; and they should not be understood as proof that the families served did not benefit from or need the services. Instead the evaluations were designed to test whether a particular manner of delivering the same kinds of caseworker activities (e.g., anything from help paying a utility bill to counseling about effective and appropriate child discipline) could produce better outcomes for children and families. The most-scrutinized intensive family preservation services delivery model (Homebuilders) provides that services must be initiated quickly (within 72 hours of a "crisis" that precipitated imminent child removal), that they must be intensive (caseworkers are to be assigned no more than two families to work with, must be available to those families 24 hours a day, seven days a week, and are expected to swiftly offer any or all of a full range of material and clinical aids needed), and they are to be of short duration (4-6 weeks). As these characteristics suggest, the target population for the delivery of services via the Homebuilders model is families where children are at imminent risk of removal . This is especially critical to the model's theory of effectiveness, which rests on an aspect of "crisis theory" and posits that a family in crisis is at a juncture where it is particularly amenable to change. In practice, and for a variety of reasons, providing intensive family preservation services to families and children who are "imminent risk of foster care removal" has proven difficult. In the four-site study contracted by HHS and jointly conducted by Westat, the Chapin Hall Center for Children and James Bell Associates, the evaluators found that even though special precautions were taken to ensure only families at imminent risk were studied, very small percentages of the "control group children"—those are children who were randomly assigned to receive regular caseworker services rather than intensive family preservation services—were actually placed in foster care within 30 days of their assignment to the study. The share of control group children who were not placed in foster care during this time period ranged from 89% to 95%. This was very similar to the share of experimental group children not placed in foster care during the first 30 days after their assignment to the study (89% to 99%). Given that targeting intensive family preservation services on children at imminent risk for removal has been a problem for most or all of the evaluations of this service delivery model, and that for the multi-site HHS study the evaluators developed special tools meant to ensure only families most at risk were included in the study, researchers suggest that optimal targeting may never be achieved. These evaluators also questioned whether many families coming into contact with child welfare services—and referred to family preservation services—understand themselves to be at a crisis point. Noting that the lives of families served "are often full of difficulties—externally imposed and internally generated" they suggest that the imminent removal of a child might simply be understood as part of a set of ongoing problems rather than as a crisis. For families with chronic problems, they suggest, a short term dose of services—no matter how intense—would be unlikely to resolve all or many of the chronic concerns. Noting that the intensive family preservation services provided did not harm families, the evaluators also made it clear that services for many families whose children are not in foster care are still needed. However, given the heterogeneity of the child welfare needs of these families (child behavioral problems, child abuse, child neglect, suspected child abuse or neglect, etc.), they suggest that a single service delivery model providing access to relatively general services is unlikely to work for everyone. What Next for Family Preservation Services? The federal statute does not provide that a specific family preservation services delivery model must be used by states and HHS explicitly declined to do this when it issued program regulations. In addition, the discouraging evaluation data on intensive family preservation services is not new (some suggestions of the current findings were available even as the program was being federally implemented in the middle 1990s). States then have had ample time to adjust or otherwise change their models of service delivery, although much remains to be learned about what the most effective services and delivery of those services might be. Researchers have suggested more study of the effectiveness of specific caseworker activities, more effective and more selectively delivered parent training classes (which are a staple service in both preservation and reunification cases) and different service delivery models, or activities on behalf of specific subgroups of child welfare clients (e.g., young mothers or families with substance abuse concerns) are needed. Need for In-Home Services Apart from the specific way in-home services are delivered to families, there remains an apparent need for services to families in which children have not been removed from their homes but have been maltreated in those homes. Of the estimated 872,000 children found to be victims of child maltreatment in FY2004, a little more than 40% received in-home services (following the investigation that confirmed their maltreatment), an additional 19% were removed to foster care while the remaining 41% of these child victims continued to live at home and received no post-investigation services of any kind. While some of the children may not have been served because their parents refused assistance offered (unlike removal to foster care, parents generally must voluntarily participate in services offered to intact families), researchers also note that there may not be enough of the kind of services needed or there may be long waiting lists for the services. Beyond the substantial number of children and families arguably in need of services who do not receive them, a case-level analysis of findings in the initial Child and Family Services Review (CFSR) shows that states were less successful in meeting the needs of children and families served in their own homes, than those with children in foster care. This analysis found that in the on-site review of cases, in-home cases were significantly more likely than foster care cases to receive an "area needing improvement" rating for a number of key indicators related to ensuring the well-being of children and families. These items in which in-home cases were significantly more likely to receive this rating than foster care cases include those related to assessing child and family needs and providing needed services; involving children/families in case planning; adequate face-to-face worker visits with children; and ensuring that children receive services to meet their educational, mental health and physical health needs. In-home cases were also significantly more likely to be rated lower on the safety item related to reducing risk of harm to children served than were foster care cases. This same study also reported on "common challenges" to better state performance and while these may apply to either foster care or in-home cases, a number are directly related to the indicators listed above and for which the on-site case reviews revealed specific weakness for in-home cases. Common challenges associated with those indicators and identified for many states, include the agency doesn't consistently provide sufficient services to address risk of harm to children, particularly in the in-home services cases; the agency doesn't consistently monitor families to assess service participation and change in risk factors to protect children in their homes and prevent removal; the agency doesn't consistently provide appropriate services to meet the identified needs of children and parents; fathers, mothers, and children (age appropriate) are not sufficiently involved in case planning; the frequency of face-to-face contacts between workers and children isn't consistently sufficient to ensure children's safety and well being; the agency is not consistent in providing services to meet children's identified education-related needs; the number of dentists/doctors in the state willing to accept Medicaid is not sufficient to meet the need; there is a lack of mental health services for children; and the agency doesn't consistently conduct mental health assessments. In sum, while children in foster care are much discussed as the barometer of states' child welfare performance, states' in-home case loads are generally more sizeable than their foster care caseloads and the data suggest that not all families are receiving needed services, nor are those receiving services having their needs fully met. Family Support Services Where family preservation services may be requested once a family has come to the attention of the child welfare agency (e.g., child maltreatment allegation and/or finding made), family support services seek to reach families that have not reached that threshold. The central object of these services is to ensure a child never experiences abuse or neglect and to improve the functioning of parents on behalf of their children. Typically these services have been provided by community agencies or groups—rather than by the state or local public child welfare agency—and the "target family group" is much broader than those typically served by the child welfare agency. Although family support services may be described (and implemented) as intended for families "at-risk" of child abuse or neglect, in theory they are designed to benefit any family in a particular community or neighborhood. Overall, families that receive family support services (such as parent training or child development classes) would seem much more likely to seek out (or volunteer) for the service as opposed to families that may be offered these same services (or may be ordered by the court to participate in them) for family preservation. Study Design Citing the vast range of programs that might fall under the "family support" rubric, the Abt Associates researchers who conducted the HHS-funded study opted to conduct a "meta-analysis" of program success. This evaluation technique required the researchers to identify previously conducted studies of a range of family support programs and to organize the data collected in these studies in such a way that they could generate findings across these studies. For the family support studies, the researchers coded information from 665 studies (representing 260 different family support programs) that were conducted after 1965 in Canada, the United States or Great Britain. Kinds of Programs Evaluated To be included in the meta-analysis, a study needed to evaluate a program that provided services intended to improve child outcomes by strengthening the capacity of parents to support their children's development. Accordingly, nearly all the programs included in the meta-analysis had goals of improved parenting (98%) and child development (91%). Most services were delivered in the family home (62%) but other settings (in descending order of frequency) included hospital or clinic, school, community center, university -college, and public or private agency. Home visits were a primary service delivery mode, followed, in descending order of frequency, by parent meetings/classes/ groups, parent-child classes/groups and group early education for children. Most programs (87%) used at least some staff with a degree and formal training. Finally, although the original family support programs were neighborhood-based and available to all in the community, many programs targeted specific populations. About 88% of the family support programs included in the meta-analysis targeted families believed to be at certain environmental risk (e.g., poverty, risk of abuse or neglect, teen parenthood), those with certain biological risks (e.g., low-birth weight baby, developmental delay, behavior problems) or a combination of these populations. Most services were available to families for less than one year and families received relatively small amounts of service (measured in number of hours per month). Findings Overall, the meta-analysis showed that family support programs have small but consistent and (statistically) significant positive effects in children's cognitive development and their social and emotional development. Programs that had larger positive effects on children's cognitive outcomes were those that focused on children with special needs (either biological or developmental), or provided early childhood education directly to children, or provided parents with opportunities for peer support. Programs that used home visiting as a primary service had less effect on children's cognitive outcomes. Although on an overall basis, child safety was not otherwise shown to be meaningfully affected, programs that targeted teen parents with young children and combined case management with parent-child activities were more effective in protecting children from accidental injury, abuse or neglect. Finally, family support programs were not shown to have a meaningful effect on children's health and physical development. With regard to parent/family outcomes, the study showed that overall family support programs have small but consistent and statistically significant positive effects in parenting attitudes and knowledge, parenting behavior, and family functioning. Programs that used professional staff to help parents to be effective adults, and that provide opportunities for parents to meet in support groups, were more effective in producing positive outcomes for parents. The programs that had greatest effect on parents' attitudes towards and knowledge of child-rearing and child development were those that work with special needs children and provided opportunities for peer support. The meta-analysis found no or little meaningful effect of family support programs on parent mental health, nor on family economic self-sufficiency. Other Services In contrast to the large scale family preservation and family support studies, HHS has recently directed the PSSF evaluation funds towards generally smaller scale projects that look at one kind of service or program design (often at a single site). In recent years projects funded include those related to strengthening and promoting healthy marriage, the meaning of termination of parental rights for older foster children, fathers involvement in permanency planning and child welfare casework, Early Head Start services provided to child welfare families, interventions for substance abusing parents, post-adoption services, and adoption promotion efforts, intensive family reunification efforts, and provision of crisis nursery/respite care service. Research and/or evaluation is ongoing for most of these projects. Planning and Reporting The 1993 law ( P.L. 103-66 ) establishing funding for child and family services under Title IV-B, Subpart 2, both encouraged and required states to engage in planning how these services would be delivered. The law requires states to consult with "appropriate public and nonprofit private agencies" with experience in administering services to children and families and to (jointly with HHS) prepare a five-year plan, which establishes the goals the state intends to accomplish and describes the methods that will be used to measure progress toward accomplishing those goals. It further requires states to annually review and report on progress toward achieving these goals and to make any necessary adjustments to the plan that reflect changed circumstances. States must continually be engaged in this planning and review process. That is, every five years the state must establish a new five-year plan and begin annual progress reviews and reports of that plan. Beyond these requirements, the 1993 legislation encouraged states to take planning seriously by permitting each state to use up to $1 million of its first year grant (FY1994) for planning purposes and providing that this spending on planning did not need to be matched with state spending. The policy guidance and subsequent regulations from HHS further encouraged and required this extensive planning. As ultimately implemented by HHS, the regulation consolidated a number of child welfare program planning requirements into a single Child and Family Services Plan. States submit this single five-year plan (the most recent was due in June 2004 for the period FY2005-FY2009), and annual progress reports. In addition to the requirements related to the PSSF programs, this plan must include the assurances required for receipt of funds for Child Welfare Services (Title IV-B, Subpart 1 of the Social Security Act), Basic State Grants (Section 106 of the Child Abuse Prevention and Treatment Act), and the Chafee Foster Care Independence Program and related Education and Training Vouchers (both in Section 477 of the Social Security Act). Also, as part of the annual progress report, states must estimate their total child welfare spending for the upcoming fiscal year, across the full continuum of services and noting amounts used from all federal funding streams (as well as state and local funding). Finally, HHS permits states to use their PSSF funds for these planning purposes without having those funds count towards the limit on use of PSSF funds which is set at 10%. Both the notice of proposed rulemaking (NPRM) and the final rule for implementing Title IV-B, Subpart 2 emphasized the importance of collaborating broadly when creating this plan to ensure the full continuum of child and family services was considered and planned for and to leverage as many resources as possible for the program's purposes. Studying the implementation of the program, James Bell Associates found that most states engaged in extensive planning and that the focus on collaboration meant increased community and consumer involvement. Initially, over the 14 states where implementation case studies were conducted, most (8) developed a state-level collaborative body that made the decisions about how PSSF funds would be used; that is to say the locus of decision making was outside the state child welfare agency. In part, this no doubt stems from the inclusion of family support on an equal basis with family preservation in the statute. Where family preservation has a long history of child welfare agency implementation, family support was (and remains) outside the traditional child welfare agency purview. Following passage of ASFA (P.L., 105-89) and the addition of two new service categories (time-limited family reunification and adoption promotion and support)—both of which were much more closely aligned with traditional child welfare programs—the locus of decision-making shifted back toward the state child welfare agency in the majority of the case study sites. Limited Information on Current Program Since the Bell study, which as one part of its implementation study made an analysis of the annual progress reports submitted by states for FY1999-FY2002, there has been no comparable study of state spending plans. That analysis showed that most states were spreading their PSSF funding across all four categories. At the same time, that report noted that the overlap in service categories—because family support and family preservation might fund the same service (but presumably for a different population) and because the newest service categories (time-limited reunification and adoption promotion and support) could be understood as subsets of the initial service categories of family support and family preservation—it was not easy to accurately report spending in the statutorily defined categories. In addition, the consolidated planning and lack of a single plan format made it hard to consistently track how funds were being spent across the states. The researchers suggested that how funds were used (or planned to be used) might better be understood based on where the service was delivered (in the home, child welfare office, school, community center, clinic, etc.) and/or who the service was targeted on (families in process of reunification, families with recently reported abuse or neglect, teenage parents, parents of children with problem behavior, etc.). The report did track the planned use of PSSF funds for 17 specific kinds of activities between FY1999-FY2002. These included home visiting and family centers, information and referral, recreation, basic needs, employment services, health services, child care, prevention services, parent support, parent skills training, mentoring, respite care, domestic violence, drug/alcohol assessment/treatment, counseling/mental health services, "family preservation" (more narrowly defined than the statute), time-limited family reunification and adoption promotion and support. Although the researchers had increasing difficulty in linking PSSF funding to specific activities (due to consolidation of program planning and reporting), they noted especially large drops in the number of states reporting that they planned to use these funds for child care (decreased from 21 states in FY1999 to 5 for FY2002), parent support and skills training (decreased from 27 states to 11 states and from 33 states to 12 respectively) and "family preservation"(decreased from 34 states to 19 states). Reporting Requirements The PSSF reporting requirements are, for the most part, a subset of the planning requirements. States must send their five-year plans to HHS and as a part of their Annual Progress Review and Report, are required to provide separate descriptions of the family preservation, family support, time-limited family reunification and adoption promotion and support services they intend to provide under the plan in the upcoming year; the populations to be served; and the geographic areas where the services will be available. Just prior to the 2006 amendments (P.L 109-288), these plans were sent to HHS regional offices of the Administration for Children and Families (ACF), rather than to the central Washington, D.C. office), and while they are required to be made available to the public, they were for the most part, not produced in any standard format and were not necessarily easy to compare or collect. Further all of the reporting requirements were prospective—providing information on what a state plans to do with its money rather than what it has actually done with the money. P.L. 109-288 amended the reporting requirements so that certain parts of the report must now include information on how the state actually spent PSSF (and Child Welfare Services) funds as well as continuing to provide information on planned spending. In addition, the law requires HHS to annually compile this information in a report for Congress. Appendix D. Selected Federal Programs with Related Purposes Some other federal programs share purposes similar to those of the Promoting Safe and Stable Families Program. Community-Based Child Abuse Prevention (CBCAP) Authorized by Title II of the Child Abuse Prevention and Treatment Act (CAPTA) the Community-Based Child Abuse Prevention (CBCAP) program provides funds to each state (including the District of Columbia), territories, and tribes to support community-based services to prevent child maltreatment. The program purposes most closely match the category of PSSF services described as "family support." However, funds under this program are not available for direct use by the state child welfare agency but must be sent to community-based groups that provide family support and family resource services. Funds are distributed by formula to a lead state agency (which may or may not be the state child welfare agency); the lead agency is responsible for ensuring coordination of services and for distributing funds to community-based groups that provide (or can refer families to) core family resource and support services. The statute describes these core services to, among other things, include—parent education, mutual support and self help; voluntary home visiting; and respite care. Other services, which CBCAP local grantees may provide access to include referrals to counseling for adoption (for those seeking to adopt or to relinquish a child for adoption); child care, early childhood development and intervention services; referrals to services and supports to meet special needs of families with children with disabilities; referrals to job readiness services; referrals to educational services; life management skills training; and others. Like Title I of CAPTA, the Senate Health, Education, Labor and Pensions (HELP) and the House Education and Labor committees have generally exercised jurisdiction over this program. It was most recently amended and re-authorized in 2003 ( P.L. 108-36 ). That legislation raised the program's authorization level to $80 million for FY2004, and such sums as necessary for each of FY2005-FY2008. However, the program has never received more than the $43 million that was appropriated for it in FY2005. For FY2006 the program received $42 million and (under P.L. 110-5 ) it is expected to receive the same sum in FY2007. Child Welfare Services Authorized by Title IV-B, Subpart 1, Child Welfare Services is the oldest federal program supporting state child welfare activities and was first authorized as part of the original 1935 Social Security Act. P.L. 109-288 made a number of changes to this program and by changing its funding authorization from indefinite (no year limit) to the same schedule as the PSSF program (funding authorization will expire with FY2011), appears to promote somewhat closer alignment of the programs. Child Welfare Services funds are distributed to states (including the District of Columbia), territories, and tribes. The funds may be used to support a broad range of services to children and families, which are intended to protect children who have been abused or neglected or are at risk of maltreatment and may take various forms, ranging from counseling and other supports for parents (intended to improve child well-being, prevent child abuse and neglect and preserve a family), to removal of the children from their homes and provision of services to parents to enable safe and appropriate return of children to their own homes. When efforts to reunite are not appropriate or do not succeed, child welfare services may include termination of parental rights, placement of the children for adoption, and provision of post adoption services. States may use Child Welfare Services, generally, for a wider range of activities than are permitted under PSSF and a 2003 General Accounting Office (GAO) study found that despite considerable overlap in the purposes, states used the bulk of their Child Welfare Services and PSSF grants to fund significantly different activities. For instance, while states reported spending both Child Welfare Services and PSSF funds to support family support/prevention, family preservation, family reunification, and adoption support and preservation services, they reported using just 11% of their Child Welfare Services funds for these purposes compared to 82% of their PSSF funds. States expended the largest share of Child Welfare Funds (71%) for child welfare worker salaries, administration and management, child protective services, and foster care maintenance payments. (PSSF expenditures for those purposes equaled just 8% of state PSSF spending. ) The House Ways and Means Committee and the Senate Finance Committee have exercised jurisdiction over Child Welfare Services. Since 1990, the program has had a discretionary funding authorization level of $325 million, but it has never received more than $295 million in a given year. For FY2006 the program is funded at $287 million and under P.L. 110-5 it is expected to receive the same level of funding in FY2007. Other Child Welfare and Related Programs Several additional child welfare programs primarily support research or demonstration projects related to adoption, as well as to services to help certain families at special risk of child abuse or neglect. Each of these programs is funded by discretionary appropriations and any appropriated funds are distributed on a competitive basis to eligible entities. These programs include Adoption Opportunities, Abandoned Infants Assistance and Adoption Awareness. Funding authorization for the Adoption Opportunities (FY2007 funding—$27 million) and Abandoned Infants Assistance Act (FY2007 funding—$12 million) was extended through FY2008 by P.L. 108-36 (handled in the Senate HELP and House Education and Workforce Committee). Funding authorization for the Adoption Awareness programs (which were included in the Public Health Services Act) expired with FY2005 but the programs nonetheless received FY2007 funding of $13 million. The House Energy and Commerce and Senate HELP committees handled the 2000 legislation that created Adoption Awareness program authority. Additional programs that support primarily the family support goals of PSSF include Early Head Start, Head Start, and the Healthy Start Initiative. Like family support programs in general, the populations served by these programs are much broader than those generally served by the child welfare population and these programs are not further described here. Some Non-dedicated Federal Funding Used for PSSF Purposes Many states also make use of federal funding streams that are not specifically or exclusively provided for child welfare purposes but for which federal law includes certain child welfare activities as purposes or permissible uses of funds. Measured by state use of the funds for child welfare purposes, the largest of these are the Temporary Assistance for Needy Families (TANF) block grant, the Social Services Block Grant (SSBG) and Medicaid. An Urban Institute survey of state FY2002 spending on child welfare found that in that year state child welfare agencies spent about $4.7 billion from these federal funding streams of which some 28% ($1.3. billion) $1.3 billion was used to support prevention activities (e.g., prevent teen-age pregnancy, prevent drug use, prevent child abuse), family reunification efforts, and in-home support, as well as child protective, services (screening and investigating reported child maltreatment). While state child welfare agencies have in recent years had access to considerable TANF, SSBG and Medicaid funds, because these funds are not appropriated solely for child welfare agencies they cannot necessarily count on their continued availability. Instead, their access to these federal funds is generally conditioned on the funding decisions made by others in the state (e.g., discretion about how funds are used may rest with the state legislature or in a different state executive agency) and may further be limited by federal legislative and administrative changes to these programs. For instance, the current Administration continues to seek new limits on state use of certain Medicaid services for a range of purposes, including child welfare. The Deficit Reduction Act of 2005 ( P.L. 109-171 ) enacted certain language intended to clarify how states may use Medicaid funds for targeted case management (TCM) on behalf of children in foster care. Further, the ability of state child welfare agencies to use TANF funds may be affected by increased work requirements included in the Deficit Reduction Act (which are expected to necessitate greater state spending of TANF on job related costs such as training and child care). Finally, Congress has greatly reduced the amount of funding for SSBG, which includes among its five primary purposes: "preventing or remedying neglect, abuse, or exploitation of children and adults unable to protect their own interests, or preserving, rehabilitating or reuniting families." Annual funding for SSBG stood at $2.8 billion when the Congress enacted new child welfare services funding (now called the Promoting Safe and Stable Families program) in 1993. In 1996, however, P.L. 104-193 reduced the SSBG entitlement cap and funding has since declined to $1.7 billion annually.

The Child and Family Services Improvement Act of 2006 was enacted on September 25, 2006 (P.L. 109-288). As enacted it extends the funding authorization of the Promoting Safe and Stable Families (PSSF) program for five years (FY2007-FY2011) and annually targets the use of $40 million in new funds for the program for two purposes: to support monthly caseworker visits and to improve outcomes for children affected by their parent/caretaker's abuse of methamphetamine or another substance. As under prior law, states must spend the majority of PSSF funds on four broad categories of child and family services: community-based family support, family preservation, time-limited reunification and adoption promotion and support. P.L. 109-288 requires states to report on their actual—as opposed to simply planned—use of PSSF (and Child Welfare Services) funds. It also increases the PSSF set-aside for tribal child and family services, and allows access to these funds for more tribes. (Appendix A of this report compares selected enacted provisions with prior law as well as provision in earlier versions of the reauthorization legislation.) Separately, P.L. 109-288 amended the Child Welfare Services program (Title IV-B, Subpart 1 of the Social Security Act), re-organizing its provisions and limiting its funding authorization to FY2007-FY2011. Beginning with FY2008, the new law limits the use of Child Welfare Service funds for administrative purposes to no more than 10%, and prohibits their use for foster care maintenance payments, adoption assistance payments, and child care above a state's use of the program's funds for those purposes in FY2005. Further, it requires states to—1) develop procedures to respond to and maintain services in the wake of a disaster; 2) describe in their state plans how they consult with medical professionals to assess the health of and provide appropriate medical treatment to children in foster care; and 3) establish a standard of no less than monthly caseworker visits of children in foster care along with standards for the content of the visit. The new law provides that in any state where less than 90% of children in foster care are visited on a monthly basis—or where the U.S. Department of Health and Human Services (HHS) determines that the state is not making enough progress to meet that standard by October 1, 2011—the state will need to supply a greater amount of non-federal funds in order to access its full federal Child Welfare Services allotment. P.L. 109-288 also extends authorization for five years (FY2007-FY2011) of Mentoring Children of Prisoners, and includes authority for a project to demonstrate the effectiveness of vouchers as a method of delivering these services. Further, it extends for five years (FY2007-FY2011) certain grants under the Court Improvement Program. This report tracked successful legislative efforts to reauthorize these programs in the 109th Congress. It describes provisions enacted by P.L. 109-288 and provides information on PSSF funding. Further it contains an appendix showing (in table form) selected provisions in prior law compared to those proposed and enacted, and additional appendices that provide a legislative history of the PSSF program, discuss selected program policy issues and offer an overview of federal programs providing funding for purposes related to the PSSF program. It will not be updated.

Introduction Following the terrorist attacks of 9/11, Congress passed the Authorization for the Use of Military Force (AUMF), which granted the President the authority "to use all necessary and appropriate force against those ... [who] planned, authorized, committed, or aided the terrorist attacks" against the United States. As part of the subsequent "war on terror," many persons captured during military operations in Afghanistan and elsewhere were transferred to the U.S. Naval Station at Guantanamo Bay, Cuba, for detention and possible prosecution before military tribunals. Although nearly 800 persons were transported to Guantanamo from early 2002 through 2008, the substantial majority of Guantanamo detainees have ultimately been transferred to a third country for continued detention or release. Detainees who remain fall into three categories: Persons who have been placed in preventive detention to stop them from returning to the battlefield (formerly labeled "enemy combatants" by the Bush Administration ). Preventive detention of captured belligerents is non-penal in nature, and must be ended upon the cessation of hostilities. Persons who, besides being subject to preventive detention, have been brought or are expected to be brought before a military or other tribunal to face criminal charges, including for alleged violations of the law of war. If convicted, such persons may be subject to criminal penalty, which in the case of the most severe offenses may include life imprisonment or death. Persons who have been cleared for transfer or release to a foreign country, either because (1) they are not believed to have been engaged in hostilities, or (2) although they were found to have been enemy belligerents, they are no longer considered a threat to U.S. security. Such persons remain detained at Guantanamo until their transfer may be effectuated. The decision by the Bush Administration to detain suspected belligerents at Guantanamo was based upon both policy and legal considerations. From a policy standpoint, the U.S. facility at Guantanamo offered a safe and secure location away from the battlefield where captured persons could be interrogated and potentially tried by military tribunals for any war crimes they may have committed. From a legal standpoint, the Bush Administration sought to avoid the possibility that suspected enemy combatants could pursue legal challenges regarding their detention or other wartime actions taken by the executive. The Bush Administration initially believed that Guantanamo was largely beyond the jurisdiction of the federal courts, and noncitizens held there would not have access to the same substantive and procedural protections that would be required if they were detained in the United States. The legal support for this policy was significantly eroded by a series of Supreme Court rulings permitting Guantanamo detainees to seek judicial review of the circumstances of their detention. Although Congress attempted to limit federal courts' jurisdiction over detainees through the enactment of the Detainee Treatment Act of 2005 (DTA; P.L. 109-148 , Title X) and the Military Commissions Act of 2006 (MCA; P.L. 109-366 ), these efforts were subject to judicial challenge. In 2008, the Supreme Court ruled in Boumediene v. Bush that the constitutional writ of habeas corpus extends to noncitizens held at Guantanamo, and found that provisions of the DTA and MCA eliminating federal habeas jurisdiction over Guantanamo detainees acted as an unconstitutional suspension of the writ. As a result, Guantanamo detainees may seek habeas review of the legality of their detention. Nonetheless, several legal issues were not definitively settled by the Boumediene decision, including the scope of habeas review available to Guantanamo detainees, the remedy available for those persons found to be unlawfully held by the United States, and the extent to which other constitutional provisions extend to noncitizens held at Guantanamo. Litigation addressing these matters is ongoing in the D.C. Circuit, with several rulings being issued by the circuit court of appeals. These rulings have generally been favorable to the legal position advanced by the government. The Supreme Court has denied certiorari with respect to all such decisions thus far, but may prove willing to take on another Guantanamo case in the future. In the meantime, it appears that the circuit court's rulings will remain controlling. On January 22, 2009, President Barack Obama issued Executive Order 13492, requiring that the Guantanamo detention facility be closed as soon as practicable, and no later than a year from the date of the Order. Any persons who continue to be held at Guantanamo at the time of closure were to be either transferred to a third country for continued detention or release, or transferred to another U.S. detention facility. The Order further provided that specified officials would review all Guantanamo detentions to assess whether the detainee should continue to be held by the United States, transferred or released to a third country, or be prosecuted by the United States for criminal offenses. Reviewing authorities were required to identify and consider the legal, logistical, and security issues that would arise in the event that some detainees are transferred to the United States. The Order also mandated that the reviewing authorities to assess the feasibility of prosecuting detainees in an Article III court. During this review period, the Secretary of Defense was required to take steps to ensure that all proceedings before military commissions and the United States Court of Military Commission Review were halted. On the same day that the Executive Order to close the Guantanamo detention facility was issued, President Obama issued two other Executive Orders which created separate task forces—the Special Task Force on Detainee Disposition and the Special Task Force on Interrogation and Transfer Policies—charged with reviewing aspects of U.S. detention policy, including the options available for the detention, trial, or transfer of wartime detainees, whether held at Guantanamo or elsewhere. Although these task forces are distinct from the task force responsible for reviewing Guantanamo detentions, their work and recommendations may have implications on U.S. policy with respect to Guantanamo. Since the issuance of the Executive Order to close Guantanamo, only one detainee formerly held there has been transferred to the United States. In June 2009, Ahmed Ghailani was transferred to the United States to face criminal charges in federal civilian court for his alleged role in the 1998 bombings of U.S. embassies in Tanzania and Kenya (the transfer occurred shortly before Congress enacted the first of several restrictions on the use of appropriated funds to bring Guantanamo detainees to the United States ). Ghailani was convicted and sentenced to life imprisonment for his part in the conspiracy. On October 28, 2009, the National Defense Authorization Act for FY2010 ( P.L. 111-81 ) was signed into law, and modified rules governing military commissions. Soon thereafter, the Departments of Justice and Defense made an announcement regarding the forums in which 10 other Guantanamo detainees, who had previously been charged before military commissions, would be tried. The Attorney General and Secretary of Defense determined that military commission proceedings against five Guantanamo detainees may be resumed However, the Department of Justice stated that it intended to bring charges against five detainees in the U.S. District Court for the Southern District of New York for criminal offenses related to the 9/11 terrorist attacks, and the charges brought before these individuals before military commissions were withdrawn without prejudice in January 2010. The decision to try some Guantanamo detainees in federal civilian court proved controversial. Plans to bring charges in federal court against Khalid Sheik Mohammed, the alleged mastermind of the 9/11 attacks, were placed on hold until the Attorney General announced in April 2011 that the Administration had reversed course and the 9/11 conspirators would be tried before military commissions. The November 2010 conviction of Ahmed Ghailani for one of the more than 280 charges he faced in connection to the 1998 embassy bombings has fueled the debate over terrorism trials. While some have characterized Ghailani's conviction as demonstrating that federal civilian courts serve as an appropriate forum for the prosecution of some Guantanamo detainees, others view Ghailani's acquittal of most charges as evidence that civilian courts are an inappropriate forum for the criminal prosecution of wartime detainees. On January 22, 2010, the Guantanamo Task Force issued its final report concerning the appropriate disposition of each detainee held at Guantanamo. The Task Force concluded that 36 detainees remained subject to active criminal investigations or prosecutions; 48 detainees should remain in preventive detention without criminal trial, as they are "too dangerous to transfer but not feasible for prosecution"; and the remaining detainees could be transferred, either immediately or eventually, to a foreign country. In December 2009, President Obama issued a memorandum directing the Attorney General and Secretary of Defense to take steps to acquire the Thomson Correctional Facility in Thomson, IL, so that at least some Guantanamo detainees may be relocated there for continued internment. Beginning in FY2011, however, Congress began including a provision in annual appropriations or defense authorization enactments that barred funds from being used to construct or modify a facility in the United States to house detainees who remain under the custody or control of the Department of Defense (DOD). Although the Thomson facility was purchased in 2012, Administration officials have averred that it will not be used to house Guantanamo detainees, but instead serve to hold high-security prison inmates. Although the original deadline for the closure of the Guantanamo detention facility established by Executive Order 13492 was not met, the Administration has stated that it still intends to close the facility as expeditiously as possible. Efforts by the executive branch to close the facility have been hampered by a series of congressional enactments limiting executive discretion to transfer or release detainees into the United States, with the most significant limitations initially established by the Ike Skelton National Defense Authorization Act for FY2011 (2011 NDAA; P.L. 111-383 ), which was signed into law on January 7, 2011, and the Department of Defense and Full-Year Continuing Appropriations Act, 2011 (2011 CAA; P.L. 112-10 ). By prohibiting funds from being used to transfer or release detainees into the United States, or to assist in the transfer or release of detainees into the country, these and subsequent similar acts seem to ensure that the Guantanamo detention facility remains open for the foreseeable future. Moreover, the measures appear to make military tribunals the only viable forum by which Guantanamo detainees could be tried for criminal offenses, as no civilian court operates within Guantanamo. When signing each of these measures into law, President Obama issued a statement expressing his opposition to those provisions limiting executive discretion to transfer detainees into the United States or to the custody of certain foreign governments or entities. While highly critical of these provisions' effect, President Obama's signing statements did not allege that the restrictions on transfers to the United States represented an unconstitutional infringement upon executive authority, or claim that the executive branch was not legally bound to comply with the provisions' requirements. President Obama did, however, state that his "Administration will work with the Congress to seek repeal of these restrictions, will seek to mitigate their effects, and will oppose any attempt to extend or expand them in the future." On March 7, 2011, President Obama issued Executive Order 13567, establishing a process for the periodic review of the continued detention of persons currently held at Guantanamo who have either been (1) designated for preventive detention under the laws of war or (2) referred for criminal prosecution, but have not been convicted of a crime and do not have formal charges pending against them. The Executive Order establishes a Periodic Review Board (PRB) to assess whether the continued detention of a covered individual is warranted in order "to protect against a significant threat to the security of the United States." In instances where a person's continued detention is not deemed warranted, the Secretaries of State and Defense are designated responsibility "for ensuring that vigorous efforts are undertaken to identify a suitable transfer location for any such detainee, outside of the United States, consistent with the national security and foreign policy interests of the United States" and relevant legal requirements. An initial review of each individual covered by the Order, which involves a hearing before the PRB in which the detainee and his representative may challenge the government's basis for his continued detention and introduce evidence on his own behalf, must occur within a year of the Order's issuance. Those persons deemed to be subject to continued detention will have their cases reviewed periodically thereafter. The Order also specifies that the process it establishes is discretionary; does not create any additional basis for detention authority or modify the scope of authority granted under existing law; and is not intended to affect federal courts' jurisdiction to determine the legality of a person's continued detention. On the same day that Executive Order 13567 was issued, the White House also released a statement concerning matters relevant to U.S. detention policy generally and to Guantanamo specifically. Among other things, the statement reaffirmed the executive's commitment to close the Guantanamo detention facility. The statement also announced that the Secretary of Defense would authorize the swearing and referring of new charges to military commissions—a practice which had been halted following the issuance of Executive Order 13492 in January 2009. The White House statement also reaffirmed the Administration's commitment to prosecute some detainees in Article III courts, and declared that it would work to repeal legislation that bars it from transferring detainees into the country for trial before civilian courts. Congress has enacted similar restrictions as part of subsequent defense authorization legislation and other measures. The National Defense Authorization Act of FY2012, P.L. 112-81 , authorizes the detention of certain categories of persons and requires the military detention of a subset of them (albeit not necessarily in Guantanamo and subject to waiver by the President); regulates status determinations for persons held pursuant to the AUMF, regardless of location; regulates periodic review proceedings concerning the continued detention of Guantanamo detainees; and continues funding restrictions that relate to Guantanamo detainee transfers to foreign countries. Despite an earlier threat to veto the bill, President Obama signed the 2012 NDAA into law while issuing a signing statement claiming that certain of its detainee-related restrictions violate separation-of-powers principles. Congress continued the funding restrictions on transfers of detainees from Guantanamo in the National Defense Authorization Act for FY2013 (2013 NDAA), P.L. 112-239 . President Obama objected to these provisions in a signing statement, complaining that "The Congress designed these sections, and has here renewed them once more, in order to foreclose my ability to shut down the Guantanamo Bay detention facility. I continue to believe that operating the facility weakens our national security by wasting resources, damaging our relationships with key allies, and strengthening our enemies." The President also charged that the restrictions could violate the Constitution: My Administration will interpret these provisions as consistent with existing and future determinations by the agencies of the Executive responsible for detainee transfers. And, in the event that these statutory restrictions operate in a manner that violates constitutional separation of powers principles, my Administration will implement them in a manner that avoids the constitutional conflict. The President reiterated his intention to work toward the closure of Guantanamo in remarks he made at a press conference on April 30, 2013. Criticizing the Guantanamo detention policy as counterproductive in terms of international support for counterterrorism efforts and as providing a recruiting tool for extremists, he stated that his Administration would review possible administrative actions and reengage with Congress to bring about the closure of the detention facility. The closure of the Guantanamo detention facility would raise a number of legal issues with respect to the individuals presently interned there, particularly if those detainees were transferred to the United States. The nature and scope of constitutional protections owed to detainees within the United States may be different from those available to persons held at Guantanamo or elsewhere. This may have implications for the continued detention or prosecution of persons transferred to the United States. The transfer of detainees to the United States may have additional consequences, as some detainees might qualify for asylum or other protections under immigration law. The Executive Order issued by President Obama to effectuate the closure of Guantanamo also contemplates that the Administration "work with Congress on any legislation that may be appropriate" relating to the transfer of detainees to the United States. This report provides an overview of major legal issues that are likely to arise in the event of executive and legislative action to close the Guantanamo detention facility. It discusses legal issues related to the transfer or release of Guantanamo detainees (either to a foreign country or into the United States), the continued detention of such persons in the United States, and the possible removal of persons brought to the United States. It considers selected constitutional issues that may arise in the criminal prosecution of detainees, emphasizing the procedural and substantive protections that exist in different adjudicatory forums. Issues discussed include detainees' right to a speedy trial, the prohibition against prosecution under ex post facto laws, and limitations upon the admissibility of hearsay and secret evidence in criminal cases. These issues are likely to be relevant not only to the treatment of Guantanamo detainees, but also to other terrorist suspects or enemy belligerents apprehended by the United States in the future. Detainee Transfer or Release from Guantanamo Any proposal to close the Guantanamo detention facility must necessarily address the transfer of persons currently detained there. While some detainees may be transferred to other countries for continued detention, supervision, or release, some proposals to close the Guantanamo detention facility have contemplated transferring at least some detainees to the United States, either for continued detention or, in the case of some detainees who are not considered a threat to U.S. security, possible release. Transfer/Release of Guantanamo Detainees to a Country Other Than the United States The vast majority of persons initially transferred to Guantanamo for preventive detention have been transferred to other countries, either for continued detention by the receiving country or for release. Decisions to transfer a detainee to another country have been based upon a determination by U.S. officials that (1) the detainee is not an enemy combatant or (2) while the detainee was properly designated as an enemy combatant, his continued detention by the United States is no longer warranted. A decision by military authorities that the continued detention of an enemy combatant is no longer appropriate is based on a number of factors, including a determination that the detainee no longer poses a threat to the United States and its allies. Generally, if continued detention is no longer deemed necessary, the detainee is to be transferred to the control of another government for his release. The DOD has also transferred enemy belligerents to other countries for continued detention, investigation, or prosecution when those governments are willing to accept responsibility for ensuring that the transferred person will not pose a continuing threat to the United States and its allies. On March 7, 2011, President Obama issued Executive Order 13567, which establishes a process to periodically review whether the continued detention of a lawfully held Guantanamo detainee is warranted. The Order provides that a Periodic Review Board (PRB), composed of officials from several departments and agencies, shall review the grounds for the continued detention of any person currently held at Guantanamo who has either been (1) designated as being subject to detention under the laws of war (i.e., a captured enemy belligerent) or (2) referred for criminal prosecution, but has yet to be formally charged with an offense. The Order also establishes a Review Committee, composed of relevant department heads and officials, to annually review the sufficiency and efficacy of transfer efforts. Following the completion of the PRB's initial review of the disposition of detainees, and every four years thereafter, the Committee is also charged with assessing "whether a continued law of war detention policy remains consistent with the interests of the United States, including national security interests." The PRB is required to assess whether the continued detention of any person covered by the Order "is necessary to protect against a significant threat to the security of the United States." In cases where the continued detention of a Guantanamo detainee is not deemed warranted, the Secretaries of State and Defense are charged with "ensuring that vigorous efforts are undertaken to identify a suitable transfer location for any such detainee, outside of the United States," consistent with U.S. obligations not to transfer persons to countries where they may face torture. The PRBs were to begin reviewing the grounds for the continued detention of covered individuals within a year of the issuance of Executive Order 13567; however, this process has not yet begun, possibly delayed due to new requirements for status reviews imposed under Section 1023 of the 2012 NDAA. The Pentagon published implementing guidelines for the PRB process in May 2012. Under the Order, the individual undergoing a review is to be provided with an unclassified summary of the factors and information to be considered by the PRB. A hearing is then to be held in which the detainee, with assistance from a government-appointed representative (along with private counsel, if obtained by the detainee at no expense to the government), may argue that his continued detention is unwarranted. The detainee has a right to present a statement to the PRB, introduce relevant information, and to call willing and reasonably available witnesses to provide information on his behalf. The detainee's representative, who generally is to be provided with all information contained in the government's disposition recommendation to the PRB (or in certain circumstances, a sufficient substitute or summary of such information), is authorized to challenge the government's information and present information in support of the detainee. If the PRB's initial review does not result in the individual being designated for transfer, the PRB will continue to periodically review the grounds for continued detention, through a review of case files every six months thereafter. Further, it must conduct a full review and hearing every three years following its initial review. If the PRB does not reach a unanimous conclusion as to whether a detainee's continued detention is warranted, the case shall be considered by the Review Committee for further review; however, the Order does not explain the procedures used by the Review Committee in its consideration of PRB decisions, or clearly describe the effect that its review has upon the final disposition of a detainee's case. The designation of a Guantanamo detainee for transfer or release does not necessarily mean that the individual's removal from the Guantanamo facility will be immediately effectuated. Domestic and international legal requirements may constrain the ability of the United States to transfer persons to foreign countries if they might face torture or other forms of persecution. Most notably, Article 3 of the U.N. Convention against Torture and Other Cruel, Inhuman, or Degrading Treatment or Punishment (CAT) and its implementing legislation prohibit the transfer of persons to countries where there are substantial grounds for believing (i.e., it would be "more likely than not") that they would be subjected to torture. The Bush Administration took the position that CAT Article 3 and its implementing legislation did not cover the transfer of foreign persons held outside the United States in the "war on terror." Nonetheless, both the Bush and Obama Administrations have stated that "it is the policy of the United States, consistent with the approach taken by the United States in implementing ... [CAT], not to repatriate or transfer ... [Guantanamo detainees] to other countries where it believes it is more likely than not that they will be tortured." When the transfer of a Guantanamo detainee is deemed appropriate, the United States seeks diplomatic assurances that the person will be treated humanely by the foreign government accepting the transfer. If such assurances are not deemed sufficiently reliable, the transfer will not be executed until the concerns of U.S. officials are satisfactorily resolved. The use of diplomatic assurances in Guantanamo transfer decisions is similar to the practice sometimes employed by U.S. authorities when determining whether the extradition of a person or the removal of an alien by immigration authorities would comply with CAT requirements. In January 2009, President Obama issued an Executive Order creating a special task force to review U.S. transfer policies to ensure compliance with applicable legal requirements. In August of that year, the task force issued recommendations to ensure that U.S. transfer practices comply with applicable standards and do not result in the transfer of persons to face torture. These recommendations include strengthening procedures used to obtain assurances from a country that a person will not face torture if transferred there, including through the establishment of mechanisms to monitor the treatment of transferred persons. If implemented, such measures might impede the transfer of some Guantanamo detainees to third countries. In April 2009, a D.C. Circuit panel held that a government determination that a detainee would not be tortured if transferred to a particular country is not subject to district court review in habeas proceedings challenging the proposed transfer. Of the persons held at Guantanamo who have been cleared for transfer or release, even prior to the enactment of statutory restrictions, several dozen remained at Guantanamo either because no country was willing to accept the detainee, or because human rights concerns have caused the United States to refrain from transferring the detainee to a country willing to accept him. According to the final report of the Guantanamo Task Force, a plurality of detainees who have been cleared for transfer but remain at Guantanamo "cannot be repatriated due to humane treatment or related concerns in their home countries … and thus need to be resettled in a third country...." Additionally, a significant number of detainees could potentially be transferred to other countries for continued detention or supervision if the United States was assured that the receiving country could manage the threat they pose. In January 2010, President Obama announced that, in light of terrorist activities emanating from Yemen, including alleged involvement by Yemeni nationals in the failed 2009 bomb attack on an airplane that was landing in Detroit, the United States "will not be transferring additional detainees back to Yemen at this time." The final report of the Guantanamo Task Force identified 30 detainees from Yemen who were designated for "conditional" detention based on the current security environment in that country. They are not approved for repatriation to Yemen at this time, but may be transferred to third countries, or repatriated to Yemen in the future if the current moratorium on transfers to Yemen is lifted and other security conditions are met. On May 23, 2013, President Obama announced that the moratorium on detainee transfers to Yemen would be lifted, and the feasibility of such transfers would be reviewed on a case-by-case basis. Whether future diplomatic efforts will effectuate the transfer of some or all of these persons to third countries remains to be seen. It has been reported that the U.S. refusal to resettle detainees on its territory may be contributing to the reluctance of other countries to accept more detainees for resettlement. Beginning with the Supplemental Appropriations Act, 2009 ( P.L. 111-32 ), Congress passed several appropriations or authorization measures that contained provisions barring funds from being used to effectuate the transfer of a Guantanamo detainee to a foreign State unless, 15 days prior to such transfer, the President submits a classified report to Congress concerning the identity of the detainee, the risk the transfer poses to U.S. security, and the terms of any agreement with the receiving country concerning the acceptance of the individual, including any financial assistance related to the agreement. Despite President Obama's objections, the 2011 NDAA placed more significant restrictions on detainee transfers. The act provides that, except in cases when a detainee transfer is done to effectuate an order by a U.S. court or tribunal, a detainee may only be transferred to the custody or control of a foreign government or the recognized leadership of a foreign entity if, at least 30 days prior to the proposed transfer, the Secretary of Defense certifies to Congress that the foreign government or entity (1) is not a designated state sponsor of terrorism or terrorist organization; (2) maintains effective control over each detention facility where a transferred detainee may be housed; (3) is not facing a threat likely to substantially affect its ability to control a transferred detainee; (4) has agreed to take effective steps to ensure that the transferred person does not pose a future threat to the United States, its citizens, or its allies; (5) has agreed to take such steps as the Secretary deems necessary to prevent the detainee from engaging in terrorism; and (6) has agreed to share relevant information with the United States related to the transferred detainee that may affect the security of the United States, its citizens, or its allies. Nearly identical certification requirements are found in the 2011 CAA, the 2012 NDAA, and 2013 NDAA, as well as two continuing appropriations measures. The 2011 NDAA and CAA also prohibited the transfer of any detainee to the custody or control of a foreign government or entity if there is a confirmed case that a former Guantanamo detainee who was transferred to that government or entity subsequently engaged in terrorist activity. However, these restrictions were subject to waiver by the Secretary of Defense if he fulfilled the certification process described in the preceding paragraph and also determined that the transfer is in the security interests of the United States. The prohibitions also did not apply in cases where a transfer is done to effectuate an order by a U.S. court or tribunal. These prohibitions were continued in subsequent legislation. Current restrictions are found in the 2013 NDAA and 2013 CAA, and are substantially identical to those passed in the 2011 NDAA. These provisions restrict the use of funds (NDAA funds or funds under any act, respectively) to transfer a detainee to a foreign country or entity unless the Secretary of Defense certifies, with the agreement of the Secretary of State and in consultation with the Director of National Intelligence, that (1) the government of the foreign country or the recognized leadership of the foreign entity to which the individual detained at Guantanamo is to be transferred— (A) is not a designated state sponsor of terrorism or a designated foreign terrorist organization; (B) maintains control over each detention facility in which the individual is to be detained ... ; (C) is not, as of the date of the certification, facing a threat that is likely to substantially affect its ability to exercise control over the individual; (D) has taken or agreed to take effective actions to ensure that the individual cannot take action to threaten the United States, its citizens, or its allies in the future; (E) has taken or agreed to take such actions as the Secretary of Defense determines are necessary to ensure that the individual cannot engage or reengage in any terrorist activity; and (F) has agreed to share with the United States any information that— (i) is related to the individual or any associates of the individual; and (ii) could affect the security of the United States, its citizens, or its allies; and (2) includes an assessment, in classified or unclassified form, of the capacity, willingness, and past practices (if applicable) of the foreign country or entity in relation to the Secretary's certifications. The prohibition on transferring detainees to any country or entity that has experienced a case of "prior confirmed recidivism," subject to limited waiver, is also continued. The certification requirements and recidivism prohibition do not apply in the case of a detainee who must be released or transferred pursuant to a court order or, in the case of 2013 CAA provision, a plea agreement under a military commission entered prior to enactment of the CAA. A few detainees have been transferred under this exception. The Secretary of Defense may waive two of the certification requirements and the recidivism prohibition if alternate assurances can be arranged. Specifically, the requirements of D and E above (regarding agreements by the recipient country to implement measures to prevent the detainee from posing a threat or reengaging in terrorist or militant behavior) may be waived, as can the prohibition regarding countries with confirmed prior recidivism, if the Secretary of Defense, with the concurrence of the Secretary of State and in consultation with the Director of National Intelligence, certifies that (1) all of the other certifications requirements are met; (2) alternative measures to D and E are put in place to avert the threats; and (3) the national security interests of the United States are served by permitting the transfer to go forward. The national security waiver for the certification requirements additionally requires a certification that "it is not possible to certify that the risks addressed in the paragraph to be waived have been completely eliminated," but that the alternative actions to be taken will "substantially mitigate such risks with regard to the individual to be transferred." A waiver of the recidivism prohibition requires an additional certification that the Secretary has considered any case of recidivism associated with the destination country or entity and that the alternative measures will mitigate any risk with respect to the individual to be transferred. The certification requirements involving security conditions in the recipient country or entity, its ability to maintain control over detention facilities, and its status as a supporter of terrorism may not be waived. Transfer of Detainees into the United States Most proposals to end the detention of foreign belligerents at Guantanamo contemplate the transfer of at least some detainees into the United States, either for continued preventive detention, prosecution before a military or civilian court, or in the case of detainees who are not deemed a threat to U.S. security, possible release. As mentioned earlier, several appropriations and authorization measures enacted by Congress have barred funds from being used to effectuate the release of Guantanamo detainees into the United States. Moreover, Congress has enacted several measures barring funds from being used to transfer detainees into the United States or its territories or possessions; the most significant beginning in the 2011 NDAA and CAA, which bar funds appropriated during the 2011 fiscal year from being used to transfer detainees into the United States for any purpose. These restrictions have continued through the 2013 NDAA and CAA without modification. The transfer of detainees into the United States may have implications under immigration law. The Immigration and Nationality Act (INA) establishes rules and requirements for the entry and presence of aliens in the United States, and provides grounds for the exclusion or removal of aliens on account of certain activities. The INA generally bars the entry into the United States or continued presence of aliens involved in terrorism-related activity. Under current law, most persons currently detained at Guantanamo would generally be barred from admission into the United States on terrorism- and other security-related grounds under normal circumstances. Even if a detainee is not inadmissible or removable ("deportable") on such grounds, he may still be inadmissible or removable under other INA provisions. Accordingly, even in the absence of recent legislative enactments barring the use of funds to release Guantanamo detainees into the United States, the INA would generally preclude most detainees from being released into the country, as such aliens would be subject to removal under immigration law. The INA's restrictions upon the entry of certain categories of aliens do not appear to necessarily bar executive authorities from transferring wartime detainees into the United States for continued detention or prosecution. During World War II, reviewing courts did not consider an alien prisoner of war's involuntary transfer to the United States for purposes of military detention to constitute an "entry" under immigration laws. Although immigration laws have been amended since that time to expressly apply to certain categories of aliens involuntarily brought to the United States (e.g., those individuals apprehended in U.S. or international waters), these modifications do not directly address the ability of the United States to intern alien enemy belligerents in the United States. Additionally, it could be argued that the 2001 AUMF, which grants the President authority to use all "necessary and appropriate force" against those responsible for the 9/11 attacks, impliedly authorizes the President to detain captured belligerents in the United States, even though such persons would generally be barred from entry under the INA. Even assuming that the INA's restrictions on alien admissibility are applicable to military detainees, the executive branch could still effectuate their transfer into the United States pursuant to its "parole" authority. In the immigration context, parole is a discretionary authority that may be exercised on a case-by-case basis to permit inadmissible aliens to physically enter the United States, including when the alien's entry or stay serves a "significant public benefit." The entry of a paroled alien does not constitute admission into the United States for immigration purposes. Despite physical entry into the country, the alien is "still in theory of law at the boundary line and had gained no foothold in the United State[s]." The executive branch may opt to use its parole authority with respect to transferred detainees in order to clarify their immigration status in case they are required to be released from U.S. custody. As discussed later, an alien's physical presence in the United States, even in cases where the alien has been paroled into the country, may result in the alien becoming eligible for asylum or other forms of immigration-related relief from removal. In recent years, several legislative proposals have been introduced that address the application of federal immigration laws to the transfer of detainees into the United States and clarify the immigration status of detainees brought into the country. Notably, the Department of Homeland Security Appropriations Act, 2010 ( P.L. 111-83 ), contained a provision barring any funds made available under the act from being used to provide any immigration benefit (including a visa, admission into the United States or any of the United States territories, parole into the United States or any of the United States territories (other than parole for the purposes of prosecution and related detention), or classification as a refugee or applicant for asylum) to any individual who is detained, as of June 24, 2009, at Naval Station, Guantanamo Bay, Cuba. The Consolidated Appropriations Act, 2010 ( P.L. 111-117 ) contained a similar restriction on using the funds it appropriates to provide a Guantanamo detainee with an immigration benefit. The funding restrictions contained in both enactments applied to funds appropriated for the 2010 fiscal year. Congress did not enact any FY2011 regular appropriations acts before the 2010 fiscal year expired, but instead passed a series of continuing resolutions that temporarily extended funding for federal agencies, subject to the terms and conditions of FY2010 appropriations enactments. In appropriating funds for the duration of FY2011, the 2011 CAA specified that the terms and conditions of most appropriations enactments in FY2010 remained in effect for the duration of the 2011 fiscal year. The complete bar against transporting detainees from Guantanamo into the United States has apparently obviated the need for renewal of the measure past 2011. The FY2010 Department of Homeland Security Appropriations Act also amended Title 49 of the United States Code to require the placement of any person who has been detained at Guantanamo on the No Fly List, unless the President certifies to Congress that the detainee poses no threat to the United States, its citizens, or its allies. Detention and Treatment of Persons Transferred to the United States Many of the rules and standards governing the detention and treatment of persons at Guantanamo would remain applicable to detainees transferred into the United States. However, non-citizens held in the United States may be entitled to more protections under the Constitution than those detained abroad. Authority to Detain Within the United States Guantanamo detainees properly determined to be enemy belligerents may be held in preventive detention by military authorities even if transferred to the United States. In the 2004 case of Hamdi v. Rumsfeld , a majority of the Supreme Court recognized that, as a necessary incident to the 2001 AUMF, the President is authorized to detain persons captured while fighting U.S. forces in Afghanistan for the duration of the conflict. A divided Supreme Court also declared that "a state of war is not a blank check for the president," and ruled that persons who had been deemed "enemy combatants" by the Bush Administration had the right to challenge their detention before a judge or other "neutral decision-maker." While the preventive detention of enemy belligerents is constitutionally acceptable, the scope of persons potentially falling under this category remains uncertain. The Hamdi plurality was limited to an understanding that the phrase "enemy combatant" includes an "individual who ... was part of or supporting forces hostile to the United States or coalition partners in Afghanistan and who engaged in an armed conflict against the United States there." Left unresolved is the extent to which the 2001 AUMF permits the detention of persons captured away from the zone of combat, or whether the President has the independent authority to detain such persons in the exercise of his Commander-in-Chief power. The Court also did not define what constitutes "support" for hostile forces necessary to acquire enemy belligerent status, or describe which activities constitute "engage[ment] in an armed conflict." In December 2008, the Supreme Court agreed to hear an appeal of an en banc ruling by the Fourth Circuit in the case of al-Marri v. Pucciarelli , in which a majority of the Court of Appeals found that the 2001 AUMF permits the detention as an "enemy combatant" of a resident alien alleged to have planned to engage in hostile activities within the United States on behalf of Al Qaeda, but who had not been part of the conflict in Afghanistan. However, prior to the Supreme Court considering the merits of the case, al-Marri was indicted by a federal grand jury for providing material support to Al Qaeda and conspiring with others to provide such support. The government immediately requested that the Supreme Court dismiss al-Marri's pending case and authorize his transfer from military to civilian custody for criminal trial. In March 2009, the Supreme Court granted the government's application concerning the transfer of al-Marri, vacated the Fourth Circuit's judgment, and remanded the case back to the appellate court with instructions to dismiss the case as moot. As a result, the scope of the executive's authority to militarily detain persons captured away from the battlefield, including alleged members or associates of Al Qaeda or the Taliban who did not directly engage in hostilities against the United States or its coalition partners, will likely remain a matter of continuing dispute. In January 2010, a three-judge panel of the D.C. Circuit Court of Appeals considered the scope of executive detention authority in the case of Al-Bihani v. Obama . In an opinion supported in full by two members of the panel, the appellate court recognized that, at a minimum, the President was authorized to detain persons who were subject to the jurisdiction of military commissions established pursuant to the Military Commissions Acts of 2006 and 2009; namely, any person who was "part of forces associated with Al Qaeda or the Taliban," along with "those who purposefully and materially support such forces in hostilities against U.S. Coalition partners." While the panel concluded that either purposeful and material support for or membership in an AUMF-targeted organization may be independently sufficient to justify detention, it declined "to explore the outer bounds of what constitutes sufficient support or indicia of membership to meet the detention standard." It did, however, note that this standard would, permit the detention of a "civilian contractor" who "purposefully and materially supported" an AUMF-targeted organization through "traditional food operations essential to a fighting force and the carrying of arms." The D.C. Circuit Court of Appeals thereafter denied a petition for an en banc rehearing the Al-Bihani case, and the Supreme Court denied certiorari. Accordingly, the standard endorsed by the panel is controlling in the D.C. Circuit unless the Supreme Court agrees to take up the issue in a future case. The D.C. Circuit has also recognized that, when determining whether an individual was "part of" an AUMF-targeted organization, the government is not required to demonstrate that the person was part of the organization's "command structure" in order to justify his detention. Instead, a determination as to whether an individual is "part of" al Qaeda or the Taliban "must be made on a case-by-case basis by using a functional rather than a formal approach and by focusing upon the actions of the individual in relation to the organization." Congress enacted a provision as part of the 2012 NDAA to clarify executive authority to detain "covered persons" pursuant to the law of war. The provision appears intended to codify the D.C. Circuit's approach to determining who is subject to detention under the AUMF. Section 1021(b)(2) of the 2012 NDAA includes among "covered persons" subject to detention under the authority of the AUMF: "A person who was a part of or substantially supported al-Qaeda, the Taliban, or associated forces that are engaged in hostilities against the United States or its coalition partners, including any person who has committed a belligerent act or has directly supported such hostilities in aid of such enemy forces." The NDAA provision did not attempt to provide additional clarification for terms such as "substantial support," "associated forces," or "hostilities." For that reason, it may be subject to an evolving interpretation that effectively permits a broadening of the scope of the conflict. Certain "covered persons" are required to be militarily detained, at least until their ultimate disposition under the measure is determined. It is not clear whether the provisions apply to persons arrested or captured within the United States, but it appears intended to cover any Guantanamo detainees who may be transferred into the United States and who meets those criteria. Nevertheless, some detainees may be determined to fall outside the criteria for detention under the AUMF, as clarified by the 2012 NDAA. In the absence of legal authority to militarily detain a terrorist suspect, U.S. military authorities must generally release the person from custody. However, there may be grounds for the person's continued detention by U.S. law enforcement or immigration authorities. If a former detainee brought to the United States is charged with a federal crime, a judicial officer may order his pretrial detention following a hearing in which it is determined that no other conditions would reasonably assure the individual's appearance for trial or the safety of the community or another individual. A former detainee may also potentially be held in detention as a material witness to a criminal proceeding, including a grand jury proceeding, if a judicial officer orders his arrest and detention after determining that it may become impracticable to secure the presence of the person by subpoena. If the military lacks authority to hold a detainee brought to the United States and is unable to effectuate his transfer to another country, the detainee might nonetheless be placed in immigration removal proceedings and continue being detained pending removal. Detention pending removal is generally required for aliens inadmissible on criminal or terrorism-related grounds. Following a final order of removal, an alien is typically required to be removed within 90 days. During this period, an alien is usually required to be detained, and in no circumstance may an alien inadmissible or deportable on any terrorism-related ground or most crime-related grounds be released from detention. If the alien is unable to be removed during the 90-day period provided by statute, his continued detention for a period beyond six months may be statutorily and constitutionally prohibited. However, those aliens who are specially dangerous to the community may be subject to continued detention beyond the six-month period, subject to periodic review. Immigration regulations permit the continued detention of certain categories of aliens due to special circumstances, including, inter alia , any alien who is detained on account of (1) serious adverse foreign policy consequences of release; (2) security or terrorism concerns; or (3) being considered specially dangerous due to having committed one or more crimes of violence and having a mental condition making it likely that the alien will commit acts of violence in the future. Some reviewing courts, however, have determined that these regulations are not based on a permissible construction of the immigration statute governing detention following an order of removal. Proposals have been made to require any alien detainee released from military custody into the United States to be taken into custody by immigration authorities pending removal. Although in prior conflicts the United States interned "enemy aliens" and U.S. citizens who did not participate in hostilities against the United States, the scope and effect of proposals requiring the detention of specified categories of persons other than enemy combatants may be subject to constitutional challenges. Treatment of Detained Persons In the absence of new legislation, the rules governing the treatment of Guantanamo detainees would largely remain unchanged if detainees were transferred to the United States. The DTA provides that no person in the custody or effective control of the DOD or detained in a DOD facility shall be subject to any interrogation treatment or technique that is not authorized by and listed in the United States Army Field Manual on Intelligence Interrogation, unless the person is being held pursuant to U.S. criminal or immigration laws (in which case the detainee's interrogation would be governed by applicable criminal or immigration law enforcement standards). The Field Manual requires all detainees to be treated in a manner consistent with the Geneva Conventions, and prohibits the use of torture or cruel, inhuman, and degrading treatment in any circumstance. In the 2006 case of Hamdan v. Rumsfeld , the Supreme Court found that, at a minimum, Common Article 3 of the Geneva Conventions applied to persons captured in the conflict with Al Qaeda. Common Article 3 requires persons to be treated humanely and protected from "violence to life and person," "cruel treatment and torture," and "outrages upon personal dignity, in particular, humiliating and degrading treatment." All of these requirements would remain applicable to detainees transferred into the United States, at least so long as they remained in military custody. Noncitizen detainees transferred to the United States may also receive greater constitutional protections than those detained outside the United States. "It is well established that certain constitutional protections available to persons inside the United States are unavailable to aliens outside of our geographic borders." Although the Supreme Court in Boumediene held that the constitutional writ of habeas corpus extends to Guantanamo, it did not elaborate as to the extent to which other constitutional provisions apply to noncitizens held at the detention facility. In February 2009, a D.C. Circuit panel held in the case of Kiyemba v. Obama that the Constitution's due process protections do not extend to Guantanamo detainees. In October 2009, the Supreme Court granted certiorari to review the Kiyemba ruling, but in March 2010 it vacated the appellate court's opinion and remanded the case in light of changed circumstances surrounding the Kiyemba petitioners. The circuit court thereafter reinstated its earlier opinion, but the Supreme Court denied certiorari. Regardless of the Constitution's application to persons held at Guantanamo, the DTA and MCA prohibit any person in U.S. custody or control (including those located at Guantanamo or elsewhere outside U.S. territory) from being subjected to cruel, inhuman, or degrading treatment of the kind prohibited by the Fifth, Eighth, and Fourteenth Amendments. Legal Challenges to Nature of Detention If transferred to the United States, detainees may be able to seek judicial review over a broader range of actions taken against them. Besides eliminating detainees' access to habeas corpus review, the DTA and MCA stripped federal courts of jurisdiction to hear most claims by noncitizen detainees. Specifically, federal courts are denied jurisdiction over "any other action against the United States or its agents relating to any aspect of the detention, transfer, treatment, trial, or conditions of confinement of an alien who is or was detained by the United States and has been determined by the United States to have been properly detained as an enemy combatant or is awaiting such determination." Although the Boumediene Court held that the constitutional writ of habeas permitted Guantanamo detainees to challenge the legality of their detention, the Court declined to "discuss the reach of the writ with respect to claims of unlawful conditions of treatment or confinement." Because the Boumediene Court left these questions unresolved, the viability of measures stripping courts of jurisdiction to hear claims regarding the conditions of detention may depend upon a reviewing court's interpretation of the constitutional protections owed to detainees. While measures that eliminate detainees' ability to pursue statute- or treaty-based challenges to aspects of their detention may be deemed permissible by a reviewing court, measures that seek to eliminate (rather than merely circumscribe) detainees' ability to bring constitutional challenges regarding the circumstances of their detention would likely be subject to serious legal challenge. Although the scope of constitutional protections owed to Guantanamo detainees remains a matter of legal dispute, it is clear that the procedural and substantive due process protections of the Constitution apply to all persons within the United States, regardless of their citizenship. Accordingly, detainees transferred to the United States might be able to more successfully pursue legal challenges against aspects of their detention in the United States that allegedly infringe upon constitutional protections owed to them. Removal of Detainees from the United States If there are no longer legal grounds to hold a detainee, the United States must terminate custody either through transfer or release. Persons held in the United States may have greater legal redress against their unwilling transfer to another country than those held abroad, and may potentially seek judicial review of transfer decisions through habeas proceedings. CAT Article 3 and its implementing legislation prohibit the transfer of detainees from the United States to countries where they would more likely than not face torture. This prohibition is absolute and without regard to whether an individual has been involved in terrorist or criminal activity. While the Bush Administration took the position that CAT Article 3 and its implementing legislation do not govern the transfer of detainees held outside the United States, there appears to be little if any dispute regarding CAT's application to the transfer of persons from within the country. Detainees transferred to the United States who may no longer be held by military authorities might potentially seek relief from removal under U.S. immigration laws. An alien who is physically present or arrives in the United States, regardless of immigration status, may apply for asylum, a discretionary form of relief from removal available to aliens who have a well-founded fear of persecution if transferred to another country. Persons granted asylum may thereafter apply for adjustment of status to that of a legal permanent resident. Certain potentially over-lapping categories of aliens are disqualified from asylum eligibility, including those involved in terrorism-related activity (including members of the Taliban and Al Qaeda) and those who are reasonably believed to pose a danger to U.S. security. Nonetheless, it is possible that some detainees who have been found not to have fought on behalf of the Taliban or Al Qaeda may qualify for asylum or other forms of relief from removal if transferred to the United States. Further, if a detainee is declared ineligible for asylum or another form of relief from removal and is thereafter ordered removed by immigration officials, immigration authorities may be required to provide evidence forming the basis of this determination in the face of a legal challenge by the detainee. It is important to note that asylum only constitutes relief from removal under immigration laws. It would not bar the transfer of a detainee pursuant to some other legal authority (e.g., extradition). As discussed, proposals may be considered that would clarify the application of immigration laws to Guantanamo detainees transferred to the United States. Former Secretary of Defense Gates stated that the Obama Administration will seek legislation from Congress addressing detainees' immigration status, possibly including barring them from asylum eligibility. As previously mentioned, the Department of Homeland Security Appropriations Act, 2010 ( P.L. 111-83 ) and the Consolidated Appropriations Act, 2010 ( P.L. 111-117 ) contained provisions barring any funds they made available from being used to provide any immigration benefit to Guantanamo detainees brought to the United States, or to provide for a detainee's classification as a refugee or applicant for asylum. Congress extended the restrictions imposed by FY2010 appropriation enactments through the 2011 fiscal year, but has not renewed the restriction since that time. Detainees' Rights in a Criminal Prosecution While many persons currently held at Guantanamo are only being detained as a preventive measure to stop them from returning to battle, the United States has brought or intends to pursue criminal charges against some detainees. Various constitutional provisions, most notably those arising from the Fifth and Sixth Amendments to the U.S. Constitution, apply to defendants throughout the process of criminal prosecutions. Prosecuting Guantanamo detainees inside the United States would raise at least two major legal questions. First, does a detainee's status as an enemy belligerent reduce the degree of constitutional protections to which he is entitled? Secondly, would the choice of judicial forum—that is, civilian court, military commission, or court-martial—affect interpretations of constitutional rights implicated in detainee prosecutions? As previously discussed, the nature and extent to which the Constitution applies to noncitizens detained at Guantanamo is a matter of continuing legal dispute. Although the Supreme Court held in Boumediene that the constitutional writ of habeas extends to detainees held at Guantanamo, it left open the nature and degree to which other constitutional protections, including those relating to substantive and procedural due process, may also apply. The Boumediene Court noted that the Constitution's application to noncitizens in places like Guantanamo that are located outside the United States turns on "objective factors and practical concerns." The Court has also repeatedly recognized that at least some constitutional protections are "unavailable to aliens outside our geographic borders." The application of constitutional principles to the prosecution of aliens located at Guantanamo remains unsettled. On the other hand, it is clear that if Guantanamo detainees are subject to criminal prosecution in United States, the constitutional provisions related to such proceedings would apply. The application of these constitutional requirements might nevertheless differ depending upon the forum in which charges are brought. The Fifth Amendment's requirement that no person be held to answer for a capital or infamous crime unless on a presentment or indictment of a grand jury, and the Sixth Amendment's requirements concerning trial by jury, have been found to be inapplicable to trials by military commissions or courts-martial. The application of due process protections in military court proceedings may also differ from civilian court proceedings, in part because the Constitution "contemplates that Congress has 'plenary control over rights, duties, and responsibilities in the framework of the Military Establishment, including regulations, procedures, and remedies related to military discipline.'" In the past, courts have been more accepting of security measures taken against "enemy aliens" than U.S. citizens, particularly as they relate to authority to detain or restrict movement on grounds of wartime security. It is possible that the rights owed to enemy belligerents in criminal prosecutions would be interpreted more narrowly by a reviewing court than those owed to defendants in other, more routine cases, particularly when the constitutional right at issue is subject to a balancing test. There are several forums in which detainees could potentially be prosecuted for alleged criminal activity, including in federal civilian court, before military commissions, or possibly in general courts-martial proceedings. The procedural protections afforded to the accused in each of these forums may differ, along with the types of offenses for which the accused may be prosecuted. The MCA initially authorized the establishment of military commissions with jurisdiction to try alien "unlawful enemy combatants" for offenses made punishable by the MCA or the law of war, and afforded the accused fewer procedural protections than would be available to defendants in military courts-martial or federal civilian court proceedings. The statutory framework for military commissions was amended by the Military Commissions Act of 2009 (MCA 2009), enacted as part of the National Defense Authorization Act for Fiscal Year 2010 ( P.L. 111-84 ), so that the procedural protections afforded to the accused (now referred to as alien "unprivileged enemy belligerents" ) more closely resemble those found in military courts-martial proceedings, though differences between the two forums remain. The modifications made by the MCA 2009 are discussed in detail in CRS Report R40932, Comparison of Rights in Military Commission Trials and Trials in Federal Criminal Court , by [author name scrubbed]. Critics raised questions regarding the constitutionality of the military commission system initially established by the original MCA, and some of these arguments may also be raised even following the amendments made by the MCA 2009. Courts have yet to rule on the constitutional legitimacy of many procedures used by military commissions. Military commissions are not statutorily restricted from exercising jurisdiction within the United States, and the Supreme Court has previously upheld the use of commissions against enemy belligerents tried in the country. In November 2009, the Department of Justice and Department of Defense announced that military commission prosecutions against five Guantanamo detainees, which had been halted following President Obama's January 2009 Executive Order, may be resumed. It appears likely that several other detainees will be tried before military commissions as well. Detainees could also potentially be prosecuted in federal civilian court for offenses under federal criminal statutes. Provisions in the U.S. Criminal Code relating to war crimes and terrorist activity apply extraterritorially and may be applicable to some detainees, though ex post facto and statute of limitation concerns may limit their application to certain offenses. In June 2009, one detainee was transferred from Guantanamo to the United States for trial in federal court for his alleged role in the 1998 bombings of the U.S. embassies in Tanzania and Kenya. In November 2009, the DOJ and DOD announced plans to bring charges in federal court against five detainees for their alleged role in the 9/11 terrorist attacks, but opposition to the plan caused the Attorney General to place it on indefinite hold. The plan was eventually dropped in favor of trying the 9/11 conspirators by military commission, but Attorney General Holder did not foreclose civilian trials for other Guantanamo detainees. Currently, funding bars on transferring detainees to the United States seem to foreclose civilian trials for those detained at Guantanamo. Although they have yet to be used for this purpose, military courts-martial could also be employed to try detainees by exercising jurisdiction under the Uniform Code of Military Justice (UCMJ) over persons subject to military tribunals under the law of war. Detainees brought before military courts-martial could be charged with offenses under the UCMJ and the law of war, though courts-martial rules concerning the accused's right to a speedy trial, as well as statute of limitations issues, may pose an obstacle to prosecution. The executive currently retains at least technical discretion to determine the appropriate forum in which to prosecute detainees (though various funding measures have effectively precluded Guantanamo detainees from being tried in civilian court through the 2013 fiscal year, through their provisions barring the transfer of detainees into the United States for any purpose). The Administration has repeatedly expressed its desire to prosecute some Guantanamo detainees in Article III courts and others before military commissions. Legislative proposals have been introduced that would require prosecutions to occur in a particular forum or modify the procedural rules applicable to the prosecution of detainees. Pursuant to existing statutory authorization, the executive could also potentially modify military commission procedural rules to some degree, including by amending existing procedures so that they more closely resemble those employed by courts-martial. Some commentators have proposed the creation of an entirely new forum for the prosecution of detainees, such as a national security court. The scope and effect of such proposals may be shaped by constitutional constraints, including with respect to the rights owed to the accused in criminal proceedings. The following sections discuss selected constitutional issues that may arise in the criminal prosecution of detainees, emphasizing the procedural and substantive protections that apply in different adjudicatory forums. Right to Assistance of Counsel Detainees brought to the United States would have a constitutional right to assistance of counsel in any criminal prosecution. The procedural rules for federal civilian courts, courts-martial, and military commissions all provide a defendant with the right to assistance of counsel, but the exercise of this right may differ according to the forum. The Sixth Amendment guarantees a criminal defendant the right "to have the Assistance of Counsel for his defence." This constitutional protection attaches at the time of indictment and affords a defendant the right to retain counsel of his or her choosing as well as an opportunity to consult with that counsel. Where a criminal defendant cannot afford to retain a lawyer, counsel will be appointed by the court to serve at public expense, in which case the defendant's choice of counsel need not be heeded. The court must advise a criminal defendant of his or her right to counsel and must ask the defendant whether he or she wishes to waive that right. A defendant's waiver is valid only if it is knowing, voluntary, and intelligent. This standard does not require that the defendant fully and completely comprehend all of the consequences of that waiver. The right to counsel also encompasses the right of a defendant to represent himself or herself, if the defendant intelligently and knowingly chooses to do so. It appears that there is no constitutional right to continuity of appointed counsel, although federal law requires that substitution of counsel serve "the interest of justice," and the military justice system authorizes substitution of detailed military counsel only for good cause. The Sixth Amendment right to counsel is the right to the effective assistance of counsel. The standard for determining whether a defendant has received ineffective assistance of counsel is two-fold. The attorney's performance must have been deficient, and the prejudice to the defense resulting from the attorney's deficient performance must be so serious as to bring into question the outcome of the proceeding. If there is an actual breakdown in the adversarial process, such as a case involving "circumstances that are so likely to prejudice the accused that the cost of litigating their effect in a particular case is unjustified," the Sixth Amendment is violated. In the federal civilian courts, the right to counsel is implemented under Rule 44 of the Federal Rules of Criminal Procedure. In part, this rule affords a criminal defendant who is unable to obtain counsel the right to have counsel appointed to represent him at every stage of the proceedings from initial appearance through appeal, unless the defendant waives this right. In courts-martial, the right to counsel is implemented under Rule 506 of the Rules for Courts-Martial (R.C.M.). Rule 506 provides that a defendant has the right to be represented at a general or special court-martial by civilian counsel, if provided at no expense to the government, and either by military counsel detailed under Article 27 of the UCMJ or military counsel of the defendant's own selection. As in a civilian court, the defendant may also waive the right to be represented by counsel and may conduct the defense personally. A detainee subject to a military commission has the right to be represented by counsel. The right is implemented by Rule 506 of the Rules for Military Commissions (R.M.C.), which provides an accused detainee with a detailed military defense counsel. The detainee also has the right to be represented by civilian counsel, if retained at no cost to the government. Civilian counsel must fulfill certain qualifications, including being a U.S. citizen and having security clearance of Secret or higher. As under the Rules for Courts-Martial, a defendant in a military commission proceeding may waive his right to counsel and may conduct the defense personally. In a departure from the rules governing courts-martial under the earlier rules, the detainee did not have the right to be granted specific individual military counsel upon request. Pursuant to modifications to military commission procedures made by the MCA 2009, the accused is now able to request a military defense counsel of his choosing from the pool of qualified military attorneys, if that counsel is reasonably available. Right Against Use of Coerced Confessions One issue that could arise in the prosecution of certain detainees involves the admissibility of statements obtained during interrogation by U.S. or foreign military and intelligence agencies. Some detainees currently held at Guantanamo were subjected to interrogation techniques that, if performed in the United States, would almost certainly be deemed unconstitutionally harsh. The use of any such evidence, or evidence derived from it, in the criminal trial of a detainee would likely be subject to legal challenge under the Fifth Amendment on the ground that the statement was gained through undue coercion. As a general rule, statements made in response to coercive interrogation methods are inadmissible in U.S. courts. Fifth Amendment protections concerning the right against self-incrimination and due process serve as dual bases for exclusion of such evidence. Under the leading Supreme Court case, Miranda v. Arizona , courts will not admit defendants' statements at trial unless law enforcement officers issued the well-known Miranda warnings, which typically begin with "You have the right to remain silent," before the statements were made. As a general rule, Miranda applies any time police question a defendant who is in "custody," broadly defined. In the context of terrorist suspects' statements, at least one court has held that Miranda applies in Article III courts even if the questioning took place outside of the United States. However, the Court's recent jurisprudence has weakened Miranda 's effect by making clear that despite the holding's constitutional status, there are cases in which it is appropriate to depart from strict adherence to Miranda warnings. The Miranda exception possibly relevant to the Guantanamo detainees is the "public safety" exception, which the Court introduced in New York v. Quarles . In Quarles , police officers apprehended a rape suspect in a supermarket and, on discovering his empty holster, inquired, "where's the gun?" The Court held that the suspect's incriminating response, "The gun is over there," was admissible in court, despite the lack of a Miranda warning, because the question had been necessary to secure the public's safety in that moment. Despite the Court's emphasis in Quarles on the time-sensitive nature of the safety risk in that case, some commentators have argued that the Quarles "public safety" exception should be extended to reach interrogations of all captured terrorist suspects. Attorney General Holder has stated that the "public safety" exception was used to question suspected Times Square bomber Faisal Shahzad and suspected Detroit airline bomber Umar Farouk Abdulmutallab prior to the reading of their Miranda rights. An FBI memorandum from October 2010 advises agents that the circumstances surrounding the arrest of a terrorist operative or leader may warrant significantly more extensive "public safety questioning" than an ordinary arrest, and could include questions about "possible impending or coordinated terrorist attacks; the location, nature, and threat posed by weapons that might pose an imminent danger to the public; and the identities, locations, and activities or intentions of accomplices who may be plotting additional imminent attacks." The memorandum further notes that in exceptional cases, an unwarned intelligence interrogation may be necessary to collect information related to less immediate threats, where the need to collect the information outweighs the government's need to use such statements in court. A second Miranda exception possibly applicable to some detainees is an exception for statements made in response to questioning by foreign officials. In United States v. Yosef , the U.S. Court of Appeals for the Second Circuit held that "statements taken by foreign police in the absence of Miranda warnings are admissible if voluntary." The Yosef court identified two situations in which this exception does not apply: (1) situations where U.S. interrogators are working with foreign interrogators as part of a "joint venture"; and (2) situations that "shock the judicial conscience." If the Quarles public safety exception, the foreign-interrogator exception, or another Miranda exception applied to statements made during questioning of a Guantanamo detainee, prosecutors would need to show only that the detainees' statements were made "voluntarily" before a court would admit them at trial. For example, in United States v. Abu Ali , a case involving a defendant who had been arrested and questioned by the Saudi government for allegedly assisting terrorists in an attack, the U.S. Court of Appeals for the Fourth Circuit upheld statements made to the Saudi interrogators, despite a lack of Miranda warnings, because the court found that the statements were voluntary. The constitutional standard of "voluntariness" is recognized as "the ultimate safeguard against coerced confessions." The definition for "voluntary" in this context matches the definition employed in other due-process cases; specifically, the test for voluntariness is "whether the confession was 'extracted by any sort of threats or violence, [or] obtained by any direct or implied promises, however slight, [or] by the exertion of any improper influence.'" The voluntariness test is a totality-of-the-circumstances inquiry, in which courts examine factors such as "the youth of the accused, his lack of education, or his low intelligence, the lack of any advice to the accused of his constitutional rights, the length of detention, the repeated and prolonged nature of the questioning, and the use of physical punishment such as the deprivation of food or sleep." The failure to provide Miranda warnings can serve as one factor in the totality-of-circumstances evaluation. Absent an exception, the failure to administer a Miranda warning to a suspect in custody results in the exclusion of any unwarned statements at trial as part of the prosecution's case in chief. Evidence derived from an unwarned statement need not be excluded at trial under the "fruit of the poisonous tree" doctrine unless, some courts have ruled, the evidence was uncovered (or witness identified) as a result of a coerced statement and the government cannot show that its subsequent discovery of the derivative evidence is so remote from the illegal action that the taint is removed. In the trial of Ahmed Ghailani for conspiracy in relation to the 1998 embassy bombings, the defendant's allegedly abusive interrogation in CIA custody abroad did not persuade the judge to dismiss charges, but it did result in the exclusion of a government witness whose identity was uncovered during Ghailani's interrogation and whose cooperation with prosecutors was less than willing. Congress appears to have taken the position that Miranda warnings are not constitutionally required to be given to enemy belligerents captured and detained outside the United States. Pursuant to the National Defense Authorization Act for FY2010 ( P.L. 111-84 ), Congress has generally barred enemy belligerents in military custody outside the United States from being read Miranda warnings, absent a court order. Specifically, it provides that Absent a court order requiring the reading of such statements, no member of the Armed Forces and no official or employee of the Department of Defense or a component of the intelligence community (other than the Department of Justice) may read to a foreign national who is captured or detained outside the United States as an enemy belligerent and is in the custody or under the effective control of the Department of Defense or otherwise under detention in a Department of Defense facility the statement required by Miranda v. Arizona … or otherwise inform such an individual of any rights that the individual may or may not have to counsel or to remain silent consistent with Miranda v. Arizona . This provision is expressly made inapplicable to the Department of Justice, meaning that agents of the DOJ could potentially read Miranda warnings to persons in military custody. One instance where the DOJ might opt to read Miranda warnings to an enemy belligerent in military custody would be when it intends to bring criminal charges against a detainee in federal civilian court. Under Article 31 of the UCMJ, individuals "subject to the code" who are brought before a court-martial are protected from the use of statements obtained through the use of coercion, unlawful influence, or unlawful inducement. Additionally, an individual may not be forced to incriminate himself or to answer a question before any military tribunal that is not material to the issue and may tend to degrade him. A suspect is also generally entitled to Miranda type warnings, commonly referred to as 31 bravo rights, which require that a suspect be informed of the nature of the accusation against him; be advised that he does not have to make a statement regarding the offense; and be informed that any statement may be used as evidence in a trial by court-martial. The protections of Article 31 are broader than Miranda warnings in that a suspect must receive the warnings even if he is not in custody. While a strict reading of the UCMJ might support the proposition that a captured insurgent suspected of engaging in unlawful hostilities could not be questioned by military personnel about such activities without first receiving a warning and possibly the opportunity to consult an attorney, developments in military case law cast that conclusion in doubt. A review of Army regulations pertaining to the treatment of war-time captives suggests that military authorities do not regard Article 31 as applicable to captured belligerents suspected of violating the law of war, regardless of their prisoner-of-war status. Military courts have also recognized a "public safety" exception to Miranda requirements similar to the rule applied in federal courts. The relationship between UCMJ Article 31 and the provision of the 2010 National Defense Authorization Act limiting the reading of Miranda rights is not immediately clear. A narrow reading of act's limitation on Miranda warnings might not encompass Article 31 warnings because they technically differ from the warnings required by Miranda . Persons subject to a military commission also have a statutory privilege against self-incrimination, though this standard is less robust than that applicable in courts-martial proceedings. Statements obtained by the use of torture are statutorily prohibited. Under the original MCA, military commissions were permitted to admit statements obtained in the course of harsh interrogation not rising to the level of torture, if certain criteria were met. Statements made on or after December 30, 2005, would not be admitted if the interrogation methods used to obtain them amounted to "cruel, inhuman, or degrading treatment" prohibited by the DTA. The DTA's prohibition applies to statements obtained through methods that, if they had occurred within the United States, would be considered unconstitutionally harsh. The MCA's requirement did not apply with respect to the admission of statements made prior to December 30, 2005, meaning that statements elicited via "cruel, inhuman, or degrading treatment" could potentially have been introduced into evidence in military commission proceedings. Pursuant to amendments made by the MCA 2009, all statements obtained via torture or "cruel, inhuman, or degrading treatment" are now inadmissible in military commission proceedings, regardless of when such statements were made, except when presented "against a person accused of torture or [cruel, inhuman, or degrading treatment] as evidence that the statement was made." A detainee cannot be required to testify against himself. However, self-incriminating statements made by the accused may be introduced into evidence during military commission proceedings when specific criteria are met. Specifically, the MCA 2009 provides that in order for a statement made by the accused to admissible, the military commission judge must find that (1) … the totality of the circumstances renders the statement reliable and possessing sufficient probative value; and (2) … (A) the statement was made incident to lawful conduct during military operations at the point of capture or during closely related active combat engagement, and the interests of justice would best be served by admission of the statement into evidence; or (B) the statement was voluntarily given. The standards for admission of evidence in military commissions may be subject to legal challenge, particularly by those defendants who seek to bar the admission of statements as involuntary. Issues may also arise regarding the admissibility of any incriminating statements made after a detainee has been subjected to harsh interrogation. In November 2008, a military commission judge ruled that statements made by a detainee to U.S. authorities were tainted by his earlier confession to Afghan police hours before, which had purportedly been made under threat of death. The judge concluded that the coercive effects of the death threats producing the detainee's first confession had not dissipated by the time of the second. Subsequently, a federal habeas court ruled that "every statement made by the detainee since his arrest [was] a product of torture," and could not be used by the government to support his detention. The detainee was thereafter ordered released by the habeas court and subsequently transferred to Afghanistan. In a separate case, however, a military judge permitted the use of a detainee's statements despite allegations that interrogators had threatened the youth by recounting stories of the prison rape of a fictitious Afghan youth. The military commission in that case was not persuaded that any of the statements the government sought to introduce at trial had been elicited through such tactics. The MCA does not explicitly address evidence derived from statements elicited through torture or coercion. However, Rule 304 of the Military Commission Rules of Evidence states in paragraph 5(A): Evidence Derived from Statements Obtained by Torture or Cruel, Inhuman, or Degrading Treatment. Evidence derived from a statement that would be excluded under section (a)(1) of [rule 304] may not be received in evidence against an accused who made the statement if the accused makes a timely motion to suppress or an objection, unless the military judge determines by a preponderance of the evidence that— (i) the evidence would have been obtained even if the statement had not been made; or (ii) use of such evidence would otherwise be consistent with the interests of justice. Right Against Prosecution under Ex Post Facto Laws The ability to seek penal sanction against some detainees may be limited by ex post facto rules. Art. I, Section 9, cl. 3, of the U.S. Constitution provides, "No Bill of Attainder or ex post facto Law shall be passed." The Ex Post Facto Clause "protects liberty by preventing the government from enacting statutes with 'manifestly unjust and oppressive' retroactive effects." This limitation may impede the ability of U.S. authorities to pursue criminal charges against some detainees, or alternatively inform decisions as to whether to pursue criminal charges in a military or civilian court, as offenses punishable under the jurisdiction of one forum may not be cognizable under the laws of another. While laws having retroactive effect may also invite due process challenges, the Ex Post Facto Clause acts as an independent limitation on congressional power, going "to the very root of Congress's ability to act at all, irrespective of time or place." Accordingly, the Ex Post Facto Clause may be pertinent to the prosecution of detainees regardless of whether they are brought to the United States or held for trial at Guantanamo. It appears that some detainees could be prosecuted for activities in federal civilian court without running afoul of the Ex Post Facto Clause, including for offenses related to or preceding the 9/11 terrorist attacks. While the number of laws criminalizing terrorism-related activity expanded in the aftermath of the 9/11 terrorist attacks, some criminal statutes concerning terrorist activity and having extraterritorial application were in effect in the years preceding, including laws relating to acts of terrorism within the United States that transcend national boundaries; killing or causing serious bodily injury to an American overseas for terrorist purposes; and money laundering in support of certain terrorism-related activity. However, it may be more difficult to prosecute some detainees on account of other types of terrorist activity or material support that occurred abroad. In the early days of the conflict with the Taliban and Al Qaeda, many terrorism-related statutes did not apply to wholly extraterritorial acts committed by foreign nationals that did not injure U.S. persons. For instance, prior to 2004, federal criminal law generally did not extend to non-citizens with no ties to the United States who provided material support to a terrorist organization. Some persons could also be charged with offenses under the War Crimes Act, which imposes criminal penalties for specified offenses under the law of war, including "grave breaches" of the Geneva Conventions. For some alleged offenses, in particular those that occurred prior to September 11, 2001, it may be difficult to establish that they were committed in the context of an armed conflict. Statute of limitations concerns may affect the ability of U.S. authorities to prosecute persons for some of the offenses noted above. While the statute of limitations for most non-capital federal offenses is five years, the period for terrorism-related offenses is typically eight years unless the offense results in or raises a foreseeable risk of death or serious bodily injury. If such a risk is foreseeable, then, like capital offenses, there is no limitation to the time within which an indictment may be found. The constitutional prohibition against ex post facto laws may also have implications in courts-martial or military commission proceedings, limiting the offenses with which detainees may be charged. The UCMJ provides that general courts-martial have jurisdiction to "try any person who by the law of war is subject to trial by a military tribunal and may adjudge any punishment permitted by the law of war." The UCMJ does not enumerate the offenses punishable under the law of war, instead relying on the common law of war to define the subject-matter jurisdiction in general courts-martial. In Hamdan v. Rumsfeld , a plurality of the Supreme Court recognized that, for an act to be triable under the common law of war, there must be "plain and unambiguous" precedent for treating it as such. After examining the history of military commission practice in the United States and internationally, the plurality further concluded that conspiracy to violate the law of war was not in itself a crime under the common law of war or the UCMJ. Congress's post- Hamdan enactment of the original MCA exempted military commissions from many UCMJ requirements applicable to courts-martial proceedings. Although military commissions may exercise personal jurisdiction over a more limited category of belligerents than courts-martial, the two forums share subject-matter jurisdiction over violations of the law of war. However, the systems differ in that Congress defined specific offenses punishable by military commissions, including, inter alia , murder of protected persons; murder in violation of the law of war; attacking civilians, civilian objects, or protected property; denying quarter; terrorism; providing material support for terrorism; and conspiracy to commit an offense punishable by military commission. By statute, Congress has provided that such acts by an unprivileged enemy belligerent are punishable by military commissions regardless of whether they were "committed … before, on, or after September 11, 2001." In enacting the original MCA, Congress asserted that it did "not establish new crimes that did not exist before its enactment," but rather codified "offenses that have traditionally been triable by military commissions." Congress retained this language when it amended the statutory guidelines for military commissions pursuant to the MCA 2009. The Court of Military Commission Review (CMCR) heard appeals on the question of ex post facto crimes in two cases, and in issuing its first two opinions, upheld Salim Hamdan's conviction for providing material support for terrorism and Ali Hamza Ahmad Suliman al Bahlul's conviction for support of terrorism and conspiracy. After reviewing historical evidence of what were arguably analogous crimes, the CMCR found that Congress could reasonably determine that these offenses violate the common law of war. On appeal in the Hamdan II case, the D.C. Circuit disagreed and reversed. In its unanimous opinion, the three-judge panel found that Congress did not intend for the offenses it defined in the MCA to apply retroactively. Because the court agreed that the crime of material support of terrorism did not exist as a war crime under the international law of war at the time the relevant conduct occurred, which it found to be required under pre-MCA law regarding military commissions, it found Hamdan's conviction invalid. The court also hinted that other offenses proscribed by the MCA might fall into the retroactive category. To avoid that fate, the court suggested, an offense must be shown to be "based on norms firmly grounded in international law." Another panel of the D.C. Circuit followed Hamdan II to reverse Al Bahlul's conviction in a per curiam order. The government asked for and was granted a petition for rehearing en banc in the Al Bahlul case, which will likely give it the opportunity to challenge the decision in Hamdan as well. In addition to these offenses, the crime of "murder in violation of the law of war," which punishes persons who, as unprivileged belligerents, commit hostile acts that result in the death of any persons, including lawful combatants, in the context of an armed conflict, may also be new, depending on how it is interpreted. Whether the full D.C. Circuit, or possibly the Supreme Court, ultimately deems some of the punishable offenses listed by the MCA as constitutionally impermissible, at least when applied to activities occurring prior to the MCA's enactment, may turn on the degree of deference given to Congress in defining violations of the law of war. The Constitution expressly grants Congress the power to "define and punish Offences ... against the Law of Nations." While the Supreme Court has applied stringent criteria when determining whether an act is punishable under the law of war in the absence of a congressional declaration, the standard may be more lenient when Congress acts pursuant to its constitutional authority to define war crime offenses. Ex post facto concerns could potentially be raised in other situations, such as when there is a change to the statute of limitation applicable to a crime or if there is an increase in a penalty. Statute of limitations concerns may arise in war crimes prosecutions under the UCMJ, though these limitations may not apply with respect to prosecutions before military commissions. These considerations may inform decisions by U.S. authorities as to whether to pursue criminal charges against detainees in civilian court or another forum. They may also be relevant in the crafting of any new legislative proposals concerning the prosecution of detainees. A further ex post facto issue could arise if the rules of evidence applicable at the time of prosecution for an offense set a lower evidentiary bar for conviction than those applicable at the time of the commission of the offense. Rules Against Hearsay Evidence Hearsay is a prior out-of-court statement of a person, offered at trial either orally by another person or in written form, in order to prove the truth of the matter asserted. In a trial before either a civilian or military court, the admissibility of hearsay may raise both procedural and constitutional issues. Civilian and military courts each have procedural rules limiting the admission of hearsay evidence. Further, the Sixth Amendment's Confrontation Clause states that the accused in any criminal prosecution retains the right to be "confronted with the witnesses against him." As a practical matter, hearsay issues may arise in any prosecution of persons captured in the war against Al Qaeda and associated forces for reasons peculiar to that context. For example, witnesses detained by foreign governments may be unavailable to come to the United States to testify in a federal court, or the government may be unwilling to make military and intelligence assets and personnel available for testimony. Procedural rules and constitutional requirements may limit the use of hearsay evidence in the prosecution of some detainees, though exceptions may permit the introduction of certain types of hearsay evidence. Evidentiary Issues Federal civilian courts, courts-martial, and military commissions all operate under procedural rules governing the admission of hearsay evidence. Procedural rules applicable to federal courts under the Federal Rules of Evidence and courts-martial proceedings under the Military Rules of Evidence impose largely similar restrictions on the usage of hearsay evidence. Under both the federal and the military rules of evidence, hearsay is generally inadmissible unless it qualifies under an exception to the hearsay rule. For the most part, these exceptions require the hearsay evidence to be of a particular nature or context that gives it a greater degree of reliability than other out-of-court statements. Examples of exceptions to the hearsay rule include "excited utterances" made under the stress of excitement caused by a startling event; records of regularly-conducted activity; and statements of a self-incriminating nature. Both sets of evidentiary rules recognize a residual exception for statements that have "equivalent circumstantial guarantees of trustworthiness." Examples of statements that have been held to qualify under the residual exception include interviews of child abuse victims by specially trained FBI agents and statements contained within the files of a foreign intelligence agency. One important aspect of the definition of hearsay is that statements made by co-conspirators in furtherance of a conspiracy are not considered hearsay. For example, in prosecutions alleging material support to terrorist organizations, evidence of statements by co-conspirators may be introduced against a defendant at trial even if those statements would not have qualified under a hearsay exception. Before these statements may be admitted, it is necessary to establish that the conspiracy exists. The co-conspirators' statements being offered may be considered when making this initial determination, but are not sufficient standing alone to establish the existence of a conspiracy. In comparison with the Federal Rules of Evidence and the Military Rules of Evidence, the procedural rules for military commissions under the Military Commission Rules of Evidence are much more permissive regarding the admissibility of hearsay evidence. Under the MCA 2006, hearsay evidence could be admitted in commission proceedings if either (1) it would be admitted under rules of evidence applicable in trial by general courts-martial; or (2) more broadly, if the proponent of the evidence makes known to the adverse party the intention to offer such evidence, and as well as the particulars of the evidence. In the latter case, the accused could only have such evidence excluded if he could demonstrate by a preponderance of evidence that the hearsay evidence was unreliable under the totality of the circumstances. The rules for admissibility of hearsay evidence in military commission proceedings were modified by the MCA 2009. Under the new rule, hearsay evidence that would not be admissible in general courts-martial proceedings may be admitted in a trial by military commission only if (i) the proponent of the evidence makes known to the adverse party, sufficiently in advance to provide the adverse party with a fair opportunity to meet the evidence, the proponent's intention to offer the evidence, and the particulars of the evidence (including information on the circumstances under which the evidence was obtained); and (ii) the military judge, after taking into account all of the circumstances surrounding the taking of the statement, including the degree to which the statement is corroborated, the indicia of reliability within the statement itself, and whether the will of the declarant was overborne, determines that – (I) the statement is offered as evidence of a material fact; (II) the statement is probative on the point for which it is offered; (III) direct testimony from the witness is not available as a practical matter, taking into consideration the physical location of the witness, the unique circumstances of military and intelligence operations during hostilities, and the adverse impacts on military or intelligence operations that would likely result from the production of the witness; and (IV) the general purposes of the rules of evidence and the interests of justice will best be served by admission of the statement into evidence. Despite this modification, hearsay evidence that is inadmissible in federal civilian court or military courts-martial proceedings might be admissible in a trial before a military commission. As a result, prosecutors may have a broader range of inculpatory evidence at their disposal. On the other hand, military commission rules permit a broader scope of hearsay for both parties. In some cases, a defendant might be able to introduce more exculpatory evidence in a military commission proceeding than in a federal court or court martial. Because prosecutors generally choose the forum in which to prosecute a case, U.S. authorities may have the option of choosing among the different hearsay rules to their advantage, depending upon the particular facts of a case. Constitutional Issues The Constitution imposes its own limitations on the admission of hearsay evidence in criminal cases. The protections afforded under the Confrontation Clause apply to both civilian and military proceedings. While courts have yet to rule as to whether the Confrontation Clause's protections against hearsay extend to noncitizens brought before military commissions held at Guantanamo, it would certainly appear to restrict the use of hearsay evidence in cases brought against detainees transferred to the United States. In Crawford v. Washington , the Supreme Court held that even where a hearsay exception may apply under applicable forum rules, the Confrontation Clause prohibits the admission of hearsay against a criminal defendant if the character of the statement is testimonial and the defendant has not had a prior opportunity for cross-examination. Although the definition of testimonial statements has not been thoroughly explicated, lower courts have interpreted the proper inquiry to be "whether a reasonable person in the declarant's position would have expected his statements to be used at trial." In the traditional law enforcement context, the Court has expressly held that statements taken by police officers in the course of either investigations of past criminal activity or formal interrogation would qualify as testimonial under any reasonable definition of the term. In contrast, the Supreme Court has held that statements made "to enable police assistance to meet an ongoing emergency" were not testimonial, because, objectively determined, the purpose of the statements was to request assistance and not to act "as a witness." Many of the individuals detained at the naval base at Guantanamo Bay were apprehended on the battlefield in Afghanistan or other locations, as a consequence of their alleged actions there. Evidence against these potential defendants may include statements regarding their activities by persons also engaged in that conflict and subsequently captured. Sixth Amendment concerns may be raised if prosecutory authorities attempt to introduce statements made by other persons or detainees without presenting those declarants to personally testify in court. In these situations, the admissibility of the statements against the defendants would appear to turn on whether the character of the statements made is testimonial or not. In light of the Supreme Court's rulings in the domestic law enforcement context, it seems reasonable to conclude that the statements of enemy combatant witnesses obtained during formal interrogation by law enforcement would be considered testimonial. Similarly, incriminating statements made to U.S. or foreign military personnel by enemy combatants on the battlefield might also be considered testimonial. Insofar as these statements are determined to be testimonial, the Sixth Amendment would not appear to permit their use against a defendant without an opportunity for the defendant to cross-examine the declarant. This constitutional requirement is not affected by less stringent rules regarding the admission, or even the definition, of hearsay that may be used in different forums. While the reach of the Confrontation Clause to noncitizens held at Guantanamo has not been definitively resolved, that clause would clearly apply to military commissions held within the United States. Therefore, although the evidentiary rules for federal civilian courts, general courts-martial, and military commissions may permit different amounts of hearsay initially, prosecutors in each forum would be subject to the requirements of the Confrontation Clause regarding testimonial hearsay against the defendant, at least with respect to proceedings occurring within the United States. Lastly, non-testimonial hearsay against the defendant, including statements which a reasonable person would not expect to be used at trial, are unaffected by the Crawford decision, and even testimonial hearsay may be admitted if the defense has had a prior opportunity to cross-examine the declarant. Right to a Speedy Trial In early 2008, the DOD announced that approximately 80 detainees being held at Guantanamo were expected to face trial before military commissions. In January 2010, it was reported that the Obama Administration intends to bring charges against about 35 detainees in military or civilian court. The Sixth Amendment guarantees a right to a speedy trial for the accused in all criminal prosecutions. The protection is triggered "when a criminal prosecution has begun." The invocation of the right may occur prior to indictment or formal charge, when "the actual restraints imposed by arrest and holding" are made. The right has been found to extend to civilian and military courts, though the nature of the right's application to military courts may differ from its application in the civilian context. Statutory requirements and forum rules may also impose speedy trial requirements on applicable proceedings. Detainees transferred to the United States may argue that they are constitutionally entitled to a speedy trial, and that denial of this right compels a reviewing court to dismiss the charges against them. A reviewing court's assessment of any speedy trial claim raised by a detainee is likely to balance any prejudice suffered by the accused with the public's interest in delaying prosecution. Courts have employed a multi-factor balancing test to assess whether a defendant's right to a speedy trial has been violated, taking into account the length of the delay, the reason for the delay, the defendant's assertion of the right, and the prejudice to the defendant. Because the remedy for the government's violation of the speedy trial right—dismissal—is relatively severe, courts have often hesitated to find violations of the right. However, the Supreme Court has indicated that extremely long delays violate a person's Sixth Amendment right to a speedy trial even in the absence of "affirmative proof of particularized prejudice." It is possible that a court could find that some Guantanamo detainees have been prejudiced in any future prosecution by their long periods of detention, since "a defendant confined to jail prior to trial is obviously disadvantaged by delay." If so, a key question in cases involving Guantanamo detainees might be whether the prejudice suffered by detainees outweighs the public's interest in delaying prosecution. However, it is possible that a court would find that non-citizen detainees were not entitled to a speedy trial right prior to their transfer to the United States, which may affect a reviewing court's consideration of any speedy trial claims. Ahmed Ghailani, the sole Guantanamo detainee to have been transferred to the United States to face trial in civilian court, sought dismissal of his indictment based on his claim that the government violated his Sixth Amendment right to a speedy trial due to the five-year delay between the time he was brought into U.S. custody and his production before the court. The court denied the motion, finding that the time Ghailani spent in CIA detention was justified by the need to interrogate him for intelligence purposes, a process that was incompatible with prosecution in federal court. The time between Ghailani's transfer to Guantanamo in 2006 and his transfer to New York in 2009 was held not to justify postponement of trial, because the need to prevent the defendant from returning to hostilities was not incompatible with federal prosecution. The aborted military commission prosecution did not justify delay because the government had complete discretion as to where to prosecute the defendant. However, although the Guantanamo portion of the delay was attributable to the government, it was assessed as a "neutral factor" because there was no evidence that its purpose had to do with a "quest for tactical advantage." Because Ghailani was detainable as an "enemy combatant" with or without prosecution, the need to avoid excessive incarceration was also not a relevant factor under Barker analysis. Because the court was not persuaded that Ghailani was prejudiced by the delay, it held there was no violation of his Sixth Amendment rights. Statutory and Regulatory Requirements In addition to these constitutional requirements, statutes and forum rules may impose speedy trial requirements of their own. The Federal Speedy Trial Act of 1974 delineates specific speedy trial rules in the context of federal courts. As a general rule, the Speedy Trial Act requires that the government bring an indictment against a person within 30 days of arrest, and that trial commences within 70 days of indictment. However, the act provides several specific exceptions, under which the determination regarding speed of prosecution becomes nearly as much a balancing act as under the Supreme Court's interpretation of the constitutional right. Potentially relevant exceptions to the prosecution of detainees permit a trial judge to grant a so-called "ends of justice" continuance if he or she determines that the continuance serves "ends of justice" that outweigh the interests of the public and defendant in a speedy trial, and also permit the granting of a continuance when the facts at issue are "unusual or complex." Presumably, many of the same factors that are important in considering constitutional issues relating to a right to a speedy trial are also relevant when interpreting the statutory requirements of the Speedy Trial Act. In United States v. al-Arian , the United States charged four men with having provided material support to terrorists, among other charges. The primary evidence in the case included more than 250 taped telephone conversations, which the U.S. government had collected pursuant to the Foreign Intelligence Surveillance Act. A federal district court granted co-defendants' motion for a continuance in the case over the objection of one defendant, al-Arian, who claimed that the continuance violated his constitutional right to a speedy trial. The court determined that the "ends of justice" would be served by granting the continuance because factors such as the complexity of the case, the "voluminous" discovery involved, and the "novel questions of fact and law" outweighed the defendant's interest in a speedy trial. In addition, the al-Arian court found that the defendant had failed to prove that he would suffer any specific prejudice as a result of the continuance, because the period of the continuance would in any case be consumed with discovery proceedings. Speedy Trials under Military System There are no statutory or procedural rule requirements governing military commissions concerning enemy combatant's right to a speedy trial. While many UCMJ requirements apply to military commission proceedings, those relating to the right to a speedy trial do not. Whatever rights owed to the accused in this context are only those provided by the Sixth Amendment. In contrast, statutory requirements and forum rules afford significant speedy trial rights to individuals subject to courts-martial. Article 10 of the UCMJ requires the government, when a person is placed in arrest or confinement prior to trial, to take immediate steps to inform of the accusations and to try the case or dismiss the charges and release. The R.C.M. implements this requirement in Rule 707(a) with a requirement that an individual be brought to trial within 120 days of the preferral of charges or the imposition of restraint, whichever date is earliest. Rule 707 provides for certain circumstances when time periods of delay are excluded from the 120 day requirement, as well as allows the military judge or the convening authority to exclude other periods of time. On their face, the statutory and procedural rules concerning speedy trial rights in courts-martial proceedings may pose a significant obstacle for their usage in prosecuting persons held at Guantanamo. While enemy combatants may be tried by a general court-martial for war crimes under the UCMJ, statutory and procedural rules governing a defendant's right to a speedy trial may be implicated. Arguably, the speedy trial requirement may have started to run when the enemy combatants were placed in confinement by the United States military. And while it is possible to exclude time from the speedy trial requirement for those periods when the accused was in the custody of civilian authorities or foreign countries, it may be difficult to argue that the speedy trial period did not start when the U.S. military commenced detention of the person at Guantanamo. The government is not precluded from preferring charges to a general court-martial in this scenario, but the defense has the right to object to the trial on the basis of the speedy trial requirement. Prosecution of detainees before a general court-martial may require modification of applicable statutes and forum rules relating to a defendant's right to a speedy trial. Finally, even if the government complied with time constraints imposed by applicable statutes and forum rules and did not violate detainees' constitutional rights to a speedy trial under the Sixth Amendment, it is possible that a court could hold that the government violated a defendant's constitutional right to a fair trial under the Fifth Amendment Due Process Clause by "caus[ing] substantial prejudice to [the detainee's] right to a fair trial," typically by intentionally stalling prosecution in a case. Right to Confront Secret Evidence The Sixth Amendment requires that "[i]n all criminal prosecutions, the accused shall enjoy the right ... to be confronted with the witnesses against him." However, in the context of prosecuting persons seized in the armed conflict against Al Qaeda and associated forces, a public trial could risk disclosure of classified information. In these cases, the government is arguably placed in a difficult position, forced to choose between waiving prosecution and potentially causing damage to national security or foreign relations. This dilemma was one factor leading to the enactment of the Classified Information Procedures Act (CIPA), which formalized the procedures to be used by federal courts when faced with the potential disclosure of classified information during criminal litigation. Courts-martial and military commissions also have procedures concerning a defendant's right to confront secret evidence. The rules governing the disclosure of classified information in military commissions were amended by the MCA 2009 to more closely resemble the practices employed in federal civilian court under CIPA and in general courts-martial. Prosecutions implicating classified information can be factually varied, but an important distinction that may be made among them is from whom information is being kept. In some situations, the defendant seeks to introduce classified information of which he is already aware, typically because he held a position of trust with the U.S. government. The interests of national security require sequestration of that information from the general public. In the case of ordinary terrorism prosecutions, the more typical situation is likely to be the introduction of classified information as part of the prosecution's case against the defendant. In these cases, preventing disclosure to the defendant, as well as to the public, may be required. Preventing the accused from having access to evidence to be used against him at trial raises concerns under the Confrontation Clause of the Constitution. Both CIPA and the Federal Rules of Criminal Procedure authorize federal courts to issue protective orders preventing disclosure of classified information to various parties, including the defendant, in cases where nondisclosure would not unduly prejudice the rights of the accused. The judge may permit the prosecution to provide an unclassified summary or substitute statement so long as this procedure provides the defendant with substantially the same ability to make his defense as disclosure of the classified information itself would provide. Such a substitute submission might redact, for example, sources and methods of intelligence gathering so long as enough information is made available to give the defendant a fair opportunity to rebut the evidence or cast doubt on its authenticity. Legal issues related to withholding classified information from a defendant are likely to arise during two distinct phases of criminal litigation. First, issues may arise during the discovery phase when the defendant requests and is entitled to classified information in the possession of the prosecution. Secondly, issues may arise during the trial phase, when classified information is sought to be presented to the trier-of-fact as evidence of the defendant's guilt. The issues implicated during both of these phases are discussed below. Withholding Classified Information During Discovery The mechanics of discovery in federal criminal litigation are governed primarily by the Federal Rules of Criminal Procedure. These rules provide the means by which defendants may request information and evidence in the possession of the prosecution, in many cases prior to trial. There are two important classes of information that the prosecution must provide, if requested by the defendant: specifically Brady material and Jencks material. Brady material, named after the seminal Supreme Court case Brady v. Maryland , refers to information in the prosecution's possession which is exculpatory, that is, tends to prove the innocence of the defendant. For example, statements by witnesses that contradict or are inconsistent with the prosecution's theory of the case must be provided to the defense, even if the prosecution does not intend to call those witnesses. Prosecutors are considered to have possession of information that is in the control of agencies that are "closely aligned with the prosecution," but, whether information held exclusively by elements of the intelligence community could fall within this category does not appear to have been addressed. Jencks material refers to written statements made by a prosecution witness that has testified or may testify. For example, this would include a report made by a witness called against the defendant. In the Supreme Court's opinion in Jencks v. United States , the Court noted the high impeachment value a witness's prior statements can have, both to show inconsistency or incompleteness of the in court testimony. Subsequently, this requirement was codified by the Jencks Act. The operation of Jencks and Brady may differ significantly in the context of classified information. Under Section 4 of CIPA, which deals with disclosure of discoverable classified information, the prosecution may request to submit either a redacted version or a substitute of the classified information in order to prevent harm to national security. While the court may reject the redacted version or substitute as an insufficient proxy for the original, this decision is made ex parte without defense counsels' input or knowledge. Classified information that is also Jencks or Brady material is still subject to CIPA. In some cases, the issue may not be the disclosure of a document or statement, but whether to grant the defendant pre-trial access to government witnesses. In United States v. Moussaoui , one issue was the ability of the defendant to depose "enemy combatant" witnesses that were, at the time the deposition was ordered, considered intelligence assets by the United States. Under the Federal Rules of Criminal Procedure, a defendant may request a deposition in order to preserve testimony at trial. In Moussaoui , the court had determined that a deposition of the witnesses by the defendant was warranted because the witnesses had information that could have been exculpatory or could have disqualified the defendant for the death penalty. However, the government refused to produce the deponents, citing national security concerns. In light of this refusal, the Fourth Circuit, noting the conflict between the government's duty to comply with the court's discovery orders and the need to protect national security, considered whether the defendant could be provided with an adequate substitute for the depositions. The court also noted that substitutes would necessarily be different from depositions, and that these differences should not automatically render the substitutes inadequate. Instead, the appropriate standard was whether the substitutes put the defendant in substantially the same position he would have been absent the government's national security concerns. Here, the Fourth Circuit seemed to indicate that government-produced summaries of the witnesses' statements, with some procedural modifications, could be adequate substitutes for depositions. Within the courts-martial framework, the use of and potential disclosure of classified information is addressed in Rule 505 of the Military Rules of Evidence. Rule 505 applies at all stages of proceedings, including during discovery. Under the Rule, the convening authority may (1) delete specified items of classified information from documents made available to the accused; (2) substitute a portion or summary of the information; (3) substitute a statement admitting relevant facts that the classified materials would tend to prove; (4) provide the document subject to conditions that will guard against the compromise of the information disclosed to the accused; or (5) withhold disclosure if actions under (1) through (4) cannot be taken without causing identifiable damage to the national security. Prior to arraignment, any party may move for a pretrial session to consider matters related to classified information that may arise in connection with the trial. The military judge is required, upon request of either party or sua sponte , to hold a pretrial session in order to address issues related to classified information, as well as any other matters that may promote a fair and expeditious trial. As amended by the MCA 2009, disclosure of classified information during a military commission is governed by 10 U.S.C. §§949p-1–949p-9. The act provides that "[t]he judicial construction of the Classified Information Procedures Act … shall be authoritative" in interpreting the statutory requirements governing the use of classified information in military commission proceedings, "except to the extent that such construction is inconsistent with the specific requirements" of these statutory provisions. Much like in courts-martial, any party may move for a pretrial session to consider matters related to classified information that may arise during the military commission proceeding. However, in a departure from the rules governing courts-martial, the convening authority is replaced by the military judge with respect to the modification or substitution of classified information. Pursuant to modifications made by the MCA 2009, the military judge shall, upon request by either party, "hold such conference ex parte to the extent necessary to protect classified information from disclosure, in accordance with the practice of the federal courts under the Classified Information Procedures Act." The military judge may not authorize discovery or access to the classified information unless the judge finds that the information "would be noncumulative, relevant, and helpful to a legally cognizable defense, rebuttal of the prosecution's case, or to sentencing, in accordance with standards generally applicable to discovery of or access to classified information in federal criminal cases." The military judge, upon motion of the government's counsel, has the authority to modify and/or substitute classified evidence during discovery, and ultimately may dismiss the charges or specifications if he feels that the fairness of the proceeding will be compromised without disclosure of the classified evidence. The Use of Secret Evidence at Trial The use of secret evidence at trial also implicates constitutional concerns. As described above, there may be instances where disclosure of classified information to the defendant would be damaging to the national security. In these instances, the prosecution may seek to present evidence at trial in a manner that does not result in full disclosure to the defendant. One proposed scenario (which is not authorized by the MCA) might be the physical exclusion of the defendant from those portions of the trial, while allowing the defendant's counsel to remain present. However, such proceedings could unconstitutionally infringe upon the defendant's Sixth Amendment right to confrontation. Historically, defendants have had the right to be present during the presentation of evidence against them, and to participate in their defense. But other courts have approved of procedures which do not go so far as to require the defendant's physical presence in the same room as witnesses to be confronted. For example, the government is in some cases permitted to use depositions in lieu of live witness testimony where the witness is beyond the subpoena power of federal courts, as is the case with foreign national witnesses overseas. In United States v. Abu Ali , the Fourth Circuit permitted video conferences to allow the defendant to observe, and be observed by, witnesses who were being deposed in Riyadh, Saudi Arabia. The Fourth Circuit stated that these procedures satisfied the Confrontation Clause if "the denial of 'face-to-face confrontation' [was] 'necessary to further an important public policy,'" and sufficient procedural protections were in place to assure the reliability of the testimony. Here, the Fourth Circuit cited the protection of national security as satisfying the "important public policy" requirement, where the government could not reasonably ensure that a defendant charged with serious terrorism offenses would remain in its custody if he were permitted to travel abroad. The cited procedural safeguards were the presence of mutual observation, the fact that testimony was given under oath in the Saudi criminal justice system, and the ability of defense counsel to cross examine the witnesses. CIPA does not have any provisions which authorize the exclusion of defendants from any portion of trial, based upon national security considerations. But as noted earlier, CIPA Section 3 authorizes the court to issue protective orders preventing disclosure of classified information to the defendant by defense counsel, for example, in order to protect intelligence sources and methods by which evidence to be presented at trial was obtained. Under CIPA, the admissibility of classified information at trial is determined at a pretrial hearing. As with the case in discovery, the government may seek to replace classified information with redacted versions or substitutions. However, in this context, the adequacy of a substitute or redacted version is determined in an adversarial proceeding in which both prosecutors and defense counsel have full access to the substitute and may argue whether it provides the defendant with "substantially the same ability to make his defense" as the underlying classified information would provide. In the courts-martial context, Rule 505 of the Military Rules of Evidence governs the use of classified information during trial. When classified material is relevant and necessary to an element of the offense or a legally cognizable defense, the convening authority may obtain the information for use by the military judge in determining how to proceed with the trial, or may dismiss the charges against the accused rather than disclose the information in the interest of protecting the national security. If the classified information is provided to the judge, an in camera proceeding may be ordered allowing for an adversarial proceeding on the admissibility of the potential evidence. Additionally, the military judge has the authority to issue a protective order to prevent the disclosure of classified evidence that has been disclosed by the government to the accused. In a case where classified information has not been provided to the military judge, and proceeding with the case without the information would materially prejudice a substantial right of the accused, the military judge shall dismiss the charges or specifications or both to which the classified information relates. In trials before military commissions, the military judge shall permit, upon motion of the government, the introduction of otherwise admissible evidence while protecting from disclosure the sources, methods, or activities by which the United States obtained the evidence. An in camera hearing may be held to determine how classified information is to be handled, from which the detainee may be excluded in order to maintain the classified nature of the material. In this scenario, the detainee will not have access to the information pertaining to the source of the evidence, but his defense counsel will be able to argue for the release of the information on behalf of the detainee. The detainee will have access to all evidence that will be viewed by the commission members. If constitutional standards required by the Sixth Amendment are applicable to military commissions, commissions may be open to challenge for affording the accused an insufficient opportunity to contest evidence. An issue may arise as to whether, where the military judge is permitted to assess the reliability of evidence based on ex parte communication with the prosecution, adversarial testing of the reliability of evidence before the panel members meets constitutional requirements. If the military judge's determination as to the reliability of ex parte evidence is conclusive, precluding entirely the opportunity of the accused to contest its reliability, the use of such evidence may serve as grounds to challenge the verdict. On the other hand, if evidence resulting from classified intelligence sources and methods contains "'particularized guarantees of trustworthiness' such that adversarial testing would be expected to add little, if anything, to [its] reliability," it may be admissible and survive challenge. Conclusion Since its inception, the policy of detaining suspected belligerents at Guantanamo has been the subject of controversy. In particular, there has been significant international and domestic criticism of the treatment of detainees held there, as well as detainees' limited access to federal courts to challenge aspects of their detention. Defenders of the policy argue that Guantanamo offers a safe and secure location away from the battlefield where suspected belligerents can be detained and prosecuted for war crimes when appropriate. They contend that enemy belligerents should not receive the same access to federal courts as civilians within the United States. To a degree, these conflicting viewpoints are reflected in the divergent actions taken by the executive and legislative branches. While the Obama Administration has made efforts to close the facility, and has stated its interest in bringing at least some persons held at Guantanamo into the United States for continued detention or prosecution, its efforts to close the facility have been impeded, in part, by congressional enactments that have effectively prevented the executive from transferring any Guantanamo detainee into the United States. It remains to be seen whether Congress and the Administration will reassess their respective positions in the foreseeable future. In any event, the closure of the Guantanamo detention facility may raise complex legal issues, particularly if detainees are transferred to the United States. The nature and scope of constitutional protections owed to detainees within the United States may be different from the protections owed to those held elsewhere. The transfer of detainees into the country may also have immigration consequences. Criminal charges could also be brought against detainees in one of several forums—that is, federal trial courts, the courts-martial system, or military commissions. The procedural protections afforded to the accused in each of these forums may differ, along with the types of offenses for which persons may be charged. This may affect the ability of U.S. authorities to pursue criminal charges against some detainees. Whether the military commissions established to try detainees for war crimes fulfill constitutional requirements concerning a defendant's right to a fair trial is likely to become a matter of debate, if not litigation. There is considerable prosecutorial discretion within the executive branch regarding which forum to utilize, but legislative enactments may potentially limit the exercise of such discretion, including by requiring detainees to be charged in a particular forum. The issues raised by the proposed closure of the Guantanamo detention facility have broad implications. Executive policies, legislative enactments, and judicial rulings concerning the rights and privileges owed to enemy belligerents may have long-term consequences for U.S. detention policy, both in the conflict with Al Qaeda and the Taliban and in future armed conflicts.

Following the terrorist attacks of 9/11, Congress passed the Authorization for the Use of Military Force (AUMF), which granted the President the authority "to use all necessary and appropriate force against those ... [who] planned, authorized, committed, or aided the terrorist attacks" against the United States. Many persons subsequently captured during military operations in Afghanistan and elsewhere were transferred to the U.S. Naval Station at Guantanamo Bay, Cuba, for detention and possible prosecution. Although nearly 800 persons have been held at Guantanamo since early 2002, the substantial majority of Guantanamo detainees have been transferred to another country for continued detention or release. Those detainees who remain fall into three categories: (1) persons placed in non-penal, preventive detention to stop them from rejoining hostilities; (2) persons who face or are expected to face criminal charges; and (3) persons who have been cleared for transfer or release, whom the United States continues to detain pending transfer. Although the Supreme Court ruled in Boumediene v. Bush that Guantanamo detainees may seek habeas corpus review of the legality of their detention, several legal issues remain unsettled. In January 2009, President Obama issued an Executive Order to facilitate the closure of the Guantanamo detention facility within a year. This deadline was not met, but the Administration has repeatedly stated its intent to close the facility. In March 2011, President Obama issued a new Executive Order establishing a process to periodically review whether the continued detention of a lawfully held Guantanamo detainee is warranted, which resulted in some 80 detainees being cleared for release and transfer to a foreign country. Efforts to transfer these prisoners and close Guantanamo have been hampered by a series of congressional enactments limiting executive discretion to transfer or release detainees into the United States, including, most recently, the National Defense Authorization Act for FY2013 (2013 NDAA; P.L. 112-239) and the Consolidated and Further Continuing Appropriations Act, 2013 (2013 CAA; P.L. 113-6 ). By prohibiting funds from being used to transfer or release detainees into the United States, or to assist in the transfer or release of detainees into the country, these acts seem to ensure that the Guantanamo detention facility remains open at least through the 2013 fiscal year, and perhaps for the foreseeable future. Moreover, the measures appear to make military tribunals the only viable forum by which Guantanamo detainees could be tried for criminal offenses, as no civilian court operates within Guantanamo, unless efforts to close the facility are successfully renewed. Upon signing each of these measures into law, President Obama issued a statement describing his opposition to the restrictions imposed on the transfer of Guantanamo detainees, and asserted that his Administration will work with Congress to mitigate their effect. The closure of the Guantanamo detention facility would raise a number of legal issues with respect to the individuals formerly interned there, particularly if those detainees are transferred to the United States. The nature and scope of constitutional protections owed to detainees within the United States may be different from the protections owed to aliens held abroad. The transfer of detainees to the United States may also have immigration consequences. This report provides an overview of major legal issues likely to arise as a result of executive and legislative action to close the Guantanamo detention facility. It discusses legal issues related to the transfer of Guantanamo detainees (either to a foreign country or into the United States), the continued detention of such persons in the United States, and the possible removal of persons brought into the country. It also discusses selected constitutional issues that may arise in the criminal prosecution of detainees, emphasizing the procedural and substantive protections that are utilized in different forums (i.e., federal courts, court-martial proceedings, and military commissions).

Introduction Members of the North Atlantic Treaty Organization (NATO) contribute to the alliance in various ways. The most significant means by far is through funding, in their individual national defense budgets, the deployment of their respective armed forces in support of NATO missions. As the alliance has undertaken enlargement in the post-Cold War period, current member countries have been providing bilateral assistance to prospective future members to assist them in modernizing their forces and making them interoperable with other NATO militaries. Defense analysts point out that the NATO allies also contribute to mutual security in many other ways. Several NATO activities, however, are coordinated and conducted by the alliance's headquarters in Brussels. These operations are directly funded by three common accounts: the NATO Military Budget, the NATO Civil Budget, and the NATO Security Investment Program (NSIP). The funds are maintained by direct contributions from NATO's member states. Individual shares of the civil and military budgets remained unchanged for decades, while NSIP shares were adjusted every few years based upon relative gross domestic product (GDP), per capita GDP, and several other factors. In 2005, members negotiated new burdensharing arrangements for all three funds—for all countries except the United States. Twice a year, ministers of NATO member countries provide guidance on general use of NATO resources. But the actual management of the accounts is conducted by various separate committees. As their names imply, the three funds are responsible for separate, but often complementary, activities. NATO Civil Budget The NATO civil budget supports the alliance's Brussels headquarters and its international civilian staff, which is responsible for policy planning of operations and capabilities, liaison with non-alliance partner countries, and public diplomacy aimed at building international support for the alliance. NATO's international staff is headed by the Secretary General's office, and consists of civilian employees of member countries, often provided to NATO on three- to four-year details. Among other activities, this staff supports the work of the North Atlantic Council (the governing body of the alliance) and its more than two dozen committees. The civil budget covers standard administrative tasks, such as personnel, travel, communications, utilities, supplies and furniture, security, and the NATO headquarters project, for which construction began in 2010. In addition, this budget is used for several program activities, including public information, civil emergency planning, and the work of the science committee. The civil budget also has funded the non-military aspects of structures related to enlargement, including the Partnership for Peace (PfP) program and the Euro-Atlantic Partnership Council (EAPC). The civilian side of these bodies sponsors activities intended to strengthen European security through creating stronger political and economic systems in former communist countries. In addition, the civil budget funds activities related to the Mediterranean Dialogue, the NATO-Russia Founding Act, the NATO-Ukraine Charter, as well as relations with the European Union. NATO's civil budget is financed by all member states, usually through their ministries of foreign affairs. The U.S. contribution is provided through the State Department's budget (Contributions to International Organizations). The U.S. current assessment is 21.7394%. In FY2010 through FY2012, the U.S. contributed $81.9 million, and $79.7 million, and $82.4 million, respectively. The Obama Administration requested a total of $68.8 million in its FY2013 budget. NATO Military Budget NATO's military budget is, in most years, the largest of the three accounts. More than half of this fund is used to pay for operational and maintenance costs of the international military staff, its headquarters in Mons, Belgium, and subordinate commands in different NATO geographical areas, including the Allied Command Operations (ACO) in Casteau, Belgium, and the Norfolk, VA-based Allied Command Transformation (ACT). This budget also covers the cost of administering the alliance's military-related activities and organizations, including the international military headquarters; the Airborne Early Warning and Control System (AWACS) fleet operations, which accounts for a significant portion of the U.S. share; the NATO pipeline (referred to as the Central European Operating Agency); and the Maintenance and Supply Agency. The level of the NATO military budget is reviewed and approved annually by the North Atlantic Council. Individual member state contributions to the budget are based on a cost-sharing formula. According to DOD, "The U.S. Ambassador to NATO and the Office of the Secretary of Defense are responsible for negotiating the cost share with NATO." The U.S. contribution to NATO's military budget is provided through the Department of the Army's Operations and Maintenance account (Support for Other Nations). The U.S. share is approximately 25%. In FY2010 through FY2012, the U.S. contributed $425.3 million, $462.5 million, and $449.9 million, respectively. The Obama Administration requested $443.0 million in its FY2013 budget. NATO Security Investment Program Formerly known as the NATO Infrastructure Fund, this program in the past was responsible chiefly for funding military installations and construction projects. In May 1993, the functions of the program were changed significantly to reflect the alliance's post-Cold War security policy. Known since December 1994 as the NATO Security Investment Program (NSIP), the fund's activities have been steered away from a static defense posture, appropriate to countering a possible Warsaw Pact invasion, toward crisis control, anti-terrorism, and other tasks that require more rapid force mobility and flexibility. Accordingly, the NSIP budget now involves the collective financing of a wide variety of NATO support functions, including, for example command, control, communications, and information hardware and software; surveillance and intelligence capabilities; logistics activities; harbors and airfields; training installations; transportation; and storage facilities for equipment, fuel, and munitions. Its work is managed by the NATO Infrastructure Committee, and individual projects are implemented by host countries or NATO agencies or commands. In light of fiscal constraints being experienced by all nations in the wake of the global financial crisis, "NATO has had to postpone many long-term defense investment requirements, focusing instead on requirements for Active operations and Missions (notably Afghanistan)." The Alliance Global Hawk unmanned reconnaissance aircraft being used in Afghanistan is one such priority project. Because NSIP projects may be located in any of the member countries, this program has tended to be somewhat more politically sensitive than the other two. Infrastructure and other NSIP projects are decided upon through a priority planning process. Specific projects are generally awarded on the basis of competitive bidding, and, once completed, undergo NATO-controlled inspection and auditing. According to the U.S. Department of Defense (DOD), the focus on new NATO missions and the resultant redirection of NSIP activities have been relatively advantageous for the United States. Among other benefits, a change made in May 1993 to the "program's funding criteria for facilities construction and restoration all but eliminates NATO facility funding for the European allies but continues full support for U.S. requirements at European bases." NSIP also helps fund U.S. storage facilities in Europe, as well as U.S.-based facilities for American reinforcement forces assigned to NATO. DOD has noted that the United States has benefitted from NATO infrastructure support for several military operations, including the 1986 air strike on Libya, Desert Storm, Provide Comfort, Deny Flight, peacekeeping activities in the Balkans, as well as military operations in Afghanistan and training in Iraq. Finally, the Pentagon notes that U.S. companies have been successful in bidding on NSIP contracts. In the 1990s, NSIP funding shortfalls were an issue. According to DOD, Congress had "substantially reduced the Department's budget request ... [and] a large number of U.S.-unique projects could not be considered for NATO funding." Pentagon officials state that in the post-9/11 defense budget environment, this has ceased to be a problem. NSIP is used in support of out-of-area NATO military missions. The U.S. Department of Defense notes that "the highest Alliance priority [for the program] is to support on-going military operations in Afghanistan, the Balkans, and Iraq." Defense officials note further that NSIP pays for projects that would otherwise be paid for by the United States alone, or be cancelled for lack of funds. They emphasize that "U.S. credibility, as well as the ability for NATO to make payments to U.S. contractors for NATO-awarded projects and urgently needed U.S. operational support facilities, is directly related to the [U.S. Defense] Department's ability to secure appropriations that will satisfy its prorated share of NATO contributions." With the addition of two new members (Albania and Croatia), and the reappearance of France in the alliance's integrated military command structure in 2009, the current U.S. share of the NSIP projects is 22.2%, which represents a slight decrease from earlier years. The United States provides funds to NSIP annually through the military construction appropriations. According to the U.S. Department of Defense Budget Justification for FY2013, Based on the existing cost sharing agreement and budgeted exchange rates, the U.S. cost share of the NSIP for FY2013 is $264.4 million. Approximately $10.2 million of the total FY2013 program is expected to be available from recoupments of prior year work funded by the U.S. Applying this amount toward the requirement of $264.4 million decreases the need for appropriation in FY2013 by a corresponding amount since this is an alternate source of funds. The FY2013 request for new appropriation is $254.2 million. Common Funds Burdensharing Issues The majority of NATO-related expenses incurred by member states arises from the deployment of their own armed forces. For this reason, the burdensharing debate in the United States has tended to focus not so much on NATO's common funds, but rather on the extent to which established allies have been restructuring their forces and acquiring new military capabilities that enable them to respond to both NATO's traditional Article V, as well as its new, non-Article V missions—particularly Afghanistan—and on the ability and willingness of the newer members to modernize their militaries, make them interoperable with alliance standards, and develop niche capabilities. As noted above, the three NATO common accounts are funded by contributions from the member states. How have these national shares been determined in the past? The 2001 NATO Handbook noted that [b]y convention, the agreed cost-sharing formulae which determine each member country's contributions are deemed to represent each country's "ability to pay". However the basis for the formulae applied is as much political as it is economic. In May 1998, the U.S. Government Accountability Office (GAO), responding to a congressional request, issued a report on the history and apportionment of NATO common funds shares. According to GAO, NATO cost shares had not been reviewed regularly, but had been changed in response to requests from individual member states, or to major events, such as changes in membership. Like all NATO decisions, burdensharing arrangements are based upon members' consensus. NATO has revised relative member contributions based on "event-driven" changes. The GAO cited the following: (1) the 1966 French withdrawal from the military command, described below; (2) the admission of Spain in 1982 (to which could be added the more recent enlargements in 1999, 2004, and 2009), for which shares were renegotiated among all members; and (3) Canada's 1994 unilateral 50% reduction of its NSIP contribution, for which several European member countries agreed to defray the cost among themselves. In addition to changes caused by specific events, the alliance has periodically subjected shares to comprehensive reviews. In the early years of NATO, the alliance agreed to split up members' shares by grouping countries according to their economic strength, and then assigned members within the different groups identical shares, referencing those countries' contributions to the United Nations. In 1952, the three largest member states (the United States, the United Kingdom [U.K.], and France) each paid 22.5% of the budget, while the other nine founding member countries (plus Greece and Turkey, which joined in February 1952) were assessed according to their ability to pay (i.e., their relative GDP). In 1955, NATO determined that each country's future contribution would be based on its average past expenditures for the civil and military budgets, and also agreed not to continue to review cost shares annually. Since then, relative shares of the civil account have remained unchanged. The military account was revisited in 1965, when the U.K. requested a review of that budget to take into account changed relative economic conditions among member states. The following year, France withdrew from the NATO military structure, and reduced its contributions (since made on a unilateral, ad hoc basis); this change was accommodated by prorating shares among the other members. The net effect of both the British-requested review and the partial French pullout was a small redistribution of shares of the military budget. Shares of the NSIP account have been examined somewhat more frequently. The changes have been made through negotiations, but the complete rationales behind the share revisions have not been made public. According to GAO, the alliance has sought to achieve an equitable distribution of NSIP cost shares by considering several factors: (1) members' capacity to pay; (2) benefits of use of NSIP projects that accrue to individual members; (3) economic benefits of construction of NSIP projects in member countries; (4) non-infrastructural security contributions made by individual countries; and (5) "various political and economic factors." In addition, the alliance reportedly takes into account the scope and sophistication of member nations' defense industries. These criteria are not, of course, fully quantifiable; NATO has sought to develop such hard-and-fast, objective guidelines, but has been unable to achieve consensus. Therefore, GAO concluded, "the setting of cost shares is essentially accomplished through negotiations." NSIP cost shares were last reviewed and revised in 1990. However, in early 2004 the alliance's European members agreed to standardize the percentages that each participating nation contributes to the military budget and NSIP. When burdensharing contributions are negotiated, the alliance reportedly has taken into consideration the United States' worldwide security responsibilities. For example, the 2003 U.S. contribution to the NSIP budget was 23.8%—not too far above Germany's 19.8%. But that same year, U.S. GDP was $10.3 trillion, while the combined GDP of the other 18 NATO allies was $8.9 trillion. If NATO common funds assessments were based solely on GDP, the U.S. share that year would have been 53.6% and Germany's would have been 9.8%. In addition, policy analysts long have argued that alliances save money. The 2001 NATO Handbook , for example, noted that "to arrive at a meaningful conclusion" on the cost of belonging to the alliance, "each member country would have to factor into the calculation the costs which it would have incurred, over time, in making provision for its national security independently or through alternative forms of international cooperation." Nonetheless, the total size and individual shares of the common funds have been the subject of discussion in recent years. Prior to the 1999 enlargement, analysts estimated the cost of adding new members at between $10 billion and $125 billion, depending upon different threat scenarios and accounting techniques. Some Members of Congress expressed concern over these cost projections and were also worried that the United States might be left to shoulder a large share of the expenditures; they questioned whether existing burdensharing arrangements should continue and suggested that the European allies should be encouraged to assume a larger financial share for the security of the continent. However, a NATO study estimated that enlargement would require only $1.5 billion in common funds expenditures over 10 years, and a Pentagon study concurred. It was further forecast that the 2004 round of enlargement would cost a similar amount, "with greater benefits" to U.S. security. Furthermore, the addition of 10 new contributors to the NATO common funds actually reduced the percentage shares of the established members—including the United States. In preparation for the Bucharest summit in April 2008, NATO staff prepared estimates of the total cost and the cost-sharing implications of a new round of enlargement. NATO staff concluded, and allies informally agreed, that the methodologies and assumptions used to estimate costs and cost sharing arrangements in prior rounds of enlargement were still valid, and that the addition of new members in 2009 would not entail significant costs. The main expenses likely to be charged directly to the alliance's common military budget would be for air defense upgrades, improvement of in-country facilities (mainly airfields for deployment), and the procurement of secure communications between NATO headquarters in Brussels and Mons, and capitals of the new member countries. Any other common-funded projects in new members states would be assessed and funded in terms of their contributions to NATO capabilities or support to ongoing missions and are not directly attributable to enlargement. In mid-2005, after reviewing existing burdensharing arrangements, NATO's Senior Resource Board recommended a new formula that seeks to be "fair, equitable, stable, and objectively based, ... [with] an automatic mechanism for regular updates." The new formula excludes from its calculations the United States, which negotiated a ceiling for its cost share percentages at the existing rate. The allies also agreed that if new members join the alliance, U.S. contributions would decline on a pro rata basis. The new pro rata apportionment will apply to cost shares after the limited U.S. share has been subtracted. The military and NSIP budgets would be similarly adjusted to account for French participation. The formula is being based on gross national income (GNI) data, representing an average of figures using current prices and data measuring purchasing power parity, both taken from the World Bank's World Development Indicators . The formula will use a two-year rolling average of each country's GNI to smooth out annual fluctuations. The revised cost share plan was introduced in January 2006, and is being gradually phased in over a 10-year transition period. After additional review, NATO staff recommended in mid-2006 that future burdensharing arrangements take into account several other factors besides GNI, including nationally provided staffing for critical NATO operational activities, NATO Airborne Early Warning, benefits from NSIP and other projects, and NATO staffing levels. It was recommended that NATO biennially review each nation's contributions to specified NATO operations over the previous four years and adjust the final share according to those contributions. In addition, during their February 2010 meeting, NATO defense ministers approved measures aimed at balancing the alliance's budget, and also "committed to inject additional resources into the budget this year, as well as to modernise how NATO does its budgeting and looks for savings where it can." During its November 2010 summit in Lisbon, NATO member states agreed to the acquisition of a new capability: ballistic missile defense. Secretary General Rasmussen stated that the territorial missile defense plan would cost an estimated 200 million euros (about $260 million) over 10 years. This amount was characterized as an additional expenditure for upgrading the alliance's existing ALTBMD (Active Layered Theatre Ballistic Missile Defense) program, which is expected to cost approximately 800 million euros (approximately $1 billion) over 14 years. The outlays for both programs are to be borne among all member states, and will be funded from the common NATO budget. In addition, individual countries will be responsible for supporting the deployment of their own ship- or land-based interceptors and sensors. However, in December 2010, a NATO-mandated industry advisory group reportedly concluded in an internal study that the cost could far exceed the early estimate. Inside the Army quoted the group's report as stating that "[w]hile NATO publicly envisages relatively benign cost for currently assumed territorial missile defence functionalities as add-on to the [existing theater-level missile defense] programme, it is obvious that a new, open [command-and-control] architecture approach will require a significant investment by NATO." In recent years, questions concerning the level and shares of the three NATO common funds have received relatively little attention from U.S. policymakers and the media. The focus has instead been on (1) specialized capabilities that new and existing members can bring to the alliance, (2) member states' willingness to contribute military assets to alliance operations, particularly in Afghanistan, and (3) operational restrictions (known as caveats) that member states place on their national contingents. In a November 2010 article, The Economist stated that the Americans (and those like the British, the Canadians, and the Danes who have taken disproportionately heavy casualties) have been frustrated by the reluctance of some countries to put their forces in harm's way and by the maddening caveats that dictate their rules of engagement. One NATO insider observes that such problems arise not always because those allies 'are chicken, but because they don't have the right equipment for war-fighting conditions'. That is no less damning a criticism, reflecting the toll on the alliance's fighting capability of inadequate or poorly conceived defence spending by too many of its members ... ." The 112 th Congress may review the new common funds burdensharing arrangements—as well as U.S. contributions to the NATO budgets—in the context of the Defense Department and State Department appropriations.

For decades, Congress has maintained an interest in burdensharing arrangements with allies, particularly with those of the North Atlantic Treaty Organization (NATO). The 28 NATO member states contribute to the activities of the alliance in several ways, the chief of which is through the deployment of their own armed forces, funded by their individual national budgets. Certain commonly conducted activities, however, are paid for out of three NATO-run budgets. These three accounts—the civil budget, the military budget, and the security investment program—are funded by individual contributions from the member states. The countries' percentage shares of the common funds are negotiated among the members, and are based upon per capita gross national income and several other factors. The U.S. shares for the three funds, which have fallen over the past three decades, currently range from about 22%-25%. In three waves, 12 central and eastern European nations were admitted into the alliance in 1999, 2004, and 2009. As NATO has expanded, it has incurred certain additional costs to address some of the force modernization needs of the new members. These costs are being shared by all, including the new countries. In 2005, members of the alliance adopted a new burdensharing agreement, under which the U.S. level was limited to its then-existing share. Further changes in the cost share formulas may be under review. During a November 2010 summit in Lisbon, NATO member states agreed to the acquisition of a new capability: ballistic missile defense. Although the estimated commonly shared costs of the planned system are relatively modest, member states eventually will be encouraged to assume responsibility individually for deploying various elements of the system, such as radar, interceptor missiles, sensors, and Aegis-equipped naval vessels. The 112th Congress may examine U.S. contributions to the NATO budgets. In the wake of the global financial crisis, most member states have been making or considering reductions in their defense budgets, prompting questions over their willingness and ability to contribute effectively to possible future alliance operations.

Introduction The Department of Veterans Affairs (VA) provides a range of benefits and services to veterans who meet certain eligibility rules; these benefits include medical care, disability compensation and pensions, education, vocational rehabilitation and employment services, assistance to homeless veterans, home loan guarantees, administration of life insurance as well as traumatic injury protection insurance for servicemembers, and death benefits that cover burial expenses. The VA carries out its programs nationwide through three administrations and the Board of Veterans Appeals (BVA). The Veterans Benefits Administration (VBA) is responsible for, among other things, providing compensation, pensions, and education assistance. The National Cemetery Administration (NCA) is responsible for maintaining national veterans' cemeteries; providing grants to states for establishing, expanding, or improving state veterans' cemeteries; and providing headstones and markers for the graves of eligible persons, among other things. The Veterans Health Administration (VHA) is responsible for health care services and medical and prosthetic research programs. The VHA is primarily a direct service provider of primary care, specialized care, and related medical and social support services to veterans through the nation's largest integrated health care system. Inpatient and outpatient care are also provided in the private sector to eligible dependents of veterans under the Civilian Health and Medical Program of the Department of Veterans Affairs (CHAMPVA). The VHA is also a provider of health care education and training for physician residents and other health care trainees. The other statutory missions of VHA are to serve as a contingency backup to the Department of Defense (DOD) medical system during a national security emergency, and to provide support to the National Disaster Medical System and the Department of Health and Human Services as necessary. In general, eligibility for VA health care is based on previous military service, presence of service-connected disabilities, and/or other factors. Veterans generally must enroll in the VA health care system to receive medical care. Once enrolled, veterans are assigned to one of eight categories (see Appendix A ). It should be noted that in any given year, not all enrolled veterans obtain their health care services from the VA. While some veterans may rely solely on the VA for their care, others may receive the majority of their health care services from other sources, such as Medicare, Medicaid, private health insurance, and the military health system (TRICARE). VA-enrolled veterans do not pay premiums or enrollment fees to receive care from the VA; however, they may incur out-of-pocket costs for VA care related to conditions that are not service-connected. The Veterans Access, Choice and Accountability Act of 2014 (Choice Act) In response to the crisis of access to medical care at many VA hospitals and clinics across the country, Congress passed the Veterans Access, Choice and Accountability Act of 2014 ( P.L. 113-146 as amended by P.L. 113-175 and P.L. 113-235 ). On August 7, 2014, President Obama signed the bill into law. The act, as amended, makes a number of changes to programs and policies of the VHA that aim to increase access and lower wait times for veterans who seek care at VA facilities. Among other things, the act establishes a new program (the Veterans Choice Program) that would allow the VA to authorize care for veterans outside the VA health care system if they meet certain criteria. Congress also provided mandatory funding for the Choice Program with a total of $10 billion over three years (through 2017). In addition, Section 801(a) of the Choice Act provided an additional mandatory funding of $5 billion to increase veterans' access to healthcare by hiring more physicians and staff and to improve VA's physical infrastructure. These amounts are not reflected in the tables of this report nor is it discussed in the legislative developments pertaining to the FY2015 VHA budget. The Veteran Patient Population In FY2014, there were approximately 21.9 million living veterans in the nation whose service ranged from World War II, Korea, Vietnam, the Gulf War (which includes Operation Enduring Freedom/Operation Iraqi Freedom/Operation New Dawn (OEF/OIF/OND)) and the intervening periods. Of this number approximately 9.1 million were estimated to be enrolled in the VA health care system (see Table 1 ). From FY2011 through FY2014 the total number of enrollees has increased by 6.3%. Of the total number of enrolled veterans in FY2014, VA anticipated treating approximately 5.9 million unique veteran patients (see Table 2 ). For FY2015, VHA estimates that it will treat about 6 million unique veteran patients, and of these, VA anticipates treating more than 757,000 Operation Enduring Freedom (OEF), Operation Iraqi Freedom (OIF), and Operation New Dawn (OND) veterans. In FY2015, OEF, OIF, and OND patients would represent approximately 11.2% of the overall patients served by the VA. VHA also provides medical care to certain non-veterans; in FY2015 this population is expected to increase by more than 14,000 patients over the FY2014 level. In total, including non-veterans, it is estimated the VHA will treat nearly 6.7 million patients in 2015, a slight increase of 1.9% over the number of patients treated in FY2014 (see Table 2 ). Between FY2011 and FY2015, the number of patients treated by VA has grown by 9.3%. The total number of outpatient visits, including visits to Vet Centers, reached 91.7 million during FY2013 and is projected to increase to approximately 94.6 million in FY2014 and 97.2 million in FY2015. The rest of this report focuses on appropriations for VHA. It begins with a brief overview of VHA's budget formulation, a description of the accounts that fund the VHA, and a summary of the FY2014 VHA budget. The report ends with a section discussing recent legislative developments pertaining to the FY2015 VHA budget. Advance Appropriations28 In order to understand annual appropriations for the Veterans Health Administration (VHA), it is essential to understand the role of advance appropriations. In 2009, Congress enacted the Veterans Health Care Budget Reform and Transparency Act of 2009 ( P.L. 111-81 ) authorizing advance appropriations for three of the four accounts that comprise VHA: medical services, medical support and compliance, and medical facilities. The fourth account, the medical and prosthetic research account, is not funded with an advance appropriation. P.L. 111-81 also required the Department of Veterans Affairs to submit a request for advance appropriations for VHA with its budget request each year. Congress first provided advance appropriations for the three VHA accounts in the FY2010 appropriations cycle; the Consolidated Appropriations Act, 2010 ( P.L. 111-117 ), provided advance appropriations for FY2011. Subsequently, each successive appropriation measure has provided advance appropriations for the VHA accounts: the Department of Defense and Full-Year Continuing Appropriations Act, 2011 ( P.L. 112-10 ), provided advance appropriations for FY2012; the Consolidated Appropriations Act, 2012 ( P.L. 112-74 ), provided advance appropriations for FY2013; the Consolidated and Further Continuing Appropriations Act, 2013 ( P.L. 113-6 ), provided advance appropriations for FY2014; and the Consolidated Appropriations Act, 2014 ( P.L. 113-76 ) provided advance appropriations for FY2015. The Consolidated and Further Continuing Appropriations Act, 2015 ( H.R. 83 ; P.L. 113-235 ) provides advance appropriations for FY2016. Additionally, the Consolidated and Further Continuing Appropriations Act, 2015 ( H.R. 83 ; P.L. 113-235 ), amended 38 U.S.C §117 and included three more accounts to the Advance Appropriations list of accounts. This authorizes advance appropriations for three mandatory VA programs within the Veterans Benefits Administration (VBA): compensation and pensions, readjustment benefits, and veterans insurance and indemnities. Beginning with the FY2016 MILCON-VA Appropriations bill, those accounts would receive advance appropriations for FY2017 in addition to the three VHA accounts that are already authorized to receive advance appropriations. Under current budget scoring guidelines, advance appropriations of budget authority are scored as new budget authority in the fiscal year in which the funds become newly available for obligation, and not in the fiscal year the appropriations are enacted. Therefore, throughout the funding tables of this report, advance appropriations numbers are shown under the label "memorandum" and in the corresponding fiscal year column. For example, the Consolidated and Further Continuing Appropriations Act, 2015 ( H.R. 83 ; P.L. 113-235 ) provides advance appropriations for the medical services, medical support and compliance, and medical facilities accounts for FY2016. Funding shown for FY2015 does not include advance appropriations provided in FY2015 by P.L. 113-235 for use in FY2016. Instead, the advance appropriation provided in FY2015 for use in FY2016 is shown in the memorandum in the FY2016 column. Department of Veterans Affairs Budget The VA budget includes both mandatory and discretionary funding. Mandatory accounts fund disability compensation, pensions, vocational rehabilitation and employment, education, life insurance, housing, and burial benefits (such as graveliners, outer burial receptacles, and headstones), among other benefits and services. Discretionary accounts fund medical care, medical research, construction programs, information technology, and general operating expenses, among other things. Appendix B provides enacted appropriations from FY1995 to FY2014 for the VA, including all three administrations that compose the VA: VBA, VHA, and NCA. Figure 1 provides a breakdown of FY2014 budget allocations for both mandatory and discretionary programs. In FY2014, the total VA budget authority was approximately $147.9 billion; discretionary budget authority accounted for about 42.8% ($63.2 billion) of the total, with about 86.9% ($54.9 billion) of this discretionary funding going toward supporting VA health care programs, including medical and prosthetic research. The VA's mandatory budget authority accounted for about 57.4% ($84.7 billion) of the total VA budget authority, with about 84.4% ($71.4 billion) of this mandatory funding going toward disability compensation and pension programs. Figure 2 provides a breakdown of the FY2015 President's budget request for both mandatory and discretionary programs. For FY2015, the Administration requested approximately $158.6 billion. This includes approximately $65.1 billion in discretionary funding and $93.5 billion in mandatory funding. A major portion of the mandatory benefits will be for compensation and pension benefits for veterans and surviving spouses, dependent children, and dependent parents. Overview of Veterans Health Administration's Budget Formulation33 Similar to most federal agencies, the VA begins formulating its budget request approximately 10 months before the President submits the budget to Congress, generally in early February. VHA's budget request to Congress begins with the formulations of the budget based on the Enrollee Health Care Projection Model (EHCPM), and the Civilian Health and Medical Program Veterans Administration (CHAMPVA) Model. The two models collectively estimate the amount of budgetary resources VHA will need to meet the expected demand for most of the health care services it provides. The EHCPM's estimates are based on three basic components: the projected number of veterans who will be enrolled in VA health care, the projected utilization of VA's health care services—that is, the quantity of health care services enrollees are expected to use—and the projected unit cost of providing these services. Each component is subject to a number of adjustments to account for the characteristics of VA health care and the veterans who access VA's health care services. The EHCPM makes projections three or four years into the future. Each year, VHA updates the EHCPM estimates to "incorporate the most recent data on health care utilization rates, actual program experience, and other factors, such as economic trends in unemployment and inflation." For instance, in 2013, VHA used data from FY2012 to develop its health care budget estimate for the FY2015 request, including the advance appropriations request for FY2016. The CHAMPVA Model is a more recent model adopted by VHA in 2010. The CHAMPVA model projects the cost of providing medical coverage to CHAMPVA eligible beneficiaries. The CHAMPVA Model is composed of two major components: the enrollment model and the claims cost model. The enrollment model projects the number of beneficiaries enrolled in CHAMPVA, and the claims cost model projects expenditures for providing care to beneficiaries. According to the VHA, the "2013 CHAMPVA Model was developed using data from fiscal years 2005 to 2012, publically available research, and input from a development team (including subject matter experts from VHA and VHA's CHAMPVA program)." Table 3 provides a detailed timeline for formulating the FY2015 budget request and the FY2016 advance appropriations request. Funding for the VHA As noted previously, VHA is funded through four appropriations accounts. These are supplemented by other sources of revenue. Although the appropriations account structure has been subject to change from year to year, the appropriation accounts used to support the VHA traditionally include medical care, medical and prosthetic research, and medical administration. Congress also appropriates funds for construction of medical facilities through a larger appropriations account for construction for all VA facilities. In FY2004, "to provide better oversight and [to] receive a more accurate accounting of funds," Congress changed the VHA's appropriations structure. Specifically, the Department of Veterans Affairs and Housing and Urban Development and Independent Agencies Appropriations Act, 2004 ( P.L. 108-199 , H.Rept. 108-401 ), funded VHA through four accounts: (1) medical services, (2) medical administration (currently known as medical support and compliance), (3) medical facilities, and (4) medical and prosthetic research. Brief descriptions of these accounts are provided below. Medical Services The medical services account covers expenses for furnishing inpatient and outpatient care and treatment of veterans and certain dependents, including care and treatment in non-VA facilities; outpatient care on a fee basis; medical supplies and equipment; salaries and expenses of employees hired under Title 38, United States Code (U.S.C.); cost of hospital food service operations; aid to state veterans' homes; and assistance and support services for family caregivers of veterans authorized by the Caregivers and Veterans Omnibus Health Services Act of 2010 ( P.L. 111-163 ). For FY2013, the President's budget request proposed the transfer of funding for biomedical engineering services from the medical facilities account to this account. The Consolidated and Further Continuing Appropriations Act, 2013 ( P.L. 113-6 ), approved this transfer. The President's budget request for FY2014 proposed to continue funding for biomedical engineering services in the medical services account. The Military Construction and Veterans Affairs, and Related Agencies Appropriations bill for FY2014 ( H.R. 2216 ; H.Rept. 113-90 ) that was passed by the House of Representatives June 4, 2013, and the Senate Appropriations Committee reported version of H.R. 2216 ( S.Rept. 113-48 ) continued this transfer for FY2014. The Military Construction, Veterans Affairs, and Related Agencies Appropriations Bill, 2015 ( H.R. 4486 ) continues to fund bioengineering services under the medical services account. Medical Support and Compliance (Previously Medical Administration) This account provides for expenses related to the management, security, and administration of the VA health care system through the operation of VA medical centers, and other medical facilities such as community-based outpatient clinics (CBOCs) and Vet Centers. It also funds 21 Veterans Integrated Service Network (VISN) offices and facility director offices; chief of staff operations; public health and environmental hazard programs; quality and performance management programs; medical inspection; human research oversight; training programs and continuing education; security; volunteer operations; and human resources management. Medical Facilities The medical facilities account funds expenses pertaining to the operations and maintenance of the VHA's capital infrastructure. These expenses include utilities and administrative expenses related to planning, designing, and executing construction or renovation projects at VHA facilities. It also funds leases, laundry services, grounds maintenance, trash removal, housekeeping, fire protection, pest management, and property disposition and acquisition. Medical and Prosthetic Research As required by law, the medical and prosthetic research program (medical research) focuses on research into the special health care needs of veterans. This account provides funding for many types of research, such as investigator-initiated research; mentored research; large-scale, multi-site clinical trials; and centers of excellence. VA researchers receive funding not only through this account but also from the Department of Defense (DOD), the National Institutes of Health (NIH), and private sources. In general, VA's research program is intramural; that is, research is performed by VA investigators at VA facilities and approved off-site locations. Unlike other federal agencies, such as NIH and DOD, VA does not have the statutory authority to make research grants to colleges and universities, cities and states, or any other non-VA entities. Medical Care Collections Fund (MCCF) In addition to the appropriations accounts mentioned above, the Committees on Appropriations include medical care cost recovery collections when considering funding for the VHA. Congress has provided VHA the authority to bill some veterans and most health care insurers for nonservice-connected care provided to veterans enrolled in the VA health care system, to help defray the cost of delivering medical services to veterans. Funds collected from first and third party (copayments and insurance) bills are retained by the VA health care facility that provided the care for the veteran. VA is expecting MCCF total collections to be approximately $2.5 billion in 2015. FY2014 Budget Summary46 Consolidated Appropriations Act, 2014 (P.L. 113-76) House and Senate Action Congress was unable to complete action on any of the FY2014 appropriation acts prior to the beginning of the new fiscal year. Lawmakers also failed to agree on language in a FY2014 continuing resolution (CR). With no agreement in place on October 1, 2013, the resulting lapse in funding led to a partial shutdown of government operations. Congress finally reached agreement on a temporary CR on October 16, 2013, and the President signed the Continuing Appropriations Act, 2014 ( P.L. 113-46 ) the following day to reopen the government. That CR ( P.L. 113-46 ) funded most of the VA (excluding the three medical care accounts: medical services, medical support and compliance, and medical facilities) through January 15, 2014. P.L. 113-73 extended the CR through January 18, allowing extra time for legislative consideration of an omnibus appropriation bill. On January 17, 2014, the President signed into law the Consolidated Appropriations Act, 2014 ( P.L. 113-76 ). Division J of this act included the Military Construction and Veterans Affairs, and Related Agencies Appropriations Act, 2014 (MILCON-VA Appropriations Act, 2014). In total the MILCON-VA Appropriations Act, 2014 provides a total of $147.9 billion in budget authority for VA programs in FY2014. Of this amount $54.9 billion is provided for VHA which comprises four accounts: medical services, medical support and compliance, medical facilities, and medical and prosthetic research accounts. P.L. 113-76 provides $40 million for FY2014 for the medical services account in addition to the advance appropriation of $43.6 billion which was provided in P.L. 113-6 (see Table 5 ). Furthermore, the MILCON-VA Appropriations Act, 2014 provides $85 million for FY2014 for the medical facilities account in addition to the advance appropriation of $4.9 billion provided in P.L. 113-6 . This additional funding will be used to address the backlog of non-recurring maintenance needs at existing VA hospitals and clinics. As required by the Veterans Health Care Budget Reform and Transparency Act of 2009 ( P.L. 111-81 ), the MILCON-VA Appropriations Act, 2014 provides advance appropriations of $55.6 billion for FY2015 for three VHA accounts (medical services, medical support and compliance, and medical facilities). Furthermore, P.L. 113-76 rescinds $229 million from the FY2014 VHA accounts (see Table 5 ). FY2015 VHA Budget President's Request The President submitted his FY2015 budget request to Congress in March 2014. The FY2015 President's Budget is requesting $158.6 billion for the VA as a whole (see Table 4 ). For VA medical services, the Administration's budget is requesting $367.8 million in additional funding above the FY2015 advance appropriations of $45 billion provided in FY2014. In total, the President is requesting $56.6 billion for VHA for FY2015. This includes $45.4 billion for the medical services account, $5.9 billion for the medical support and compliance account, $4.7 billion for the medical facilities account, and nearly $589 million for the medical and prosthetic research account (see Table 5 ). As required by the Veterans Health Care Budget Reform and Transparency Act of 2009 ( P.L. 111-81 ), the President's budget is requesting $58.6 billion in advance appropriations for the three medical care appropriations (medical services, medical support and compliance, and medical facilities) for FY2016 (see Table 5 ). This request for advance appropriations would provide care for over 6.8 million unique patients in FY2016. House Action On April 3, 2014, the House Military Construction and Veterans Affairs Subcommittee approved its version of a Military Construction and Veterans Affairs and Related Agencies Appropriations bill for FY2015 (MILCON-VA Appropriations bill). The full House Appropriations Committee approved a draft version of the measure by voice vote in an April 9, 2014, and the House passed the MILCON-VA Appropriations bill for FY2015 ( H.R. 4486 ; H.Rept. 113-416 ) on April 30, 2014. H.R. 4486 proposes a total of $158.2 billion for the VA (see Table 4 ). The total includes $93.5 billion for mandatory programs, and $64.7 billion for discretionary programs (see Table 4 ). H.R. 4486 ( H.Rept. 113-416 ) as passed by the House proposes $56.2 billion for VHA for FY2015 (see Table 5 ), which comprises four accounts: medical services, medical support and compliance, medical facilities, and medical and prosthetic research. The House-passed measure does not include the additional funding amount of $367.8 million (above the FY2015 advance appropriations) for the medical services account that was requested by the President for FY2015. According to H.Rept. 113-416 , "with $450 million in unobligated, balances expected to be available and a drop of $690 million in projected medical services expenditures, the committee believes that the identified need can be absorbed within existing resources." H.R. 4486 proposes $58.6 billion in advance FY2016 funding for the medical services, medical support and compliance, and medical facilities accounts—the same level as the President's request (see Table 5 ). Senate Committee Action On May 20, 2014, the Senate Military Construction, Veterans Affairs, and Related Agencies Subcommittee marked up its version of the MILCON-VA Appropriations bill for FY2015. The full Senate Appropriations Committee approved the measure ( H.R. 4486 ; S.Rept. 113-174 ) on May 22. The committee-approved bill proposes $158.6 billion for the VA as a whole (see Table 4 ). This includes $93.5 billion for mandatory programs and $65.1 billion for discretionary programs. The MILCON-VA Appropriations bill for FY2015 ( H.R. 4486 ; S.Rept. 113-174 ) approved by the Senate Appropriations Committee proposes $56.4 billion for VHA (see Table 5 ). This includes $45.1 billion for the medical services account, including an additional $1 million over the FY2015 advanced appropriations—instead of $367.8 million as requested by the President for the medical services account. The committee recommendation for the medical facilities account is $4.8 billion, which includes an additional $125 million over the FY2015 advanced appropriations. According to the committee report to accompany H.R. 4486 , "the Committee remains very concerned about the backlog of maintenance needs at existing VHA hospitals and clinics and has included this additional funding to address this need." Additionally, the committee recommendation includes $5.9 billion for the medical support and compliance account and approximately $589 million for the medical and prosthetic research account. The MILCON-VA Appropriations bill for FY2015 ( H.R. 4486 ; S.Rept. 113-174 ) also proposes an advance appropriation of $58.6 billion for medical services, medical support and compliance, and medical facilities accounts for FY2016—the same level as the President's request (see Table 5 ). Consolidated and Further Continuing Appropriations Act, 2015 (P.L. 113-235) House and Senate Action Since none of the regular appropriations bills—including the Military Construction and Veterans Affairs, and Related Agencies Appropriations bill—were passed by the end of the fiscal year, the House and Senate passed a Continuing Appropriations Resolution (CR), 2015, on September 17 and 18, respectively. The President signed the CR into law (P.L. 113-164) on September 19, 2014. The Continuing Appropriations Resolution funded government agencies and programs, including the Department of Veterans Affairs, at an across-the-board reduction of 0.0554% below the Consolidated Appropriations Act, 2014 (P.L. 113-76) through December 11, 2014. However, since P.L. 113-76 provided advance appropriations for the VA's medical care accounts—medical services, medical support and compliance, and medical facilities—for FY2015, these accounts will not be affected by the Continuing Appropriations Resolution, 2015 ( H.J.Res. 124 ; P.L. 113-164 ). Congress also passed several short term CRs (H.J. Res. 130; P.L. 113-202 and H.J. Res. 131; P.L.113-203) in order to work on a larger spending measure. The Consolidated and Further Continuing Appropriations bill, 2015, was passed by the House December 11, 2014, and the Senate passed it December 13, 2014. The President signed the Consolidated and Further Continuing Appropriations Act, 2015 ( H.R. 83 ; P.L. 113-235 ), into law on December 16, 2014. Division I of this act included the Military Construction and Veterans Affairs, and Related Agencies Appropriations Act, 2015 (MILCON-VA Appropriations Act, 2015). The MILCON-VA Appropriations Act, 2015 (H.R. 83; P.L. 113-235 ), provides a total of $159.1 billion in budget authority for VA programs in FY2015 (see Table 4 ). Of this amount, $56.4 billion is provided for VHA (excluding rescissions), which comprises four accounts: medical services, medical support and compliance, medical facilities, and medical and prosthetic research accounts. P.L. 113-235 provides $209 million for FY2015 for the medical services account in addition to the advance appropriation of approximately $45.0 billion that was provided in P.L. 113-76 (see Table 5 ). This additional amount is provided to fund the higher than expected costs associated with the acquisition of two new Hepatitis-C drug therapies; to support the higher than expected demand for the Program of Comprehensive Assistance for Family Caregivers—established Title I of the Caregivers and Veterans Omnibus Health Services Act of 2010 (P.L. 111-163); and to fund several unfunded provisions in the Veterans Access, Choice, and Accountability Act of 2014 ( P.L. 113-146 as amended by P.L. 113-175 and P.L. 113-235 ). As required by the Veterans Health Care Budget Reform and Transparency Act of 2009 ( P.L. 111-81 ), the MILCON-VA Appropriations Act, 2015, provides advance appropriations of approximately $58.7 billion for FY2016 for three VHA accounts (medical services, medical support and compliance, and medical facilities). Furthermore, P.L. 113-235 rescinds $16 million from VA's FY2015 discretionary accounts (which is reflected in the total budget for VA shown in Table 4 ). Physician Ambassadors Helping Veterans Program The Explanatory Statement accompanying the MILCON-VA Appropriations Act, 2015 ( H.R. 83 ; P.L. 113-235 ), included language directing the Secretary of Veterans Affairs to establish a three-year pilot program, under the authorities contained in Section 7405(a)(1) of title 38 United States Code(U.S.C). The pilot program will be titled the ''Physician Ambassadors Helping Veterans Program.'' According to the Explanatory Statement: In some communities non-VA physicians have encountered difficulties when seeking to volunteer time at VA medical facilities. Under existing authority, Section 7405(a)(1) of title 38, United States Code, the Secretary may appoint on a without compensation basis such personnel found necessary for the provision of healthcare for veterans. At medical facilities exhibiting staffing shortages and appointment backlogs due to waiting time issues, the VA is urged to utilize this existing authority to appoint physicians on a volunteer basis to serve veterans' healthcare needs at VA medical facilities. To further understand the benefit to the Department of the utilization of volunteer physicians the VA is directed to establish [the] three-year pilot program. Under the Physician Ambassadors Helping Veterans Program, the Secretary is required to establish this pilot program in no fewer than two VA medical facilities in two distinct Veterans Integrated Service Networks (VISNs). Furthermore, the Explanatory Statement language urges the Secretary to select "medical facilities for this pilot program that have a demonstrated need for additional physicians in any practice area or specialty, yet have been unable to expeditiously fill such vacancies and/or continue to exceed VA's appointment waiting time goals in any area of practice." Furthermore, each pilot location must have a volunteer coordinator who will develop relationships with local medical associations to educate non-VA physicians in the area about the program. The volunteer coordinator will be the initial point of contact for physicians seeking to volunteer at the medical facility. Additionally, due to the cost and effort exerted to credential and educate physicians about volunteer opportunities, the VA is required establish a requisite number of hours per year physician ambassadors must commit to serving at a facility that is cost beneficial to the VA. The Explanatory Statement further stipulates that this metric should be no fewer than 60 hours a year and no more than 100 hours a year, though there is no limit to the total number of hours a physician ambassador may volunteer a year. The VA medical facility is required to enter into agreement with the physician ambassadors regarding the minimum number of hours required before beginning the credentialing or privilege granting process. Appendix A. Priority Groups Appendix B. Department of Veterans Affairs, Enacted Appropriations FY1995-FY2014

The Department of Veterans Affairs (VA) provides benefits to veterans who meet certain eligibility criteria. Benefits to veterans range from disability compensation and pensions to hospital and medical care. The VA provides these benefits through three major operating units: the Veterans Health Administration (VHA), the Veterans Benefits Administration (VBA), and the National Cemetery Administration (NCA). This report focuses on funding for the VHA. The VHA is primarily a direct service provider of primary care, specialized care, and related medical and social support services to veterans through the nation's largest integrated health care system. Eligibility for VA health care is based primarily on previous military service, disability, and income. The President's FY2015 budget request was submitted to Congress on March 4, 2014. The President's budget requested $158.6 billion in budget authority for the VA as a whole. This included $93.5 billion in mandatory funding and $65.1 billion in discretionary funding. For FY2015, the Administration requested $56.6 billion for VHA. This included $45.4 billion for the medical services account, $5.9 billion for the medical support and compliance account, $4.7 billion for the medical facilities account, and nearly $589 million for the medical and prosthetic research account. Furthermore, as required by the Veterans Health Care Budget Reform and Transparency Act of 2009 (P.L. 111-81), the President's budget requested $58.6 billion in advance appropriations for the three medical care accounts (medical services, medical support and compliance, and medical facilities) for FY2016. On April 3, 2014, the House Military Construction and Veterans Affairs Subcommittee approved its version of a Military Construction and Veterans Affairs and Related Agencies Appropriations bill for FY2015 (MILCON-VA Appropriations bill). The full House Appropriations Committee approved a draft measure by voice vote on April 9, 2014, and the House passed the MILCON-VA Appropriations bill for FY2015 (H.R. 4486; H.Rept. 113-416) on April 30, 2014. The House-passed version of the MILCON-VA Appropriations bill for FY2015 proposed a total of $158.2 billion for the VA as whole. For FY2015, H.R. 4486 proposed $56.2 billion for VHA. On May 20, 2014, the Senate Military Construction, Veterans Affairs, and Related Agencies Subcommittee marked up its version of the MILCON-VA Appropriations bill for FY2015. The full Senate Appropriations Committee approved the measure (H.R. 4486 ; S.Rept. 113-174) on May 22. The committee-approved bill proposed $158.6 billion for the VA as a whole. For FY2015, H.R. 4486 (S.Rept. 113-174) proposed $56.4 billion for VHA. A MILCON-VA Appropriations bill funding most of the VA (excluding the three medical care accounts: medical services, medical support and compliance, and medical facilities), was not enacted prior to the beginning of FY2015, and Congress passed several continuing appropriations resolutions (CRs) to fund the VA. The President signed the Consolidated and Further Continuing Appropriations Act, 2015 (H.R. 83; P.L. 113-235) on December 16, 2014. Division I of P.L. 113-235 contained the FY2015 MILCON-VA Appropriations Act. The act provides appropriations totaling $159.1 billion for FY2015 for the functions of the VA as a whole and $56.4 billion for VHA. The MILCON-VA Appropriations Act, 2015 includes $58.6 billion in advance FY2016 funding for the medical services, medical support and compliance, and medical facilities accounts. P.L. 113-235 also amended 38 U.S.C §117. Beginning with the FY2016 MILCON-VA Appropriations bill, compensation and pensions, readjustment benefits, and veterans insurance and indemnities accounts will be provided advance appropriations for FY2017 together with the three health accounts.

Introduction In the United States, being born to an unmarried mother is more likely to lead to less favorable outcomes than is being born to a married mother. In the U.S., births to unmarried women (i.e., nonmarital births) are widespread, touching families of varying income class, race, ethnicity, and geographic area. Many analysts attribute this to changed attitudes about fertility and marriage. They find that many adult women and teenage girls no longer feel obliged to marry before, or as a consequence of, having children. During the 66-year period from 1940 to 2006, the percentage of births to unmarried women increased by a multiple of nine, from 3.8% in 1940 to 38.5% in 2006. This represented about 1.6 million children in 2006. "Nonmarital births" can be first births, second births, or higher-order births; they can precede a marriage or occur to a woman who has never married. "Nonmarital births" can occur to divorced or widowed women. Moreover, a woman with several children may have had one or more births within marriage and one or more births outside of marriage. Many of the children born outside of marriage are raised by a single parent (who may or may not have a "significant other"). Parents and family life are the foundation that influences a child's well-being throughout the child's development and into adulthood. The family also is the economic unit that obtains and manages the resources that meet a child's basic needs while also playing an instrumental role in stimulating the child's cognitive, social, and emotional development. Children born outside of marriage often are raised solely by their mothers, but sometimes live in other types of family situations. Some are raised solely by their fathers, some are raised by both biological parents who are not married to each other (i.e., cohabiting). Others may be raised by a mother who is living with a male partner. Still others may be living with a mother who is divorced from someone other than their father. Additionally, some may be living with a mother whose husband died (i.e., the mother is a widow but the child was not fathered by the deceased husband). Although most children who grow up in mother-only families, father-only families, step-parent families, or families in which the mother is cohabiting with a male partner become well-adjusted, productive adults, a large body of research indicates that children who grow up with only one biological parent in the home are more likely to be financially worse off and have worse socioeconomic outcomes (even after income differences are taken into account) compared to children who grow up with both biological parents in the home. To emphasize, this research indicates that all family situations in which both biological parents are not living together (regardless of whether the mother is divorced, separated, widowed, or was never married) are more likely to result in less favorable outcomes for children than a family situation in which the child is living in a household with both biological parents. It is also noteworthy that some researchers conclude that even among children living with both biological parents, living with married parents generally results in better outcomes for children than living with cohabiting parents mainly because marriage is a more stable and longer lasting situation than cohabitation. The federal concern about nonmarital childbearing centers on its costs via claims on public assistance. These federal costs primarily reflect the fact that many of these "nonmarital children" are raised in single-parent families that are financially disadvantaged. Federal concern also arises because of the aforementioned research indicating that children living in single-parent families are more likely to face negative outcomes (financially, socially, and emotionally) than children who grow up with both of their biological parents in the home. As mentioned earlier, many children born outside of marriage are raised in single-parent families. This report analyzes the trends in nonmarital childbearing in the U.S., discusses some of the characteristics of unwed mothers, addresses some issues involving the fathers of children born outside of marriage, covers many of the reasons for nonmarital childbearing, examines the impact of nonmarital births on families and on the nation, and presents the public policy interventions that have been used to prevent nonmarital births or alleviate some of the problems that are associated with nonmarital childbearing. This report concludes with commentary on public policy interventions—healthy marriage programs, responsible fatherhood programs, and teen pregnancy prevention strategies—that may receive renewed attention and debate in the 111 th Congress. Key Findings Nonmarital childbearing sometimes results in negative outcomes for children mainly because children born outside of marriage are generally not raised by both of their biological parents but rather by single mothers. (Children living in a household maintained by a never-married mother are among the poorest population groups in the U.S.) Even in cases in which cohabiting parents start off raising their children together, it is often of short duration. This section presents some of the major findings of the report. After stabilizing in the 1990s, nonmarital births are again increasing. In 2006, 38.5% of all births were nonmarital births. This surpasses the percentage in 1960 that prompted some policymakers to claim that the black family was disintegrating because a large share of nonmarital births were to black women. In 2006, 70.7% of African American births were nonmarital births compared with 64.6% of American Indian births, 49.9% of Hispanic births, 26.6% of white births, and 16.3% of Asian births. Nonmarital births can be first births, second births, or higher-order births; they can precede a marriage or occur to a woman who has never married. Nonmarital births can occur to divorced or widowed women. Moreover, a woman with several children may have had one or more births within marriage and one or more births outside of marriage. After declining for 14 straight years, all teen births increased in 2006. Contrary to public perception, women in their early twenties, not teens, have the highest percentage of births outside of marriage. In 2005, women ages 20 through 24 accounted for 38% of the 1.5 million nonmarital births. The comparable statistic for females under age 20 was 23%. However, many women who have nonmarital births in their twenties were also teen moms. Births to teenagers are an important component of nonmarital births because more than 80% of births to teenagers are nonmarital births. Although women have been postponing marriage, women of all ages do not view marriage as a requirement for sexual activity. With the longer time span between the onset of sexual activity and marriage, the trend of high numbers of nonmarital births may/could continue. Although nonmarital births are increasing, many more children than in previous decades live with both biological parents in cohabiting situations for some period of time. According to analysts, marriage is considered a better option for children than cohabitation because marriage is more stable (i.e., lasts longer) than cohabiting situations. Growing up in a single-parent family is one of many factors that put children at risk of less favorable outcomes. The economic, social, psychological, and emotional costs associated with children with absent noncustodial parents are significant. Nevertheless, most children who grow up in single-parent families become productive adults. Children living in a single-parent home are more likely to do poorly in school, have emotional and behavioral problems, become teenage parents, and have poverty-level income (as children and adults) compared to children living with married biological parents. In 2007, 67.8% of the 73.7 million U.S. children (under age 18) lived with both of their married parents, 2.9% lived with both parents who were not married, 17.9% lived with their mother, and 2.6% lived with their father. The advent of multiple relationships that produce children adds complexity to the problem. These relationships, often referred to as multiple partner fertility (i.e., when mothers and fathers have had children with more than one partner), generally complicate the family situation of children. Compared to women without nonmarital children, women with children who were born outside of marriage are less like to marry; if they do marry, their spouses are more likely to be economically disadvantaged. Demographically, without nonmarital births, the U.S. would be far below population replacement levels. Having the birth rate reach the replacement rate is generally considered desirable by demographers and sociologists because it means a country is producing enough young people to replace and support aging workers without population growth being so high that it taxes national resources. Nonmarital births are expected to increase over time because of a projected population shift toward more minorities. The Census Bureau projects that by 2050, 54% of the U.S. population will consist of minority groups (i.e., Hispanics, blacks, Indians, and Asians). Minorities, now roughly one-third of the U.S. population, are expected to become the majority in 2042, with the nation projected to be 54% minority in 2050. By 2023, minorities will represent more than half of all children. The Hispanic population is projected to nearly triple, and its share of the nation's total population is projected to double, from 15% to 30%. Thus, nearly one in three U.S. residents will be Hispanic. In 2005, 48% of Hispanic births were nonmarital births. Trends in Nonmarital Births: 1940-2006 In this report, births to unmarried women are termed nonmarital births. Data on nonmarital births are usually expressed by three measures: the number of nonmarital births, the percent of births that are nonmarital, and the rate of nonmarital births per 1,000 unmarried women. The number of nonmarital births provides the absolute count of babies who are born to women (including adolescents), who are not married. The percent of all births that are nonmarital is the number of all nonmarital births divided by all births (both nonmarital births and marital births). The nonmarital birth rate is defined as the number of nonmarital births per 1,000 unmarried women. During the 66-year period from 1940 through 2006, there was a 17-fold increase in the number of babies born to unmarried women living in the United States. The number of babies born to unmarried women increased from 89,500 in 1940 to 1,641,700 in 2006. In 2006, 38.5% of all U.S. births were to unmarried women, up from 3.8% in 1940—a nine-fold increase. Numbers, Percentages, and Rates The number of nonmarital births reached a record high in 2006 with 1,641,700 births to unmarried women. As mentioned above, the number of births to unmarried women has generally increased over the years, with some downward fluctuations. As shown in Figure 1 , nonmarital births rose 17-fold from 1940-2006. (Also see the data table in Appendix .) The average annual increase in nonmarital births has slowed substantially from earlier decades. The average annual increase in nonmarital births was 4.9% from 1940-1949; 5.6% from 1950-1959; 6.1% from 1960-1969; 5.0% from 1970-1979; 6.4% from 1980-1989; 1.2% from 1990-1999 (and 3.6% for the seven years from 2000-2006). The 1990s showed a marked slowing of nonmarital births, dropping from an average increase of 6.4% a year in the 1980s to an average of 1.2% a year in the 1990s. During the first six years of the 2000 to 2010 period, the average annual increase in nonmarital births increased to 3.6%. The percent of births to unmarried women increased substantially during the period from 1940-2006 (see Figure 2 and the Appendix table). (However, from 1994-2000, there was almost no change in this measure.) In 1940, 3.8% of all U.S. births were to unmarried women. By 2006, a record 38.5% of all U.S. births were to unmarried women. The nonmarital birth rate provides a measure of the likelihood that an unmarried woman will give birth in a given year. The birth rate for unmarried women increased dramatically during the 1940-2006 period, with many upward and downward fluctuations. (However, during the years 1995-2002, the nonmarital birth rate remained virtually unchanged. ) The nonmarital birth rate increased from 7.1 births per 1,000 unmarried women ages 15 through 44 in 1940 to a record high of 50.6 births per 1,000 women ages 15 through 44 in 2006 (a six-fold increase). (See Figure 3 and the Appendix , Table A-1 .) Characteristics of Unwed Mothers This section discusses some of the characteristics of unmarried mothers. It includes some of the demographic characteristics like race, ethnicity, and age as well as other features like whether the unwed mother has additional children, her income status, whether or not she marries, and whether or not she is in a cohabiting relationship. Some of the highlights include the following: black women are more likely to have children outside of marriage than other racial or ethnic groups; it is not teenagers but rather women in their early twenties who have the highest percentage of births outside of marriage; single motherhood is more common among women with less education than among well-educated women; a substantial share of nonmarital births (44%) were to women who had already given birth to one or more children; a significant number of unwed mothers are in cohabiting relationships; and women who have a nonmarital birth are less likely than other women to eventually marry. Race and Ethnicity The rate at which unmarried women have children varies dramatically by race and ethnicity. As mentioned earlier, in 2005, the nonmarital birth rate for all U.S. women was 47.5 births per 1,000 unmarried women. In 2005, Hispanic women had the highest nonmarital birth rate at 100.3 births per 1,000 unmarried women. The nonmarital birth rate in 2005 was 67.8 for black women, 30.1 for non-Hispanic white women, and 24.9 for Asian or Pacific Islander women. Although Hispanic women had the highest nonmarital birth rate, a greater share (percentage) of black women had nonmarital births. In 2005, 36.9% of all U.S. births were to unmarried women. In 2005, 69.9% of births to black women were nonmarital births. The percentage of nonmarital births for American Indians or Alaska Natives was 63.5%. The nonmarital birth percentage was 48.0% for Hispanic women, 25.3% for non-Hispanic white women, and 16.2% for Asian or Pacific Islander women. (See Table 1 .) The greatest share of children born to unmarried women are white; however, minority children, particularly black children and Hispanic children, are overrepresented. Of the 1.5 million children who were born outside of marriage in 2005, 38% were white (whites constituted 80% of the U.S. population), 27% were black (blacks constituted 13% of the population), 2% were American Indian/Alaskan Native (American Indians or Alaskan Natives constituted 1% of the population), 2% were Asian or Pacific Islander (Asians or Pacific Islanders constituted 4% of the population), and 32% were Hispanic (Hispanics constituted 14% of the population). In 2005, the percentage of nonmarital births to black women (nearly 70%) was more than three times the 22% level of the early 1960s that so alarmed Daniel Patrick Moynihan, then President Johnson's Assistant Secretary of Labor. Moynihan addressed the issue in a report called "The Negro Family: The Case for National Action." One theory that attempts to explain the disproportionate share of nonmarital births to black women hypothesizes that the universe of males (ages 15 and above) who are unmarried is disproportionately lower for blacks. For example, in 2005, there were 74 black unmarried males for every 100 unmarried black females; 87 white non-Hispanic unmarried males for every 100 unmarried white non-Hispanic females; 98 Asian unmarried males for every 100 Asian unmarried females; and 113 Hispanic unmarried males for every 100 Hispanic unmarried females. Supporters of this theory argue that if the universe of possible marriage partners is reduced to desirable marriage partners (e.g., heterosexual men, men with steady jobs, men without a criminal record, and men with a similar educational background), the black "male shortage" is drastically increased. Age Teen marriage and birth patterns have shifted from a general trend of marrying before pregnancy, to marrying as a result of pregnancy, to becoming pregnant and not marrying. Early nonmarital childbearing remains an important issue, especially in the U.S., because young first-time mothers are more likely to have their births outside of marriage than within marriage, and because women who have a nonmarital first birth are increasingly likely to have all subsequent births outside of marriage, although often in cohabiting unions. The proportion of births to unmarried women (i.e., nonmarital births) who are teenagers also has decreased over the last half-century. In 1950, 42% of the 141,600 nonmarital births were to females under age twenty. In 1970, 50% of the 398,700 nonmarital births were to females under age twenty. In 1990, 31% of the nearly 1.2 million (1,165,384) nonmarital births were to females under age twenty. In 2005, 23% of the 1.5 million (1,527,034) nonmarital births in the U.S. were to teenagers. In contrast, the percentage of all teen births that are nonmarital has increased dramatically. In other words, in recent years, most teenagers who give birth are not married. For example, only 13% of the 419,535 babies born to teens (ages 15 to 19) in 1950 were born to females who were not married. Whereas, in 2005, 83% of the 414,593 babies born to teens (ages 15 to 19) were born to unwed teens. There are two reasons for this phenomenon. The first is that marriage in the teen years, which was not uncommon in the 1950s, has become quite rare. (As mentioned earlier, the typical age of first marriage in the U.S. has risen to 25.5 for women and 27.5 for men.) The second is that this general trend of marriage postponement has extended to pregnant teens as well: In contrast to the days of the "shotgun marriage," very few teens who become pregnant nowadays marry before their baby is born. Contrary to public perception, it is not teenagers but rather women in their early twenties who have the highest percentage of births outside of marriage. In 1990, 31% of the 1,165,384 nonmarital births in the U.S. were to teenagers (under age 20), 35% were to women ages 20 through 24, 20% were to women ages 25 through 29, 10% were to women ages 30 through 34, 4% were to women ages 35 through 39, and less than 1% were to women ages 40 and above (see Figure 4 ). In 2005, 23% of the 1,527,034 nonmarital births in the U.S. were to teenagers (under age 20), 38% were to women ages 20 through 24, 22% were to women ages 25 through 29, 11% were to women ages 30 through 34, 5% were to women ages 35 through 39, and 1% were to women ages 40 and above. (See Figure 5 .) Nonetheless, even though the percentage of all nonmarital births to teens has declined, teen mothers are likely to have subsequent births outside of marriage. In 2006, 19% of all teen births were second or higher-order births. According to some research, 20%-37% of adolescent mothers give birth a second time within 24 months. Thus, some of the women who have a nonmarital birth in their early twenties were teenage mothers as well. An alternate analysis of the age and nonmarital birth data shows that across all age groups a growing share of women are having nonmarital births. In 1990, 67.1% of births to females under age 20 were nonmarital, as were 36.9% of births to women ages 20 through 24, 18.0% of births to women ages 25 through 29, 13.3% of births to women ages 30 through 34, 13.9% of births to women ages 35 through 39, and 17.0% of births to women ages 40 and over. Whereas in 2005, 83.5% of births to females under age 20 were nonmarital, as were 56.2% of births to women ages 20 to 24, 29.3% of births to women ages 25 to 29, 17.0% of births to women ages 30 to 34, 15.7% of births to women ages 35 to 39, and 18.8% of births to women ages 40 and over. (See Figure 6 .) Until recently, a commonly held view was that if childbearing was deferred until a woman reaches her early or late twenties, she would most likely be married. Given that nonmarital birth rates and percentages are at their highest recorded levels and that the number of babies born to teenagers has dramatically decreased in fourteen of the last fifteen years, policymakers are faced with a new paradigm of whether to address births outside of marriage for older women. In these times of scarce resources, it is debatable whether a consensus can be garnered for using public funds to educate women in their mid-twenties and thirties about the negative consequences associated with nonmarital births. Many observers hold the view that older women who have children outside of marriage should have known better, or believe that these women have children for selfish reasons and should live with the consequences, without government assistance or interference. Others argue that the motto "in the best interest of the child" should prevail and that if government aid is necessary and appropriate it should be given. Educational Attainment Single motherhood has always been more common among women with less education than among well-educated women. But the gap has grown over time. In 1960, 14% of mothers in the bottom quarter of the education distribution were unmarried, as compared to 4.5% of mothers in the top quarter—a difference of 9.5 percentage points. By 2000, the corresponding figures were 43% for the less educated mothers and 7% for the more educated mothers—a gap of 36 percentage points. Income Status An examination of never-married mothers shows that in 2007, 41.1% of never-married mother families (with children under age 18) had income below the poverty level. With respect to the various income categories, 23.0% of never-married mother families had income below $10,000, 45.9% had income below $20,000, and 55.1% had income below $25,000; 19.2% had income above $50,000. Additional Children Some studies have found that a woman is most likely to have a second birth while in the same type of situation (single, cohabiting, or married) as she was in for the first birth. The public perception is that nonmarital births are first births. The reality is that in 2005, 44% of the 1.5 million nonmarital births occurred to women who had already given birth to one or more children. In 2007, 46% of mother-only families had more than one child. Cohabitation In 2007, 6.4 million family households in the U.S. were classified as unmarried-partner, or cohabiting, households. This represented 8.2% of the 78.4 million U.S. family households. Thirty years earlier, in 1977, only 1.1 million family households consisted of cohabiting couples—this represented 2% of the 56.5 million family households in 1977. A report on trends in cohabitation indicated that cohabitation is now the norm with approximately 54% of all first marriages beginning with a cohabiting relationship. The report estimated that a majority of young men and women of marriageable age today will spend some time in a cohabiting relationship. Cohabiting relationships are generally considered less stable than marriages. According to several sources, cohabiting relationships are fragile and relatively short in duration, with fewer than half lasting five years or more. A 2004 study found that, a year after the birth, 15% of cohabiting couples had married. The notion that unmarried births equals mother-only families is no longer correct. The decline in the percentage of births to married women has in large measure been in tandem with the increase in births to parents who are living together but who are not married (in cohabiting relationships). According to one study, the proportion of babies of unmarried women born into cohabiting families increased from 29% to 41% from 1980-1984 to 1990-1994, accounting for almost all of the increase in unmarried childbearing over that period. According to Census data, in 2006, approximately 160,000 never-married women (4%) who gave birth within the last 12 months were in a cohabiting relationship. Some children live with cohabiting couples who are either their own unmarried parents or a biological parent and a live-in partner. Approximately 39% of the 6.4 million unmarried-partner (cohabiting) families in 2007 included biological children (of either the mother or father or both) under the age of 18 (i.e., this amounted to 2.5 million families). This is compared to the 44% of the 58.9 million married-couple families with biological children under age 18 (this amounted to 26.2 million families); and the 60% of the 14.4 million mother-only families with biological children under age 18 (this amounted to 8.6 million families); and the 40% of the 5.1 million father-only families with biological children under age 18 (this amounted to 2.0 million families). Some analysts contend that the increase in nonmarital childbearing could be seen as less of an issue if viewed through a framework that portrays out-of-wedlock births as babies born to cohabiting couples rather than "single" women. Consistent with the data mentioned earlier, several reports and studies indicate that about 40% of unmarried mothers are cohabiting with the father of their baby, at least at the time of the baby's birth. According to the National Survey of Family Growth, about 9% of annual births to white women were to cohabiting women; among black women, 15% were to cohabiting women; and among Hispanic women, 22% of births occurred to women who were cohabiting. Others point out that cohabitation is a complex phenomenon that has an array of meanings. Some view it as a precursor to marriage while others view it as an alternative to marriage. According to one study: "cohabitation is a continuous rather than a dichotomous variable. At both ends of the continuum, there is substantial agreement across measures about who is (not) cohabiting. In the middle of the continuum, however, there is considerable ambiguity, with as much as 15% of couples reporting part-time cohabitation. How we classify this group will affect estimates of the prevalence of cohabitation, especially among African Americans, and may impact the characteristics and outcomes of cohabitors." Subsequent Marriage of Mothers Many women marry after having a child. According to the research, about 40% of unwed mothers marry within five years after giving birth (it is not known whether they marry the father of their child). Yet, women who have a nonmarital birth are less likely than other women ever to marry. A study based on retrospective life histories found that at age 17, girls who had a nonmarital birth were 69% more likely to be never married at age 35 than 17-year old girls who did not have a nonmarital birth (i.e., 24% vs. 14.0%). Women ages 20 to 24 who had a nonmarital birth were more than twice as likely (102%) to not be married at age 35 than women ages 20 to 24 who did not have a nonmarital birth (i.e., 38% vs. 19.0%). The reported implications of these findings is that there probably is a causal relationship between nonmarital childbearing and subsequent marriage. Another study points out the racial differences associated with the eventual marriage of many women who had a nonmarital birth. The study found that white women were more likely to be married than their minority counterparts. Some 82% of white women, 62% of Hispanics and 59% of blacks who had a nonmarital first birth had married by age 40; the corresponding proportions among those who avoided nonmarital childbearing were 89%, 93% and 76%, respectively. By some estimates, having a child outside of marriage decreases a woman's chances of marrying by 30% in any given year. Even when they do marry, women who have had a nonmarital birth generally are less likely to stay married. Analysis of data from the 2002 National Survey of Family Growth indicates that women ages 25 to 44 who had their first child before marriage and later got married are half as likely to stay married as women who did not have a nonmarital birth (42% compared to 82%)." The following section highlights a couple of demographic factors associated with the fathers of children born outside of marriage. It also discusses the importance of establishing paternity for children born outside of marriage. Fathers of Children Born Outside of Marriage It has been pointed out that fathers are far too often left out of discussions about nonmarital childbearing. It goes without saying that fathers are an integral factor in nonmarital childbearing. It appears that one result of the so-called sexual revolution was that many men increasingly believed that women could and should control their fertility via contraception and abortion. As a result, many men have become less willing to marry the women they impregnate. There are myriad reasons why so many children live in homes without their fathers. Some reasons are related to choices people make about fertility, marriage, and cohabitation. But others are the result of unexpected events, such as illness, or incarceration. Some noncustodial fathers are active in the lives of their children, whereas others are either unable or unwilling to be involved in their children's lives. Whatever the reason, a father's absence from the home results in social, psychological, emotional, and financial costs to children and economic costs to the nation. A 2008 report maintains that the federal government spends about $99.8 billion per year in providing financial and other support (via fourteen federal social welfare programs) to father-absent families. This section of the report discusses the race and ethnicity of fathers to children born outside of marriage, age of fathers, and the importance of establishing paternity for children born outside of marriage. One of the prominent, but perhaps not unexpected, findings related to fathers and nonmarital births is that when older men have sexual relationships with young women it often results in nonmarital births. Race and Ethnicity According to the 2002 National Survey of Family Growth, 33% of unmarried Hispanic men and 33% of unmarried non-Hispanic black men have had a biological child, compared with 19% of unmarried non-Hispanic white men. Non-Hispanic black fathers were less likely to be married at the time their first child was born (37%) compared with non-Hispanic white fathers (77%) and Hispanic fathers (52%). A nonmarital first birth was more prevalent among younger fathers, black and Hispanic fathers, and fathers with lower levels of income, and men whose mothers had lower levels of education. Age In the United States, it is not unusual for a man to be several years older than his female partner. Some data indicate that the man is three or more years older than the woman in almost four in 10 relationships today. Therefore, it is not unexpected that a similar pattern exists for sexually active teenagers. However, such age differences often have adverse consequences for young women. Several studies have found that the unequal power dynamic that is often present in relationships between teenage girls and older men is more likely to lead to sexual contact not wanted by the female, less frequent use of contraceptives, and a greater incidence of sexually-transmitted diseases (STDs) among the adolescent females. Further, a significant share of teenagers in relationships with older men have children outside of marriage. According to one study, about 20% of births to unmarried, teenage girls are attributed to men at least five years older than the mother. According to another report, unmarried teenagers younger than 18 were especially likely to become pregnant when involved with an older partner: 69% of those whose partner was six or more years older became pregnant, compared with 23% of those whose partner was three to five years older and 17% of those whose partner was no more than two years older. Paternity Establishment Paternity is presumed if a child is conceived within marriage. In other words, the husband is presumed to be the father of a child born to his wife. In cases in which the child is born outside of marriage, paternity can be voluntarily acknowledged or it can be contested. It would be contested in cases in which (1) the mother does not want to establish paternity, thereby forcing the father to take his case to court to assert his rights, (2) the biological father does not want to pay child support and denies paternity to delay establishment of a child support order, or (3) the alleged father has genuine doubt about his paternity. If paternity is contested it is generally resolved through either an administrative process or a judicial proceeding. A child born outside of marriage has a biological father but not necessarily a legal father. Paternity establishment refers to the legal determination of fatherhood for a child. In 2006, 38.5% of children born in the United States were born to unmarried women, adding approximately 1.6 million new children to the list of children without a legally identified father. Data from the federal Office of Child Support Enforcement (OCSE) indicate that in 2006 the total number of children in the Child Support Enforcement (CSE) caseload who were born outside of marriage amounted to about 10.4 million. Paternity has been established or acknowledged for about 8.9 million (86%) of these children (1.7 million during FY2006), leaving nearly 1.5 million children in the CSE caseload without a legally identified father. Paternity establishment is not an end in itself, but rather a prerequisite to obtaining ongoing economic support (i.e., child support) from the other (noncustodial) parent. Once paternity is established legally (through a legal proceeding, an administrative process, or voluntary acknowledgment), a child gains legal rights and privileges. Among these may be rights to inheritance, rights to the father's medical and life insurance benefits, and to social security and possibly veterans' benefits. It also may be important for the health of the child for doctors to have knowledge of the father's medical history. The child also may have a chance to develop a relationship with the father and to develop a sense of identity and connection to the "other half" of his or her family. The public policy interest in paternity establishment is based in part on the dramatic increase in nonmarital births over the last several decades and the economic status of single mothers and their children. The poorest demographic group in the U.S. consists of children in single-parent families. Paternity establishment generally is seen as a means to promote the social goals of (1) providing for the basic financial support of all minor children regardless of the marital status of their parents, (2) ensuring equity in assessing parental liability for the financial support of their children, and (3) promoting responsibility for the consequences of one's actions. Many observers maintain that the social, psychological, emotional, and financial benefits of having one's father legally identified are irrefutable. They suggest that paternity should be established, regardless of the ability of the father to pay child support. They argue that the role of both parents is critical in building the self-esteem of their children and helping the children become self-sufficient members of the community. Current literature and studies suggest that in most cases visitation with the noncustodial parent is important to the healthy emotional development of children. Children with regular contact with their noncustodial parent often adjust better than those denied such contact. Moreover, generally it is in the best interest of the child to receive social, psychological, and financial benefits of a relationship with both parents. Visitation (i.e., contact with one's children) is the primary means by which noncustodial parents carry out their parenting duty. The following section discusses some of demographic factors that have contributed to the increase in nonmarital births as well as some of the reasons, cited by women, for nonmarital childbearing. Reasons for the Increase in Nonmarital Childbearing Declining marriage rates, increased childbearing among unmarried women, increased number of unmarried women in the childbearing ages (i.e., 15-44), and decreased childbearing among married women have contributed to the rising share of children being born to unwed women. Many social science analysts attribute the increase in nonmarital births to the decades-long decline of "shotgun marriages," rather than to an increased incidence of nonmarital conceptions. They contend that when the social pressure to get married once pregnancy became obvious ended, the likelihood that women would marry between conception and birth decreased substantially. The entry of more and more women into the paid labor force also made childbearing outside of marriage more economically feasible. Through the 1960s, most Americans believed that parents should stay in an unhappy marriage for the sake of the children. By the 1970s, this view was not as prominent. Divorce and not getting married to the father of a child—which were generally considered to not be in the best interest of the child—were acceptable if it resulted in the happiness of the adult. Thus, many observers and analysts agree that marriage is now more likely to be viewed through a framework of adult fulfillment rather than through a framework of childbearing and childrearing. Factors that have contributed to an unprecedented level of nonmarital childbearing include an increase in the median age of first marriage (i.e., marriage postponement), delays in childbearing of married couples, increased marital dissolution, an increase in the number of cohabiting couples, increased sexual activity outside of marriage, participation in risky behaviors that often lead to sex, improper use of contraceptive methods, and lack of marriageable partners. This section of the report does not try to verify, refute, or support any of the reasons commonly cited for nonmarital births. Instead, its purpose is to give the reader a better understanding of the nonmarital birth phenomenon by synthesizing and simplifying the large body of research on the subject and presenting the views of analysts and other observers in a way that helps to clarify the complexity of the topic. Demographic Factors Contributing to the Increase in the Number and Percent of Nonmarital Births The combined factors of more unmarried women of childbearing age in the population and the increased birth rates of unmarried women resulted in dramatic increases in the number of nonmarital births over the last several decades. The text box shows that the percentage of women of childbearing age increased about 16% during the period from 1960 to 1990, from 39.7% to 46.0%. Table 3 shows that the percent of women who never married increased from 11.9% in 1960 to 22.0% in 2006 (an 85% increase). In addition, the percent of all births to unmarried women rose substantially over the last several decades as well. The reason for the increase was primarily due to three concurrent demographic factors. First, the number and proportion of unmarried women increased as more and more women from the baby boom generation postponed marriage. Postponement of Marriage Since the 1960s, couples have postponed marriage. Table 2 shows that in 1950 and 1960 the median age at first marriage was 22.8 years for men and 20.3 years for women. In 2006, for both men and women the median age at first marriage had increased by more than four years. An increasing share of men and women also have never been married. Table 3 shows that in 1960, 11.9% of females age 15 and older (and 17.3% of males of the same age) had not yet married, compared to 22.0% of females (and 28.6% of males) in 2006. The second demographic factor is that the birth rates for unmarried women of all ages continued to increase. Third, the birth rates for married women decreased. Thus, the percent of all births that were to unmarried women rose because births to unmarried women increased while births to married women decreased. Attitude Toward Marriage During the last half-century, the median age at first marriage has increased for both men and women by more than four years. As seen in Table 2 , in 2006, the median age at first marriage was 27.5 years for men and 25.5 years for women. Marriage postponement has increased the number of unmarried women in the population. In 2006, 22.0% of all females (ages 15 and older) had not yet married, the comparable figure in 1960 was 11.9% (see Table 3 ). Attitudes towards marriage are varied and complex. Fifty years ago, marriage was the central and defining feature of adult identity. It was intertwined with moral rightness. Although some viewed marriage as a form of social obligation and a restriction on personal freedom, it was considered the proper progression by most Americans. Today, most Americans continue to view marriage as a natural stage in life. They also generally perceive marriage as a way toward personal growth and deeper intimacy. Some view it as a way to share one's life with someone in a committed loving relationship. Others view it as a safe haven that imbues sexual faithfulness, emotional support, mutual trust, and lasting commitment. Others are more cynical and view it as a relationship mainly designed for the sexual and emotional gratification of each adult. Although attitudes towards marriage have changed, most people eventually marry and the desire to marry is widespread. Generally, teens think that having a good marriage is important, and most say that it is likely they will get married. But they are less than certain that their future marriages will last a lifetime. In addition, marriage is facing stiff competition from cohabitation. Living together before getting married is considered acceptable by most young people. Moreover, sex outside of marriage (especially for adults) is almost considered the norm and has virtually no stigma attached to it. There is much agreement that the link between marriage and parenthood has weakened considerably. Many policymakers contend that the link must be firmly reestablished for the well-being of children and the good of the nation. Lack of Marriageable Partners The so-called shortage of "marriageable" men (both the number of unmarried men and the "quality" of unmarried men, as viewed in terms of their ability to support a family) has been cited as one explanation for declining marriage rates, and to a lesser extent for why nonmarital childbearing has increased. In effect, although some women may have sexual relations with certain men, it does not mean that they consider those men to be viable marriage partners. A national survey of unmarried adults under age 35 found that more than two-thirds of the women surveyed and one-third of the men said that they would be "not at all willing to marry someone who was not likely to hold a steady job." This sentiment was shared across racial and ethnic groups. Nonetheless, the "shortage of marriageable" men argument is primarily associated with black men and women. In The Truly Disadvantaged, William Julius Wilson argued that as rates of employment and rates of labor force participation dropped for young black men, the number of desirable marriage partners for black women also decreased. In other words, many black women (and women generally) limit their marriage universe to men with steady jobs (and other desirable attributes). Biological Clock Issues Women may choose to have children outside of marriage because of concerns that they are older, unmarrried, and may no longer have the opportunity to have children. This is especially true among professional women who have pursued post-secondary education and have been entrenched in time-consuming careers. In addition, some women are not willing to sacrifice their independence or their desire to have children, simply for sake of marriage. Since the 1990s, some women have used new technology such as in-vitro fertilization and sperm donation procedures to have a child without a spouse. Cohabiting Relationships In contrast to years past, today many children born outside of marriage are born to cohabiting parents rather than to biological parents who live in separate households. Nonetheless, it is generally agreed that cohabiting relationships are less stable than marriage. In 1977, there were 1.1 million family households (with children under age 18) that consisted of cohabiting couples. In 2007, 6.4 million family households (with children under age 18) consisted of cohabiting couples. Thus in that 30-year period, cohabiting couples as a share of all family households increased from 2% to 8.2%. According to one report: "Just as it has become more common for couples to have intercourse and to live together without marrying, it has become more likely that couples who conceive outside marriage will remain unmarried." Growing up with two continuously cohabiting biological parents is rare. The Fragile Families Study indicates that about one-fourth of cohabiting biological parents are no longer living together one year after the child's birth. Another study of first births found that 31% of cohabiting couples had broken up after five years, as compared to 16% of married couples. A study using the 1999 National Survey of American Families found that only 1.5% of all children lived with two cohabiting parents at the time of the survey. Similarly, an analysis of the 1995 Adolescent Health Study revealed that less than one-half of 1% of adolescents ages 16 to 18 had spent their entire childhoods living with two continuously cohabiting biological parents. Divorce If a woman is divorced and engages in sexual relations she may become pregnant and thereby may have a child outside of marriage. A recent study using cohort analysis found that 14.4% of nonmarital births were to women who had divorced but not yet remarried. The discussion below briefly highlights trends in divorce, median duration of divorce, and proportions of women who remarry. In 1950, the marriage rate was more than four times the divorce rate (11.1 per 1,000 population versus 2.6 per 1,000 population); by 2006, it was only twice the divorce rate (7.3 per 1,000 population versus 3.6 per 1,000 population). Although marriage and divorce data are usually displayed as rates, researchers generally agree that a comparison of marriage and divorce rates is misleading because the persons who are divorcing in any given year are typically not the same as those who are marrying. In 2004, 23% of U.S. women who were once married had been divorced. The median duration of marriages before divorce was about 8 years. The median time between divorce and a second marriage was about three and a half years. In 2004, 12% of men and 13% of women had married twice, and 3% of both men and women had married three or more times. Among adults 25 and older who had ever divorced, 52% of men and 44% of women were currently married. Sexual Activity Outside of Marriage Sexual activity outside of marriage is associated with nonmarital births. A study that was based on data from several panels of the National Survey of Family Growth found that, by age 44, 95% of those surveyed had engaged in sexual activity (intercourse) before marriage. According to the survey, 69% of women ages 15 through 44 who had never been married and who were not cohabiting had engaged in sexual intercourse. If in fact such a large percentage of unmarried men and women are engaging in sex they are at risk of becoming parents (unless their choice of contraception is effective). Risk factors and behaviors may contribute to the increase in sex outside of marriage among teenagers. A report on research findings on programs that attempt to reduce teen pregnancy and STDs contends that hundreds of factors affect teen sexual behavior. Among them are (1) community disorganization (violence and substance abuse are prevalent); (2) family disruption, including substance abuse by family members and physical abuse and general maltreatment; (3) the mother had a child at a young age; (4) an older sibling engaged in sex; (5) close friends are older; (6) friends drink alcohol and use drugs; (7) friends have permissive views regarding sex; (8) friends are sexually active; (9) the youth is romantically involved with someone older; (10) the youth has problems with understanding and completing schoolwork; (11) the youth uses alcohol and other drugs; (12) the youth is part of a gang; (13) the youth is frequently involved in fighting and has carried a weapon; (14) the youth works more than 20 hours per week; (15) the youth has permissive attitudes toward premarital sex; (16) the youth dates frequently or is going steady; and (17) the girl has several boyfriends. The author maintains that many of the risk factors and behaviors can be changed with effective youth development programs. Declining Abortion Rates The decrease in the rate of abortions may contribute to the increasing share of unmarried women who have children. According to the Guttmacher Institute, nearly half of all pregnancies to American women are unintended. Moreover, about 20% of all pregnancies end with an abortion. The annual number of legal abortions in the United States increased through the 1970s, leveled off in the 1980s, dropped in the 1990s, and has continued to drop from 2000 through 2005. The number of abortions was 1.554 million in 1980, 1.609 million in 1990 (a record high), 1.313 million in 2000, 1.287 million in 2003, and 1.206 million in 2005. Women who have abortions tend to be unmarried and white, and a disproportionate share are in their twenties. In 2003 (latest available comprehensive data), about eight of ten females who had abortions were unmarried. White females (who represented about 80% of the U.S. female population in 2003) constituted 56% of the females who had abortions in 2003, followed by black and other women who had 44% of the abortions in 2003. Also in 2003, of those females who had abortions, the largest percentage was among women ages 20 through 24 (33%). The remaining shares were 1% for girls under age 15; 17% for women ages 15 through 19; 23% for women ages 25 through 29; 15% for women ages 30 through 34; 8% for women ages 35 through 39; and 3% for women age 40 or over. For nearly half (46%) of the women who had an abortion in 2003 it was not their first abortion. Impact of Nonmarital Births on Families Although 38.5% of all U.S. births in 2006 were to women who were not married, 23.3% of the 73.7 million U.S. children under age 18 lived in mother-only families in 2006. The difference occurs because the proportion of births to unmarried women has increased over the past several decades and because some of these women married and some were in cohabiting relationships. A wide body of research indicates that children who grow up with only one biological parent in the home are more likely to be financially worse off and have worse socioeconomic outcomes (even after income differences are taken into account) compared to children who grow up with both biological parents in the home. Specifically, children living in a single-parent home are more likely to do poorly in school, have emotional and behavioral problems, become teenage parents, and have poverty-level incomes (as children and adults) than children living with married biological parents. Further, children in single-parent families are six times more likely to be poor than children in two-parent families. It has been reported that 22% of children in one-parent families will experience poverty during childhood for seven years or more, as compared to only 2% of children in two-parent families. In 2007, 7.5% of children under age 18 living in married-couple families were living below the poverty level compared to 38.3% of children living with mother-only families. One analyst makes the following assertion regarding two-parent families: Social science research is almost never conclusive. There are always methodological difficulties and stones left unturned. Yet in three decades of work as a social scientist, I know of few other bodies of data in which the weight of evidence is so decisively on one side of the issue: on the whole, for children, two-parent families are preferable to single-parent and stepfamilies. Others assert that although marriage of biological parents is associated with greater child well-being, little is known about why or how much of the relationship is caused by marriage and how much by other factors. In other words, it could be that the effect of marriage on child well-being is derived not from marriage itself, but rather from the distinctive characteristics of the individuals who marry and stay married (sometimes referred to as the "selection effect"). It is sometimes argued that some of the problems associated with non-intact families may be the effect of poverty rather than the father's absence. Further, most children who grow up in mother-only families or step-parent families become well-adjusted, productive adults. For some children, the absence of the father may result in freedom from an abusive or otherwise difficult situation and may result in a more supportive loving mother-child relationship. Impact of Nonmarital Births on the Nation This section reviews assertions that it is not just the family that is negatively affected by nonmarital childbearing, but the taxpayer as well. It discusses some of the impacts of financial and demographic factors associated with nonmarital births on the population as a whole. Potential Financial Costs Although the three reports mentioned below do not categorically say that nonmarital births cost the federal government a specific dollar amount, they do provide a context in which to consider the financial costs associated with nonmarital childbearing. The first report examines nonmarital childbearing and divorce together to measure taxpayer costs of what the author calls family fragmentation, but it does not separately attribute costs to nonmarital childbearing. The second study examines how poverty in the U.S. would be affected if more children were living in two-parent families. The third report attributes a specific dollar amount to the consequences of teens having children. A 2008 report examines the economic costs associated with the decline in marriage (which the authors contend increases the number of children and adults eligible for and in need of government services). The authors of the report maintain that the decline in marriage is a product of both divorce and unmarried childbearing. The report estimates that combined , the high rates of divorce and nonmarital childbearing costs U.S. taxpayers at least $112 billion per year in federal, state, and local costs—$70.1 billion of which is federal costs. The report states that "These costs arise from increased taxpayer expenditures for antipoverty, criminal justice, and education programs, and through lower levels of taxes paid by individuals who, as adults, earn less because of reduced opportunities as a result of having been more likely to grow up in poverty." Another study examined the impact of nonmarital childbearing on poverty by using a regression approach that was based on hypothetically matching single women and men in the population on the basis of factors such as age, education, and race. It found that if the share of children living with two parents in 2000 was increased to what it had been in 1970, the child poverty rate in 2000 would have declined by about 29% compared to the actual decline of 4.5%. If that analysis is applied to 2007 data, 3.7 million fewer children would be in poverty. In addition, a 2006 report quantified the costs of adolescent childbearing. As noted earlier, births to teens represented 10% of all births and 23% of nonmarital births (2005 data). The report estimated that, in 2004, adolescent childbearing cost U.S. taxpayers about $9 billion per year. Specific estimates cited were $2.3 billion in child welfare benefits; $1.9 billion in health care expenses; $2.1 billion in spending on incarceration (for the sons of women who had children as adolescents); and $6.3 billion in lost tax revenue because of lower earnings of the mothers, fathers, and children (when they were adults). Added to these cost figures are $3.6 billion in savings that result from the declines in births to teens. Research indicates that teens who give birth are less likely to complete high school and go on to college, thereby reducing their potential for economic self-sufficiency. The research also indicates that the children of teens are more likely than children of older parents to experience problems in school and drop out of high school and, as adults, are more likely to repeat the cycle of teenage pregnancy and poverty. The 2006 report contends that if the teen birth rate had not declined between 1991 and 2004, the annual costs associated with teen childbearing would have been almost $16 billion (instead of $9 billion). Although these data are interesting, it is important to remember that although 83% of births to teens are nonmarital births, adolescent childbearing is only a subset of nonmarital childbearing. Demographic Impacts Having the birth rate reach the replacement rate is generally considered desirable by demographers and sociologists because it means a country is producing enough young people to replace and support aging workers without population growth being so high that it taxes national resources. An examination of nonmarital births from a demographic perspective is perhaps the only analysis that does not view nonmarital births as a negative phenomenon. The nation's total fertility rate—the number of children the average woman would be expected to bear in her lifetime—has been below the replacement level since 1972. The replacement rate is the rate at which a given generation can exactly replace itself. The fertility level required for natural replacement of the U.S. population is about 2.1 births per woman (i.e., 2,100 births per 1,000 women). The replacement rate was reached in 2006 for the first time in many years. Given that the marital birth rate has been decreasing over time, if the birth rate of unmarried women had begun to reverse itself, the U.S. population would cease growing (if the immigration factor is excluded). From a geopolitical perspective, this means that those who support policies to lower nonmarital fertility do so at the risk of lowering overall U.S. fertility that has been hovering near replacement levels. In the United States, non-Hispanic white women and Asian women 40 to 44 years old had fertility levels below the replacement level (1.8 and 1.7 births per woman, respectively). The fertility level of black women ages 40 to 44 (2.0 births per woman) did not differ statistically from the natural replacement level. Hispanic women ages 40 to 44 had an average of 2.3 births and were the only group that exceeded the fertility level required for natural replacement of the U.S. population. Nonmarital births are also influencing other demographic shifts. On the basis of the fertility rate of women by racial and ethnic groups, by 2050, 54% of the U.S. population will consist of minority groups (i.e., Hispanics, blacks, American Indians, and Asians). Minorities, now roughly one-third of the U.S. population, are expected to become the majority in 2042, with the nation projected to be 54% minority in 2050. By 2023, minorities will represent more than half of all children. By 2050, the Hispanic population is projected to nearly triple, and its share of the nation's total population is projected to double, from 15% to 30%. Thus, nearly one in three U.S. residents will be Hispanic. (As mentioned earlier, in 2005, 48% of Hispanic births were nonmarital births.) The black population is projected to increase from 14% of the population in 2008 to 15% in 2050. The Asian population's share of the nation's population is expected to rise from 5.1% to 9.2%. Among the remaining race groups, American Indians and Alaska Natives are projected to rise from 1.6% to 2% of the total population. The Native Hawaiian and Other Pacific Islander population is expected to more than double, from 1.1 million to 2.6 million, representing about 0.6% in 2050. The number of people who identify themselves as being of two or more races is projected to more than triple, from 5.2 million to 16.2 million, representing almost 4% of the population in 2050. Non-Hispanic whites are projected to represent 46% of the total population, down from 66% in 2008. Public Policy Interventions In recognition of the potential long-term consequences of nonmarital births, the federal government's strategy to nonmarital childbearing has been varied. The federal government acknowledges that an effective approach for teenagers may be inappropriate for older women. Some observers criticize women much farther along the age spectrum who have nonmarital births as being selfish and not looking long-range to what would be in the best interest of their offspring. Other observers counter, pointing out that it is not the unmarried, college-educated, thirty-something-year-olds with well-paying jobs who are worried that their time for having a child is running out that should be a concern. Rather it is the millions of women for whom single motherhood is the norm, who entrench themselves and their children in a less favorable economic lifestyle by having a child outside of a healthy marriage. Many of these women become mothers in their teenage years. In order to address these two distinct groups of females, federal policy toward teens has primarily focused on pregnancy prevention programs, whereas federal policy toward older women has focused on healthy marriage programs. Income support programs, such as the Child Support Enforcement program and the Temporary Assistance for Needy Families (TANF) block grant program, that attempt to reduce or ameliorate negative financial consequences that are sometimes associated with nonmarital childbearing are available to mothers of all age groups. This section discusses the public policy interventions (1) directed at teens, such as abstinence education programs, comprehensive sex education programs, and youth programs; (2) focused on adults, namely the healthy marriage programs and the responsible fatherhood programs (that usually include several components dealing with improving communication skills with respect to the other parent); and (3) provided to all persons regardless of age such as family planning programs, adoption services, and federal income support programs—the Child Support Enforcement and Temporary Assistance for Needy Families (TANF) programs. Abstinence Promotion Many argue that sexual activity in and of itself is wrong if the individuals are not married. Advocates of the abstinence education approach argue that teenagers need to hear a single, unambiguous message that sex outside of marriage is wrong and harmful to their physical and emotional health. These advocates contend that youth can and should be empowered to say no to sex. They argue that supporting both abstinence and birth control is hypocritical and undermines the strength of an abstinence-only message. They also cite research that indicates that teens who take virginity pledges to refrain from sex until marriage appear to delay having sex longer than those teens who do not make such a commitment. (One study found that teens who publicly promise to postpone sex until marriage refrain from intercourse for about a year and a half longer than teens who did not make such a pledge.) They further argue that abstinence is the most effective (100%) means of preventing unwanted pregnancy and sexually transmitted diseases (including HIV/AIDS). Three federal programs include funding that is exclusively for abstinence education: Adolescent Family Life (AFL) program, the Title V Abstinence Education Block Grant to States, and the Community-Based Abstinence Education (CBAE) program. All of these programs are carried out by the Department of Health and Human Services (HHS). For FY2008, federal abstinence education funding totaled $177 million: $13 million for AFL abstinence education projects; $50 million for the Title V Abstinence Education Block Grant to states; and $109 million for the CBAE program (up to $10 million of which may be used for a national abstinence education campaign); and $4.5 million for an evaluation of the CBAE program. The AFL demonstration program was enacted in 1981 as Title XX of the Public Health Service Act ( P.L. 97-35 ). It is administered by the Office of Adolescent Pregnancy Programs at HHS. From 1981 until 1996, the AFL program was the only federal program that focused directly on the issues of adolescent sexuality, pregnancy, and parenting. The AFL program was designed to promote family involvement in the delivery of services, adolescent premarital sexual abstinence, adoption as an alternative to early parenting, parenting and child development education, and comprehensive health, education, and social services geared to help the mother have a healthy baby and improve subsequent life prospects for both mother and child. The AFL program authorizes grants for three types of demonstrations: (1) projects that provide "care" services only (i.e., health, education, and social services to pregnant adolescents, adolescent parents, their infant, families, and male partners); (2) projects that provide "prevention" services only (i.e., services to promote abstinence from premarital sexual relations for pre-teens, teens, and their families); and (3) projects that provide a combination of care and prevention services. Any public or private nonprofit organization or agency is eligible to apply for a demonstration grant. AFL projects can be funded for up to five years. The Title V Abstinence Education Block Grant to States was authorized under P.L. 104-193 (the 1996 welfare reform law). The law provided $50 million per year for five years (FY1998-FY2002) in federal funds specifically for the abstinence education program. Although the program has not yet been reauthorized, the latest extension, contained in P.L. 110-275 , continues funding for the abstinence-only block grant through June 30, 2009. Funds must be requested by states when they solicit Title V Maternal and Child Health (MCH) block grant funds and must be used exclusively for teaching abstinence. To receive federal funds, a state must match every $4 in federal funds with $3 in state funds. This means that full funding (from states and the federal government) for abstinence education must total at least $87.5 million annually. Additional abstinence-only education funding, for the CBAE program, has been included in appropriations measures. The program provides abstinence-only education for adolescents aged 12 through 18. Funding for the program increased incrementally, from $30 million in FY2002 to $109 million in FY2008. Evaluation of Abstinence Education Programs Mathematica's April 2007 report presents the final results from a multi-year, experimentally based impact study on several abstinence-only block grant programs. The report focuses on four selected Title V abstinence education programs for elementary and middle school students. On the basis of follow-up data collected from youth (aged 10 to 14) four to six years after study enrollment, the report, among other things, presents the estimated program impacts on sexual abstinence and risks of pregnancy and STDs. According to the report, Findings indicate that youth in the program group were no more likely than control group youth to have abstained from sex and, among those who reported having had sex, they had similar numbers of sexual partners and had initiated sex at the same mean age.... Program and control group youth did not differ in their rates of unprotected sex, either at first intercourse or over the last 12 months.... Overall, the programs improved identification of STDs but had no overall impact on knowledge of unprotected sex risks and the consequences of STDs. Both program and control group youth had a good understanding of the risks of pregnancy but a less clear understanding of STDs and their health consequences. In response to the report, HHS has stated that the Mathematica study showcased programs that were among the first funded by the 1996 welfare reform law. It stated that its recent directives to states have encouraged states to focus abstinence-only education programs on youth most likely to bear children outside of marriage, that is, high school students, rather than elementary or middle-school students. It also mentioned that programs need to extend the peer support for abstinence from the pre-teen years through the high school years. Comprehensive Sex Education Advocates of a comprehensive approach to sex education argue that today's youth need information and decision-making skills to make realistic, practical decisions about whether to engage in sexual activities. They contend that such an approach allows young people to make informed decisions regarding abstinence, gives them the information they need to set relationship limits and to resist peer pressure, and also provides them with information on the use of contraceptives and the prevention of sexually transmitted diseases. They argue that about 50% of high school students have experienced sexual intercourse. They maintain that abstinence-only messages provide no protection against the risks of pregnancy and disease for those who are sexually active. They point out that, according to one study, teens who break their virginity pledges were less likely to use contraception the first time than teens who had never made such a promise. In addition, the alarming number of females under age 25 with sexually transmitted diseases (STDs) has re-energized efforts to persuade girls and young women to abstain from sexual activity or to use condoms (along with other forms of contraceptives) to prevent or reduce pregnancy as well as reduce their risk of getting STDs. No earmarked federal funding currently exists for comprehensive sex education in schools. In other words, there is no federal appropriation specifically for comprehensive sex education. Although there is not a federal comprehensive sex education program per se, many federal programs provide information about contraceptives, provide contraceptive services to teens, and provide referral and counseling services related to reproductive health. These programs include Medicaid Family Planning, Title X Family Planning, and Adolescent Family Life care services. Also, funds from the Maternal and Child Health block grant, the Title XX Social Services block grant, and the TANF block grant can be used to provide contraceptive services to teens. Evaluation of Comprehensive Sex Education Programs There have been numerous evaluations of teen pregnancy prevention programs, but most of them did not use a scientific approach with experimental and control groups—an approach that most analysts agree provides more reliable, valid, and objective information than other types of evaluations. A recent report by the National Campaign to Prevent Teen Pregnancy, however, highlighted five teen pregnancy prevention programs that were subjected to a random assignment, experimentally designed study. These five comprehensive sex education programs were found to be effective in delaying sexual activity, improving contraceptive use among sexually active teenagers, or preventing teen pregnancy. Many analysts and researchers agree that effective pregnancy prevention programs: (1) convince teens that not having sex or that using contraception consistently and carefully is the right thing to do; (2) last a sufficient length of time; (3) are operated by leaders who believe in their programs and who are adequately trained; (4) actively engage participants and personalize the program information; (5) address peer pressure; (6) teach communication skills; and (7) reflect the age, sexual experience, and culture of young persons in the programs. Youth Programs Youth programs generally include one or more of the following components to address teen sexual activity: sex education, mentoring and counseling, health care, academic support, career counseling, crisis intervention, sports and arts activities, and community volunteer experiences. Youth programs receive funding from a wide array of sources, including the federal government, state and local governments, community organizations, private agencies, nonprofit organizations, and faith-based organizations. The sex education component of many youth programs usually includes an abstinence message (which enables teens to avoid pregnancy) along with discussions about the correct and consistent use of contraception (which reduces the risk of pregnancy for sexually active teens). There is a significant difference between abstinence as a message and abstinence-only interventions . Although the Bush Administration continues to support an abstinence-only program intervention (with some modifications), others argue that an abstinence message integrated into a comprehensive sex education program that includes information on the use of contraceptives and that enhances decision-making skills is a more effective method to prevent teen pregnancy. A recent nationally representative survey found that 90% of adults and teens agree that young people should get a strong message that they should not have sex until they are at least out of high school and that a majority of adults (73%) and teens (56%) want teens to get more information about both abstinence and contraception. The American public—both adults and teens—support encouraging teens to delay sexual activity and providing young people with information about contraception. A study that evaluated youth programs that sought to delay the first time teens have sex partly summarized the research by highlighting some characteristics or activities associated with teenagers who delayed sexual activity. The study reported that (1) teens who do well in school and attend religious services are more likely to delay sexual initiation; (2) girls who participate in sports also delay sex longer than those who do not; and (3) teens whose friends have high educational aspirations, who avoid such risky behavior as drinking or using drugs, and who perform well in school are less likely to have sex at an early age than teens whose friends do not. Some youth programs have an underlying goal of trying to decipher the root reasons behind teen pregnancy and childbearing. Is it loneliness or trying to find love or a sense of family? Is it carelessness—not bothering with birth control or using it improperly—or shame—not wanting to go to the doctor to ask about birth control or not wanting to be seen in a pharmacy purchasing birth control? Is it a need to meet the sexual expectations of a partner? Is it trying to find individual independence or is it defiance (a mentality of you can't boss me or control me, "I'm grown")? Is it trying to validate or provide purpose to one's life? Is it realistically facing the probability that the entry-level job she can get at the age of 18 is the same or similar to the one she will likely have when she is 30, thus why should she wait to have a child? In addition, many youth programs also want to prevent second or additional births to teens, and they realize that a different approach may be needed to prevent secondary births as compared to first births. Research has indicated that youth programs that include mentoring components, enhanced case management, home visits by trained nurses or program personnel, and parenting classes have been effective in reducing subsequent childbearing by teens. Healthy Marriage Programs Much of the increase in nonmarital childbearing results from changes in marital behavior rather than changes in fertility behavior. In other words, Americans are not having more babies, they are having fewer marriages. The first finding of P.L. 104-193 (the 1996 welfare reform law) is that marriage is the foundation of a successful society. The second finding is that marriage is an essential institution of a successful society that promotes the interests of children. The law sought to promote marriage through the new TANF program. As authorized by P.L. 104-193 , the TANF program established as statutory goals to promote the formation and maintenance of two-parent families and to reduce welfare dependence via job preparation, work, and marriage. Pursuant to the law, states may spend TANF funds on a wide range of activities (services) for cash welfare recipients and other families toward the achievement of these goals. P.L. 109-171 (the Deficit Reduction Act of 2005) established new categorical grants within TANF for healthy marriage promotion and responsible fatherhood initiatives. The healthy marriage promotion initiative is funded at approximately $100 million per year (FY2006-FY2010), to be spent through grants awarded by HHS to support research and demonstration projects by public or private entities; and technical assistance provided to states, Indian tribes and tribal organizations, and other entities. The activities supported by the healthy marriage promotion initiatives are programs to promote marriage to the general population, such as public advertising campaigns on the value of marriage and education in high schools on the value of marriage; education on "social skills" (e.g., marriage education, marriage skills, conflict resolution, and relationship skills) for engaged couples, those interested in marriage, or married couples; and programs that reduce the financial disincentive to marry, if combined with educational or other marriage promotion activities. Entities that apply for marriage promotion grants must ensure that participation in such activities is voluntary and that domestic violence concerns are addressed (e.g., through consultations with experts on domestic violence). Critics of healthy marriage programs caution that government must be careful about supporting programs that provide cash incentives to induce people to marry or that coerce or cajole individuals into marrying. They note the problems associated with child-bride marriages and the short-term and often unhappy nature of the so-called "shot-gun" marriage. Supporters of healthy marriage programs remark that many long-lasting marriages were based on financial alliances (e.g., to increase economic status, family wealth, status in the community, etc.). They assert that policies or programs designed to promote healthy marriages are not intended to force anyone into unwanted, unhealthy relationships, trap women in abusive relationships, or withdraw support from single mothers. Supporters maintain that a relationship is not healthy if it is not safe. Nonetheless, many observers are concerned about the impact of healthy marriage promotion programs on survivors of domestic violence or those still in abusive relationships. They assert that all marriage promotion programs must identify and respond to domestic violence issues in a manner that is effective for the individual program in question. Some observers contend that policymakers should focus healthy marriage programs on couples who want to get married, couples who are free from substance abuse problems and/or violent tendencies, and couples who do not have any children by other partners. Evaluation of Healthy Marriage Programs HHS is sponsoring three multi-year impact evaluations of the Healthy Marriage program. Two of the three studies use a random assignment approach in which couples are assigned to either an experimental group (group that receives the program services) or a control group (group that does not receive program services). One study, called Building Strong Families, focuses on low-income unmarried parents. This study began in 2002 and is expected to continue through 2011; it is using an experimental design. A second study, called Supporting Healthy Marriages, focuses on low-income married parents, began in 2003 and is expected to continue through 2012; it is using an experimental design. A third study, called Community Healthy Marriage Initiative, focuses on families in three geographic communities (i.e., Milwaukee, Wisconsin; Dallas, Texas; and St. Louis, Missouri—with comparison communities (Cleveland, Ohio; Ft. Worth, Texas, and Kansas City, Missouri) where there are no federally funded healthy marriage programs. This third study began in 2003 and is expected to continue through 2011. A final report on the impact of each of the three programs is expected between 2011 and 2013. Responsible Fatherhood Programs Connecting or reconnecting children to their noncustodial parents has become a goal of federal social policy. During the 106 th Congress, then-Representative Nancy Johnson, chair of the Ways and Means Subcommittee on Human Resources, stated, "to take the next step in welfare reform we must find a way to help children by providing them with more than a working mother and sporadic child support." She noted that many low-income fathers have problems similar to those of mothers on welfare—namely, they are likely to have dropped out of high school, to have little work experience, and to have significant barriers that lessen their ability to find or keep a job. She also asserted that in many cases these men are "dead broke" rather than "dead beats" and that the federal government should help these noncustodial fathers meet both their financial and emotional obligations to their children. In hopes of improving the long-term outlook for children in single-parent families, federal, state, and local governments, along with public and private organizations, are supporting programs and activities that promote the financial and personal responsibility of noncustodial fathers to their children and increase the participation of fathers in the lives of their children. These programs have come to be known as "responsible fatherhood" programs. To help fathers and mothers meet their parental responsibilities, many policy analysts and observers support broad-based collaborative strategies that go beyond welfare and child support agencies and include schools, work programs, prison systems, churches, community organizations, and the health care system. Most responsible fatherhood programs include media campaigns that emphasize the importance of emotional, physical, psychological, and financial connections of fathers to their children. Most fatherhood programs include parenting education; responsible decision-making; mediation services for both parents; providing an understanding of the CSE program; conflict resolution, coping with stress, and problem-solving skills; peer support; and job-training opportunities. Although responsible fatherhood programs have been debated in Congress since the 106 th Congress (1999) and supported from the start by the Bush Administration (2001), it was not until the Deficit Reduction Act of 2005 ( P.L. 109-171 , enacted February 8, 2006) was passed and enacted that specific funding was provided for responsible fatherhood programs. P.L. 109-171 included a provision that provides up to $50 million per year (for each of the five fiscal years 2006-2010) in competitive grants through TANF to states, territories, Indian tribes and tribal organizations, and public and nonprofit community organizations (including religious organizations) for responsible fatherhood initiatives. Under P.L. 109-171 , responsible fatherhood funds can be spent on activities to promote responsible fatherhood through (1) marriage promotion (through counseling, mentoring, disseminating information about the advantages of marriage and two-parent involvement for children, etc.), (2) parenting activities (through counseling, mentoring, mediation, disseminating information about good parenting practices, etc.), (3) fostering economic stability of fathers (through work first services, job search, job training, subsidized employment, education, etc.), or (4) contracting with a nationally recognized nonprofit fatherhood promotion organization to develop, promote, or distribute a media campaign to encourage the appropriate involvement of parents in the lives of their children, particularly focusing on responsible fatherhood; and to develop a national clearinghouse to help states and communities in their efforts to promote and support marriage and responsible fatherhood. According to data from the Administration for Children and Families (ACF) in the U.S. Department of Health and Human Services (HHS), 99 grantees were awarded five-year contracts to implement responsible fatherhood programs. The contracts (in aggregate) amounted to $41 million per year. Evaluation of Responsible Fatherhood Programs Although Congress only recently authorized federal funding specifically earmarked for responsible fatherhood programs (via P.L. 109-171 ), many states and localities, private organizations, and nonprofit agencies have been operating responsible fatherhood programs for several years. Some researchers have noted that although there is a growing body of research on the impact of father absence in the lives of their children, there is not enough research on the benefits of father presence in the lives of their children. Several rather large demonstration projects have focused on noncustodial fathers, and this report highlights two of them. The Parents' Fair Share (PFS) Demonstration (designed and evaluated by MDRC) was a national demonstration project (that operated between 1994 and 1996) that combined job training and placement, peer support groups, and other services with the goal of increasing the earnings and child support payments of unemployed noncustodial parents (generally fathers) of children on welfare, improving their parenting and communication skills, and providing an opportunity for them to participate more fully and effectively in the lives of their children. The final report on the PFS demonstration concluded that the program did not significantly increase employment or earnings among the full sample of PFS participants during the two years after they entered the program. However, the program reportedly increased earnings among a subgroup of men who were characterized as "less employable" (i.e., those without a high school diploma and with little recent work experience). Some analysts maintain that most of the fathers who participated in the PFS demonstration were estranged from their children when they entered the program and that some of them participated in lieu of serving time in jail. They assert that new unwed fathers are generally very attached to their children around the time of the child's birth and probably are more motivated than fathers of older children to take advantage of the opportunities or services offered by responsible fatherhood programs. The federal Office of Child Support Enforcement (OCSE) provided $2.0 million to fund Responsible Fatherhood demonstrations under Section 1115 of the Social Security Act. The programs operated in eight states between September 1997 and December 2002. The following eight states received Section 1115 grants or waivers from OCSE/Administration for Children and Families (ACF) to implement and test responsible fatherhood programs: California, Colorado, Maryland, Massachusetts, Missouri, New Hampshire, Washington, and Wisconsin. These projects attempted to improve the employment and earnings of under- and unemployed noncustodial parents, and to motivate them to become more financially and emotionally involved in the lives of their children. Although the projects shared common goals, they varied with respect to service components and service delivery. The outcome report found that employment rates and earnings increased significantly especially for noncustodial parents who were previously unemployed. In addition, child support compliance rates increased significantly especially for those who had not been paying previously. The report found that 27% of the fathers reported seeing their children more often after completion of the program. The outcome report on the OCSE Responsible Fatherhood programs also found that (1) low-income noncustodial fathers are a difficult population to recruit and serve; (2) many of the participants found jobs with the programs' help, but they were low-paying jobs, and relatively few of the participants were able to increase earnings enough to meet their financial needs and those of their children; (3) child access problems were hard to define and resolve, and mediation should be used more extensively; (4) child support guidelines result in orders for low-income noncustodial parents that are unrealistically high; (5) CSE agencies should collaborate with fatherhood programs and pursue routine enforcement activities, as well as adopt policies and incentives that are responsive to low-income fathers; and (6) criminal history was the norm rather than the exception among the program participants, many participants faced ongoing alcohol and substance abuse problems, many did not have reliable transportation, and many lacked a court-ordered visitation arrangement. Although several new evaluations are underway to scientifically determine whether responsible fatherhood programs work, they are many years from impact findings. Most are still at the initial stage of providing information on the implementation of the responsible fatherhood programs. An HHS-sponsored evaluation of responsible fatherhood programs, called the National Evaluation of the Responsible Fatherhood, Marriage and Family Strengthening Grants for Incarcerated and Re-entering Fathers and Their partners (MFS-IP), began in 2006 and is still enrolling participants. The evaluation is a multi-year (quasi-experimental) study that is expected to run from 2006 through 2013. A final report on the impact of the program is expected between 2011 and 2013. Family Planning Services One of the purposes of family planning services is to prevent unwanted pregnancies that may lead to nonmarital births. The National Family Planning Program, created in 1970 as Title X of the Public Health Service Act, is administered through the Office of Population Affairs/Office of Public Health and Science at HHS. It provides grants to public and private non-profit agencies to provide voluntary family planning services for individuals who are otherwise ineligible for medical services. Family planning programs provide basic reproductive health services: contraceptive services and supplies; infertility services; natural family planning methods education; special services to adolescents; adolescent abstinence counseling; gynecological care; screening for breast and cervical cancers; STD and HIV prevention education, counseling, and referrals; and reproductive health counseling, education, and referrals. Priority for the provision of these services is to be given to lower-income families; grantees may use a sliding fee schedule for determining client contributions for care, but grantees may not charge low-income persons for care. The services must be provided "without coercion and with respect for the privacy, dignity, social, and religious beliefs of the individuals being served." Adoption Some have said that adoption makes nonmarital childbearing "less visible" and perhaps to some more acceptable. Mothers who place their infant for adoption are more likely to finish school and less likely to live in poverty. Further, mothers who choose to give up their infants for adoption are more likely to marry than those who parent their baby. Although adoption is not an intervention to negate nonmarital childbearing, it does present an alternative living arrangement for children born to unmarried parents. Adoption is the legal process of adding a person to an existing family. Adoption, unlike foster care, is meant to be permanent. The goal of adoption is to provide lifelong security to the child. According to some studies, children placed in adoptive homes have better scores in school and engage in less delinquent behavior than children raised by a single parent. "Shotgun" marriages and adoption were once viewed as the common remedies for a nonmarital birth. Even so, historically, adoption has played a very limited role as an alternative to mother-only families. Adoption has been and remains rare. There were approximately 130,000 adoptions in the U.S. in 2002. Of these 130,000, the number that are children born to unmarried women is not known. Some observers contend that adoption might be viewed as a more viable option for an unwanted pregnancy if school systems included a meaningful discussion of adoption in their sex education classes. Child Support Obligation as a Deterrent The Child Support Enforcement (CSE) program was enacted in 1975 as a federal-state program (Title IV-D of the Social Security Act) to help strengthen families by securing financial support for children from their noncustodial parent on a consistent and continuing basis and by helping some families to remain self-sufficient and off public assistance by providing the requisite CSE services. Over the years, CSE has evolved into a multifaceted program. Although cost-recovery still remains an important function of the program, its other aspects include service delivery and promotion of self-sufficiency and parental responsibility. The CSE program contains numerous measures to establish and enforce child support obligations. Because strict child support enforcement is thought to deter nonmarital childbearing, the child support provisions are seen by some in Congress as another method of attempting to reduce nonmarital pregnancies. Child support enforcement measures include streamlined efforts to name the father in every case, employer reporting of new hires (to locate noncustodial parents quicker), uniform interstate child support laws, computerized statewide collections to expedite payment, and stringent penalties, such as the revocation of a drivers' license and the seizure of bank accounts, in cases in which noncustodial parents owe past-due child support. According to social science research, stronger child support enforcement may increase the cost of children for men and should make men more reluctant to have children outside of marriage. In other words, by raising the cost of fatherhood to unmarried men, effective paternity establishment and child support enforcement deter nonmarital births. In contrast, stronger child support enforcement may reduce the cost of children for women (making them more willing to have children outside of marriage). However, according to recent evidence, once a single woman becomes a mother, her chances of marrying anyone other than the father of her child are greatly reduced. Temporary Assistance for Needy Families (TANF): Title IV-A of the Social Security Act The TANF block grant (Title IV-A of the Social Security Act) funds a wide range of benefits and services for low-income families with children. TANF was created by P.L. 104-193 (the 1996 welfare reform law). Its funding was extended through FY2010 by P.L. 109-171 (the Deficit Reduction Act of 2005, enacted February 8, 2006). One of the four goals of the 1996 welfare reform law ( P.L. 104-193 ) is to prevent and reduce out-of-wedlock pregnancies. To this end, unmarried minor parents may only receive TANF assistance if they live at home or in an adult-supervised setting and attend school if they lack a high school diploma. States are using TANF funds to support activities that may prevent nonmarital pregnancies. Generally these activities focus on preventing teen pregnancy. These activities are often classified as "youth services" (includes after-school programs for teens and sub-grants to community organizations such as Boys and Girls Clubs). Several states have reported that they conduct home visits to new parents, in an effort to reduce subsequent pregnancies. Many states reported operating abstinence education programs (which may be funded in whole or in part through TANF or other federal abstinence education programs). In addition, family planning services can be funded in part from TANF or other federal grant programs. Another one of the four TANF goals is to promote the formation and maintenance of two-parent families. States have separate funding via their TANF programs to operate responsible fatherhood programs and marriage promotion initiatives (discussed below). Future Prospects The language regarding births to unmarried women has changed in significant ways. What once were referred to as "bastard" or "illegitimate" children are now termed "out-of-wedlock," "outside of marriage," or "nonmarital" births. The stigma and shame that had once been attached to these children is no longer recognized by the public. Further, some commentators argue that the facts have been twisted in such a way that mothers are justified in having a nonmarital birth and that having a baby without a husband represents a higher level of maternal devotion and sacrifice than having a baby with a husband. They assert that it is often the case that adults pursue individual happiness in their private relationships, which is in direct conflict with the needs of children for stability, security, and permanence in their family lives. Some observers contend that the problem is not the weakening of marriage (about 75% of all women ages 15 and older eventually marry), but rather the de-linking of marriage and having children and the abdication of the traditional view of marriage as a life-long commitment. Some researchers and policymakers argue that although couple relationships are a private matter, an overwhelming body of evidence suggests that not all family structures produce equal outcomes for children. They maintain that there is widespread agreement that a healthy, stable (i.e., low-conflict) family with two biological parents is the best environment for children. Finally, some observers assert that we as a society have not strayed too far, and that it is not too late to return to the somewhat old-fashioned, but not simplistic, precept of falling in love, getting married, and having a baby, in that order. Although marriage and family life are generally considered private issues, they have become part of the public arena primarily because of public policies that help families affected by negative outcomes associated with nonmarital births to maintain a minimum level of economic sufficiency. The abundance of research on the subject of the impact on children of various living environments also raises the stakes—in that it is now almost unanimously agreed that children living with both biological parents fare better on a host of measures—economic, social, psychological, and emotional—than children living with a single parent or in a step-parent or cohabiting situation. One of the things that this report highlights is that although there has been a rise in nonmarital births, it does not mean that there has been a subsequent rise in mother-only families. Instead, it reflects the rise in the number of couples who are in cohabiting relationships. Because the number of women living in a cohabiting situation has increased substantially over the last several decades, many children start off in households in which both of their biological parents reside. Nonetheless, cohabiting family situations are disrupted or dissolved much more frequently than married-couple families. As discussed in an earlier section, the federal government funds a number of programs that seek to (1) reduce or eliminate nonmarital childbearing or (2) ameliorate some of the negative outcomes often associated with children of unmarried parents. The rest of this section highlights several interventions that may receive further attention and more debate in Congress. Although this report does not base the analysis of increased nonmarital childbearing by segmenting teen births from other births, it is important to note that more than half of first nonmarital births are to teens. This means that policies that are successful in reducing births to teenagers would significantly lessen the problem of nonmarital childbearing. The difference between the average age of first intercourse (seventeen) and the age at first marriage (twenty-five) for women is eight years. For the majority of adult women, living without a married spouse does not mean living without sex, nor in many cases does it mean living without having children. In 2005, almost 20% of the women ages 40 and older who gave birth had a child born outside of marriage. For women ages 20 through 24, the percentage was almost 60%. These figures reflect the new paradigm of women in all age groups, not just teenagers, having children outside of marriage. Some observers and analysts assert that new strategies that account for this new paradigm must be developed to significantly reduce nonmarital births. Others argue that the nation must decide whether to try to change the fertility behavior of women in their thirties and forties. They contend that given the new economic framework and the scarcity of resources in most areas of public finance, it may be wiser to pursue a strategy that focuses primarily on adolescents and women in their early twenties. Given the patterns of swift transitions into and out of marriage and the high rate of single parenthood, a family policy that relies too heavily on marriage will not help the many children who will live in single-parent and cohabiting families—many of them poor—during most of their formative years. Moreover, national data from the 2002 panel of the National Survey of Family Growth indicate that 14% of white men, 32% of black men, and 15% of Hispanic men had children with more than one woman. Thus, children in the same family may potentially face different outcomes. For example, children with the same mother and different fathers may potentially face less desirable outcomes if their mother marries the biological father of their half-brothers or half-sisters. The advantages married couples and their children have over those in other living arrangements led the Bush Administration and Congress to propose marriage promotion initiatives. The knowledge that American society has changed in ways that will no longer permit all children to live with their biological parents led the Bush Administration and Congress to support responsible fatherhood programs. Both the healthy marriage programs and the responsible fatherhood programs were funded by the same legislation (i.e., P.L. 109-171 under the auspices of the TANF block grant program). The rationale for implementing these two approaches in a complementary manner was to promote the best interest of children. Although there was some animosity between proponents of healthy marriage programs and proponents of responsible fatherhood programs when they were debated during the period from 2001 through 2005, there is a growing consensus that the two programs can be implemented in a complementary manner to promote the best interest of children. Some of the impact analysis on the two programs, based on scientifically designed evaluations with experimental and control groups, is to be completed during the next Congress. This may help the 111 th Congress and the new Administration to determine whether or not they need to shift priorities between the programs, redistribute funding, or make other changes that will improve the effectiveness of both programs. Similarly, there is now some discussion about a middle ground between abstinence education and comprehensive sex education. Some call this approach abstinence-plus. Under the abstinence-plus education approach, participants are given a hierarchy of safe-sex strategies. At the top of the hierarchy is the promotion of sexual abstinence as the safest route to pregnancy prevention and HIV and STD prevention. Recognizing that some participants will not be abstinent, the abstinence-plus approach encourages individuals to use condoms and to adopt other safer-sex strategies. Proponents of the abstinence-plus approach contend that it does not encourage teens or young adults to have more sex, it just encourages them to do so safely if they do have sex. Some policymakers maintain that this middle ground approach accepts the reality that sexual activity among older teens and young adults is an entrenched by-product of today's society. They argue that it is not bad policy but rather good planning to educate persons who thought they would remain abstinent until marriage, but do not, with the appropriate information regarding contraceptive methods. They contend that an abstinence-plus education approach is in the best interest of young people and in the best interest of the nation. As mentioned earlier, no federal funding is specifically earmarked for comprehensive sex education. Some observers contend that the debate over abstinence-only education versus comprehensive sex education will likely continue for several more years. They surmise that the issue of which approach is more appropriate and more effective for adolescents and older teens may receive renewed attention by the 111 th Congress and the new Administration. They also note that the abstinence-plus approach may be further scrutinized within the context of the debate on abstinence-only versus comprehensive sex education. Appendix. Data Table

In 2006, a record 38.5% of all United States births were nonmarital births. Many of these children grow up in mother-only families. Although most children who grow up in mother-only families or step-parent families become well-adjusted, productive adults, the bulk of empirical research indicates that children who grow up with only one biological parent in the home are more likely to be financially worse off and have worse socioeconomic outcomes (even after income differences are taken into account) compared to children who grow up with both biological parents in the home. In recognition of the potential long-term economic and social consequences associated with nonmarital births, the federal government's strategy with regard to nonmarital childbearing has been varied. The federal government recognizes that an effective approach for teenagers may be inappropriate for older women. Federal policy toward teens has primarily focused on pregnancy prevention programs, whereas federal policy toward older women has focused on healthy marriage programs. Federal income support programs are available to mothers of all age groups. In the U.S., nonmarital births are widespread, touching families of varying income class, race, ethnicity, and geographic area. Many analysts attribute this to changed attitudes about fertility and marriage. They find that many adult women and teenage girls no longer feel obliged to marry before, or as a consequence of, having children. With respect to men, it appears that one result of the so-called sexual revolution is that many men now believe that women can and should control their fertility via contraception or abortion and have become less willing to marry the women they impregnate. Factors that are associated with the unprecedented level of nonmarital childbearing include an increase in the median age of first marriage (i.e., marriage postponement), decreased childbearing of married couples, increased marital dissolution, an increase in the number of cohabiting couples, increased sexual activity outside of marriage, participation in risky behaviors that often lead to sex, improper use of contraceptive methods, and lack of marriageable partners. This report analyzes the trends in nonmarital childbearing, discusses some of the characteristics of unwed mothers, addresses some issues involving the fathers of children born outside of marriage, covers many of the reasons for nonmarital childbearing, examines the impact of nonmarital births on families and on the nation, and presents the public policy interventions that have been used to prevent nonmarital births or ameliorate some of the negative financial consequences that are sometimes associated with nonmarital childbearing. This report will not be updated.

Overview The Consolidated Appropriations Act for FY2004 ( P.L. 108-199 ), which combined six appropriations bills—including the FY2004 District of Columbia Appropriations Act—authorized and appropriated funding for the Opportunity Scholarship program, a federally funded school voucher program, for the District of Columbia. More specifically, the Opportunity Scholarship program was enacted under the DC School Choice Incentive Act of 2003, which was included in P.L. 108-199 . The Opportunity Scholarship program provides scholarships (also known as vouchers) to students in the District of Columbia to attend participating private elementary and secondary schools, including religiously affiliated private schools. Appropriations for the program were authorized through FY2008. While the program is no longer authorized, the 111 th Congress provided appropriations for the program in FY2009 under the Omnibus Appropriations Act, 2009 ( P.L. 111-8 ) and in FY2010 under the Omnibus Appropriations Act, 2010 ( P.L. 111-117 ). P.L. 111-8 specified that the use of any funds in any act for Opportunity Scholarships after the 2009-2010 school year shall be available only upon reauthorization of the program and the adoption of legislation by the District of Columbia approving such reauthorization. P.L. 111-117 eliminated this restriction on funding and provided continued appropriations for the Opportunity Scholarship program, as well as school improvement funding for DCPS and public charter schools in the District of Columbia. It provided $42.2 million to DCPS, $20 million for public charter schools, and $13.2 million for Opportunity Scholarships. The latter, however, could be used to provide private school vouchers only to students who received scholarships in the 2009-2010 school year. The 112 th Congress has introduced two bills that would reauthorize the DC Opportunity Scholarship Program: the Scholarships for Opportunity and Results Act of 2011 ( S. 206 ) and the Scholarships for Opportunity and Results Act ( H.R. 471 ). H.R. 471 was ordered reported ( H.Rept. 112-36 ) by the House Committee on Oversight and Government Reform on March 17, 2011. On March 30, 2010, H.R. 471 was considered by the House. It passed without amendment by a vote of 225 to 195. S. 206 was referred to the Senate Committee on Homeland Security and Governmental Affairs. No further legislative action has occurred with respect to S. 206 . This report begins with a general overview of issues related to school choice and the provision of vouchers for elementary and secondary education students to attend private schools. This is followed by a discussion of the debate that surrounded the initial passage of the DC School Choice Incentive Act. The next section of the report examines the act, including eligibility requirements for students to receive a voucher and for private schools to participate. The next section of the report examines current research on the program's effectiveness with respect to student academic achievement and parental and student satisfaction with the program. This is followed by a summary of appropriations made available for the Opportunity Scholarship program and other school improvement initiatives in the District of Columbia. The report concludes with a discussion of actions taken with respect to the program during the FY2009 and FY2010 appropriations cycles and issues related to the continuation of the Opportunity Scholarship program. School Choice and Vouchers for Elementary and Secondary Education Many of the disputes involving public education and school choice stem from a fundamental question of whether education is a public or private good. While education has historically been considered a public good, it has characteristics of both a public and a private good. That is, the benefits of education are both private, accruing to individuals, and public in that they promote a stable and democratic society. However, the distinction between education as a private good and a public good may be blurred as others benefit from the work produced by an individual, and an individual benefits from living in a stable and democratic society. As researchers have argued, "schooling takes place at the intersection of two sets of rights, those of the family and those of the society." Parents have the right to raise their children in the manner they deem most suitable, including making decisions about their education, while a democratic society uses education "as a means to reproduce its most essential political, economic, and social institutions through a common schooling experience." Over the past several Congresses, many school choice proposals have been introduced and debated, but most have failed to be enacted. The most controversial issues regarding publicly funded school choice have been the provision of direct or indirect support to enable students to attend private schools, especially religiously affiliated private schools. The District of Columbia Opportunity Scholarship program is an example of a federal program that supports the enrollment of students in private elementary and secondary schools. Concerns about programs that provide public funds for students to enroll in private schools have centered on whether public funds should be used to provide support to private (especially religiously affiliated) schools and whether the existence of public funding for private school choice options effectively improves educational outcomes for participating students. The Supreme Court has ruled in Aleman v. Simmons-Harris that the Constitution permits public funding of school vouchers for attendance at religiously affiliated schools in instances where parents have the opportunity of selecting from a range of options that includes public and private secular schools. Nonetheless, objections are still raised regarding the use of public funds to pay tuition at religiously affiliated schools. Less controversial are school choice programs in which funding remains under public control, such as public charter schools and the implementation of school choice provisions under Title I-A of the Elementary and Secondary Education Act (ESEA). Those who support school choice proposals that include the choice of attending private schools have argued that in view of the apparent resistance to change in many public schools, the most effective way in which the federal government can help to improve academic performance, especially for students from low-income families, is to enhance students' opportunities to select from a broader range of schools, including private sectarian and non-sectarian schools. Choice proponents argue that assisting at least some students from low-income families to leave their current, often low-performing public schools, provides immediate benefits to those students. In addition, choice proponents argue that it also provides these students with a degree of educational choice and opportunity that already exists for students from more affluent families. Another major argument made in support of choice is that competition through choice would be a catalyst for major improvements in the performance of public school systems, including those serving large numbers of low-income students. At the same time, choice supporters recognize that providing public funding to private schools may be accompanied by new forms of government regulation. They argue, however, that federal regulations could be limited through statutory prohibitions, especially if the aid was provided indirectly to the private school via vouchers provided directly to individual students. Opponents of federal school choice proposals that include private schools tend to focus on the limitations of the proposed choice options and the potentially negative effects on public schools and their students, particularly the shifting of attention and resources away from the goal of public school system reform. Choice proposals involving private schools generally involve only a portion of the potentially eligible student population (e.g., opportunities would be available in a limited number of localities or be made available only to a limited number of low-income families nationwide). In addition, choice proposals are often limited or capped in terms of the proportion or amount of private school tuition or fee costs that may be covered by vouchers or scholarships. While these amounts may cover a substantial share of the costs of attending some private schools, they are often sufficient to pay the full costs of attending only the least expensive private schools. Some opponents also argue against the creation of federal school choice programs based on concerns about the substantial governmental regulation of private schools that could ensue, regardless of whether funds are provided directly or indirectly to the schools. Further, some opponents argue that the effects of competition on public school systems are more likely to be negative than constructive, including a reduction in funds that are provided based on student enrollment levels, loss of students whose families are best informed about their education options, and unequal constraints on public schools. The last issue focuses on concerns that public schools may have to serve numerous hard-to-educate students whose parents did not exercise the opportunity to choose a private school or students who were not accepted to private schools, potentially based on their academic performance. Enactment of the Opportunity Scholarship Program In the Bush Administration's FY2004 budget submission, the Administration requested $75 million for a Choice Incentive Fund that would have provided competitive grants to states, local educational agencies (LEAs), and community-based organizations that expanded opportunities for parents of children who attend low-performing schools to attend higher-performing schools, including charter schools and private schools. Under the Administration's proposal, a portion of the funds would have been reserved for school choice programs in the District of Columbia. Both the mayor of the District of Columbia, Anthony Williams, and the President of the District of Columbia Board of Education, Peggy Cooper Cafritz, endorsed the concept of private school vouchers as a means of improving education options for DC public school students and as a means for transforming the city's faltering public school system. Local supporters of a voucher program insisted that the program had to be federally funded and could not result in a reduction of funds to the city's traditional public schools and public charter schools. Eleanor Holmes Norton, the District of Columbia's Delegate to Congress, subsequently criticized the mayor's support for a federally funded voucher program, noting that the proposal was an affront to home rule. Other opponents of the voucher program argued that the program would reduce needed funding for public education and be of minimal benefit to most of the city's students. The establishment of a federally supported voucher program met with both support and resistance in Congress. In July 2003, the House Committee on Government Reform passed H.R. 2556 , the DC Parental Choice Incentive Act of 2003, by a vote of 22 to 21. The act would have created a federally funded scholarship program to serve low-income students in the District of Columbia. The program would have established a competitive grant program under which the Secretary of Education would award grants to eligible entities for the operation of one or more scholarship programs. Grantees would have awarded scholarships (also known as vouchers) of up to $7,500 per academic year to students who are residents of the District of Columbia and whose family income does not exceed 185% of the poverty level to enable them to attend private elementary and secondary schools located in the District of Columbia. The program would have been authorized at $15 million for FY2004 and at such sums as may be necessary through FY2008. Later that month, the House Committee on Appropriations reported H.R. 2765 , which would have provided $10 million for a school choice program in the District of Columbia in the FY2004 appropriations bill for the District of Columbia. The program was substantively similar to the program proposed under H.R. 2556 . During floor debate on H.R. 2765 two voucher-related amendments were offered. The first, offered by Delegate Norton, would have eliminated the proposed voucher program. The amendment failed to pass by a vote of 203 to 203. A second amendment was offered by Representative Tom Davis that would have established eligibility criteria for students to receive a voucher and cap the maximum amount of funding a voucher could provide for any given school year. The amendment passed by a vote of 209 to 206. The Senate's version of the FY2004 District of Columbia appropriations bill ( S. 1583 ) included the DC Student Opportunity Scholarship Act of 2003. This bill was substantively similar to H.R. 2556 , and contained the framework on which the final provisions for the DC School Choice Incentive Act were based. It was placed on the Senate calendar but was never considered on the Senate floor. The Senate-passed version of H.R. 2765 , however, did not include funding to establish a scholarship program for low-income students. It did include funding for school improvement for traditional public schools and public charter schools in the District of Columbia. The House-passed version of H.R. 2765 did not include funding for these specific purposes. The DC School Choice Incentive Act, which created the Opportunity Scholarship program, was authorized and funded by the Consolidated Appropriations Act, 2004 ( H.R. 2673 ; P.L. 108-199 ), which included the FY2004 District of Columbia appropriations bill. Specific funding for the Opportunity Scholarship program was provided under the header "Federal Payment for School Improvement," which also included funding for the District of Columbia Public Schools (DCPS) for the improvement of public education and the State Education Office (SEO) for the expansion of public charter schools. This approach, commonly known as the three-prong approach to funding elementary and secondary education in the District of Columbia, was initially suggested by Mayor Williams when he asked for federal assistance for public education in the District of Columbia. The proposal was supported by the Administration and many Members of Congress. While concerns were raised during consideration of the bill that only the Opportunity Scholarship program—not school improvement funding for DCPS or public charter schools—was authorized for five years, each year the Opportunity Scholarship program has been funded, the federal government has also provided funds to support school improvement in the city's traditional public schools and public charter schools. DC School Choice Incentive Act The DC School Choice Incentive Act ( P.L. 108-199 , Title III) authorized a scholarship or voucher program to provide the families of low-income students, particularly students attending elementary or secondary schools identified for improvement, corrective action, or restructuring under the ESEA, as amended by the No Child Left Behind Act (NCLB; P.L. 107-110 ), with expanded opportunities to enroll their children in schools of choice located in the District of Columbia. The program was authorized for FY2004 through FY2008. An appropriation of $14 million was specified for FY2004; appropriations for the subsequent fiscal years were for "such sums as may be necessary." Under the Opportunity Scholarship program, the Secretary of Education (hereinafter referred to as the Secretary) may award grants to eligible entities for a period of not more than five years to make opportunity scholarships to eligible individuals. Eligible entities were defined as an educational entity of the DC government, a nonprofit organization, or a consortium of nonprofit organizations. In selecting one or more eligible entities to operate the program, the Department of Education (ED) was required to give priority to eligible entities who would most effectively give priority to eligible students who, in the school year preceding the school year for which the student is seeking a scholarship, were attending a school that was identified for improvement, corrective action, or restructuring under the ESEA. In addition, ED was required to give priority to eligible applicants that would target available resources to students and families who lacked the financial resources to take advantage of school choice options and that would provide students and families with the widest range of school options. The Washington Scholarship Fund (WSF) was the sole program administrator since the program's inception in 2004 through May 13, 2010. On May 14, 2010, The DC Children and Youth Investment Trust Corporation assumed the role of program administrator. The program administrator is permitted to use up to 3% of the funds it receives from ED for administrative expenses. Student eligibility for the program is open to children from families with incomes not exceeding 185% of the poverty line who are entering kindergarten through 12 th grade or who turn five years old by September 30 of the school year for which scholarships are awarded. Eligible students may apply to receive an Opportunity Scholarship valued at up to $7,500 to cover the costs of tuition, fees, and transportation expenses associated with attending participating private elementary and secondary schools located in the District of Columbia. Scholarships provided to students are considered assistance to the student (as opposed to the school) but are not treated as income of the parents for federal tax purposes or for determining eligibility for other federal programs. Students must reapply each year to participate in the program. Scholarship recipients remain eligible to continue to participate in the scholarship program, as long as their family income does not exceed 300% of the poverty level. Student Participation From the program's inception through the 2008-2009 school year, 8,480 students applied for scholarships. Of these students, 5,547 were deemed eligible to participate, and 3,738 were awarded scholarships. In fall 2009, the first school year for which the program no longer accepted new applicants, 1,322 students received continuing scholarships. Table 1 provides information on the number of students who received a scholarship by program year and grade level from the 2004-2005 school year through the 2008-2009 school year. Overall, from the program's inception through the 2010-2011 school year, a total of 3,023 individual students have participated in the program. Not all of the students who were offered scholarships chose to enroll in a participating private school. Among students offered scholarships who had four or five years of potential participation in the program, 282 out of 1,293 (22%) never used the scholarships. The most common reasons cited by parents for not using the available scholarship was a lack of space at their preferred private school (30.7%), a lack of special needs services (21.6%), and that their child gained admission to a preferred public charter school (16.3%). In addition, some students who initially used scholarships left the program over time. The most common reasons cited for leaving the program mirror those for never using the available scholarship. That is, parents indicated that their child left the scholarship program to attend a preferred public charter school (21.8%) or due to a lack of space at their preferred private school (18.5%). The next most common responses cited for leaving the program included moving out of the District of Columbia (15.2%), transportation issues (13.7%), and lack of special needs services (12.3%). Private School Involvement in the Program In general, private schools accepting scholarships through the Opportunity Scholarship program are prohibited from discriminating against program participants or applicants on the basis of race, color, national origin, religion, or gender. The last prohibition does not apply, however, to single sex schools that are operated by, supervised by, controlled by, or connected to a religious organization to the extent that nondiscrimination based on gender would be inconsistent with the religious beliefs of the school. In addition, nothing in the School Choice Incentive Act allows participating schools to alter or modify the provisions of the Individuals with Disabilities Education Act (IDEA). With respect to sectarian private schools that accept scholarship students, nothing in the School Choice Incentive Act prohibits the school from hiring in a manner consistent with the school's religious beliefs or requires the school to alter its mission or remove religious symbols from its building. All participating private schools are required to comply with requests for data and information with respect to program evaluations required by the School Choice Incentive Act. Based on the most recent evaluation of the Opportunity Scholarship program, 52 of 90 private elementary and secondary schools in the District of Columbia participated in the program during the 2008-2009 school year. The majority of the participating schools (54%) were faith-based schools, primarily the parochial schools of the Catholic Archdiocese of Washington. Of the participating schools, 50% charged an average tuition above the voucher cap of $7,500. The Omnibus Appropriations Act, 2009 ( P.L. 111-8 ), added additional requirements for participating schools. First, the participating school must have and maintain a valid certificate of occupancy issued by the District of Columbia. Second, the core subject matter teachers of the scholarship recipient must hold four-year bachelor's degrees. In addition, given that P.L. 111-8 extends the Opportunity Scholarship program beyond its original authorization period, ED had to hold a competition to select a new program administrator. The Washington Scholarship Fund's contract to administer the program was for the five-year period that corresponded with the original program application. As previously mentioned, the DC Children and Youth Investment Trust Corporation was selected as the new program administrator. P.L. 111-117 also added additional requirements for participating schools. Participating schools must be in compliance with accreditation and other standards under the District of Columbia compulsory school attendance laws that apply to educational institutions that are not affiliated with the District of Columbia Public Schools (DCPS). In addition, the Secretary of Education was required to submit a report to Congress by June 15, 2010, that provided information on the academic rigor and quality of each participating school. To obtain comparable data for the report, the Secretary was required to ensure that all eligible voucher recipients participated in the same academic performance assessments as students enrolled in DCPS during the 2009-2010 school year. The Secretary must also ensure that at least two site inspections are conducted at each participating school on an annual basis. The Appendix provides a list of schools participating in the Opportunity Scholarship Program in school year 2009-2010, and includes their religious affiliation, where applicable. Evaluations of the Opportunity Scholarship Program The School Choice Incentive Act required the scholarship program to be evaluated annually. The Secretary and Mayor of the District of Columbia were required to jointly select an independent entity to conduct these evaluations. The evaluations were conducted by Westat, a social science research firm in Maryland, that worked with two subcontractors—the University of Arkansas Department of Education Reform and Chesapeake Research Associates. Up to 3% of the total annual appropriation for the School Choice Incentive Act could be used for program evaluation purposes. The National Center for Education Evaluation and Regional Assistance (NCEE) at the Institute of Education Sciences (IES) oversees the contract. The independent entity evaluating the program was required to measure the academic achievement of participating students, use the same measurement to assess participating students as is used to assess students in DCPS, and work with the Washington Scholarship Fund to ensure that the parents of all students who apply for a scholarship, regardless of whether a scholarship is received, agree that the student will participate in measurements conducted by the independent evaluator for the period for which the student applied for or received a scholarship. The evaluation was required to compare the academic achievement of scholarship recipients with students in the same grades attending DC public schools and the eligible students who applied for but did not receive a scholarship. The evaluation must also examine the extent to which the program expanded choice options for parents; the reasons parents chose to participate in the program; retention rates, dropout rates, graduation rates, and college admissions rates for participating students with students of similar backgrounds who did not participate in the scholarship program; the impact of the program on students and public elementary and secondary schools in the District of Columbia; the safety of the participating schools versus schools attended by non-scholarship recipients; and other issues as designated by the Secretary. In June 2010, NCEE released the final report on the DC Opportunity Scholarship program, which evaluated the impact of the program after at least four years. The evaluation used a randomized control trial to compare the results of two groups: (1) students who applied for the scholarship program and were randomly selected by the lottery to receive a scholarship, and (2) students who applied for the scholarship program and were eligible to receive a scholarship, but were not selected. In the discussion below, results of this analysis represent comparisons of students who were offered a scholarship versus those who were not. A second analysis made statistical adjustments to the group of students who received a scholarship and compared two different groups: (1) students who were offered a scholarship and used the scholarship and (2) students who were offered a scholarship but did not use the scholarship. In the discussion below, results of this analysis represent comparisons of students who used a scholarship versus those who did not. Impact of Scholarship Offer The analysis of the impact of a scholarship offer was conducted on the total sample of students participating in the DC Opportunity Scholarship program. Follow-up analyses were conducted on the following subgroups: (1) students from schools in need of improvement (SINI), (2) students from schools not identified for improvement, (3) students who were higher academic performers at the onset of the program, (4) students who were lower academic performers at the onset of the program, (5) male students, and (6) female students. The primary analysis of the impact study measured student achievement in reading and mathematics. After at least four years of the DC Opportunity Scholarship program, there were no statistically significant effects on reading or mathematics performance for the total sample of students who were offered scholarships. That is, students who were offered a scholarship did not perform significantly differently in reading or mathematics than students who were not offered a scholarship. Subgroup analyses revealed some significant effects of the program in reading performance. Students from schools not identified for improvement who were offered a scholarship significantly outscored students from schools not identified for improvement who were not offered a scholarship; students who were higher performers at the onset of the program who were offered a scholarship significantly outscored high performers who were not offered a scholarship; and females who were offered a scholarship outscored females who were not offered a scholarship. There were no subgroup effects in mathematics performance. The impact study also investigated the effect of the DC Opportunity Scholarship program on educational attainment, which was measured by high school graduation rate. The program had a significantly positive impact on students who were offered a scholarship. The graduation rate of students who were offered a scholarship was 82%, compared to 70% for students who were not offered a scholarship. Further analyses demonstrated significant effects of educational attainment across several subgroups. Students from SINI who were offered a scholarship were more likely to graduate from high school than students from SINI who were not offered a scholarship (79% vs. 66%). Higher performers at the onset of the program who were offered a scholarship were more likely to graduate from high school than higher performers who were not offered a scholarship (93% vs. 79%). Females who were offered a scholarship were more likely to graduate from high school than females who were not offered a scholarship (95% vs. 75%). There were no significant effects of educational attainment on students from schools not identified for improvement, students who were lower performers at the onset of the program, and male students. Finally, the impact study investigated parent and student reports of school safety and overall satisfaction. Overall, parents of children who were offered a scholarship rated their child's school as significantly safer than parents of children who were not offered a scholarship. Similarly, parents of students who were offered a scholarship were more satisfied with their child's school than parents of students who were not offered a scholarship. Students who were offered a scholarship did not rate their school as significantly safer than students who were not offered a scholarship, nor did they report significantly increased satisfaction with their school than students who were not offered a scholarship. Impact of Scholarship Use The analysis of the impact of scholarship use was conducted on the group of students who were offered a scholarship. Some students who were offered a scholarship chose to use it to enroll in a participating private school whereas others chose not to use it to enroll in a participating private school. Follow-up analyses were conducted on the subgroups described in the previous section (see " Impact of Scholarship Offer "). The impact of scholarship use mirrored that of a scholarship offer . After at least four years of the DC Opportunity Scholarship program, there were no statistically significant effects on the reading or mathematics performance of students who used a scholarship. Subgroup analyses revealed significant effects of the program in reading performance for the same subgroups as the previous analysis of those offered a scholarship. Similar to the results of educational attainment for students who were offered a scholarship, the program had a significantly positive impact on high school graduation rates of students who used a scholarship. The subgroup analyses revealed that the impact on high school graduation for students who used the scholarship was greater than the impact on high school graduation for students who were offered the scholarship. Using a scholarship increased the graduation rate of students from SINI by 20%, whereas the offer of a scholarship increased high school graduation rates of students from SINI by 13%. Similarly, using a scholarship increased the graduation rate of students who were higher performers at the onset of the program and female students (25% and 28%, respectively) more than students who were higher performers at the onset of the study and female students who were offered a scholarship (14% and 20%, respectively). There were no differences between parent and student reports of school safety and overall satisfaction between the group offered a scholarship and the group that used a scholarship. Government Accountability Office Report A Government Accountability Office (GAO) report on the DC Opportunity Scholarship Program did not seek to evaluate student outcomes of the program; however, it provided information on reasons that parents chose to participate (or not participate) in the program. The reasons cited in the GAO report may highlight some of the potential differences between the group of students who were offered scholarships and those who used scholarships. GAO reported that the information provided to parents about the program may not have been complete or correct. Some parents may have been misinformed that participation in the program may reduce other social service benefits, and other parents believed the offer may be "too good to be true." Parents declined to participate in the scholarship program for a variety of reasons, including family issues, personal problems, moving, special education needs of their child, transportation problems, convenience, and before- and after-care services. The impact evaluation and the GAO report did not directly address the extent to which the program expanded choice options for parents, and the college admission rates for students who participate in the program. Appropriations Provided for DC School Improvement Funding for the Opportunity Scholarship Program has been included with more general funding provided by the federal government to the District of Columbia for school improvement since the program's inception. The FY2004 Consolidated Appropriations Act, which authorized the School Choice Incentive Act, provided funding specifically for school improvement in the District of Columbia that is allocated among three entities: (1) the District of Columbia Public Schools for the improvement of public education; (2) the State Education Office for the expansion of public charter schools; and (3) ED for the DC School Choice Incentive program. Appropriations for school improvement have been provided to these three recipients for FY2004 through FY2010. Table 2 details funding allocations for the program's three funding recipients. FY2009 Appropriations While the Omnibus Appropriations Act, 2009 ( P.L. 111-8 ) provided funding for Opportunity Scholarships, it added additional requirements for schools to be eligible to participate in the program and included language limiting the appropriation of funds for the program beyond FY2010. P.L. 111-8 added two requirements that schools participating in the voucher program must meet. First, participating schools must have and maintain a valid certificate of occupancy issued by the District of Columbia. Second, a core subject matter teacher of voucher recipients is required to hold a four-year bachelor's degree. Statutory language does not require that the bachelor's degree be held in the subject area of instruction. That is, it does not require, for example, that only a teacher with a four-year bachelor's degree in English can provide English classes for voucher recipients. P.L. 111-8 further specified that the use of any funds in any act for Opportunity Scholarships after the 2009-2010 school year shall be available only upon reauthorization of the program and the adoption of legislation by the District of Columbia approving such reauthorization. Senator Ensign (NV) offered an amendment ( S.Amdt. 615 ) to strike the requirement that additional funding could only be provided to the program if the program was reauthorized by Congress and subsequently approved by the District of Columbia. He noted that other federal education programs, including the Higher Education Act, continued to receive federal funding despite having expired authorizations. Further he argued that the final program evaluation had not been completed and ending the program after the 2009-2010 school year would force students, including those who had been Opportunity Scholarship participants for several years, to find new schools. The amendment failed to pass by a vote of 39-58. The explanatory statement accompanying P.L. 111-8 specified that appropriations provided for Opportunity Scholarships in the FY2009 Omnibus Appropriations Act could only be used to provide scholarships for students currently participating in the program . That is, the funds could not be used to expand program participation. The explanatory statement also directed the Chancellor of DCPS to take steps to minimize the potential disruption and ensure the smooth transition for any voucher recipients seeking to enroll in the public school system as a result of changes made to the Opportunity Scholarship program after the 2009-2010 school year. FY2010 Appropriations The Omnibus Appropriations Act, 2010 ( P.L. 111-117 ), eliminated the provision in P.L. 111-8 that required that Opportunity Scholarship funds be available only upon reauthorization of the program and the adoption of legislation by the District of Columbia. It provided $42.2 million to DCPS to improve public school education in the District of Columbia, $20 million to the State Education Office to expand quality public charter schools in the District of Columbia, and $13.2 million for ED to provide Opportunity Scholarships. Consistent with the previous year's appropriations language, P.L. 111-117 maintained that the $13.2 million could only be used to provide Opportunity Scholarships to students who received scholarships in the 2009-2010 school year. In addition to the requirements for participating schools included in P.L. 111-8 (i.e., participating schools must maintain a valid certificate of occupancy issued by the District of Columbia and core subject matter teachers of voucher recipients are required to hold a four-year bachelor's degree), P.L. 111-117 added additional requirements. Participating schools are now required to be in compliance with the accreditation and other standards prescribed under the District of Columbia compulsory school attendance laws that apply to elementary and secondary educational institutions not affiliated with public schools in the District of Columbia. P.L. 111-117 required the Secretary to submit a report to Congress by June 15, 2010, that provided information on the academic rigor and quality of each participating school. It also requires the Secretary to ensure that at least two site inspections are conducted at each participating school on an annual basis. FY2011 Appropriations and H.R. 1 On February 19, 2011, the House passed H.R. 1 , the Full-Year Continuing Appropriations Act, 2011. Subsequently, on March 9, 2011, the Senate voted against the passage of the bill. H.R. 1 would have provided appropriations to federal agencies for the remainder of FY2011. H.R. 1 would have made several changes to the Opportunity Scholarship program. It would have prohibited the use of up to $1 million for the administration of testing of students to determine and compare the academic performance of the schools enrolling students receiving scholarships. It would no longer have restricted the use of funds to provide scholarships only to students who received scholarships in the 2009-2010 school year. Further, it would have specifically stated that funds could be used to provide scholarships to students regardless of whether a student had received a scholarship in a prior year. H.R. 1 would have eliminated the requirement that the Secretary submit a report to Congress by June 15, 2010, that provided information on the academic rigor and quality of each participating school and that the Secretary administer to eligible students participating in the program the same academic performance assessments as were administered to students enrolled in DCPS during the 2009-2010 school year. It also would have modified the requirement that the Secretary ensure that at least two site inspections are conducted at each participating school on an annual basis to require the Secretary to ensure that site inspections were conducted annually, with no number of inspections specified. Policy Issues Related to the Continuation of the Opportunity Scholarship Program While the future of the Opportunity Scholarship program remains in question, there are several issues that may arise based on the most recent requirements added to the program and as a result of the program's possible sunset following the 2009-2010 school year. Several potential issues are discussed briefly below. As previously discussed, P.L. 111-8 added new requirements for participating schools with respect to a certificate of occupancy and teacher education requirements. It is unclear whether these new requirements will result in any participating schools having to leave the program. If this does occur, it is also unclear whether voucher recipients attending these schools will be able to find another participating school to attend for the upcoming school year. If voucher recipients return to the city's traditional public schools or public charter schools, this may have a budgetary impact on the DC government. The DC government does not provide funding to support the education of students receiving vouchers through the Opportunity Scholarship program. While it is unknown how many students currently receiving vouchers would remain in their private schools (e.g., either by the family paying tuition or the private school providing additional financial assistance to the student), if all of the students were to return to DC public schools, the costs to the city could be substantial. While there are several ways these costs could be estimated, two have been selected for the purposes of this report. The first is the foundation level for the District's Uniform Per Student Funding Formula, which is the District's basis for funding the public school system. The funding level is subsequently adjusted for various factors. For example, the level may be higher for students at certain grade levels (e.g., grades 9-12). In addition, the foundation level does not include the additional costs that may be associated with educating students with special needs, educating English language learners, or providing summer school. The second measure is the current per pupil expenditure for the District of Columbia as reported by ED. The most recent year for which data are available is FY2008. Current expenditures include instruction, instruction-related support services, general administration, school administration, operations and maintenance, student transportation, other support services, and food services. Current expenditures do not include items such as capital outlay or interest on long-term debt. Given the composition of current per pupil expenditures, this number will be higher than the foundation level payment as it includes different types of expenditures. The two measures are included to provide a sense of the potential range of costs associated with students leaving the scholarship program and returning to DC public schools. Under the first measure, for FY2011, the foundation level for the District's Uniform Per Student Funding Formula is $8,945 per student. Using the foundation level as an estimate for the cost per student, if the 1,322 students who received continuing scholarships during the 2009-2010 school year transferred back into the city's public schools in FY2011, it would cost the city about $11.8 million to provide an education for these students. Under the second measure, the current expenditures per student for FY2008 were $16,353. If this figure is multiplied by the 1,322 students who received continuation scholarships during the 2009-2010 school year, it would cost the city about $21.6 million to provide an education for these students. Another issue that may arise if the Opportunity Scholarship program is discontinued is that some of the private schools, particularly those that may have been more heavily dependent on the voucher funding to operate, may seek to convert to public charter schools. As noted in the GAO report on the Opportunity Scholarship program, voucher recipients are clustered in a small subset of schools. In addition, during the 2006-2007 school year, voucher recipients constituted at least 60% of total enrollment in three participating schools. During the 2008-2009 school year, seven formerly Catholic schools in the District of Columbia reopened as public charter schools. It may be that other private elementary and secondary schools, including those that are religiously affiliated, may also apply to become public charter schools, especially if financially they are unable to remain open otherwise. This could result in increased public costs for education. Finally, funding for the Opportunity Scholarship program has been provided under the larger umbrella of school improvement funding for the District of Columbia. Prior to the enactment of the Opportunity Scholarship program, the federal government did not provide specific funding to the District of Columbia for the three purposes for which school improvement funds were provided from FY2004 through FY2010. Since the introduction of the three-prong approach to school improvement in the District of Columbia, FY2009 was the first time school improvement funding for each of DCPS and public charter schools exceeded the funding provided for Opportunity Scholarships. This trend in funding continued with FY2010 appropriations. Thus, if the Opportunity Scholarship program were to be discontinued entirely, the loss of funding for public education could be substantial, especially as the District of Columbia faces a budget shortfall. Appendix. Participating Schools

The Consolidated Appropriations Act for FY2004 (P.L. 108-199), which combined six appropriations bills—including the FY2004 District of Columbia Appropriations Act—authorized and appropriated funding for the Opportunity Scholarship program, a federally funded school voucher program, for the District of Columbia. It also provided funding for the District of Columbia Public Schools (DCPS) for the improvement of public education and the State Education Office for public charter schools. The provision of federal funds for DCPS, public charter schools, and vouchers is commonly referred to as the "three-prong approach" to supporting elementary and secondary education in the District of Columbia. More specifically, the Opportunity Scholarship program was enacted under the DC School Choice Incentive Act of 2003, which was included in P.L. 108-199. The Opportunity Scholarship program provides scholarships (also known as vouchers) to students in the District of Columbia to attend participating private elementary and secondary schools, including religiously affiliated private schools. Appropriations for the program were authorized through FY2008. While the program is no longer authorized, the 111th Congress provided appropriations for the program in FY2009 under the Omnibus Appropriations Act, 2009 (P.L. 111-8) and in FY2010 under the Omnibus Appropriations Act, 2010 (P.L. 111-117). P.L. 111-8 specified that the use of any funds in any act for Opportunity Scholarships after the 2009-2010 school year shall be available only upon reauthorization of the program and the adoption of legislation by the District of Columbia approving such reauthorization. P.L. 111-117 eliminated this restriction on funding and provided continued appropriations for the Opportunity Scholarship program, as well as school improvement funding for DCPS and public charter schools in the District of Columbia. It provided $42.2 million to DCPS, $20 million for public charter schools, and $13.2 million for Opportunity Scholarships. The latter, however, could be used to provide private school vouchers only to students who received scholarships in the 2009-2010 school year. The 112th Congress has introduced two bills that would reauthorize the DC Opportunity Scholarship Program: the Scholarships for Opportunity and Results Act of 2011 (S. 206) and the Scholarships for Opportunity and Results Act (H.R. 471). H.R. 471 was ordered reported (H.Rept. 112-36) by the House Committee on Oversight and Government Reform on March 17, 2011. On March 30, 2010, H.R. 471 was considered by the House. It passed without amendment by a vote of 225 to 195. S. 206 was referred to the Senate Committee on Homeland Security and Governmental Affairs. No further legislative action has occurred with respect to S. 206.

Introduction For more than a decade, Congress has considered proposals to change the income and rent calculation policies governing the primary federal rental assistance programs. The current policies base families' eligibility for assistance on their incomes and their contributions toward their rent on a share of their adjusted incomes. The income-based eligibility system is meant to ensure that limited federal subsidies go to those families that most need them. The income-based rent structure is intended to ensure that low-income families pay rent that is "affordable" to them, with affordability currently defined as 30% of family income. The process of calculating families' incomes and, subsequently, their rent contributions, involves a system of inclusions, exclusions, imputations, and deductions. While the current, rather complicated system is designed to ensure that the most accurate estimate of family income is calculated and that families' financial circumstances are fully captured, it can also lead to confusion among recipients as well as difficulties for local program administrators. This report provides answers to some of the most common questions about the income and rent policies in federal rental assistance programs, including questions about where these policies came from and how they compare to other federal assistance programs that serve the same or similar purposes or populations. It is intended to help answer commonly asked questions, as well as provide information to policymakers seeking to understand and evaluate proposed changes to the current system. What Are the Main Federal Rent Assistance Programs? This report discusses the five main Department of Housing and Urban Development (HUD) programs that subsidize rents for low-income families. Together, these programs serve more than 4 million families and make up well over three-quarters of HUD's budget. These rental assistance programs are Public Housing —housing developments owned and operated by local Public Housing Authorities (PHAs) for which the federal government provides capital and operating assistance; Section 8 Housing Choice Vouchers (HCVs) —rent subsidies that tenants can use to subsidize their rents in the private market housing of their choice; Section 8 project-based rental assistance —subsidies provided directly to private owners of multifamily housing to subsidize the rents of specific units; Section 202 Supportive Housing for the Elderly —multifamily housing developments owned by private nonprofit organizations for which the federal government provides capital grants and project-based rental assistance; and Section 811 Supportive Housing for Persons with Disabilities —similar to Section 202, but serves persons with disabilities. Three of the five programs—Section 8 project-based rental assistance, Section 202, and Section 811—provide project-based rental assistance to private owners of multifamily housing properties. Throughout this report, we refer to these three programs as the "project-based programs." Project-based rental assistance subsidizes tenant rents in specific rental units; often, all units in a building receive rental assistance. Project-based assistance differs from both public housing and Section 8 HCVs; public housing developments receive federal operating subsidies rather than direct rental assistance, while HCVs are tenant-based, meaning that tenants may use the vouchers to find housing of their choice in the private market from landlords willing to accept them. Each of the five programs discussed in this report is governed by the same statute and regulations regarding tenant eligibility and rent (although there may be some variation in HUD guidance and handbooks). The statute that establishes eligibility and rent determination is 42 U.S.C. Section 1437a, and the regulations are at 24 C.F.R. Part 5, Subpart F (§5.601 et. seq.). This report does not directly address eligibility for a number of other assisted housing programs. For example, there are several HUD programs, such as the Homeless Assistance Grants, the Housing Opportunities for Persons with AIDS program, and the HOME Investment Partnerships program, that provide grant funding that can be used to provide rental assistance, but rules and regulations may be different. And non-HUD programs, such as the Department of Agriculture Rural Housing Service rental assistance programs and the Low Income Housing Tax Credit, also have different policies for eligibility and assistance. For more information about other programs and a brief summary of how their eligibility rules compare to the rules of the five programs addressed in this report, see the section entitled " Comparisons ." Finally, this report does not address eligibility for two HUD legacy rental assistance programs from the 1960s and 1970s where units have largely been converted to Section 8 project-based rental assistance. These are the Rental Assistance Program (RAP) and the Rent Supplement program. The Basics Who Is Eligible? Eligibility for HUD's five main rent assistance programs is based on family income, their citizenship or immigration status, and, in some cases, other characteristics. It is important to note that even though a family may be eligible for assistance, they are not guaranteed to receive it. Housing assistance programs are not entitlements, thus, due to funding limitations, they serve only roughly one in four eligible households. Families wishing to receive assistance are generally placed on waiting lists. The statute establishing eligibility for HUD rent assistance programs uses the term "family" to describe the entity that is eligible for assistance. In regulation, family is defined broadly to include, but is not limited to (regardless of actual or perceived sexual orientation, gender identity, or marital status) the following: A single person; A group of persons residing together, and such group includes, but is not limited to elderly families—those where the head of household (including cohead), spouse, or sole member is age 62 or older; near-elderly families—those where the head of household (including cohead), spouse, or sole member is at least age 50, but younger than 62; disabled families—those where the head of household (including cohead), spouse, or sole member has a disability as defined by statute; families in which two or more elderly or near-elderly individuals or persons with disabilities live together; and families in which an elderly person, near-elderly person, or person with a disability lives together with one or more people who are "determined under the public housing agency plan to be essential to their care or well-being." The term "household" is also used occasionally in the statute (for example, the statute refers to "heads of household" or "household income"), and is defined in regulation to include a family and any necessary live-in aid. However, since the term family is used most often in describing eligibility, we use that term instead of "household" throughout this report. Income Eligibility Unlike some other federal assistance programs, the five housing programs discussed in this report do not use the federal poverty level as the basis for eligibility. Instead, income eligibility for housing assistance is generally based on a percentage of local area median income (AMI). Each year, HUD reports area median incomes for metropolitan statistical areas and nonmetropolitan counties. HUD then establishes three income limits based on a percentage of these area median incomes. Whether a family qualifies for assistance varies by program. The three income limits are Low-Income —families who have incomes at or below 80% of area median income; Very Low-Income —families who have incomes at or below 50% of area median income; or Extremely Low-Income —families who have incomes at or below the greater of 30% of area median income or the federal poverty level. According to the authorizing statute, families are initially income eligible for the HUD rental assistance programs if they are low-income. For the Section 8 HCV program, families must also be very low-income, have previously received assistance, or meet other criteria established by the Secretary of HUD. Section 202 and Section 811 properties funded after 1990 are available only to elderly residents and persons with disabilities who are very low-income. In the case of the project-based programs, owners may, with HUD's permission, admit some families with incomes above the low-income limit if they are having difficulty leasing all of their units. Income Targeting In addition to setting basic income eligibility standards, the authorizing statutes for several housing assistance programs require that some share of the assistance be set aside for, or targeted to, families with the lowest incomes. In the Section 8 HCV program, PHAs must provide 75% of all vouchers issued each year to families who are extremely low-income. PHAs and owners must provide 40% of all public housing and Section 8 project-based rent-assisted units made available each year to families who are extremely low-income. For Section 8 project-based rent-assisted properties, depending on the date the project became available, most assistance has to be provided to families that are very low-income; only a limited percentage of units may be leased to families with incomes above the very low-income standard. Treatment of Over-Income Families Circumstances may occur where families living in assisted housing who were once eligible for assistance see their incomes increase to the point where they exceed the income eligibility standards. At that point, families are considered "over-income." The statute governing HUD's rental assistance programs does not directly address the treatment of over-income families. Instead, HUD has adopted regulations that govern what occurs when family incomes increase. In the case of public housing, the PHAs that administer the program are not required to evict over-income families, but they are permitted to do so. In the case of the Section 8 HCV program, families no longer qualify for assistance when their incomes increase to the point that they no longer mathematically qualify for a subsidy (when 30% of the family income is equal to the rent). At that point, the family can continue in the program receiving no subsidy for up to six months. In the case of project-based rental assistance, families are considered to have an "increased ability to pay" when, similar to the HCV program, their incomes increase to the point that they no longer qualify for a subsidy. Owners must terminate assistance to those families with an increased ability to pay, although a family's assistance may be reinstated if their income declines again. Note that a termination of assistance does not necessarily mean an eviction. Instead, the family may continue to live in its unit paying market rent. An exception exists for r esidents living in Section 202 and Section 811 developments that were funded after 1990. In those cases, assistance may not be terminated. Noncitizen Eligibility In order to receive assistance under all of the HUD rental assistance programs, each household member must be a citizen or an eligible noncitizen (e.g., persons with Green Cards). However, a household can receive prorated assistance if the family is a mixed family, meaning it has some citizen/eligible noncitizen members and some ineligible noncitizen members. For more detailed information, see CRS Report RL31753, Immigration: Noncitizen Eligibility for Needs-Based Housing Programs , by Maggie McCarty and Alison Siskin. Special Populations For some of the HUD rental assistance programs, only special populations are eligible. The Section 202 program serves only elderly families. The Section 811 program serves only persons with disabilities. While both the public housing program and the Section 8 project-based rental assistance program are generally available to all types of families, PHAs and owners may designate some properties as available only to elderly families or disabled families. Similarly, while the Section 8 HCV program is available to all types of families, some vouchers are designated by Congress as available only to certain populations. For example, Veterans Affairs Supported Housing (VASH) vouchers are only available to homeless veterans and Family Unification Program (FUP) vouchers are only available to families involved with the child welfare system. What Counts as Income?29 In general, the statute and regulations governing HUD rental-assistance programs define income by what is excluded , rather than by what is included; most common sources of income from all family members count in determining a family's eligibility for HUD-assisted housing, unless they are otherwise excluded by statute or regulation. The term "income" is defined at 42 U.S.C. Section 1437a(b)(4) as "income from all sources of each member of the household, as determined in accordance with criteria prescribed by the [HUD] Secretary, in consultation with the Secretary of Agriculture." HUD, through regulation, has developed a list of items that are excluded from income. In addition, statutes governing other federal benefit programs may exclude their benefits from income for purposes of determining eligibility for HUD-assisted housing. This section first gives examples of what is included in income, and then discusses what is excluded. What Is Included in Income? HUD regulations provide an illustrative list of items included in income, which includes income earned on assets (described in more detail in the next section). Among items included in income are earnings from employment, including overtime pay, tips, and bonuses; payments from Social Security, pensions, or other retirement benefits; disability income, including veterans disability benefits, death benefits, and insurance payments; unemployment compensation, disability compensation, and workers' compensation; Temporary Assistance for Needy Families (TANF) cash assistance (with exceptions); alimony and child support; and military pay. Sometimes questions arise about whether veterans' benefits are included in determining eligibility for HUD-assisted housing. Under the law and HUD regulations, all forms of veterans' benefits are included as income except for lump-sum disability payments, as mentioned in the next section. What Is Excluded from Income? Items excluded from income can be found in various places in statute and regulation. Items excluded in 42 U.S.C. §1437a(b)(4): The housing assistance statute where income is defined specifically excludes lump sum deferred payments for Supplemental Security Income (SSI), Social Security, or veterans disability. Such payments may occur when back payments are made to cover the period during which the beneficiary appealed a denial of benefits or if prior payments were underestimated. Items excluded in HUD regulation: The HUD Secretary also has discretion in determining items that are excluded from income. These are listed in regulation at 24 C.F.R. Section 5.609(c). As of the date of this report, there were 17 items in the regulation excluded from income. Among the excluded items are employment income earned by children under age 18; payments received for the care of foster children; adoption assistance in excess of $480 per child; amounts received to pay for medical expenses; income of a live-in aide; and special pay of a family member in the Armed Forces exposed to hostile fire. Items excluded in other federal statutes: One of the 17 items excluded in the HUD regulation is "[a]mounts specifically excluded by any other Federal statute." As of the date of this report, there were 26 categories of federal payments or benefits excluded from income. HUD has published notices in the Federal Register when new categories of assistance were excluded; the last instance was in 2014. Some of the programs where benefits are excluded include Supplemental Nutrition Assistance Program (SNAP, formerly Food Stamps) benefits; payments under the Low Income Home Energy Assistance Program (LIHEAP); child care provided under the Child Care and Development Block Grant (CCDBG); payments or earnings for those participating in Workforce Investment Act (WIA) programs; and major disaster and emergency assistance received by individuals and families. What Are the Rules for Assets?40 There is no asset limit for eligibility under the five programs discussed in this report. Instead, PHAs and owners of multifamily housing must either count the actual income earned on assets, or impute income from assets, and include that amount in a household's annual income calculation for purposes of determining eligibility and rent. Assets include real property, savings accounts, stocks, and bonds. They do not include necessary personal items such as furniture and automobiles. Pursuant to regulation, if a family's net assets (the cash value excluding costs of disposal) are at or below $5,000, then any actual income received from the assets (e.g., interest on a savings account) is included in annual income for determining program eligibility. If a family's net assets exceed $5,000, then the greater of actual income or imputed income is attributed to the family. Imputed income is "a percentage of the value of such assets based on the current passbook savings rate ... " and for most programs is currently set below 1%. For example, if a family has $6,000 in a non-interest-bearing checking account (so earning no actual income), the PHA or owner would multiply the amount by 1% and add the resulting amount ($60) to the family's annual income. Or, if a family owns a house, the PHA or owner would determine its market value, subtract any mortgage owed as well as costs of disposal, and multiply the resulting cash value by 1%. The greater of this amount or any actual rental income would be added to the family's annual income. How Is Tenant Rent Determined? Families receiving HUD rental assistance are generally required to contribute toward their rent. The subsidy the family receives then generally makes up the difference between the tenant contribution toward rent and the actual cost of the housing (rent and utilities). Families' contributions are statutorily set as the greatest of 30% of a family's adjusted income, 10% of a family's gross income, welfare rent (if applicable), or in the case of public housing and the Section 8 HCV program, the minimum rent set by the PHA (not to exceed $50, with a hardship exemption). If a family participating in the Section 8 HCV program chooses to live in a unit for which their minimum tenant contribution plus their allowable subsidy are not sufficient to fully cover the rent, the family may choose to pay the difference, as long as their total contribution does not exceed 40% of their income in the first year (although the family may choose to pay more than 40% in subsequent years). Families living in public housing must be offered the option to pay an alternative market-comparable flat rent. Utility Costs In cases where utility costs (e.g., natural gas, electricity, other heat sources, water, sewer, and garbage) are not included in rent—meaning utilities are tenant-paid—tenants are provided with a utility allowance. A utility allowance is meant to cover the approximate cost of tenant-paid utilities, based on a utility allowance schedule developed by the PHA or property owner. Utility allowances are deducted from a tenant's monthly rental contribution, or, in the case where a utility allowance exceeds a tenant's monthly rental contribution, a utility reimbursement is paid to the tenant. What Is Adjusted Income?52 As mentioned in the previous section, adjusted income is used to determine a family's contribution toward rent in assisted housing. PHAs and property owners calculate adjusted income after taking deductions from total annual income. By statute, there are a number of mandatory deductions from annual income when calculating adjusted income: Elderly and Disabled Families: $400 is deducted for elderly or disabled families. Certain Unreimbursed Medical Expenses: To the extent that the sum of certain unreimbursed health-related expenses exceeds 3% of a family's income, they may be deducted in the following cases: (1) medical expenses for elderly and disabled families, and (2) attendant care or apparatus expenses for a family member with a disability if the expenses allow any family member to work. Reasonable Child Care Expenses: These are deductible to the extent that they allow a family member to be employed or further his or her education. Dependents: $480 is deducted for each member of the family who is not the head of household and who is either (1) younger than 18; (2) a full-time student; or (3) 18 or older and has a disability. Earned Income of Certain Public Housing and Section 8 Voucher Residents: Current law includes an earned income disregard for certain public housing residents and Section 8 HCV holders. Specifically, certain residents of public housing who begin employment or increase their earnings can have 100% of their increased earnings disregarded in the first year and 50% disregarded in the second year. Disabled Section 8 HCV holders are eligible for the same disregard. Additionally, the law includes deductions for child support and spousal support payments, provided that Congress provides additional funding expressly to cover the cost of those deductions. Specifically, child support paid by a family member on behalf of a child who does not live in the household may be deducted, up to $480 per child. Similarly, spousal support for a spouse who lives outside the household may be deducted. Neither of these deductions have ever been funded by Congress, so they are not currently in effect. How Often Is Family Income Recertified?56 The statute governing tenant income eligibility states that family income must be reviewed upon selection for assistance and at least annually thereafter. HUD regulations require annual recertification of tenant income and rent and give guidance regarding interim recertification. Across all programs, families must report any changes in family composition when they occur and family income must be reexamined at that time. If a family experiences a decrease in income, the family may request a mid-year reexamination. If a family experiences an increase in income, PHAs and owners are required to reexamine income, though the circumstances of how this occurs vary by program. In the three project-based rental assistance programs, if the family experiences an increase in income, the owner must reexamine family income if it increases by $200 or more per month. For the public housing and Section 8 HCV program, the regulations do not establish a reexamination threshold for increases in income and, instead, leave the discretion to the PHA to establish their own thresholds. History What Is the Origin of the Current Income Limits Used in Housing Assistance Programs? Income limits as we know them today, which are based on percentages of area median income (AMI), were introduced in the 1970s as part of the then-new Section 8 program. Prior to the introduction of Section 8, public housing, which has existed since the 1930s, provided housing for "low income" families. While the federal law governing public housing included rules regarding rent-to-income ratios (e.g., a family's income could not be more than five times the rent), each PHA made the determination of what was considered "low income" for the area that it served. Further, two other multifamily housing programs enacted in the 1960s used different measures for income eligibility. The Section 221(d)(3) program generally based eligibility on costs to support a unit, but not to exceed area median income, while the Section 236 program set eligibility at 135% of public housing income limits. Proposals to standardize eligibility using median income came from HUD. In both 1970 and 1971, Administration-sponsored bills proposed to simplify income eligibility for FHA-insured multifamily housing programs, which at the time primarily consisted of the Section 236 program, by tying eligibility to median income rather than local public housing income limits. The rationale was that the variability of public housing income limits resulted in regional disparities in who was eligible for assistance in multifamily housing. The area median income measure was meant to "provide the needed flexibility to serve all geographic areas equitably." The Administration proposals to standardize income eligibility were not adopted. However, a few years later when Congress enacted the Housing and Community Development Act of 1974 ( P.L. 93-383 ), it incorporated area median income into the newly enacted Section 8 program eligibility guidelines, as well as Section 236, setting eligibility at 80% of AMI. In addition, the term "very low-income" was introduced and defined as income that does not exceed 50% of area median income. P.L. 93-383 changed the law regarding public housing so that at least 20% of new units were available to very low-income families, but eligibility criteria for public housing generally were not changed to define low-income as 80% of AMI until 1981, as part of the Omnibus Reconciliation Act ( P.L. 97-35 ). What Is the Origin of the Income-Based Rent Setting Standard? Most families receiving federal rental assistance pay 30% of their adjusted income toward rent (or 10% of gross income, or welfare rent, if higher). This has been the standard across HUD rental assistance programs since 1981. Before that time, minimum tenant contribution standards varied based on program and tenant income. The so-called "Brooke Amendment" in 1969 is credited with creating today's income-based rent standard. The Brooke Amendment limited tenant contributions toward rent in public housing at no more than 25% of family income. Prior to that time, tenant contributions toward rent were set by PHAs based on the cost of maintaining public housing. As public housing properties aged, the cost of maintaining them grew and families were asked to pay higher and higher rents. The Brooke Amendment was intended to cap tenants' contributions toward rent in public housing at a level that was deemed affordable. The 25% standard of affordability that was adopted under the Brooke Amendment was based on pre-Great Depression standards for mortgage qualification: a week's wages for a month's rent (or, 25% of income). The Brooke Amendment proved influential; the Section 8 program, which was created in 1974, included income-based rents, set at between 15% and 20% of family income, depending on household characteristics. The Omnibus Budget Reconciliation Act of 1981 (OBRA, P.L. 97-35 ) standardized rents across all HUD rent assistance programs at 30% of adjusted gross income (or 10% of gross income or welfare rent). The new standard was higher than previous standards, which meant families' contributions towards rent were increased. Since increases in families' contributions reduce federal subsidy costs, this policy change achieved budget savings for the federal government, which was the intent of OBRA 1981. Comparisons The five HUD rental assistance programs discussed in this report are the largest, but not the only, rental housing programs administered by the federal government. HUD operates additional housing programs, and the Departments of Agriculture and the Treasury also administer housing programs targeted to low-income families. These other housing programs serve similar populations as the five HUD rental assistance programs, and while there may be some differences in eligibility and benefit structures, they also use many of the same income and rent standards as the five HUD programs. This is important to note because if changes were to be made to the income and rent policies governing HUD's rental assistance programs, those changes may also affect other programs. This section of the report provides brief comparisons of HUD's five main rental assistance programs to other federal housing programs as well as other federal benefits programs that serve low-income populations. How Do These Income and Rent Policies Compare to Other HUD Programs? HUD administers several other programs where funds are distributed to state and local governments or to community providers by formula or competition, and the recipients have the option of using the funds to provide rental assistance to low-income families living in permanent housing. These programs are the Homeless Assistance Grants, the Housing Opportunities for Persons with AIDS (HOPWA) program, and the HOME Investment Partnerships program. These programs differ from the five rental assistance programs already discussed in that they leave a number of decisions about eligibility and subsidy levels to local grantees. Homeless Assistance Grants70 Permanent and transitional housing for homeless individuals is funded primarily through the Homeless Assistance Grants. The Homeless Assistance Grants consist of three separate grant programs: the Emergency Solutions Grant, the Continuum of Care (CoC) program, and the Rural Housing Stability Assistance program. Unlike the other programs discussed in this report, there is no statutory income requirement for the Homeless Assistance Grants. The statute provides that eligibility depends on requirements that are specific to the individual programs. The CoC program is the primary source of assistance for permanent and transitional housing. The program does not have income limitations for determining eligibility. However, income could be relevant in determining a family's contribution to housing costs. Grant recipients that lease property where homeless clients reside have the option of imposing an "occupancy charge." If an occupancy charge is imposed, income is calculated in accordance with the regulations governing income and adjusted income (24 C.F.R. §5.609 and §5.611), and the occupancy charge cannot exceed the greater of 30% of adjusted income, 10% of gross income, or welfare rent. In cases where homeless clients live in units receiving rental assistance, they must contribute toward rent. The regulations governing income and adjusted income for the five HUD rental assistance programs and discussed in this report apply. Housing Opportunities for Persons with AIDS (HOPWA)73 Funds through the HOPWA program may be used for short-term housing assistance, permanent housing, and supportive services. HOPWA-funded permanent housing may be provided through project- or tenant-based rental assistance as well as in community residences. Residents receiving rental assistance must be low-income, defined as income at or below 80% of area median income, but families or individuals living in community residences need not be low-income. In each case, the HOPWA program requires families to pay rent, and the general regulations governing income and adjusted income apply (24 C.F.R. §5.609 and §5.611). HOME Investment Partnerships Program78 HOME program funds can be used for tenant-based rental assistance and to construct, acquire, or rehabilitate properties for rental housing. Families living in HOME-funded rental housing or receiving rental assistance must be low-income (at or below 80% of area median income); however, with income targeting, 90% of families must be at or below 60% of area median income. Under HOME regulations, annual income may be determined in one of three ways: (1) using the regulations at 24 C.F.R. Section 5.609, (2) as reported using the Census long form, or (3) adjusted gross income as reported to the IRS. Adjusted income is determined according to the general HUD regulations (24 C.F.R. §5.611). Rent for housing that was developed using HOME funds cannot exceed the lesser of Section 8 fair market rents or 30% of the adjusted income of a family whose income is 65% of the area median income. The HOME statute and regulations do not set a maximum rent contribution for tenants receiving tenant-based rental assistance, but local jurisdictions must set a minimum rent contribution level. How Do These Income and Rent Policies Compare to Non-HUD Housing Assistance Programs? USDA Rural Housing The U.S. Department of Agriculture's Rural Housing Service funds the construction of affordable rental housing in rural areas through its Section 515 program and ongoing rent subsidies tied to those properties through its Section 521 program. Similar to HUD rent assistance programs, families are generally eligible to live in Section 515/521 properties if they have low or very low incomes (using HUD's income limits), although, in some cases, moderate-income families may also be eligible. USDA uses the same basic standards as HUD for determining family income, adjusted income, and rent. Low-Income Housing Tax Credit Program The U.S. Department of the Treasury's Low-Income Housing Tax Credit (LIHTC) program does not provide direct rental assistance; instead, it provides federal tax credits that are used to fund the construction of multifamily properties in which a portion of the units must be offered at below-market rents to lower-income families. Rather than specifying maximum income eligibility for tenants, the LIHTC program sets standards that apply at the property level. In order for a property to receive tax credits under the program and be in compliance with program rules, either 20% of the units must be rented to families with incomes at or below 50% of local area median income, or 40% of units must be rented to families with incomes at or below 60% of median income. This effectively means that families must have income at either 50% or 60% of AMI in order to live in rent-restricted units. The LIHTC program uses the HUD definition of income. Low-income families in rent-restricted units pay flat, below-market rents rather than income-based rents. The below-market rents for LIHTC units are set at 30% of either 50% or 60% of AMI (depending on which standard the property meets). How Do These Policies Compare to Other Federal Low-Income Assistance Programs? The low-income families who receive assistance through the HUD rental assistance programs discussed in this report may also qualify for other forms of public assistance. However, other public assistance programs use different standards for determining family eligibility, family income, and benefit levels. The policies of the Temporary Assistance for Needy Families (TANF) assistance program, the Supplemental Nutrition Assistance Program (SNAP, formerly Food Stamps), and the Medicaid health insurance program are compared to those of HUD housing assistance programs below. One important difference between these programs and HUD's rental assistance programs is that each of these three programs is administered at the state level, whereas the HUD rental assistance programs are administered at the local level. TANF90 TANF differs significantly from the housing assistance programs in that it provides a block grant to states, and states are left to make most of the decisions about how assistance will be provided within the state. Eligibility for assistance, the type of benefit provided, the amount of assistance, and definitions of income are all set by states, in contrast to HUD housing assistance programs, where these aspects of programs are all determined by federal law. SNAP91 SNAP (formerly Food Stamps) is more similar to HUD rental assistance than TANF, in that eligibility, type of benefit provided, and amount of assistance are all set by federal law. However, the federal eligibility standards differ substantially from those in HUD rental assistance programs. Families are eligible for SNAP benefits if they meet income eligibility standards based on federal poverty guidelines that generally apply to the entire country, rather than the local area median income limits used in the HUD rental assistance programs. Similar to HUD rental assistance programs, family income is determined for SNAP based on federal definitions that include some sources of income, exclude other sources of income, and allow for certain deductions. However, what counts as income and what is deducted from income in SNAP is different than in HUD rental assistance programs. Additionally, SNAP law's "categorical eligibility" rules permit some families to qualify for SNAP benefits based on their participation in other programs. HUD rental assistance programs do not have any "categorical eligibility" provisions. Medicaid The income eligibility standards under Medicaid are quite different from those of the HUD rental assistance programs. Whereas HUD programs use federal income and eligibility standards, the Medicaid program uses a mix of federal and state standards. Under the Affordable Care Act (ACA), as amended, states were required to transition to a new income counting rule based on Modified Adjusted Gross Income (MAGI) when determining eligibility for most of Medicaid's nonelderly populations. Under the Medicaid MAGI income counting rules, the state will look at the individual's MAGI, deduct an amount equal to 5% of the Federal Poverty Level, which the law provides as a standard disregard, and compare that income to the new income standards set by each state in coordination with the federal government to determine if the individual meets the program's eligibility requirements. MAGI is defined as the Internal Revenue Code's (IRC's) adjusted gross income (AGI) plus certain foreign earned income and tax-exempt interest as calculated for tax purposes. AGI reflects a number of deductions, including trade and business deductions, losses from sale of property, and alimony payments, increased by tax-exempt interest and income earned by U.S. citizens or residents living abroad. From there, various types of income not included in AGI are added to calculate MAGI depending on the particular program (e.g., Medicare, Medicaid, and ACA exchange and premium tax credits). Additionally, under Medicaid regulations, particular types of income may be subtracted from AGI to calculate MAGI for determining Medicaid eligibility. The inclusions and exclusions under MAGI differ substantially from the inclusions and exclusions used for determining adjusted gross income under HUD's rental assistance programs. Certain groups (e.g., individuals who are eligible for Medicaid through another federal or state assistance program such as foster care children and individuals receiving SSI, and the elderly) are exempt from income eligibility determinations for Medicaid based on MAGI. Prior law's income determination rules under Medicaid will continue to be used for determining eligibility for these groups. Federal requirements and options combined with state choices and definitions make generalizations about Medicaid eligibility policies for the MAGI-exempted groups difficult.

The Department of Housing and Urban Development (HUD) administers five main rental assistance programs that subsidize rents for low-income families: the Public Housing program, the Section 8 Housing Choice Voucher program, the Section 8 Project-Based Rental Assistance program, the Section 202 Supportive Housing for the Elderly program, and the Section 811 Supportive Housing for Persons with Disabilities program. Together, these programs serve more than 4 million families and make up well over three-quarters of HUD's budget. All five programs provide rental assistance in the form of below-market rent available to low-income individuals and families. While the programs vary in some important ways—how assistance is provided, who administers the assistance, whether the assistance is restricted to certain populations—they use many of the same or similar standards when establishing tenants' income eligibility and their minimum contributions toward rent. Families are generally eligible for HUD assistance if their incomes are below certain income standards set by HUD. Unlike the poverty measurement used by some other federal benefits programs that target low-income populations, income eligibility for HUD-assisted housing varies by locality and is tied to local area median income. Income, for the purposes of eligibility, is defined as income from all sources earned by all members of the family, with some exclusions (e.g., income earned by minors). Although a family may be eligible for assistance, they are not guaranteed to receive it. Housing assistance programs are not entitlements, thus, due to funding limitations they serve only roughly one in four eligible households. Families wishing to receive assistance are generally placed on waiting lists. Once a family is determined eligible for HUD assistance and is selected to receive assistance, the rent they pay is generally based on 30% of their adjusted income. Those adjustments include deductions for elderly and disabled families, certain medical costs, and certain child care costs. Families' incomes, adjusted incomes, and contributions toward rent are typically recertified annually. The laws governing both income eligibility and tenant rents were standardized in the early 1980s, although the origins of the current policies date back earlier and are derived from experiences with the public housing program, which was the first federal rental assistance program. The income and rent policies in the five primary HUD rental assistance programs are also used to some extent by other HUD programs such as the homeless assistance programs and the HOME Investment Partnerships program. Looking at non-HUD housing programs, the Department of Agriculture's rural rental assistance program largely uses HUD's income and rent policies, and the Department of Treasury's Low-Income Housing Tax Credit program uses some HUD standards, but not all of them. Comparing HUD's primary rental assistance programs to other federal assistance programs that serve similar populations, HUD's programs differ in important ways; most notably, other assistance programs devolve more decisionmaking about income determination and eligibility to state administrators, whereas the HUD policies are largely set by federal statute and regulation. While the income and rent policies that govern HUD's five main rental assistance programs are designed to accurately calculate and capture family incomes and financial circumstances, they can also lead to confusion among recipients as well as difficulties for local program administrators. In response to the rather complicated rules, stakeholders and some policymakers have called for changes to the current system; in fact, several laws were enacted in the 114th Congress to streamline income and rent calculations and those policy changes are in various stages of implementation. This report provides answers to some of the most common questions about the income and rent policies in federal rental assistance programs, including questions about where these policies came from and how they compare to other federal assistance programs that serve the same or similar purposes or populations. It is intended to help answer commonly asked questions, as well as provide information to policymakers seeking to understand and evaluate proposed changes to the current system.

U.S.-Cambodian Relations1 Although human rights concerns place limits on the depth of the U.S.-Cambodia relationship, a period of relative political stability in Cambodia that began in 2006, combined with U.S. regional security and strategic concerns, has led to a movement toward deeper bilateral ties. U.S. interests in the Kingdom of Cambodia include social, economic, and political development, trade and investment, regional security, civil society, and human rights. As China's economic and political influence has grown in Cambodia and the Lower Mekong Delta region, the Obama Administration has attempted to bolster U.S. ties with Cambodia and other countries in the region. A key challenge for U.S. policy toward Cambodia lies in combining and balancing efforts to engage the Kingdom on a range of fronts while promoting human rights and democracy. Some policy makers and experts contend that U.S. relations with Cambodia should be restricted until Prime Minister Hun Sen reverses a trend of deteriorating conditions for civil liberties and democratic institutions. High-Level Diplomacy According to some observers, Cambodia's close ties with China do not preclude improved relations with Washington, and Phnom Penh welcomes increased U.S. attention. The Obama Administration has taken tentative but meaningful steps toward strengthening U.S. ties with the Kingdom, particularly as Washington has sought to place greater foreign policy emphasis on East Asia. Hillary Clinton visited Phnom Penh in October 2010, the first visit by a U.S. Secretary of State in seven years, where she met with Prime Minister Hun Sen, King Norodom Sihamoni, opposition leader Mu Sochua, and others. During the trip, Secretary Clinton cautioned the Cambodians about becoming "too dependent" upon China. In June 2012, Cambodian Foreign Minister Hor Namong met with Clinton in Washington, DC, to discuss bilateral and regional issues. In July 2012, Secretary Clinton participated in the U.S.-Association of Southeast Asian Nations (ASEAN) Ministerial Meeting in Phnom Penh, where she spoke about U.S. support for ASEAN, maritime disputes in the South China Sea, and six strategic "pillars" of U.S. engagement in the region: regional security cooperation, economic integration and trade, engagement in the Lower Mekong region, transnational threats, democratic development, and war legacies. The former Secretary of State met with Hun Sen and participated in the U.S.-ASEAN Business Forum held at Siem Reap, near the famous temples of Angkor Wat. In November 2012, President Barack Obama traveled to Phnom Penh to attend the U.S.-ASEAN Leaders Meeting and the East Asia Summit (EAS). Obama was the first U.S. President to visit Cambodia. While in Phnom Penh, the President met briefly with Prime Minister Hun Sen—the usual protocol for a U.S. President on the sidelines of an EAS summit. During the meeting, Obama reportedly focused on human rights issues and urged the Cambodian leader to release political prisoners and allow opposition parties greater freedom. Human rights groups welcomed the call for improvements in Cambodia's human rights record, although some argued that the President should not have met Hun Sen at all. Military Cooperation The U.S. government has devoted a small but sustained level of engagement with the Cambodian military, in part to maintain a degree of leverage in the Kingdom. U.S. military officials have expressed a desire for further cooperation with the Royal Cambodian Armed Forces (RCAF) as part of the Administration's policy of rebalancing toward Asia. U.S. military engagement in Cambodia includes naval port visits, military assistance, and joint exercises related to international peacekeeping, civic action and humanitarian activities, and maritime security. Washington began military contacts in roughly 2006 with a small International Military Education and Training (IMET) program worth $49,000 and a focus on counterterrorism cooperation. In the following years, two U.S. naval ships made port calls in Cambodia, the first in three decades, and U.S. military personnel launched training programs in counterterrorism and peacekeeping. Since 2010, U.S. and Cambodian military personnel have collaborated in bilateral and multilateral exercises. In 2012, the USS Blue Ridge visited Sihanoukville, Cambodia. Naval officers from both sides reportedly discussed joint exercises, coastal security, exploration and rescue, and other activities. In October 2012, U.S. and Cambodian naval forces participated in Cooperation Afloat Readiness and Training (CARAT) for the third year in a row, focusing on maritime security. In March 2013, the third annual Angkor Sentinel, a bilateral peacekeeping exercise held in Cambodia, took place in Kamong Speu. Cambodian Debt Cambodia owes the United States roughly $450 million (including $162 million in principal) for agricultural commodities provided by the U.S. Department of Agriculture to the Lon Nol government during the early 1970s. Cambodian officials have argued that many of the shipments never reached Cambodia, and asked the U.S. government to lower the interest rate on the debt and to return most of it (at least 70%) in the form of foreign aid. The U.S. government reportedly has already forgiven nearly $100 million, while U.S. officials have expressed a willingness to reschedule loan payments and return some payments as aid. However, U.S. officials have demanded that the Cambodian government first sign a bilateral debt agreement, acknowledging its obligations, and begin making payments before negotiations on debt terms begin. During their November 2012 meeting, President Obama remarked that his Administration would work to "find an acceptable solution for both sides." Cambodia and the Region Cambodia is integrated in the global system through foreign aid ties, the international NGO community, regional organizations, and foreign trade and investment. The Kingdom is heavily dependent upon foreign aid from Japan, the United States, Australia, and Europe. Since 1996, the World Bank, other international financial institutions, and Development Assistance Committee (DAC) countries have attempted to coordinate aid and set economic and political reform guidelines for the Cambodian government through the Consultative Group for Cambodia and later the Cambodia Development Cooperation Forum. Cambodia is a member of the Association of Southeast Asian Nations and served as the organization's rotating chair for the first time in 2012. Cambodia has significant trade relations with neighbors Thailand and Vietnam, while its largest export market is the United States. Cambodia as ASEAN Chair In 2012, Cambodia served a one-year rotating term as chair of ASEAN. Many observers believe that Cambodia's deference to China, its principal economic patron, undermined ASEAN unity at meetings of ASEAN and the East Asia Summit. At the July 2012 ASEAN Ministerial, Phnom Penh's support for China's position on territorial disputes in the South China Sea aggravated tensions within the regional organization, resulting in the first failure in ASEAN's 45-year history to issue a joint communiqué. The tensions largely centered on the objections of Cambodia, as chair of the proceedings and allegedly at China's behest, to including a statement about the standoff between China and the Philippines at Scarborough Shoal. Beijing opposes ASEAN's involvement in what it perceives to be bilateral issues. Cambodia and Thailand Cambodia and Thailand, which once ruled parts Cambodia, have a history of conflict, although they share cultural traits and have strong economic ties. The two countries have experienced outbreaks of border tensions in recent years. In 2008, the long-simmering dispute over the sovereignty of land surrounding the 11 th century Khmer Preah Vihear temple, which lies in Cambodia, reignited after the United Nations (UNESCO) granted the site World Heritage status. The Thai government opposed the declaration, since it bolstered Cambodia's claims, although most access to the temple passes through Thailand. Border clashes between Thai and Cambodian troops have flared several times since 2008, resulting in over three dozen deaths, including Thai and Cambodian soldiers and civilians. Yingluck Shinawatra, Thailand's Prime Minister since 2011, has sought to repair ties with Cambodia. In April 2013, the International Court of Justice began hearings on the dispute. Cambodia and Vietnam Relations between the Cambodian communists (Khmer Rouge) and the Vietnamese Communist Party (VCP) included mutual suspicion and periods of acrimony, culminating in the Vietnamese invasion and occupation of Cambodia in 1979-1989. The VCP provided support to some members of the current Cambodian leadership who had defected from the Khmer Rouge. Hun Sen, who served as Prime Minister (1986-1993) and Foreign Minister in the Vietnam-backed Peoples Republic of Kampuchea (see T extbox , below), has maintained close diplomatic, economic, and military relations with Hanoi. In April 2013, Cambodian and Vietnamese officials signed an agreement on defense cooperation, focusing on training, joint naval patrols, and other activities. Many Cambodians regard Vietnam with wariness stemming from the country's control over parts of the Kingdom prior to the French colonial period (1887-1953) and during the occupation of the 1980s. Some opposition leaders have criticized Hun Sen for cooperating with Hanoi in demarcating disputed border areas, asserting that he is ceding land to Vietnam. Cambodia and China The People's Republic of China (PRC), once a major provider of military support to the Khmer Rouge, has become the leading foreign economic benefactor in the Kingdom of Cambodia. Some observers contend that Cambodia's foreign policies are heavily influenced by China, as evidenced by the Kingdom's support of China's positions during the 2012 ASEAN meetings. Other analysts believe that Hun Sen values and seeks relations with multiple foreign powers. Chinese economic interests are playing a growing role in Cambodia's development. The PRC is a major source of development assistance, largely in the form of concessional loans, Chinese-built infrastructure, and investment packages. In November 2012, PRC Premier Wen Jiabao met Prime Minister Hun Sen in Phnom Penh, promising to boost ties in many economic areas. In April 2013, China and Cambodia reportedly signed economic agreements that included $500 million in PRC soft loans and $48 million in grants during Hun Sen's meeting with new PRC Premier Li Keqiang in Beijing. Hun Sen was the first foreign leader to meet with Premier Li. Beijing has provided loans, trucks, helicopters, aircraft, uniforms, and training to the Cambodian Armed Forces. China reportedly sent two military delegations to Cambodia in 2012 and signed defense cooperation agreements with Phnom Penh in 2012 and 2013. The 2012 accord, worth a reported $17 million, included the construction of military training and medical facilities. Political Developments and Human Rights During the past decade, Cambodia has made fitful progress in some areas of U.S. interest and concern, including the conduct of elections, the development of a vibrant civil society, the protection of labor rights, bringing some Khmer Rouge leaders to justice, and improving public health. After a period of relative stability and prosperity, Hun Sen and the Cambodian People's Party (CPP) appear to enjoy popular support, particularly in rural areas. A public opinion survey conducted in Cambodia by the International Republican Institute in early 2013 found that 79% of respondents felt that the country was going in the right direction, with many of them pointing to new roads, schools, and clinics as reasons for such optimism. Growing corruption and the trade and use of drugs were viewed as major national problems. During the past several years, the political system has become less democratic and civil liberties such as free speech and assembly have been encroached upon. Although political opposition groups may gain parliamentary seats in the national elections by forming a united front and tapping into voter discontent among urban voters, youth, and marginalized groups, the CPP's hold on power seems assured for now. Hun Sen has bolstered his political strength through a combination of electoral victories, influence over the broadcast media and judiciary, legal and extra-legal political maneuvers, intimidation of opponents, patronage, and economic threats. Some critics argue that while electoral processes have improved, Hun Sen possesses unfair campaign advantages through his control over the broadcast media and harassment of political opponents, critics, and civil society actors. Although the press is somewhat freer to criticize the government, the print media reaches a relatively small proportion of the population. The Prime Minister has silenced political opponents through defamation and other lawsuits. Under a penal code that went into effect in December 2010, persons can be charged with defamation for the expression of views that "affect the dignity" of individuals, public officials, and government institutions and the crime of incitement for public speech and writings that create "serious turmoil in society." Governance is marred by corruption and many observers suspect that the CPP has played a role in many unresolved, politically motivated killings. The National Democratic Institute described Cambodia as a country that has "made some progress in building democratic institutions and practices, particularly with a strong and vocal civil society." However, the "long-standing dominance of the ruling Cambodian People's Party … over all aspects of governance … has limited transparency of government activities, stifled dissent and opposition, and suppressed free speech and access to information." In October 2012, the Phnom Penh Municipal Court sentenced independent radio broadcaster, government critic, and land rights activist Mam Sonando to 20 years in prison for insurrection. Many Cambodian observers and human rights groups considered the charges to be lacking in evidence and politically motivated. In March 2013, following international pressure, Sonando's charge was replaced by a minor one and he was released. Some experts argue that the space for civil society in Cambodia is shrinking. For example, in February 2013, the Cambodian government attempted to pressure lawyers not to give media interviews without the prior approval of the national bar association. Demonstrations in the capital have been outlawed except in an officially designated "freedom park" away from state buildings and the parliament. There also have been instances of the government detaining or firing upon protestors in various disputes. 2013 National Elections In the 2008 national elections, the two opposition parties, the Sam Rainsy Party led by Sam Rainsy and the Human Rights Party headed by Kem Sokha, won a total of 29 seats. The two royalist parties, the FUNCINPEC party and the Norodom Ranariddh Party, led by Prince Norodom Ranariddh, attained four seats combined. In 2012, the CPP won local elections by a wide margin—1,592 communes out of a total of 1,633, with the Sam Rainsy Party and the Human Rights Party winning the remainder of the communes. In 2012, the Sam Rainsy Party and the Human Rights Party merged to form a single opposition party, the National Rescue Party (NRP), with Sam Rainsy as president and Kem Sokha as vice-president. Many observers believe the July 2013 national elections will likely mark another milestone in Hun Sen's evolving political power in Cambodia. Although a united democratic opposition may gain seats in Parliament, the CPP is expected to hold onto its large majority. The royalists, once a near-equal political force under FUNCINPEC, no longer constitute a challenge to the CPP. Experts are concerned that the 2013 elections will not be fair or credible. The 2008 national elections, in which the CPP won 90 out of 123 seats in the National Assembly, were perceived by some foreign election monitors as largely honest. Some irregularities were reported, although they did not appear to affect the outcome of the election or distort the will of the electorate. However, Hun Sen's political strength has further increased since 2008, giving rise to fears that he will ignore calls to ensure that the 2013 elections are conducted properly. Among major concerns are the prohibition of opposition leader Sam Rainsy from running in the contest, the expulsion of opposition lawmakers from the National Assembly, inaccurate voter lists, and the perceived bias of the National Election Committee (NEC). Sam Rainsy, a Cambodian politician for over two decades and major opposition voice, lived in self-imposed exile in France from 2009 to July 2013. He has been convicted of a number of charges since 2005, including defamation and destroying public property, and was sentenced in absentia to a total of 11 years in prison. These charges were widely regarded as politically motivated. In November 2012, the National Election Committee declared that although the National Rescue Party would be allowed to participate in the national elections, its leader, Sam Rainsy, would not, on the grounds that he was a convicted criminal. State Department spokesperson Victoria Nuland stated: "… the exclusion of a leading opposition leader calls into question the legitimacy of the whole democratic process in Cambodia." Following international pressure, on July 15, 2013, King Norodom Sihamoni pardoned Sam Rainsy at the request of Prime Minister Hun Sen. Sam Rainsy returned to Cambodia on July 19, less than 10 days before the July 28 elections. He reportedly was greeted by large and enthusiastic crowds in Phnom Penh. Although the pardon may have removed some legal obstacles to his participation in politics, the NEC concluded that Sam Rainsy was still ineligible to vote and run as a candidate in the national elections. On June 5, 2013, the National Assembly Permanent Committee expelled 29 lawmakers, including 27 opposition legislators, from Parliament, asserting that their status was no longer valid due to their decision to resign from their parties and join new ones, such as the National Rescue Party. Opposition Members argued that the Permanent Committee's move was unconstitutional and intended to weaken the recently united opposition. The U.S. government issued a statement expressing deep concern over the action, supporting "a political process that includes the full participation of all political parties on a level playing field," and urging the National Assembly leadership to allow all elected members to "fulfill their commitment to serve the Cambodian people." The Chheang Vun, chairman of the parliament's foreign affairs commission, rejected the U.S. statement as "unacceptable" and defended the legality of the Permanent Committee's decision. Some analysts warn that incomplete and flawed voter lists threaten the legitimacy of the national elections. A report by the National Democratic Institute and two Cambodian NGOs found that the quality of voter lists has declined. Voter registration fell from 88% in 2008 to 83% of the electorate in 2013. Over 10% of voters who thought they were registered were not, and over 10% of people registered could not be found. Democracy groups allege that the National Election Committee is too closely linked to the CPP and have expressed concerns over recruitment of its membership. The NEC Secretary General, Tep Nytha, responded to criticism by stating that the NEC is independent and that its selection process was done in accordance with the law and the approval of Parliament. Land Titling As the Cambodian economy has developed, tens of thousands of Cambodians—many of them living in squatter colonies—have been displaced as government, business, and foreign entities, often in collusion, have confiscated their land and homes, sometimes forcibly, for agricultural, mining, logging, tourism, and urban development projects. Some groups claim that over 400,000 Cambodians have been affected by such evictions since 2003. An estimated two-thirds of Cambodians lack proper deeds to the property on which they live. Many land titles were destroyed during the Khmer Rouge era, and many citizens lack knowledge of the law or the means to enforce it. In the past year, Cambodians have engaged in dozens of protests against forced resettlement or the lack of adequate compensation for their property. Over 200 people reportedly were arrested in protests over land rights in 2012. In 2012 and early 2013, Hun Sen announced that he would grant land titles to nearly half a million farmers, place a moratorium on land concessions, and return some property intended for development back to the people. However, critics say that the land titling scheme is not comprehensive; it does not affect urban areas or collective property belonging to indigenous peoples. They add that the process lacks transparency and accountability and is influenced by powerful interests. Furthermore, disputes continue, often resulting in arrests and violence by the government. Some observers contend that the announcement was a political move. Hun Sen reportedly warned some villagers that they would not receive titles to their properties under the new policy if he were not reelected. In June 2013, the Prime Minister announced that the titling program would be suspended until after the national elections. Trafficking in Persons Some experts argue that Cambodia has made significant strides in addressing trafficking in persons. The State Department has recognized Cambodia's efforts in combatting trafficking, although improvements reportedly have stalled. For three consecutive years, the Office to Monitor and Combat Trafficking in Persons placed Cambodia in the "Tier 2" category, meaning that the government does not fully comply with minimum standards in accordance with the Trafficking Victims Protection Reauthorization Act (TVPA), but it is making significant efforts to do so. However, in 2013, Cambodia's status fell to "Tier 2 Watch List" due to the country's inability to maintain progress. According to the State Department's Trafficking in Persons Report and other sources, Cambodia is a source, transit, and destination country for human trafficking, which reportedly is furthered by corrupt government officials in Cambodia and Thailand. Cambodians have been victims of sex trafficking, domestic servitude, debt bondage, and forced labor in surrounding countries, including the trafficking of men to work under slave-like conditions on fishing vessels. Despite improvements in the past decade, particularly in the child sex trade within the country, the Cambodian government has "failed to make progress in holding trafficking offenders and child sex tourists accountable." In the past year, government efforts were inadequate in protecting and assisting victims and prosecuting and convicting offenders, and government officials were often complicit or contributed to a climate of impunity. The Khmer Rouge Tribunal The Extraordinary Chambers in the Courts of Cambodia (ECCC), an international court with international and Cambodian judges and prosecutors, began proceedings in 2006 to try Khmer Rouge leaders and others responsible for grave violations of national and international law, such as crimes against humanity. The ECCC is financed through a U.N.-administered international trust fund and bilateral donations. The top foreign donors, in order of contributions, are Japan, Australia, the United States, Germany, France, and the United Kingdom. Japan has contributed $78.7 million since 2006. International donors pledged $35 million for operating costs in 2013. The tribunal reportedly has been hampered by interference from the Cambodian government and corruption by Cambodian court officials, resignations by some international judges, and unexpected costs and delays. Since the beginning of operations, the court has spent over $179 million, and has faced annual budget shortfalls which have resulted in unpaid salaries to Cambodian judges and staff. The United States government withheld assistance to the ECCC from 2006 to 2008 due to doubts about the court's independence. In 2008, the State Department announced that the court met international standards, and began providing contributions through the U.N. trust fund. Between 2008 and 2012, the United States contributed nearly $17 million to the tribunal. The U.S. government also has provided financial support to the Documentation Center of Cambodia (DC-Cam), an archive, library, and public service center related to Khmer Rouge atrocities. Under current congressional restrictions, foreign operations appropriations may be made available to the ECCC only if the Secretary of State certifies that the United Nations and the Government of Cambodia are taking credible steps to address allegations of corruption and mismanagement within the tribunal. Five Khmer Rouge leaders have been charged with crimes against humanity and war crimes. Kaing Guek Eav (known as Comrade Duch), Pol Pot's "chief executioner," ran the infamous Toul Sleng (S-21) prison in Phnom Penh, where an estimated 14,000 Cambodians were killed. Nuon Chea was the Khmer Rouge's second-in-command. Ieng Sary was the former foreign minister. Ieng Sary's wife, Ieng Thirith, was the regime's Minister of Social Affairs. Khieu Samphan, the chief of state, was in charge of the Communist regime's radical economic policies. In 2010, Kaing Guek Eav was sentenced to 35 years in jail (minus time already served), which many Cambodians considered to be too lenient. In February 2012, the court rejected his appeal and increased his term to life in prison. Of the remaining four defendants, all of whom were in their 80s at the beginning of 2013, Nuon Chea and Khieu Samphan have been in poor health and Ieng Thirith has been declared mentally unfit for trial and freed. Ieng Sary died in March 2013, before the completion of his trial. Cambodian and international human rights groups have advocated expanding the scope of prosecutions to include more Khmer Rouge officials. However, Prime Minister Hun Sen has opposed expanding the number of indictments, arguing that it would undermine "national reconciliation." Although Hun Sen had defected from the Khmer Rouge in 1977 and fled to Vietnam, some analysts argue that he is reluctant to widen the scope of the trials due to his former connections with Khmer Rouge military officials. Cambodian court officials have blocked the indictments of five additional suspects recommended by international members of the ECCC, maintaining that they were "not either senior leaders or those who were most responsible" during the Khmer Rouge period. Foreign Assistance Cambodia relies heavily upon foreign aid, which is equal to more than half of its government budget. Civil society groups are also heavily dependent upon foreign funding. The largest providers of traditional aid or overseas development assistance (ODA), in order of the amount of ODA, are Japan, the United States, Australia, Germany, and France. Development Assistance Committee (DAC) countries combined provided an average of $640 million per year between 2009 and 2011. U.S. Assistance Cambodia is the fourth-largest recipient of U.S. foreign aid in Southeast Asia after Indonesia, the Philippines, and Vietnam, and the second-largest beneficiary per capita after Timor-Leste. The Kingdom received $76 million in U.S. assistance in FY2012, including the following aid accounts and programs (see Table 1 ): Development Assistance : democratic elections, civil society, mass communications, trafficking in persons, agricultural productivity, environmental preservation; Economic Support Funds (ESF) : Khmer Rouge Tribunal (ECCC); Foreign Military Financing (FMF) : English-language training, military equipment, vehicle maintenance and logistical management training, maritime security; Global Health : HIV/AIDS, tuberculosis, malaria, maternal and child health, family planning and reproductive health, access to health care, nutrition; International Military Education and Training (IMET) : English-language, leadership training, maritime security; Nonproliferation, Antiterrorism, Demining and Related Programs (NADR) : Explosive remnants of war (ERW) clearance, border security; and Global and Regional P rograms : Global Climate Change Initiative, East Asia and Pacific trafficking-in-persons. In 2009, then-Secretary of State Hillary Clinton launched the Lower Mekong Initiative (LMI), a regional foreign assistance effort through which the United States aims to promote cooperation and capacity building in the areas of education, health, women's issues, regional infrastructure, and the environment. LMI participants are Burma (Myanmar), Cambodia, Laos, Thailand, and Vietnam. In 2012, the Obama Administration announced that, as part of the rebalancing policy in the Asia Pacific region, it would provide $50 million over three years for LMI programs. Among other aims, the LMI provides support to the Mekong River Commission (MRC) in an effort to help address the environmental effects of hydropower projects, many of them backed by Chinese companies, along the region's main tributary. The MRC is an inter-governmental agency whose mission is to promote the sustainable development of the Mekong River and collaboration on the management of shared water resources. Cambodia is one of the world's most heavily afflicted countries in terms of the numbers of unexploded ordnance (UXO) or explosive remnants of war (ERW), including landmines, cluster munitions, and bombs, as a result of U.S. bombing during the Vietnam War, the Vietnamese invasion, and civil wars during the 1970s and 1980s. There have been an estimated 27,000 UXO/ERW casualties since 1992, and 64,000 since 1979. U.S. assistance to Cambodia includes support for removing UXO/ERW and related training and Leahy War Victims Fund programs for prostheses, physical rehabilitation, and related training, employment, and support to non-governmental organizations (NGOs). The Kingdom reportedly has reduced the casualty rate from 900 per year in 2005 to under 200 in 2012, with the help of international aid. From 1998 to 2007, the U.S. Congress prohibited direct or government-to-government assistance to Cambodia in order to pressure Prime Minister Hun Sen into fully restoring democracy, but allowed U.S. assistance to NGOs and some humanitarian programs to continue. Congress lifted the ban in 2007 due in part to improving democratic procedures. Assistance remains largely channeled through NGOs, in part "reflecting USAID's commitment to building a vital civil society in Cambodia." Some policy makers have called upon the U.S. government to restrict and reduce foreign assistance to Cambodia if the Secretary of State deems the July 2013 national elections as not credible and competitive. Other Major Aid Providers Japan has been an important source of infrastructure and other assistance and investment. Australia's strong ties to Cambodia stem from its involvement in the U.N. Transitional Authority in Cambodia (1992-1993). Australian ODA has aimed to promote sustainable development and focused on child and maternal health and rural poverty. By other measures, China, which is not an OECD member or DAC country, is the largest provider of foreign aid to Cambodia, reportedly providing over $200 million annually during the past several years. China has been a major source of loans, infrastructure construction, investment, and development assistance to the Kingdom. Some human rights groups have criticized foreign aid donors for providing ODA despite the Cambodian government's lack of progress in improving governance and fighting corruption. Furthermore, many analysts argue that Chinese assistance has significantly reduced the effectiveness of other aid donors attempting to pressure Cambodia to make advances in the areas of rule of law, democracy, and human rights. Economic Conditions Cambodia is one of the poorest countries in Asia. The Kingdom has experienced steady economic growth during the past decade and a half, largely driven by expansions in agriculture, construction, the garment sector, and tourism. GDP growth was estimated to be 6.4% in 2012 and is forecast to be 6.9% in 2013. However, income inequality, which remains high, has been increasing. Continuing obstacles to faster and more balanced development and greater foreign investment include poor education and public health, low government capacity, weak legal and financial institutions, inadequate infrastructure, and official corruption. The United States is the largest overseas market for Cambodian goods, accounting for about half of the Kingdom's garment exports. There are about 600 clothing factories that employ approximately 400,000 workers in the Kingdom. Bilateral trade fell by 20% between 2007 and 2009, but has since rebounded. In 2011, U.S.-Cambodian trade surpassed the levels of before the global recession. In 2012, bilateral trade was worth $2.9 billion, including $2.7 billion in U.S. imports of Cambodian goods, mostly apparel, and $226 million in U.S. exports to the Kingdom. The largest U.S. export item was vehicles. In 1996, Cambodia and the United States signed a bilateral trade agreement (BTA), which provided for reciprocal "normal trade relations" tariff treatment. In July 2006, Cambodia signed a Trade and Investment Framework Agreement (TIFA) with the United States. Cambodia acceded to the WTO in October 2004. As a member of ASEAN since 1999, the Kingdom is committed to participating in the ASEAN Free Trade Area (AFTA) in 2015. Cambodia is also a party to the Regional Comprehensive Economic Partnership (RCEP), a proposed free trade area including the 10 nations of ASEAN and 6 other Asia-Pacific countries, which is under negotiation. Principal foreign investors in Cambodia include China, Malaysia, South Korea, Thailand, the United States, and Vietnam. According to one report, China has become Cambodia's largest investor with approximately $9 billion in cumulative investment ($1.19 billion in 2011). U.S. cumulative investment reportedly totals $1.3 billion. The United States invested $144 million in the country in 2011, triple the amount of 2010. Tourism accounts for 350,000 Cambodian jobs and 12% of gross domestic product, according to the Tourism Minister. Cambodians hope that offshore oil production will eventually provide a boon to government revenues and the economy. A number of multinational and national companies, including Chevron, are working in the Gulf of Thailand to develop oil reserves, estimated at 500 million barrels. However, the estimated start date of oil production has been delayed from 2013 to 2017. In addition to low labor costs, many Cambodian garment factories have developed a reputation for good labor practices, largely because of a U.S.-Cambodia agreement, enacted in 1999, that rewarded progress in labor conditions with increased access to the U.S. market. As part of the agreement, in 2001, the International Labor Organization (ILO) was brought in to monitor and promote good labor practices in the Kingdom. It continues to do so under the program Better Factories Cambodia with funding from the Royal Government of Cambodia, the Garment Manufacturers' Association in Cambodia, the U.S. Department of Labor, the World Bank, the Australian Agency for International Development, and international buyers. Labor relations have shown some signs of strain in recent years. Cambodian workers are free to form their own unions and have the right to strike, although a majority of unions are affiliated with the CPP, and independent labor leaders and strike organizers sometimes have been harassed by employers. In February 2013, an estimated 20,000 workers across a number of foreign-owned textile factories in an industrial area in southeastern Cambodia went on strike for better working conditions and higher wages. Other strikes also occurred in other regions throughout the year. Chinese Investments Although some Cambodians have expressed appreciation of China's role in their country's development, others have complained of its adverse social, environmental, and other effects. According to some estimates, China has become Cambodia's largest investor, concentrated in such areas as garments, agriculture, and mining. Although the United States is Cambodia's largest export market for apparel, China leads in foreign investment in the sector. Chinese companies are also helping to develop Cambodia's infrastructure and basic industry, reportedly building a rail line, sea port, and steel plant worth $11 billion. Other projects include road construction, hydropower, and irrigation. In December 2012, Cambodian and Chinese oil companies announced plans to build the Kingdom's first oil refinery in Kampot province, to be completed in 2013. Domestic demand for energy and Chinese investment have fueled dam construction in Cambodia and other countries along the lower Mekong and other rivers, alarming environmentalists and people who rely upon the waterways for their livelihood. Three Chinese-backed dams have been built in the Kingdom, three are under construction, and more reportedly are planned. These hydropower projects are largely financed and constructed by Chinese banks, companies, and workers, often on terms that are unfavorable to Cambodia, according to critics. Ownership of most Chinese dams is based upon a "build-operate-transfer" arrangement. During a period of Chinese operation, which may last from 30 to 45 years, Cambodia pays the Chinese company for power generated by the dam. Some experts contend that such dams endanger or disrupt fish supplies, soil conditions, drinking and irrigation water, wildlife and aquatic species, and ecological balances. They add that there is very little transparency or public input regarding the conception, construction, and environmental assessments associated with these projects. Similar dams built in Laos and Vietnam reportedly also have had damaging effects on Cambodia, which lies downstream. Proponents of the dams argue that China is filling a void made by the withdrawal of the World Bank and other developed countries from hydropower projects in the region for reasons related to feasibility and environmental, social, and political costs. They argue that these facilities supply energy for development, reduce reliance on oil, and help expand electricity in rural areas. Cambodian economic development and foreign (particularly Chinese) demand for hardwood threaten to deplete Cambodia's forests and have spurred illegal logging. Stronger environmental policies in some neighboring countries, such as Thailand, have added pressure on the Cambodian timber market. In 2012, a Cambodian environmental activist and an investigative journalist who had exposed illegal logging were killed under suspicious circumstances in separate incidents. Another reporter who had uncovered timber smuggling involving a well-connected local businessman was arrested. In May 2012, the Cambodian government suspended the granting of land to domestic and foreign companies in a move to curb forced evictions and illegal logging.

The United States and the Kingdom of Cambodia have been expanding their once-limited ties for a number of years, although U.S. concerns about Cambodia's human rights record still limit the scope of the bilateral relationship. The Obama Administration has taken steps to broaden engagement with Cambodia, partly in response to China's growing diplomatic and economic influence in Cambodia and the Lower Mekong Delta region. U.S. interests in Cambodia include promoting development, trade and investment, regional security, civil society, democracy, and human rights. U.S. military engagement with Cambodia has increased as well. These include naval port visits, military assistance, and joint exercises related to international peacekeeping, humanitarian activities, and maritime security. A key challenge for U.S. policy toward Cambodia lies in balancing efforts to engage the Kingdom on many fronts while promoting democracy and human rights. During the past decade, the Kingdom has made fitful progress in some areas of U.S. concern, including the conduct of elections, the development of civil society, labor rights, bringing some Khmer Rouge leaders to justice, public health, and counterterrorism measures. However, during the past several years, the political system has become less democratic and civil liberties have been curtailed. Although political opposition groups may gain parliamentary seats in the July 28, 2013 national elections by forming a united front and tapping into voter discontent among urban and marginalized groups, Prime Minister Hun Sen's continued hold on power seems assured. Over the past decade and a half, Hun Sen has bolstered his political strength through a combination of electoral victories, influence over the broadcast media and judiciary, legal and extra-legal political maneuvers, intimidation of opponents and critics, patronage, and economic threats. Many observers believe that the fairness of the national elections were seriously undermined prior to election day. Among the major concerns were the prevention of opposition leader Sam Rainsy from participating in politics or running in the elections, the expulsion of opposition lawmakers from the National Assembly, inaccurate voter lists, and the alleged lack of neutrality of the National Election Commission. The United States provides significant foreign aid to Cambodia, one of the poorest countries in Asia, largely through non-governmental organizations. The Kingdom received $76 million in U.S. assistance in FY2012. Program areas include public health, agricultural development, environmental preservation, military training, maritime security, elections, civil society, and removal of explosive remnants of war. The United States is the largest foreign market for Cambodian goods, buying about half of the Kingdom's garment exports. China has been a principal source of loans, infrastructure development, investment, and foreign aid to the Kingdom. Some experts maintain that Chinese assistance has significantly reduced the effectiveness of traditional aid donors in attempting to pressure Phnom Penh to make advances in the areas of rule of law, democracy, and human rights. Some groups have expressed concerns about the adverse effects of China's development projects on the local environment. Other observers also contend that Beijing has influenced Cambodian foreign policy. During its chairmanship of the Association of Southeast Asian Nations (ASEAN) in 2012, Cambodia was seen as acceding to Beijing's desire to block attempts to raise the issue of maritime security in regional fora, to the consternation of the United States and other ASEAN nations.

Most Recent Developments As the 110 th Congress begins its second session, ongoing military operations in Iraq and Afghanistan, combined with recruiting challenges and a great deal of interest among military retirees and those working on their behalf will probably continue to highlight military retirement and Concurrent Receipt issues. However, with the recruiting and retention challenges being faced by the military, it is anticipated that military personnel benefits, to include retirement, will continue to be advanced and advocated by the Department of Defense (DOD) and veteran's organizations. It is further anticipated that Concurrent Receipt eligibility will remain an issue for the second session of the 110 th Congress. Key Elements and Issues Conceptual and Political Setting Congress confronts both constituent concerns and budgetary constraints in considering military retirement issues. The approximately 2.1 million military retirees and survivor benefit recipients, and their roughly 6 million to 8 million family members, have been, and continue to be, an articulate and well-educated constituent group familiar with the legislative process and represented by associations staffed with military retirees who have long experience in working with Congress. In recent years, the long-standing efforts by military retirees and their associations to secure more benefits for their members have been buttressed by (1) the outpouring of nationwide nostalgia and support for the past heroism and current old-age needs of the "greatest generation" of World War II-era veterans, whether retirees or not; (2) concern over problems the military services were having in recruiting and retaining sufficient numbers of qualified personnel, which have been exacerbated by ongoing military operations in Iraq and Afghanistan, and the extent to which actual or perceived inadequacies in retirement benefits may have been contributing to these problems; (3) the impression by many current or former military personnel that the Clinton Administration was not favorably disposed toward the military as an institution, leading to efforts to portray increased retirement benefits as a palliative, and (4) in a reversal of the attitudes toward the Clinton Administration, efforts to obtain more benefits from the Bush Administration because it is perceived as being pro-military. And, since September 11, 2001, there has been a predictably dramatic increase in public and congressional support for the Armed Forces. In addition, it can be posited that the policy choices posed by recently-enacted increased benefits for military retirees are an integral part of a larger debate in the United States over the distribution of pension-type resources among younger workers and older retirees. In the defense context, it may take the form of tensions between DOD and current active duty and reserve military personnel, with the responsibility of defending the United States in the present, and retired military personnel, many of whom feel that they are losing benefits to which they assumed they would always have access. Some assert that rapidly increasing retiree-related benefits, although they reward those whose patriotic service is unquestionable, are "crowding out" defense resources that could go to maintaining and improving current defense capabilities. On the other hand, it can be argued that, in a defense budget of about $550 billion yearly, these benefits are not significant enough to really detract from current defense capability, and that a nearly $14 trillion GDP is more than adequate to finance both benefits for military retirees and current defense requirements if the political will to do so is present. In general, since the late 1990s, Congress has been more aggressive than the executive branch in responding to the stated concerns of retirees about their benefits. DOD and other executive branch agencies have, over time, tended to regard military retirement benefits as a place where substantial budgetary savings could be made. For instance, as noted below, Congress took the initiative in 1999 to repeal the "Redux" cuts in future military retired pay that was originally enacted in 1986, and Congress has enacted major increases in military health care benefits for retirees (TRICARE for Life) and authorized partial concurrent receipt of military retired pay and VA disability compensation, both over DOD objections. Program Summary In FY2007, total federal budget outlays for military retirement were $43.5 billion and DOD budget outlays were $14.4billion. (The differing figures for total federal and DOD outlays result from the use of the accrual method in accounting for the costs of military retirement. See the section below on Budgeting and Costs for a discussion of accrual accounting. These numbers, taken from Table 2 , also differ slightly from those in Table 1 for purely technical reasons without policy significance.) Table 1 shows the estimated numbers of retirees, and the costs to the federal government of the retired pay they receive, for FY2005-FY2008. "Redux": Its 1986 Enactment and 1999 Repeal Cuts in retired pay for future retirees were enacted in the Military Retirement Reform Act of 1986 ( P.L. 99-348 , July 1, 1986; the "1986 Act," now referred to frequently as the "Redux" military retirement system). Although enactment of Redux in 1986 represented a success for those who argued that the pre-Redux system was too generous, the repeal of compulsory Redux in late 1999 by the FY2000 National Defense Authorization Act indicated that, at least in Congress, those who defend the pre-Redux system were again ascendant. Congress began taking notice publicly of potential problems related to Redux in 1997, well before the executive branch addressed the issue. During the fall of 1998, the Administration announced that it supported Redux repeal. Eventually, the FY2000 National Defense Authorization Act contained provisions for repealing compulsory Redux; it allows post-August 1, 1986 entrants to retire under the pre-Redux system or opt for Redux plus an immediate $30,000 cash payment (see below). Entitlement to Retired Pay and Retired Pay Computation Base A servicemember becomes entitled to retired pay upon completion of 20 years of service, regardless of age. (The average nondisabled enlisted member retiring from an active duty military career in FY2005 was 41 years old and had nearly 22 years of service; the average officer was 45 years old and had nearly 24 years of service.) A member who retires from active duty is paid an immediate monthly annuity based on a percentage of his or her retired pay computation base. For persons who entered military service before September 8, 1980, the retired pay computation base is final monthly basic pay being received at the time of retirement. For those who entered service on or after September 8, 1980, the computation base is the average of the highest three years (36 months) of basic pay. Basic pay comprises approximately 70% of the total for all retirement eligibles: 75% for 30-year retirees and 66% for 20-year retirees. Thus, the 20-year retiree may get 50% of retired pay computation base upon retirement, but only 33% of RMC. The 30-year retiree will receive 75% of the computation base, but only 56% of RMC. Nor do any of these calculations include any of the many special pays, bonuses, or other cash compensation to which many military members are entitled. Retired Pay Computation Formula Military Personnel Who First Entered the Service before August 1, 1986 All military personnel who first entered military service before August 1, 1986, have their retired pay computed at the rate of 2.5% of the retired pay computation base for each year of service. The minimum amount of retired pay to which a member entitled to compute his or her retired pay under this formula is therefore 50% of the retired pay computation base (20 years of service X 2.5%). A 25-year retiree receives 62.5% of the computation base (25 years of service X 2.5%). The maximum, reached at the 30-year mark, is 75% of the computation base (30 years of service X 2.5%). However, the FY2007 National Defense Authorization Act extended the previous pay table to 40 years, allowed additional longevity raises, and provided additional retirement credit for service beyond 30 years at the rate of 2.5% per year. As a result, a servicemember who retires with 40 years of service will qualify for 100% of basic pay in their retirement. Military Personnel Who First Entered the Service on or after August 1, 1986 Personnel who first enter service on or after August 1, 1986, in accordance with the provisions of the FY2000 National Defense Authorization Act, are required to select one of two options in calculating their retired pay within 180 days of reaching 15 years of service. Option 1: Pre-Redux They can opt to have their retired pay computed in accordance with the pre-Redux formula, described above, but with a slightly modified cost of living adjustment (COLA) formula, which is less generous than that of the pre-Redux formula (see below, under COLAs). Option 2: Redux They can opt to have their retired pay computed in accordance with the Redux formula and receive an immediate $30,000 cash bonus called a Career Status Bonus (which can actually be paid in several annual installments if the recipient so wishes, for tax purposes). The Redux Formula: Under Age 62 Retirees . Redux is different from the previous formula in two major ways. First, for retirees under age 62, retired pay will be computed at the rate of 2.0% of the retired pay computation base for each year of service through 20, and 3.5% for each year of service from 21-30. Under this new formula, therefore, a 20-year retiree will receive 40% of his or her retired pay computation base upon retirement (20 years of service X 2.0%), and a 25-year retiree will receive 57.5% of the computation base [(20 years of service X 2.0%) + (5 years of service X 3.5%)]. A 30-year retiree, however, will continue to receive 75% of the retired pay computation base [(20 years of service X 2.0%) + (10 years of service X 3.5%)]. The changed formula, therefore, is "skewed" much more sharply in favor of the longer-serving military careerist, theoretically providing an incentive to remain on active duty longer before retiring. The Redux Formula: Retirees 62 and Older . Second, when a retiree reaches age 62, his or her retired pay will be recomputed based on the old formula, a straight 2.5% of the retired pay computation base for each year of service. Thus, beginning at 62, the 20-year retiree receiving 40% of the computation base for retired pay, according to the new formula, will begin receiving 50% of his or her original computation base; the 25-year retiree's annuity will jump from 57.5% of the original computation base to 62.5%; and the 30-year retiree's annuity, already at 75% of the original computation base under both the old and new formulas, will not change. (Note: this change is an increase in monthly retired pay, not a lump sum at age 62.) Temporary Early Retirement Authority (TERA), 1992-2001 (FY1993-FY2001) The FY1993 National Defense Authorization Act (Sec. 4403, P.L. 102-484 ) granted temporary authority (which expired on September 30, 2001) for the services to offer early retirements to personnel with more than 15 but less than 20 years of service. TERA was used as a manpower tool to entice voluntary retirements during the drawdown. TERA retired pay was calculated in the usual ways except that there is an additional reduction of 1% for every year of service below 20. Part or all of this latter reduction could be restored if the retiree worked in specified public service jobs (such as law enforcement, firefighting, and education) during the period immediately following retirement, until the point at which the retiree would have reached the 20-year mark if he or she had remained in the service. Military Retired Pay and Social Security Military personnel do not contribute a percentage of their salary to help pay for retirement benefits. They have paid taxes into the social security trust fund since January 1, 1957, and are entitled to full social security benefits based on their military service. Military retired pay and social security are not offset against each other; military retirees receive full social security benefits in addition to their military retired pay. Retired Pay and Survivor Benefit COLAs Military retired pay is protected against inflation by statute (10 U.S.C. 1401a). The Military Retirement Reform Act of 1986, in conjunction with recent changes in the FY2000 National Defense Authorization Act, provides for COLAs as indicated below. Congress has not modified the COLA formula since FY1996 (1995), although virtually every year since 1982 some COLA modifications, always with the aim of reducing costs and hence the payments to retirees, have been at least discussed. Therefore, it is probably inadvisable to assume at any time that COLAs will be totally off the table in future Congresses. For further information on COLAs, see CRS Report 98-223, COLAs for Military Retirees: Summary of Congressional and Executive Branch Action, 1982-2004 (FY1983-FY2005) , by [author name scrubbed]. What Was the Last COLA and When Will Be the Next COLA? The most recent military retirement COLA was 2.3%, first applied to the retired pay disbursed on January 1, 2008. The next COLA has not been announced but is to be applied to the retired pay disbursed on January 1, 2009. For a discussion of proposed and actual COLA changes over the past 20 years, see CRS Report 98-223, COLAs for Military Retirees: Summary of Congressional and Executive Branch Action, 1982-2004 (FY1983-FY2005) , by [author name scrubbed]. COLAs for Pre-August 1, 1986 Entrants For military personnel who first entered military service before August 1, 1986, each December a COLA equal to the percentage increase in the Consumer Price Index (CPI) between the third quarters of successive years will be applied to military retired pay for the annuities paid beginning each January 1. For example, assume that the CPI rises from 400.0 in September 2008 to 412.0 in September 2009, an increase of 12.0 points or 3.0% of 400.0. The monthly retired pay that accrues during December 2009, and will actually be paid to retirees on January 1, 2010, would be increased by 3.0% above that amount paid the previous month. COLAs for Personnel Who Entered Service On or After August 1, 1986 For those personnel who first entered military service on or after August 1, 1986, the FY2000 National Defense Authorization Act provides that their COLAs will be calculated in accordance with either of two methods, as noted below. Non-Redux Recipients Those personnel who opt to have their retired pay computed in accordance with the pre-Redux formula will have their COLAs computed as described above for pre-August 1, 1986 entrants. Redux/$30,000 Cash Bonus Recipients Those personnel who opt to have their retired pay computed in accordance with the Redux formula, and receive the $30,000 cash bonus, will have their COLAs computed as follows. Annual COLAs will be held to one percentage point below the actual inflation rate for retirees under age 62. Retirees covered by this new COLA formula would thus receive a 2.0% increase (rather than 3.0%) in their military retired pay under the hypothetical example described in the above paragraph. When a retiree reaches age 62, there will be a one-time recomputation of his or her annuity to make up for the lost purchasing power caused by the holding of COLAs to the inflation rate minus one percentage point. This recomputation will be applied to the old, generally more liberal retired pay computation formula on which retirees 62 or older will have their annuities computed (see the above subsection entitled Retired Pay Computation Formula ), compounding, for most retirees, the size of this one-time annuity increase. After the recomputation at 62, however, future COLAs will continue to be computed on the basis of the inflation rate minus one percentage point. Costs and Benefits of the Two Retirement Alternatives An analysis of the economic effects for hypothetical retirees indicates that in almost all cases opting for the pre-Redux formula will pay the individual much more over time. A report of the Center for Naval Analyses states that the more liberal retired pay computation formula and COLA formula of pre-Redux far outweighs the short-term benefits of a $30,000 pre-tax cash bonus. The report did say that it might be possible for an individual investor to "beat" these negative aspects of the bonus by wise investment decisions but that it would be difficult. Naturally, no study can know what an individual's financial situation is. At first, only a fairly small percentage of personnel opted for the $30,000 lump sum. However, the number appears to have been rising. Since the bonus option first became available in 2001, 50% of eligible Marine Corps enlisted retirees, 40% of warrant officers, but only 13% of commissioned officers have taken it, suggesting the attractiveness of the immediate cash payment to the lower-paid members of the career force. Military Retirement Budgeting and Costs Accounting for Military Retirement in the Federal Budget All DOD budgets through FY1984 reflected the costs of retired pay actually being paid out to personnel who had already retired. Congress simply appropriated the amount of money required to pay current retirees each year. Since FY1985, the "accrual accounting" concept has been used to budget for the costs of military retired pay. Under this system, the DOD budget for each fiscal year reflects the estimated amount of money that must be set aside and accrued at interest from investment in special, non-marketable U.S. government securities similar in some ways to Treasury bills and bonds. This interest funds the retired pay to which persons currently in the Armed Forces during that fiscal year, and who ultimately retire, will be entitled in the future. These estimated future retirement costs are arrived at by making projections based on the past rates at which active duty military personnel stayed in the service until retirement, and on assumptions regarding the overall U.S. economy, such as interest rates, inflation rates, and military pay levels. These DOD budget outlays for retirement are computed as a percentage of a fiscal year's total military pay costs for each military service. Approximately 35%-40% of military basic pay costs must be added to the DOD personnel budget each fiscal year to cover the future retirement costs of those personnel who ultimately retire from the military. DOD budget outlays in each fiscal year that pay for the estimated cost of future retirees are transferred in a paper transaction to a Military Retirement Fund, located in the Income Security Function of the federal budget. The Military Retirement Fund also receives [paper] transfers from the General Fund of the Treasury to fund the initial unfunded liability of the military retirement system. This is the total future cost of military retired pay that will result from military service performed prior to the implementation of accrual accounting in FY1985. Money is disbursed from this Military Retirement Fund to current retirees. Individual retirees continue to receive their retired pay from DOD finance centers. Technically, however, because this money paid to individuals comes not from the DOD budget, but from the Fund, it is paid out by the Income Security function of the federal budget. Actual payments to current retirees thus show up in the federal budget as outlays from the federal budget as a whole, but not from DOD. Under accrual accounting, therefore, total federal outlays for each fiscal year continue to reflect only costs of payments to military members who have already retired, as was the case before accrual accounting began. Accrual accounting only changes the manner in which the federal government accounts for military retired pay; it does not affect actual payments to individuals in any way. Unfunded Liability Current debates over both federal civilian and military retirement have included some discussion of the "unfunded liability" of both. As noted above, the military retirement system's unfunded liability consists of future retired pay costs incurred before the creation of the Military Retirement Fund in FY1985. These obligations are being liquidated by the payment to the Fund each year of an amount from the General Fund of the Treasury and will be fully paid, based on current calculations, by FY2033. The unfunded liability at the end of FY2003 was $628.3 billion; the estimated liability for FY2004 was $648.3 billion; for FY2005, $666.1 billion; and for FY2006, $684.2 billion. These figures are between $83 and $92 billion higher than the estimated unfunded liability for the same years at the end of FY2003. This increase is due almost entirely to the enactment of concurrent receipt-related retirement benefits, both actual concurrent receipt and Combat-Related Special Compensation (CRSC), discussed below. Some concerns have been voiced about the amount of unfunded liability. However, (1) the hundreds of billions of dollars of unfunded liability is a cumulative amount to be paid to retirees over the next 50 years, not all at once; (2) by the time some persons first become eligible for retired pay under the pre-accrual accounting system, many others will have died; and (3) unlike the private sector, there is no way for employees to claim immediate payment of their future benefits. An analogy would be that most homeowners cannot afford to pay cash for a house, so they get a mortgage. If the mortgage had to be paid in full, almost no homeowners could afford to do so. However, spread out over 30 years, the payments are affordable. Similarly, the unfunded liability of federal retirement programs is deemed affordable when federal retirement outlays are spread over many decades. Military Retirement Cost Trends Because military retirement is an entitlement, rather than a discretionary program, its costs to the total federal budget (payments to current retirees and survivors) always rise modestly each year, due to a predictable slow rise in the number of retirees and survivors. The cost to DOD (estimated future retirement costs of current personnel) declined after FY1989 (the beginning of the post-Cold War drawdown), as the size of the force, and therefore the number of people who will retire from it in the future, declined. However, as the drawdown stabilized, so did the DOD budget costs of retirement. Table 2 indicates the costs of military retired pay in federal budget outlays (payments to current retirees) and Department of Defense accrual outlays (money set aside to fund future retirees). (As noted above, these figures differ slightly from the figures for the same fiscal years cited in Table 1 for purely technical reasons.) Cost Concerns about Recent Retiree Benefit Increases The cost of concurrent receipt of military retired pay and VA disability compensation (discussed immediately below) is frequently cited in the context of other benefits to retired military personnel and their families that have been created, or expanded, since the late 1990s. DOD and others have argued that such retiree benefits are becoming increasingly costly and do not "leverage readiness" by applying directly to active duty or reserve military personnel and their families. They suggest that the money being used for these purposes should be channeled into active duty or reserve benefits that directly relate to recruitment or career retention not retiree compensation, whose relationship to actual or potential personnel shortages is tenuous and difficult to establish. The two benefits most often included in this category are concurrent receipt and CRSC, and TRICARE for life (extending, to Medicare-eligible military retirees, DOD health care insurance for care obtained from civilian sources). Others would include in this list repeal of the Redux cuts in military retirement (discussed above). In addition, concerns have been voiced about retiree benefit increases that have not been enacted but that are under active debate and consideration in Congress, including lowering the age at which reserve retirees can first receive retired pay from 60 to 55. The arguments in favor of these benefit increases have been equally strong. Proponents suggest that even if they do not directly affect active duty or reserve military personnel, by strengthening the broad range of benefits available to military retirees, they provide a strong career retention incentive. In particular, they argue that although most of the U.S. Army, and a substantial part of the Marine Corps, is at war in Iraq and Afghanistan, and repetitive tours of duty in those two theaters of combat operations are a likely prospect for active duty personnel and reserve personnel, now is the time to be buttressing the "pot of gold at the end of the rainbow"—the benefits available to military personnel who are willing to undergo the hardships of a military career in return for liberal retirement benefits after 20 years of service. Concurrent Receipt of Military Retired Pay and VA Disability Compensation Military Retired Pay and VA Disability Compensation: Overview Most people familiar with military retirement would probably agree that the most controversial military retirement issue that is currently the object of intense congressional interest is that involving concurrent receipt of military retired pay and Department of Veterans Affairs (VA) disability compensation. Until 2004, the law required that military retired pay be reduced by the amount of any VA disability compensation received. For many years some military retirees had sought a change in law to permit receipt of all or some of both, and legislation to allow this has been introduced during the past several Congresses, frequently having co-sponsors well above half of both the House and the Senate. This issue is referred to as "concurrent receipt," because it would involve the simultaneous receipt of two types of benefits. The FY2003 National Defense Authorization Act (NDAA), enacted in 2002, created a benefit known as "combat-related special compensation," or CRSC. CRSC provides, for certain seriously disabled retirees, a cash benefit financially identical to what concurrent receipt would provide them. The FY2004 NDAA authorized, for the first time, actual concurrent receipt (now referred to as Concurrent Receipt Disability Payments or CRDP), as well as a greatly expanded CRSC program. The FY2005 NDAA further liberalized the concurrent receipt rules contained in the FY2004 NDAA; this is discussed in greater detail below. For a detailed description of the existing CRDP and CRSC programs, including a sample application form, see a web page of the Military Officers Association of America (MOAA) at http://www.moaa.org/lac/lac_issues_list/lac_issues_fullyretired/lac.issues_news_crsc.htm . VA Disability Compensation To qualify for VA disability compensation, a determination must be made by the VA that the veteran sustained a particular injury or disease, or had a preexisting condition aggravated, while serving in the Armed Forces. Some exceptions exist for certain conditions that may not have been apparent during military service but which are presumed to have been service-connected. The VA has a scale of 10 ratings, from 10% to 100%, although there is no special arithmetic relationship between the amount of money paid for each step. Each percentage rating entitles the veteran to a specific level of disability compensation. In a major difference from the DOD disability retirement system, a veteran receiving VA disability compensation can ask for a medical reexamination at any time (or a veteran who does not receive disability compensation upon separation from service can be reexamined later). All VA disability compensation is tax-free, which makes receipt of VA compensation desirable, even with the operation of the offset. Interaction of DOD and VA Disability Benefits Military retirees can also apply to the VA for disability compensation. This can be advantageous to retirees who have a DOD disability rating because, although offset, the VA compensation is totally tax-free. Also, a retiree may (1) apply for VA compensation any time after leaving the service and (2) have his or her degree of disability changed by the VA as the result of a later medical reevaluation, as noted above. Many retirees seek benefits from the VA years after retirement for a condition that may have been incurred during military service but that does not manifest itself until many years later. The DOD and VA disability rating systems have much in common as well as significant differences. DOD makes a determination of eligibility for disability retirement only once, at the time the individual is separating from the service. Although DOD uses the VA schedule of types of disabilities to determine the percentage of disability, DOD measures disability, or lack thereof, against the extent to which the individual can or cannot perform military duties, rather than his or her ability to perform post-service civilian work. A military retiree, regardless of his or her DOD disability status immediately upon retirement, can apply for VA disability compensation at any time after leaving active military duty. Military disability retired pay is usually taxable, unless related to a combat disability. For further discussion of these and other relevant issues, see CRS Report 95-469, Military Retirement and Veterans ' Compensation: Concurrent Receipt Issues , by [author name scrubbed] (pdf). "Combat Related Special Compensation" (CRSC): Enacted in 2002 and Expanded in 2003 The FY2003 NDAA (Section 636, P.L. 107-314 ; 116 Stat. 2458), as amended by the FY2004 NDAA Section 642, P.L. 108-136 , 117 Stat. 1392, authorized "Combat Related Special Compensation" (CRSC). Military retirees with at least 20 years of service and who meet either of the following two criteria are eligible for CRSC: A disability that is "attributable to an injury for which the member was awarded the Purple Heart," and is not rated as less than a 10% disability by DOD or the VA; or A disability rating from either DOD or the VA, incurred due to involvement in "armed conflict," "hazardous service," "duty simulating war," and "through an instrumentality of war." This appears, in lay terms, to encompass combat with any kind of hostile force; hazardous duty such as diving, parachuting, using dangerous materials such as explosives, and the like; individual training and unit training and exercises and maneuvers in the field; and "instrumentalities of war," such as accidents in combat vehicles or, if due to training-related activities, aboard naval vessels or military aircraft, and accidental injuries due to occurrences, such as munitions explosions, injuries from gases or vapors related to training for combat, and the like. (The 2003 legislation limited the latter criterion to retirees with at least a 60% disability; the 2004 legislation repealed the 60% limit.) CRSC payments will be equal to the amount of VA disability compensation to which the retiree is entitled, but the new legislation does not end the requirement that the retiree's military retired pay be reduced by whatever VA compensation to which the retiree is entitled. Therefore, CRSC beneficiaries will receive the financial equivalence of concurrent receipt, but in legal and statutory terms it will not constitute concurrent receipt, and the statute also states that it explicitly is not retired pay per se. For online applications and information, see https://www.dod.mil/prhome/mppcrsc.html . Retirees may also phone the retirement services offices of their service for the necessary information. CRSC for Military Disability Retirees Servicemembers with a permanent disability rating of 30% or greater may be retired and receive retired pay prior to completing 20 years of service. These retirees are generally referred to as "Chapter 61" retirees, a reference to Chapter 61, Title 10 which governs their retirement. The original concurrent receipt legislation excluded those who retired with less than 20 years of service. However, the FY2008 NDAA ( P.L. 110-181 ) expanded Combat Related Special Compensation (CRSC) to include Chapter 61 retirees effective January 1, 2008. Eligibility is not based on a minimum number of years of service or a minimum disability rating other than the 30% noted above for disability retirement. Excluded from eligibility are those former servicemembers who were medically retired due to service-connected disabilities. The FY2008 NDAA also includes almost all reserve disability retirees except those retired under 10 U.S.C. 12731b, a special provision which allows reservists with a physical disability not incurred in the line of duty to retire with between 15 and 19 creditable years of service. CRSC for Reserve Retirees The CRSC statute in the FY2004 NDAA clearly states that personnel who qualify for reserve retirement by having at least 20 years of duty creditable for reserve retirement purposes are eligible for CRSC. When CRSC was enacted in 2002, DOD interpreted the law as requiring reserve retirees to have at least 7,200 reserve retirement "points" to be eligible for CRSC. A reservist receives a certain number of retirement points for varying levels of participation in the reserves, or active duty military service. The 7,200 point figure was extraordinarily high—in fact, it could only have been attained by a reservist who had at least 20 years of active duty military service. Hence, the DOD interpretation of the law effectively denied CRSC to reservists. Concurrent Receipt for Retirees with 50% or Greater Disability (also know as "Concurrent Receipt Disability Payments") The FY2004 NDAA (Section 641) authorized, for the first time, actual concurrent receipt for retirees with at least a 50% disability, regardless of the cause of disability. However, the amount of concurrent receipt will be phased in over a 10-year period, from 2004-2013, except for 100% disabled retirees, who will be entitled to immediate concurrent receipt effective January 1, 2005 (this provision was added in the FY2005 NDAA; see below). Depending on the degree of disability, the initial amount of retired pay that the retiree could receive would vary from $100 to $750 per month, or the actual amount, whichever is less. By 2014, the decrease in retired pay will be totally eliminated. As with the revised CRSC, this concurrent receipt benefit is also available to those reservists with at least 20 years of service creditable for reserve retirement purposes and who are receiving retired pay (eligibility begins at age 60). The actual operation of the new concurrent receipt benefit is complicated, due to its progressive implementation over several years as required by law [10 U.S.C. 1414 (c), as enacted by Subsection 641(a), P.L. 108-136 , November 24, 2003; 117 Stat. 1511]. It uses both dollar amounts and percentage amounts and varies in accordance with the degree of disability and by calendar year ( not fiscal year) as follows: 2004 In calendar year 2004, military retirees entitled to VA disability compensation were entitled to receive, in addition to that part of their military retired pay which is greater than the total VA compensation to which they are entitled, the following additional amounts of retired pay: 2005 In calendar year 2005, with the exception of 100% disabled retirees, military retirees entitled to VA disability compensation were entitled to any such amounts received in 2004, as noted above, and an additional 10% of the offset that remained in 2004. However, beginning on January 1, 2005, and thereafter, 100% disabled retirees are entitled to all of their military retired pay in addition to all of their VA disability compensation. 2006 In calendar year 2006, the same procedure as in 2005 applied, but the retirees affected got an additional 20% of their remaining offset from 2004. Full concurrent receipt for 100% disabled retirees continued. 2007 In 2007, the same procedure applies but with affected retirees receiving an additional 30% of their remaining offset from 2004. Full concurrent receipt for 100% disabled retirees will continue. 2008 In 2008, the same procedure applies but with affected retirees receiving an additional 40% of their remaining offset from 2004. Full concurrent receipt for 100% disabled retirees will continue. On January 1, 2008, those former servicemembers who were medically retired due to combat-related disabilities become eligible for Combat-Related Special Compensation (CRSC). In addition, those retirees rated as 100% Unemployable by the VA become eligible for Concurrent Receipt, retroactive to December 31, 2004. 2009-2014 Full concurrent receipt for 100% disabled retirees will continue. For those retirees who retire after 2004, their initial amounts will be the dollar amount prescribed for each percentage of disability (the range listed above, in the section on calendar year 2004, between $100 and $750, depending on degree of disability), plus the additional percentage of that dollar amount for that year. Thus, a retiree who first retires in, say, 2006, with an 80% disability will begin receiving an additional $420 monthly of his or her retired pay (the $350 that an 80% disabled retiree is entitled to, as noted above, plus the additional 20% of $350, or $70, specified for 2006). Because of the high initial amounts provided to severely disabled retirees, this new concurrent receipt benefit is "front-loaded"; that is, most retirees will be able to concurrently receive most of their military retired pay within a few years of enactment of the law. A retiree cannot receive both CRSC and CRDP benefits. The retiree may choose whichever is most financially advantageous to him or her and may move back and forth between either benefit to maximize the payments received as often as desired. Concurrent Receipt for Those Rated 100% Unemployable. After the enactment of the FY2005 NDAA in late 2004, an issue arose about whether the authorization of full concurrent receipt, effective January 1, 2005, for 100% disabled retirees applied to retirees with a disability rating of less than 100%, but with what the VA terms an " Individual Unemployability " (IU) rating of 100%. The language in Subsection 642(a) of the FY2005 NDAA states that the immediate payment of full concurrent receipt will apply to retirees "receiving veterans' disability compensation for a disability rated at 100 percent...." That is, the law does not mention the IU concept. According to individuals familiar with the issue, during the conference on the FY2005 NDAA, in 2004, language explicitly including the 100% unemployables with less than a 100% disability rating was kept out of the final legislation on cost grounds. The FY2006 NDAA ( P.L. 109-163 ) contained a partial step toward inclusion of the 100% unemployables by authorizing full concurrent receipt beginning on October 1, 2009, over four years earlier than the date of January 1, 2014 that is in current law (the date of full concurrent receipt for all retirees, regardless of their disability rating). The issue of concurrent receipt for 100% unemployables was addressed in the FY2008 NDAA ( P.L. 110-181 ). This provision extended eligibility to all who have been rated as 100% Unemployable (regardless of their disability rating) by the VA and made their eligibility for Concurrent Receipt retroactive to December 31, 2004. However, this new benefit will not begin until October 1, 2008. At that time, monthly payments will begin and will include a lump sum payment for the retroactive benefit. Service Contact Information The services have each established websites and toll-free phone numbers to assist retirees with their Concurrent Receipt concerns. They can be contacted at Army www.hrc.army.mil/site/crsc/index.html 1-866-281-3254 Navy and Marine Corps www.hq.navy.mil/ncpb/CRSCB/combatrelated.htm 1-877-366-2772 Air Force http://ask.afpc.randolph.af.mil/ 1-800-616-3775 (Select option 5, then option 1)

The military retirement system includes benefits for retirement after an active or reserve military career, disability retirement, and survivor benefits for eligible survivors of deceased retirees. The change to the system that has generated the most recent legislative activity involves whether some or all military retirees should be allowed to receive both military retired pay and any VA disability compensation to which they are otherwise entitled; this is referred to as "concurrent receipt." Until 2004, the law provided that military retired pay had to be reduced by the amount of VA disability compensation. Some maintained this was inequitable and unfair; it was defended on grounds of cost and of the need to avoid setting a precedent for concurrent receipt of numerous other federal benefits. Starting in 1999 (FY2000), provisions in each year's annual National Defense Authorization Act (NDAA) authorized payments to comparatively small groups (in the tens of thousands) of military retirees in lieu of concurrent receipt. The program enacted in 2002, in the FY2003 NDAA (P.L. 107-314), is known as "Combat Related Special Compensation" (CRSC), although it applies also to those people injured in military operations and training generally, as distinct from those whose injuries are unrelated to military service but incurred while in service. CRSC provides for payments that are the financial equivalent of concurrent receipt. The FY2004 NDAA (P.L. 108-136, November 24, 2003), for the first time provided the concurrent receipt or its practical and financial equivalence to large numbers of military retirees. The law, effective January 1, 2004, (1) authorized the payment of CRSC to all otherwise eligible military retirees, regardless of their percentage of disability; (2) authorized a 10-year phase-in of concurrent receipt for all military retirees whose disability is 50% or greater, regardless of the origins of their disability; and (3) included (hitherto almost completely excluded) reserve retirees. The FY2005 NDAA (P.L. 108-375, October 28, 2004; 118 Stat. 1811) expanded concurrent receipt eligibility by authorizing the immediate (rather than a 10-year phase-in) concurrent receipt for military retirees with a 100% service-connected disability. In its first session, the 110th Congress extended the Combat Related Special Compensation program to include those who were medically retired prior to completing 20 years of service rather than a normal longevity retirement. These individuals are generally referred to as "Chapter 61" retirees. In addition those with a 100% VA Unemployability rating were granted full concurrent receipt, retroactive to December 31, 2004. It is anticipated that the second session will continue work on these issues. This report will be updated as needed.

Semipostal Stamps Semipostal stamps are regular postage stamps that are sold at a surcharge over their postage value. The additional charge is recognized by the stamp purchaser as a voluntary contribution to a designated cause. Europe has a long tradition of using semipostal stamps to raise funds for worthy causes. Some of the causes supported by European semipostals include child health, literacy programs, national sports development, and philately (stamp collecting). The Netherlands, for example, has a tradition in which children go door-to-door to sell semipostals with a 50% surcharge to benefit children's health and welfare causes. In the United States, however, semipostals are a recent innovation. USPS has long opposed their issuance. While commemorative stamps have from time to time been issued to raise awareness of social or health problems in the nation, USPS was reluctant to get into the fund-raising business. USPS argued that there was a strong tradition of private philanthropy in this country, and "due to the vast number of worthy fund-raising organizations in existence, it would be difficult to single out specific ones to receive [semipostal] revenue." USPS also warned that the administrative costs involved in accounting for sales would tend to outweigh the revenues derived from the surcharge. Philatelic groups also opposed semipostals. They generally thought that USPS was issuing too many commemorative stamps, with a broader clientele in mind than that of the stamp collector. Semipostals were a departure from the tradition that stamps are for postage. Collectors regarded the semipostal surcharge as a tax on their hobby, and pointed out that unlike other citizens who might be unsympathetic to the cause being supported, they still had to buy the stamp or their collections would be incomplete. The Breast Cancer Research Stamp Despite USPS opposition, Congress authorized a semipostal stamp for the benefit of breast cancer research in 1997. The idea had first been broached by Dr. Ernie Bodai, chief of surgery at the Kaiser Permanente Medical Center in Sacramento, California, a constituent of Representative Vic Fazio. On May 7, 1996, Representative Fazio introduced the first semipostal bill, H.R. 3401 , in the 104 th Congress, as the Breast Cancer Research Stamp Act. In the 105 th Congress, Representative Fazio and Representative Susan Molinari of New York sponsored H.R. 1585 , the Stamp Out Breast Cancer Act. The bill was agreed to in the House on July 22, 1997, by a vote of 422 to 3, and by unanimous consent in the Senate on July 24, 1997. The measure became law as P.L. 105-41 on August 13, 1997. The Stamp Out Breast Cancer Act directed USPS to establish the special rate as the first class rate plus a differential of up to 25%, with the exact amount to be decided by USPS's Board of Governors. It also directed USPS to issue the stamp within a year, to deduct its "reasonable costs," which would include costs "attributable to printing, sale, and distribution" of the stamps, and to pay the remainder of the surcharge to two designated federal agencies. Seventy percent was to go to the National Institutes of Health (NIH), and the remainder to the Department of Defense (DOD). The act limited sales of the breast cancer research semipostal (BCRS) to two years from its initial issuance, and directed the Government Accountability Office (GAO) to evaluate the program. GAO has since reported twice on the BCRS, and the Senate Governmental Affairs Committee has held an oversight hearing to review it. GAO's evaluation was that the BCRS "has been an effective fund-raiser," but GAO also said that USPS did not have a good way of tracking its costs to avoid inadvertent subsidy from postal ratepayers. Revenue Raised and Postal Service Costs As of December 31, 2007, according to USPS, over 785 million BCRSs had been sold. The regular postage rate has been raised four times since the stamp was introduced (from 32 to 41 cents), and its cost has gone from 40 to 55 cents. Overall, according to USPS, $60.1 million has been transferred to NIH and DOD for breast cancer research. NIH has used its money to support pilot studies in the prognosis, prevention, and treatment of breast cancer. DOD has designated the money for awards in biology, immunology, and genetics related to breast cancer. In 2000, GAO and the USPS Office of Inspector General (USPSOIG) had some differences with USPS over the amount USPS had charged for its "reasonable costs" to be subtracted from the surcharge amount before the net surcharge was turned over to NIH and DOD. Additionally, USPS decided to subtract less than 9% of the BCRS costs it did identify from the surcharge proceeds before turning the rest over to NIH and DOD. USPS's reasoning was that it also stood to recoup most costs from the first-class postage portion of the stamp, since some of the stamps would be retained by the public and not used for postage. In this respect, the BCRS was similar to a "blockbuster" commemorative issue, and "retained revenues" from such issues are a perennial moneymaker for USPS. The Semipostal Authorization Act The attention given to the breast cancer stamp, and GAO's pronouncement that it was a "success," helped generate interest in other semipostals. Two public opinion surveys commissioned by GAO, in 1999 and 2003, revealed that about 70% of the public would like to see USPS issue more semipostals on a recurring basis. More than a dozen bills were introduced in the 106 th Congress to authorize the issuance of new semipostals. They would have benefitted causes such as emergency food relief, AIDS research and education, a World War II memorial, protection of vanishing wildlife, and child literacy. A May 25, 2000, Senate hearing focused on GAO's initial report and on legislative proposals to extend the BCRS and to authorize other semipostals. A USPS witness, Deborah Willhite, Senior Vice President for Government Relations and Public Policy, made it clear that while USPS was proud of the work it did on the BCRS, it still did not favor issuance of other semipostals. She testified that fund-raising was a diversion from USPS's core mission, that the philatelic community opposed semipostals on the grounds that they dilute the quality of the stamp program, but most seriously that choosing among the many worthy causes eager for semipostal revenue would be difficult for the Postal Service. She said that if semipostals were authorized in the future, she hoped Congress would make those choices. Congress chose another approach, however. The Semipostal Authorization Act cleared the House as H.R. 4437 under suspension of the rules on July 17, 2000, and the Senate by unanimous consent on July 26. The President signed the bill into law ( P.L. 106-253 ; 114 Stat. 634) on July 28, 2000, the day before the Stamp Out Breast Cancer Act was to expire. The act extended the BCRS for two more years, until July 29, 2002, and gave USPS broad authority to issue and sell semipostals for 10 more years "in order to advance such causes as the Postal Service considers to be in the national public interest and appropriate." Other than specifying that the funds raised could go only to federal agencies, the act left broad discretion to USPS in selecting future semipostals. The act also required USPS to use the notice-and-comment regulatory process to propose and then issue a regulation specifying selection criteria, procedures, and any limitations imposed on the issuance of semipostals. Procedures and Criteria for Selecting Semipostal Stamps On June 12, 2001, USPS published a regulation setting forth how it planned to implement its responsibility for the semipostal program (66 F.R. 31822-31828). USPS said it intended to invite nominations from the public for a new semipostal every two years, with no more than one semipostal in circulation at any given time. The Citizens' Stamp Advisory Committee would review the eligible proposals and make recommendations to the postmaster general, who "will act on the recommendations" of the committee. Submissions need to demonstrate that the cause to be benefitted "has broad national appeal" and "is in the national public interest and furthers human welfare." Submissions must be accompanied by an official letter from an executive agency, or up to two agencies, certifying that they are willing and able to implement the proposal and adhere to the conditions set by the act. This requirement in particular suggested that proposals need to be carefully planned and coordinated, and cannot merely be suggestions, as is the case with nominations for commemorative postage stamps. On June 12, 2001, USPS issued a notice of request for proposals for the next two semipostals (66 F.R. 31829). By the August 31, 2001, closing date, 37 valid nominations had been made and accepted, nine of them with what USPS calls "congressional interest." Most proposed support for medical research and awareness, on such diseases as AIDS, asthma, autism, colorectal cancer, stroke, deafness, Alzheimer's disease, sickle cell anemia, diabetes, lupus, and prostate cancer. Others focused on childhood abuse and neglect, pollination, missing children, and vanishing wildlife. Former President Jimmy Carter proposed a semipostal for Habitat for Humanity. Congress Intervenes to Authorize More Semipostals According to the semipostal stamp program implementing rules (39 C.F.R. Part 551), USPS will not issue other semipostals under the Semipostal Authorization Act of 2000 until after the sales period of the BCRS has ended. The implementing regulations also provide that the Office of Stamp Services will determine the date of commencement of the 10-year period. Congress, however, has enacted more semipostal stamp legislation. The Treasury-Postal Service Appropriations Act for 2002 ( P.L. 107-67 ) contained three provisions affecting the issuance of semipostal stamps. One provision extended the BCRS expiration date to December 31, 2003, and authorized raising the price of the stamp from 40 cents to 45 cents. A second provision authorized another semipostal, to be issued "as soon as possible," to assist the families of rescue workers killed or disabled in the terrorist attacks of September 11, 2001. The Federal Emergency Management Agency (FEMA) would administer the funds. USPS announced at a White House ceremony that the "Heroes of 2001" stamp would be issued June 7, 2002, and terminate on December 31, 2004. A third provision authorized issuance of a semipostal to support programs of the Department of Health and Human Services to stop domestic violence, beginning no later than January 1, 2004, and being withdrawn no later than December 31, 2006. The "Stop Family Violence" stamp went on sale October 11, 2003, at a price of 45 cents. This stamp went off the market on December 31, 2006. Over 45 million of these semipostal stamps were sold, raising about $3 million. All three of these provisions exempted the stamps from the USPS regulation limiting circulation of semipostals to one at any one time. It is unlikely that USPS would authorize a semipostal under its statutory authority to compete with those authorized directly by Congress, since USPS is well aware that the public could tire of semipostals, as has happened in several other countries. Of the 170 countries that issue stamps, only about 50 issued any semipostals in the 1990s, and only 17 did so on a regular basis. Even fewer had more than one in circulation at a time. Canada, the United Kingdom, and Sweden discontinued the use of semipostals when they became unpopular with the public and competed with other fund-raising activities. There is some evidence that the public is losing interest in semipostals. Sales of the BCRS peaked at 121.3 million stamps in FY2000. Sales declined to 83.0 million and 80.1 million in FY2003 and FY2004, rose to 92.6 million in FY2005, then fell to 67.3 million and 65.2 million in FY2006 and FY2007. GAO reported the views of some observers that the large initial sales figures of the "Heroes of 2001" semipostal "were not sustainable because that semipostal did not benefit from the support of a long-established, well-organized, nationwide network of organizations to keep the Heroes semipostal in the public eye," in contrast to the nationwide support base for the breast cancer stamp. In the last three months of 2004, a period of seasonally heavy mailing, sales of the Heroes semipostal averaged only 1.6 million per month, and sales of the domestic violence semipostal averaged only 967,000. The Heroes stamp was withdrawn from sale when its authorization expired on December 31, 2004. USPS had gradually transferred $10,174,000 in net proceeds to FEMA by that date. On July 26, 2005, FEMA published its plans to distribute the money (70 F.R. 43214). The application period for the assistance program under the 9/11 Heroes Stamp Act of 2001 started on December 2, 2005, and ended on March 29, 2006. Developments in the 108th, 109th, and 110th Congresses In the 108 th Congress, P.L. 108-199 contained a provision (Division F, Title V, Section 541) amending 39 U.S.C. 414(h) to extend the BCRS until December 31, 2005. Because the bill was not enacted until January 24, 2004, the BCRS was briefly withdrawn from sale early in the year. The 109 th Congress extended the BCRS until December 31, 2007 ( P.L. 109-100 ; 119 Stat. 2170). The 110 th Congress extended the BCRS further still, permitting USPS to sell the stamps until December 31, 2011 ( P.L. 110-150 ; 121 Stat. 1820). On February 9, 2005, the House Committee on Government Reform amended its Rule 19 to discourage the consideration of legislation to authorize new semipostals: The committee has adopted the policy that the determination of the subject matter of commemorative stamps and new semi-postal issues is properly for consideration by the Postmaster General and that the committee will not give consideration to legislative proposals specifying the subject matter of commemorative stamps and new semi-postal issues. It is suggested that recommendations for the issuance of commemorative stamps be submitted to the Postmaster General. This rule, now numbered as Rule 20, was retained by the House Oversight and Government Reform Committee in the 110 th Congress.

Semipostal stamps, postage sold at a premium to raise funds for particular causes, have only recently been authorized by Congress for use in the United States. The Breast Cancer Research Stamp (BCRS) was introduced in July 1998, and as of December 2007, has raised over $60.1 million to support research in treating breast cancer through distributions to designated agencies. In the 106th Congress, the Semipostal Authorization Act of 2000 extended the BCRS two years and authorized the U.S. Postal Service (USPS) to issue other semipostals until 2010. USPS issued regulations inviting public nominations for future semipostals, providing that each can be sold for two years but only one can be on sale at any given time. Subsequent Congresses have further extended the life of the BCRS. Most recently, the 110th Congress authorized its sale through December 31, 2011. The breast cancer stamp's success is no guarantee that other semipostals will be equally successful. The "Heroes of 2001" stamp did not sell especially well and was withdrawn from circulation.

Background On December 19, 2003, Libya announced it would dismantle its weapons of mass destruction (WMD) programs and open the country to immediate and comprehensive verification inspections. Libya pledged to eliminate its chemical and nuclear weapons programs, subject to International Atomic Energy Agency (IAEA) verification; eliminate ballistic missiles with a 300 km range or greater and a payload of 500 kilograms; accept international inspections to fulfill Nuclear Nonproliferation Treaty (NPT) obligations; and sign the Additional Protocol. Further, Libya would eliminate all chemical weapons stocks and munitions and accede to the Chemical Weapons Convention (CWC); and allow immediate inspections and monitoring to verify these actions. Since December 2003, Libya has also agreed to abide by the Missile Technology Control Regime (MTCR) guidelines, and signed the Comprehensive Test Ban Treaty. Libya's decision likely rested on several factors. The burden of 30 years of economic sanctions had significantly limited oil exports and stagnated the Libyan economy, making the prospect of renewed international investment that would follow a renunciation of WMD very attractive. Further, Libya's elimination of its WMD programs was a necessary condition for normalizing relations with the United States. The Administration has attributed Libya's decision to abandon its WMD to President Bush's national security strategy. Some officials claim that Iraq's example convinced Libya to renounce WMD; others point specifically to the interdiction of centrifuge parts (used for uranium enrichment) in October 2003. Still other observers have suggested that Libya's WMD programs were not very successful, while ending Libya's pariah status became particularly important to Colonel Qadhafi. At least two accounts record Libyan offers to renounce its WMD programs dating back to 1992 and 1999. Prior Assessments of WMD Programs Despite Libya's membership in the NPT (from 1975) and the Biological and Toxin Weapons Convention, or BWC, (from 1982), most observers believed Libya was pursuing a range of WMD programs, albeit not entirely successfully. The Bush Administration noted in 2003 that "we have long been concerned about Libya's longstanding efforts to pursue nuclear, chemical and biological weapons and ballistic missiles." Libya continues to deny any BW program, but its chemical weapons capability (including use of CW against Chad in the 1980s and facilities at Rabta and Tarhuna) was well known. Libya's ballistic missile arsenal was comprised of Scud Bs (300-km, 700 kg payload) acquired from the former Soviet Union, a handful of North Korean Scud-Cs (600-km, 700 kg payload), and a 500-700km-range missile under development, called Al Fatah. The Al Fatah program reportedly continued throughout the 1990s, although hampered by international sanctions. Israeli intelligence claimed also that Libya had received 1300-km-range No Dong missiles from North Korea, but U.S. intelligence disputed this notion. A 2001 National Intelligence Council assessment stated that "Libya's missile program depends on foreign support, without which the program eventually would grind to a halt." Libya signed the International Code of Conduct Against Ballistic Missile Proliferation (ICOC) in November 2002. New Evidence: Inspections According to many reports, Libyan officials approached British officials in March 2003 with an offer to give up their WMD programs. After several months of secret negotiations, U.S. and British officials first inspected Libyan weapon sites, laboratories, and military factories in October 2003. This coincided with the interdiction in the Italian port of Taranto of a shipment of uranium enrichment centrifuge equipment ultimately bound for Libya. Initial visits revealed more extensive Libyan nuclear activities than previously thought, and significant quantities of chemical agent. Thus far, U.S. and British officials apparently have found no evidence of an offensive biological weapons program. Some observers have suggested that each of Libya's programs suffered from shortages of parts and technical expertise as a result of years of sanctions. Libya has provided significant information about its nuclear, chemical, and missile programs, including data on foreign suppliers. In fact, Libya's revelations about Pakistani scientist A.Q. Khan's nuclear black market dealings have aided IAEA inspections of Iran's nuclear program and helped prompt Pakistan to investigate Khan. Nuclear Program10 Many observers over the years discounted Libya's nuclear weapons program because of its failure to procure key components and lack of indigenous resources and expertise. Yet, Libya's declarations revealed that A.Q. Khan seemed to have solved the procurement problem, if not the problem of expertise. In 1997, Libya acquired 20 pre-assembled P-1 centrifuges and the components for another 200. Libya constructed three different enrichment cascades, but only the smallest (using 9 centrifuges) was completely installed by 2002. In 2000, Libya received 2 centrifuges of a more advanced design (P-2 using maraging steel) and placed an order for 10,000 of those. Assistance on centrifuge enrichment reportedly came from A.Q. Khan, former head of Pakistan's enrichment facility. Khan reportedly also provided Libya with an actual nuclear weapons design, which was handed over to IAEA inspectors in December 2003 and sealed on-site. According to one source, the design closely resembles a 1960s-vintage Chinese nuclear warhead. One report suggested that such a warhead would not fit on Libya's SCUD-C missiles and that key parts of the weapons design were missing. Libya also dabbled in separating minute quantities of plutonium between 1984 and 1990. Chemical Weapons Program Libya declared to the Organization for the Prohibition of Chemical Weapons (OPCW) on March 5, 2004 that it had produced approximately 23 tons of mustard agent in one chemical weapons production facility (Rabta) between 1980 and 1990 and stored those materials in two storage sites. Libya also declared thousands of unfilled munitions. Ballistic Missile Program Libya pledged to eliminate all ballistic missiles with a range of 300 kilometers and a payload of 500 kilograms or greater. In early 2004, Libya relinquished 5 North Korean Scud-C missiles, which U.S. officials described as an "emerging" Scud-C program. Libya hoped to convert its Scud-B arsenal, estimated at between 80 and a few hundred, into shorter-range, defensive purpose missiles and end military trade with North Korea. According to one source, in February 2005, Libya asked the United States to buy 417 Scuds for $2 million each; the United States reportedly bought ten for testing. There is no further information on the status of the Al Fatah program. Libya's missile pledge will leave Libya primarily with shorter-range cruise missiles—SS-N-2c Styx, Otomat Mk2, and Exocet anti-ship cruise missiles. Eliminating Libyan WMD18 The United States eliminated the most sensitive aspects of Libya's WMD and missile programs first. On January 22, 2004, nuclear weapons design information was sent to the United States and days later, U.S. officials airlifted about 55,000 pounds of documents and components from Libya's nuclear and ballistic missile programs to Oak Ridge, Tennessee. Nuclear components included several containers of uranium hexafluoride (used as feedstock for enrichment); 2 P-2 centrifuges from Pakistan's Khan Research Laboratories and additional centrifuge parts, equipment, and documentation. Beginning in December 2003, IAEA inspectors visited Libya to confirm its declarations. Since then, the IAEA has had unlimited access to requested locations and has verified the consistency of Libya's declarations concerning its uranium conversion program, enrichment program, and other past nuclear-related activities. Libya has applied the Additional Protocol, which it ratified on August 8, 2006, on an interim basis since December 2003. In March 2004, over 1,000 tons of additional centrifuge parts and MTCR-class missile parts reportedly were shipped from Libya, including five Scud-C missiles, partial missiles, missile launchers, and related equipment. Russia also removed 17 kg of fresh, 80% highly enriched uranium it had supplied in the 1980s to the 10-megawatt research reactor at Tajura, which the United States plans to help convert to use low-enriched uranium fuel. Libya continues the dismantlement of its chemical weapons program and has requested formal assistance from the United States for the destruction of its remaining chemical weapons stockpile. The OPCW visited Libya first in February 2004, after Libya acceded to the CWC. The OPCW has supervised the on-site destruction of more than 3,500 unfilled shells for CW. Destroying the mustard agent, however, is a bit more complicated, and will require a destruction plan and a special facility for destruction. In June 2006, Defense Threat Reduction Agency Director James Tegnelia estimated the cost of destruction at $100 million, given the location of the chemicals in a remote desert area. Libya requested and received an extension of the CWC requirement to destroy all its chemical weapons and production capacity by April 29, 2007. Libya also received permission from the OPCW to convert the Rabta facility to produce pharmaceuticals. In September 2004, Libya, the United States, and the UK established the Trilateral Steering and Cooperation Committee (TSCC) to oversee the final stages of elimination of Libya's WMD and MTCR-class missile programs and to promote cooperation. Lifting Sanctions23 Libya had been subject to one of the strictest U.S. sanctions regimes as a result of its support of international terrorism. Libya's cooperation in several areas has allowed sanctions to be lifted. In September 20, 2004, President Bush made three determinations about Libya that would allow lifting certain sanctions pursuant to the Arms Export Control Act (AECA) and the Export-Import Bank Act of 1945. First, he determined: that Libya received nuclear enrichment equipment, material or technology after August 1977; that the continued termination of assistance under Section 101 of the AECA would have a serious adverse effect on vital U.S. interests; and that he has received reliable assurances that Libya will not acquire or develop nuclear weapons or assist other nations in doing so. Second, he determined that Libya sought and received design information intended for use in the development or manufacture of a nuclear explosive devices, and that the application of sanctions would have a serious adverse effect on vital U.S. interests, pursuant to Section 102 (b) of the AECA. Third, he determined that, pursuant to Section 2 (b) (4) of the Export-Import Bank Act of 1945, it is in the national interest for the Export Import Bank to guarantee, insure, or extend credit, or participate in the extension of credit in support of U.S. exports to Libya. President Bush also rescinded the national emergency with respect to Libya and lifted trade, travel, and commercial restrictions. Further measures included releasing $1.3 billion in frozen assets, providing OPIC guarantees, and removing restrictions on direct flights between Libya and the United States. Libya was finally removed from the list of state sponsors of terrorism on June 29, 2006. Issues for Congress Prior to Libya's removal from the list of state sponsors of terrorism, U.S. assistance in WMD dismantlement was limited to funding provided by the State Department's Nonproliferation and Disarmament Fund (NDF), because such funds are not restricted by limits imposed by other laws. Since 2004, NDF has committed about $34.2 million to the WMD disarmament process in Libya, including funds for: removal of equipment and material ($5 million); retraining of former WMD scientists and personnel ($2.5 million); export control assistance ($1 million); securing radiological sources ($ .7 million); and destroying chemical weapons and agents ($25 million). State Department officials estimate that about $20 million more will be required to help Libya destroy the rest of its chemical stockpile. Senator Lugar has stated that the NDF "does not have the size, scope, or experience to do dismantlement operations, to employ nuclear scientists, or undertake longer term nonproliferation efforts." One possibility is to use Cooperative Threat Reduction (CTR) funds for these activities, which became theoretically possible with the expansion of the application of CTR funds since FY2004, but which was impossible in a practical sense before July 2006 because of Libya's status as a state sponsor of terrorism. CTR funds may also contain more restrictions than NDF funds, particularly in contractual requirements. Congress may wish to consider whether to provide additional assistance to Libyan disarmament, and if so, how.

On December 19, 2003, Libya announced it would dismantle its weapons of mass destruction (WMD) and ballistic missile programs. Since then, U.S., British, and international officials have inspected and removed or destroyed key components of those programs, and Libya has provided valuable information, particularly about foreign suppliers. Libya's WMD disarmament has been a critical step towards reintegration into the world community. This report will be updated as needed. See CRS Report RL33142, Libya: Background and U.S. Relations , by [author name scrubbed].

Introduction Designating funds within appropriations legislation for specified projects or locations has been a way for Congress to provide funding for designated communities to build and upgrade water infrastructure systems. In the past, such legislative action has often been popularly referred to as earmarking. The future needs for projects to treat municipal wastewater or treat and deliver public drinking water supplies in the United States are large—$298 billion for wastewater treatment and $335 billion for public water systems, according to the most recent estimates reported by states and the Environmental Protection Agency (EPA). Federal funding to assist communities in meeting the goals and requirements of environmental laws has been provided first through programs in the Clean Water Act and also, more recently, through a program in the Safe Drinking Water Act. Under the core assistance programs in these acts, Congress annually appropriates block amounts which are allocated among states according to specified allotment formulas. States, then, make assistance awards to individual communities. Since 1972, Congress has provided more than $100 billion for these core programs. Under both laws, federal funds capitalize state revolving funds (SRFs), which states then use to make loans to communities for water infrastructure capital projects. Local communities, in turn, repay loans to the state revolving fund, not the federal government. In FY1989, congressional appropriators began the practice of supplementing appropriations for the SRF programs with designated project grants in the EPA appropriations account that funds Clean Water Act and Safe Drinking Water Act assistance. Unlike loans under the two SRF programs, these grants generally are provided on the basis of 55%-45% federal-local cost sharing, with no requirement to repay the federal share. Since 1989, Congress has awarded $7.4 billion for these grants, which have increased as a portion of appropriated water infrastructure funds in that account. Notably since FY2000, appropriators have awarded grants to a larger total number of specified projects (e.g., 46 in FY1995, compared with 319 in FY2010), resulting in more communities receiving such assistance, but at the same time most of them receiving smaller amounts of funds, on average (e.g., $18.1 million in FY1995, compared with $585,508 in FY2010). This report discusses appropriations for EPA water infrastructure programs, focusing on congressional special project designations in the account that funds these programs. Because some Members of Congress, interest groups, and Administration officials criticize these types of congressional actions, the practice of congressionally designated special project funds for EPA's water infrastructure and other programs was banned in FY2011, but some policy makers and constituents would like to see it restored. Information on the programmatic history of EPA involvement in assisting wastewater treatment and drinking water projects also is provided in two appendixes. Defining Special Purpose Project Grants In appropriations legislation, funding for EPA clean water and drinking water programs is contained in the measure providing funds for the Department of the Interior, Environment, and Related Agencies. Within the portion of that bill which funds EPA, wastewater treatment and drinking water assistance are specified in an account called State and Tribal Assistance Grants (STAG). This appropriations account includes all water infrastructure funds, as well as management grants that assist states in implementing air quality, water quality, and other media-specific environmental programs. Today, the STAG account includes appropriations both for the primary Clean Water Act and Safe Drinking Water Act assistance programs (see Appendixes A and B for background) and for congressionally designated special purpose project grants, which many persons have popularly referred to as earmarks, or often as STAG grants. There is no single definition of the term "earmark" that is accepted by all practitioners and observers of the congressional appropriations process, nor has there been a standard practice across all 13 appropriations bills. While definitions of this practice vary, an earmark generally is considered to be an allocation of resources to specifically targeted beneficiaries. They may be proposed by the President or may be originated by Congress. In the 110 th Congress, a number of budget process reform proposals were debated, including changes to House and Senate rules affecting earmarking, leading to Congress banning the practice since FY2011. Although the practice is not currently in use, the focus of this report is funds set aside within the EPA STAG account during years when it did occur to fund individual water infrastructure projects, locations, or organizations, detailed either in the appropriations act or the joint explanatory statement of its accompanying conference report, and not distinguishing those requested by the Executive from those designated by Congress. Trends in Congressionally Designated Project Grants Pressure to provide designated special project grant funding has been evident in the appropriations process where for several years Congress reserved as much as 30% of funds in the account that provides clean water and drinking water assistance for specified communities. The practice of designating a portion of the construction grants/SRF account for specific wastewater treatment and other water quality projects began in the FY1989 EPA appropriations legislation. Subsequently it increased as a portion of appropriated funds in the STAG account (3% of the total water infrastructure appropriations in FY1990, for example, increasing to 31% in FY1994, but somewhat less in recent years: 11% in FY2009 and 12% in FY2010). The number of projects receiving these designated funds also increased: from four in FY1989 to 319 in FY2010. After FY2000, the larger total number of projects resulted in more communities receiving such grants, but at the same time receiving smaller amounts of funds. Thus, while a few communities received individual awards of $2 million or more, the average size of grants shrank: $18.1 million in FY1995, $4.9 million in FY1999, $1.08 million in FY2006, and $585,508 in FY2010. See Table 1 for additional detail. Conference reports on the individual appropriations bills provide some description of projects funded in this manner, but the text is typically very brief. The effective result of using substantial amounts for congressionally designated project grants has been to reduce the amount of funds provided to states to capitalize their revolving loan programs. Of the $67 billion appropriated to EPA for water infrastructure programs since 1989 (both for wastewater, under the Clean Water Act, and drinking water projects, under the Safe Drinking Water Act), $7.4 billion, or 11%, was directed to specified project grants. Unlike loans under the two SRF programs, these grants generally were provided on the basis of 55%-45% federal-local cost sharing, or the maximum dollar amount specified in the appropriations act, whichever is less, with no requirement to repay the federal share. The matching requirements were spelled out in statutory and/or report language. From FY1989 to FY1995, the Boston Harbor project, discussed below, received the largest single project grant each year ($25 million in FY1989, $100 million in FY1994). In all years except FY2008, since FY1996, the largest single special project grant in each year's appropriations act was designated for "architectural, engineering, planning, design, construction and related activities in connection with the construction of high priority water and wastewater facilities in the area of the United States-Mexico Border" ( P.L. 109-54 ). Earmarked appropriations for these U.S.-Mexico Border projects have totaled nearly $815 million. From FY1989-FY1994, designated project grants were used only to assist wastewater treatment projects. The first two such grants for drinking water projects were provided in FY1995 appropriations legislation, two more were awarded in FY1997, and 12 (out of 42 total) were designated in FY1998. Subsequently, the number of designations for individual drinking water projects increased, and since FY2005, project grants were divided approximately equally between wastewater treatment projects and projects involving drinking water or water supply. Further, for several years, more than one-third of the individual grants were repeats, that is, grants awarded to projects that had previously received one or more. In the early years of this congressional practice, special purpose grant funding originated in the House version of the EPA appropriations bill, while the Senate, for the most part, resisted the practice by rejecting or reducing amounts and projects included in House-passed legislation. With this difference in legislative approach, special purpose grant funding was an issue on several occasions during the House-Senate conference on the appropriations bill. After FY1999, however, both the House and Senate proposed projects in their respective versions of the EPA appropriations bill, with the final total number of projects and dollar amounts being determined by conferees. In addition, as it has now been 25 years since the last major amendments to the Clean Water Act, the desire by some Members to address special needs wastewater problems that might be debated during reauthorization of that act has increased, thus leading to greater pressure on House and Senate Members to use the appropriations process to handle such concerns. Since the practice of designating projects began to increase in the early 1990s, the position of the Clinton, Bush, and Obama Administrations has been to propose a limited number of such grants for inclusion in the President's annual budget submission (such as U.S.-Mexico Border projects), but generally to oppose the congressional practice of specifying a large number of projects as a significant portion of funds in the STAG account, especially in recent years. Appropriators supported most but not all projects requested by the President, while modifying the funding amounts for some of the Administration's requests and adding many more projects not requested by the Administration. For example, the first Administration request for a specified project was in the FY1992 budget. The George H.W. Bush Administration sought $400 million at that time for grants to be directed to six projects in coastal cities. Congress agreed to funding for those six, plus two others. Likewise, in FY1993, Congress agreed to grants for six projects requested by the Administration, plus seven others. This pattern of Administration requests and congressional response continued. In FY2010, the Administration requested grants for two special needs projects; Congress funded both of them, plus 317 others. Project Grants for Specific Cities The four projects designated in FY1989 were projects for which funding had been authorized in the 1987 Water Quality Act (WQA, P.L. 100-4 ). (These project authorizations were in Title V of the WQA, which did not specifically amend the Clean Water Act.) The authorized projects were: Boston, to provide secondary treatment of wastewater and improve the environmental quality of Boston Harbor, San Diego, to remedy discharges of untreated sewage from Tijuana, Mexico, Des Moines, a sewage treatment plant project, and Oakwood Beach, New York, for relocation of natural gas facilities related to two sewage treatment facilities. For the next two years, appropriators continued to designate only WQA-authorized projects, with one exception. Two of these authorized projects (Boston Harbor and San Diego/Tijuana) continued to receive some funding through FY1999, but most designations since FY1992 have been for projects not specifically authorized in federal law. From FY1989 to FY1999, Congress appropriated a total of $740 million for the Boston Harbor project—the largest total amount received by a single community under provisions in the EPA appropriations act. A few other communities have received large total amounts of such grants over multiple years. For example, the WQA-authorized San Diego project received $235 million over seven years, and another San Diego project for a wastewater reclamation facility received a total of $135 million in the early 1990s. Los Angeles was awarded a total of $160 million from FY1992-1994 for unspecified projects. New York City received $210 million in grants over that same time period, also for unspecified infrastructure projects. Detroit has received grants totaling $352 million since FY1992 for a project called the Rouge River Wet Weather Demonstration Project. Designated funding in the EPA appropriations act for projects along the U.S.-Mexico border (distributed to multiple communities) have totaled $780 million since FY1996. Projects in Alaska Native and rural villages (also distributed to multiple locations) have been awarded $452 million since FY1995. The large awards for these projects tend to mask the average value of water infrastructure designated project grants. For example, in FY2010, the average of all 319 awards was $585,508, but discounting the $30 million for Alaska Native and rural village projects and U.S.-Mexico border projects, the average for other individual grants was $494,565. No Special Project Grants in FY2007 or Since FY2011 For FY2007, Congress was unable to enact all appropriations bills before the start of the fiscal year, on October 1, 2006. Final action on appropriations for EPA, as well as for other domestic agencies and departments funded under 11 of 13 appropriations acts, was delayed until mid-February 2007—after the FY2008 budget request had been submitted. Congress then passed a continuing appropriations resolution providing full-year funding through the end of FY2007 ( P.L. 110-5 ). In order to complete the unfinished business in a timely manner, House and Senate leaders decided to include no congressional special purpose grants in the resolution, explaining the decision in a press release. There will be no Congressional earmarks in the joint funding resolution that we will pass. We will place a moratorium on all earmarks until a reformed process is put in place. Earmarks included in this year's House and Senate bills will be eligible for consideration in the 2008 process, subject to new standards for transparency and accountability. We will work to restore an accountable, above-board, transparent process for funding decisions and put an end to the abuses that have harmed the credibility of Congress. Under the FY2007 appropriations bill for EPA that had been under congressional consideration during 2006 ( H.R. 5386 ), the House would have provided $200 million for 146 special project grants. The Senate would have provided $210 million for 195 projects. As a result of the process adopted in P.L. 110-5 , none received funding. The congressional moratorium did not apply to special project grants requested by the Administration in the President's FY2007 budget request; it had sought $14.9 million for Alaska Native and rural villages, $24.8 million for U.S.-Mexico Border projects, and $990,000 for a single project in Puerto Rico. The final result in P.L. 110-5 (see Table 1 ), however, provided funding for Administration priorities at the same levels that were enacted for FY2006: $34.5 million for Alaska Native and rural villages, $49.3 million for U.S.-Mexico Border projects, and no funding for the Puerto Rico project. After this single year, Congress resumed including special purpose grants in EPA's FY2008, FY2009, and FY2010 appropriations (see Table 1 ). However, again in FY2011, no special project funding was provided for congressional projects. Congress took only limited action on FY2011 funding for EPA before the start of the new fiscal year on October 1, 2010; a House Appropriations subcommittee approved a bill in July 2010, but no further action followed. At the end of September 2010, the House and Senate passed a continuing resolution to extend FY2010 funding levels for EPA and other federal agencies and departments until December 3, 2010, because no FY2011 appropriations bills had been enacted by October 1. President Obama signed the continuing resolution (CR) on September 30 ( P.L. 111-242 ). This bill was followed by six more short-term CRs before Congress came to final resolution of FY2011 spending on April 14, 2011, enacting a bill to provide funding for EPA and all other federal agencies and departments through September 30 ( P.L. 112-10 ). Following the 2010 mid-term election and during subsequent months while FY2011 appropriations were under consideration, the general issue of congressional earmarks of specific projects had become highly controversial because of the overall growing number of them, concern over the influence of special interests on spending decisions, and lack of congressional oversight. In response, President Obama said he would veto any legislation containing earmarks, the House extended the ban on earmarks under the Republican Conferences rules, and the chairman of the Senate Appropriations Committee announced a moratorium on earmarks for FY2011 and FY2012. Thus, the FY2011 full-year appropriations measure ( P.L. 112-10 ) contained no congressionally directed special project funds for water infrastructure projects in the EPA STAG account. However, as was the case for FY2007, it did include funds requested by the President for Alaska native and rural villages and for U.S.-Mexico Border projects. Likewise, EPA's appropriations for FY2012 were included in an omnibus act ( P.L. 112-74 ), which included no congressional earmarks for water infrastructure projects but did include funds requested by the President for Alaska native and rural villages and for U.S.-Mexico Border projects. This also occurred in FY2013 ( P.L. 113-6 ) and FY2014 ( P.L. 113-76 ) (see Table 1 ). Policy Implications Groups representing state water program managers and administrators of infrastructure financing programs have criticized the congressional practice of awarding grants to designated communities. They contend that it undermines the intended purpose of the state funds, which is to promote environmental improvements nationwide. Many state officials prefer that funds be allocated more equitably, not based on what they view largely as political considerations, and they prefer that state environmental and financing officials retain responsibility to set actual spending priorities. Further, they say, because directed funding to special projects diminishes the level of seed funding for loans under state revolving funds, it delays the time when states will become financially self-sufficient—and may actually prolong the period when states seek continued federal support. The practice has been criticized because designated projects have received more favorable treatment than other communities' projects: they generally are eligible for 55% federal grants (and are not required to repay 100% of the funded project cost, which they must do in the case of a loan through an SRF), and the practice sidesteps the standard process of states' determining the priority by which projects will receive funding. It also means that the projects have generally not been reviewed by the congressional authorizing committees. This is especially true since FY1992, when special purpose grant funding was designated for projects not authorized in the Clean Water Act or amendments to it or in the Safe Drinking Water Act. Members of Congress may intervene to provide funding for a specific community for a number of reasons. In some cases, the community may have been unsuccessful in getting state approval to fund the project under an SRF loan or other program. For some, especially small and rural communities, the cost of a project financed through a state loan, which the community must repay in full, is deemed unacceptably high, because repaying the loan can result in increased user fees that ratepayers feel are unduly burdensome. The community then seeks a grant to avoid this costly financial scenario. A number of the special purpose grants were made to projects characterized as "needy cities," based on local economic conditions. Since FY1993, report language accompanying the appropriations bills (and specifically legislative language since FY2004) directed that grants awarded in this manner were to require that 45% of a project's cost be the responsibility of the local community. EPA has been allowed to be flexible in applying the local cost-share, based on the community's financial capability, but the agency has rarely modified the general requirement. Technically, the CWA Title II grants program ended when authorizations for it expired after FY1990. One result of awarding special purpose grants in appropriations bills has been to perpetuate grants as a method of funding wastewater treatment construction long after FY1990. At the same time, it also resulted in grants which had not previously existed for drinking water system projects. Following enactment of an appropriations act, project grants designated by Congress were not provided automatically to the designated recipient communities or organizations. Since the funds are awarded as EPA grants, recipients must first meet all applicable EPA requirements in regulations and guidelines that apply to other grant programs, including applying for the grant and complying with other federal laws and requirements, and must continue to comply with program- and project-specific rules as long as the grant remains active. Consequently, there are administrative costs associated with special purpose grants both for the local communities and for EPA, which has been administering several hundred more of these grants every year. Conclusion Attention is often drawn to the relatively few projects that received large grant awards by Congress, especially over multiple years. However, the other side of that story is the large number of projects that received relatively small amounts—especially as a percentage of the total cost of water infrastructure projects, which has been very large. Even with the large awards described here for some communities, more than 75% of the projects designated in the EPA appropriations legislation received total awards (either in a single year or over multiple years) of $2 million or less. The trend of appropriators to provide smaller awards is reflected in the fact that only a small number of projects received awards of $1 million or more: 27 in FY2008 (9.6% of total earmarks), 27 again in FY2009 (9% of total), and 22 in FY2010 (6.9% of total). As individual award amounts got smaller, some questioned whether communities might conclude that the cost of receiving such funding—both in terms of political capital spent to seek it and actual resources spent subsequently to secure the grant from EPA—exceeds the benefits This congressional practice raised two significant policy issues. The first is that it alters the process of who decides which water infrastructure projects will receive funding, from state program officials to Members of Congress (for those projects not also requested by the Executive), and how the merits of particular projects may be evaluated. The second issue, noted above, is that it reduced the amount of funds provided to capitalize state revolving loan programs, thus arguably delaying the time when states will become financially self-sufficient in administering capital programs and potentially prolonging the time when states and communities seek continued federal aid. Some Members of Congress, interest groups, and Administration officials have been critical of including special project grants in this and other appropriations acts. Other Members and many local officials view it as an appropriate way to assist communities that would not be served by the legislated programs. After the moratorium for FY2007, the practice resumed and continued in FY2008, FY2009, and FY2010, although new rules were intended to provide greater transparency by requiring that the sponsors of earmarks be identified in committee reports. As described above, criticism of congressional earmarking resulted in banning the practice for EPA and other federal agencies since FY2011. Still, some Members and interest groups have pressed for rules changes that would relax the current ban. So far, Congress has not modified the prohibition on earmarks, but could choose to do so in the future. Appendix A. Background: Federal Involvement in Wastewater Treatment The Water Pollution Control Act of 1948 (P.L. 80-845) was the first comprehensive statement of federal interest in clean water programs. While it contained no federally required goals, limits, or even guidelines, it started the trickle of federal aid to municipal wastewater treatment authorities that grew in subsequent years. It established a grant program to assist localities with planning and design work and authorized loans for treatment plant construction. With each of the four successive amending statutes in the 1950s and 1960s, federal assistance to municipal treatment agencies increased. A construction grant program replaced the loan program; the amount of authorized funding went up; the percentage of total costs covered by federal funds was raised; and the types of project costs deemed grant-eligible expanded. In the Federal Water Pollution Control Act Amendments of 1972 (P.L. 92-500, popularly known as the Clean Water Act (CWA)), Congress revised the existing federal clean water law, including provisions related to wastewater systems. In the 1972 law, Congress strengthened the federal role in clean water and established the first national standards for sewage treatment. A number of new conditions were attached to projects constructed with grants (such as comprehensive planning requirements). In order to assist communities in meeting the ambitious water quality improvement goals of the new law, federal funds increased dramatically, and the federal share was raised from 55% to 75%. The grant program was reauthorized in 1977 ( P.L. 95-217 ) and again in 1981 ( P.L. 97-117 ). Efforts began focusing on use of federal funds for projects with clear environmental benefits, out of concern that the program's wide scope was not well focused on key goals. Especially reflected in the 1981 amendments were budgetary pressures and a desire to reduce federal spending. Annual authorizations were reduced from $5 billion to $2.4 billion, the federal share was again set at 55%, and project eligibilities were limited. The most recent comprehensive CWA amendments were enacted in 1987 ( P.L. 100-4 ). That legislation authorized $18 billion over nine years for wastewater treatment plant construction, through a combination of the traditional grant program and a new State Water Pollution Control Revolving Funds (SRF) program. Under the new program, federal capitalization grants are provided as seed money for state-administered loans to build sewage treatment plants and other water quality projects. Local communities, in turn, repay loans to the state, a process intended by Congress to enable a phaseout of federal involvement after states build up a source of capital for future investments. Under the amendments, the SRF program was phased in beginning in FY1989 and entirely replaced the previous grant program in FY1991. The intention was that states would have greater flexibility to set priorities and administer funding, while federal aid would end after FY1994. As a general matter, states and cities supported the program changes and the shift to a loan program that was intended to provide long-term funding for water quality and wastewater construction activities. However, the change means that local communities now are responsible for 100% of project costs financed under the SRF program, rather than 45% under the previous grant program. Congress enacted certain changes to the SRF provisions of the CWA in 2014 ( P.L. 113-121 ). These amendments addressed several issues, including extending loan repayment terms from 20 years to 30 years, expanding the list of SRF-eligible projects to include energy- and water-efficiency, increasing assistance to Indian tribes, and imposing "Buy American" requirements on SRF recipients. While municipalities have made substantial progress toward meeting the goals and requirements of the act, state water quality reports continue to indicate that discharges from wastewater treatment plants are a significant source of water quality impairments nationwide. The original authorizations expired in FY1994, but pressure to extend federal funding by reauthorizing the Title VI SRF program and by providing appropriations both for SRF capitalization grants and earmarked project grants, has continued, in part because estimated funding needs remain large. Thus, Congress has continued to appropriate funds, and the anticipated shift to full state responsibility has not yet occurred. Authorizations since 1972, for both the previous Title II grant program and now for the Title VI SRF program, totaled $66 billion, while appropriations have totaled $91.3 billion through FY2014. Appendix B. Background: Federal Involvement in Drinking Water In contrast to the 40-plus years of federal support for financing municipal wastewater treatment facilities, Congress only recently—in 1996—established a program under the Safe Drinking Water Act (SDWA) to help communities with financing of projects needed to comply with federal drinking water regulations. Funding support for drinking water only occurred more recently for several reasons. First, until the 1980s, the number of drinking water regulations was fairly small, and public water systems often did not need to make large investments in treatment technologies to meet those regulations. Second and relatedly, good quality drinking water traditionally has been available to many communities at relatively low cost. By comparison, essentially all communities have had to construct or upgrade sewage treatment facilities to meet the requirements of the CWA. Over time, drinking water circumstances have changed, as communities have grown, and commercial, industrial, agricultural, and residential land-uses have become more concentrated, thus resulting in more contaminants reaching drinking water sources. Moreover, as the number of federal drinking water standards has increased, many communities have found that their water may not be as good as once thought and that additional treatment technologies are required to meet the new standards and protect public health. Between 1986 and 1996, for example, the number of regulated drinking water contaminants grew from 23 to 83, and EPA and the states expressed concern that many of the nation's 52,000 small community water systems were likely to lack the financial capacity to meet the rising costs of complying with the Safe Drinking Water Act. Congress responded to these concerns by enacting the 1996 SDWA Amendments ( P.L. 104-182 ) which authorized a drinking water state revolving loan fund (DWSRF) program to help systems finance projects needed to comply with SDWA regulations and to protect public health. (For additional background, see CRS Report RS22037, Drinking Water State Revolving Fund (DWSRF): Program Overview and Issues , by [author name scrubbed].) This program, fashioned after the Clean Water Act SRF, authorizes EPA to make grants to states to capitalize DWSRFs which states then use to make loans to public water systems. Appropriations for the program were authorized at $599 million for FY1994 and $1 billion annually for FY1995 through FY2003. Actual appropriations, first provided in FY1997, have totaled $18.2 billion through FY2014.

Designating funds within appropriations legislation for specified projects or locations has been a way for Congress to help communities meet needs to build and upgrade water infrastructure systems, whose estimated future funding needs exceed $630 billion. Such legislative action has often been popularly referred to as earmarking. This report discusses appropriations for water infrastructure programs of the Environmental Protection Agency (EPA), focusing on such designations in the account that funds these programs. Information on the programmatic history of EPA involvement in assisting wastewater treatment and drinking water projects is provided in two appendixes. Congressional appropriators began the practice of supplementing appropriations for the primary Clean Water Act (CWA) and Safe Drinking Water Act (SDWA) assistance programs with grants for individually designated projects in FY1989. These designated project grants are often referred to as earmarks, or as STAG grants. Since 1989, of the $67 billion appropriated to EPA for water infrastructure assistance, $7.4 billion has gone to designated project grants. Beginning in FY2000, appropriators awarded such grants to a larger total number of projects, resulting in more communities receiving such assistance, but at the same time receiving smaller amounts of funds, on average. Members of Congress may intervene to provide funding for a specific community for a number of reasons. In some cases the community may have been unsuccessful in getting state approval to fund the project under other programs. Some, especially small and rural communities, seek a grant because the cost of a project financed through a state loan which must be fully repaid is deemed unacceptably high (loans are the primary assistance under the CWA and SDWA). However, this congressional practice has been criticized by state water program managers and administrators of infrastructure financing programs because designated projects are receiving more favorable treatment (55% federal grants, rather than loans) and because the practice sidesteps the standard process of states' determining the priority by which projects will receive funding. Projects so funded through appropriations acts also have generally not been reviewed by congressional authorizing committees. Attention is often drawn to the relatively few projects that have received large special project grants (more than $100 million), especially over multiple years. The majority of designated projects, however, have received comparatively small amounts. More than 75% of the projects designated in the EPA appropriations legislation received total awards (either in a single year or over multiple years) of $2 million or less. Growing criticism of congressional earmarks resulted in banning the practice since FY2011, but some policy makers and constituents would like to see a return of congressionally designated special project funds for EPA's water infrastructure and other programs.

Introduction Significant amounts of technically recoverable oil and gas resources are projected to be onfederal public lands (see Table 7 ). However, energy development on some of these lands has beenrestricted because they are considered environmentally sensitive or unique. These restricted areasmay contain sizable amounts of oil and natural gas, according to the U.S. Geological Survey (USGS)and the Energy Information Administration (EIA). The conflict between environmental concerns and the need for increased domestic energyproduction from public lands is a major policy issue. For example, the conference report on theomnibus energy bill ( H.R. 6 ) and the Senate substitute, S. 2095 hasprovisions that would examine restrictions and impediments to oil and gas development on publiclands, including an evaluation of the current permitting process. Reportedly, reflecting its EnergyTask Force recommendations, the Bush Administration has its own initiative to expedite the oil andgas permitting process on federal lands. Oil and gas development practices have generated considerable debate in Congress since theearly years of the industry. Originally, oil and gas resources on public lands could be transferred toprivate ownership (patented) under the Mining Law of 1872 -- essentially, lands containing oil weresold at a fixed price per acre to the first claimant. (1) Conservationists contended that there was widespread abuse of theMining Law that led to wasteful use of public lands. In 1909 President Taft withdrew 3 million acresof lands prospective for oil in Wyoming and California from availability under the Mining Law of1872. Taft requested congressional approval for his action, leading to the Pickett Act of 1910 (43U.S.C. 141-143), which explicitly recognized executive branch authority to make such public landswithdrawals. (2) Congress eventually decided that defense-related minerals -- including oil and gas -- shouldremain under federal ownership. As a result, the Mineral Lands Leasing Act of 1920 (30 U.S.C. 181,et. seq.) removed oil and gas from the patenting process and placed it under a leasing system. Underthe leasing system, the federal government has raised billions of dollars in revenues from royalties,rents and bonus bids. (3) Minerals owned by the federal government under lands held privately (patented) creates a"split-estate." There are other split-estate situations as well: surface and mineral rights held bydifferent private interests, or state owned mineral rights and privately held surface rights. Threemajor federal statutes (4) allowed the federal government to issue patents to land but reserve the right to the minerals. Underthese statutes the mineral estate became the dominant estate and the surface use servient. There arespecific policies and procedures that must be followed by the mineral estate holder in order todevelop minerals. Generally, for oil and gas, a federal lessee must meet one of the followingconditions: a surface agreement; written consent or a waiver from the private surface owner foraccess to the leased lands; payment for loss or damages; or the execution of a bond not less than$1,000. (5) About 11% ofthe public lands are under the split-estate category. However, in Wyoming 50% of the lands aresplit-estate and in Montana about 57%. (6) Environmentalists have supported public land withdrawals and other restrictions because ofconcern that the Mining Law of 1872 and then the Mineral Leasing Act of 1920 provided inadequateenvironmental protection. Recently, ranchers and other groups have expressed similar concernsspecifically about the impact of development on water and land. Conversely, development supporterscontend that numerous environmental laws are now in place to regulate oil and gas development onpublic lands. They note that the federal government must comply with the National EnvironmentalPolicy Act (NEPA) in leasing oil and gas and that the oil and gas industry must comply withapplicable requirements of the Clean Water and Clean Air Acts, Safe Drinking Water Act, theResource Conservation and Recovery Act, and state and federal reclamation standards, among otherlaws. The industry complains that environmental and other reviews often create long delays indrilling exploratory and production wells on leased lands. The proposed conference report on a comprehensive energy bill ( H.R. 6 ) and S. 2095 addresses some of the industry and Bush Administration concerns overincreasing domestic oil and natural gas supplies. Title III of H.R. 6 and S. 2095 , if enacted, would establish a White House Office of Federal Project Coordination to helpexpedite permitting on public lands and identify restrictions and impediments to resourcedevelopment on public lands. Environmentalists and other public land users argue that theseprovisions would cause harm to the environment and prevent the land from being used in otherproductive ways. The conference report has been approved by the House but not in the Senate as aresult of a cloture motion on November 21, 2003 that did not get the required 60 votes, (57- 40). TheSenate's scaled-back substitute bill, S. 2095 is awaiting action. This report provides a general overview of the oil and gas leasing system on U.S. publiclands, including information on permitting, production, and reserves. The report describes thecontribution of onshore oil and gas towards meeting U.S. energy demand and discusses currentestimates of reserves in restricted areas. An Appendix provides some historical background on landswithdrawn from mineral development, the role of the Bureau of Land Management (BLM), andapplication of the Federal Land Policy and Management Act (FLPMA) in the context of oil and gasdevelopment. For information on U.S. offshore oil and gas development, see CRS Report RL31521, OuterContinental Shelf Oil and Gas: Energy Security and Other Major Issues , by [author name scrubbed]. Oil and Gas Leasing on Public Lands Leasing of onshore federal public lands for oil and gas development is based on multiple-use/sustained yield Resource Management Plans (RMPs) developed by the Bureau of Land Management in the Department of the Interior. In accordance with those land-use plans, tracts of public land withoil and gas potential are offered for competitive leasing each quarter. After a lease is awarded, adrilling permit is required for each exploratory or production well. Industry has long complainedthat this process is too lengthy. In FY2002, the federal government issued 1,765 new oil and gas leases on public landstotaling about 1.4 million acres. Through the end of FY2002, about 18.6 million acres of publiclands had been leased for oil and gas development. Land Use Planning Under the Federal Land Policy and Management Act (FLPMA), Resource Management Plansor Land Use Plans (43 USC 1712) are required for tracts or areas of public lands prior todevelopment. The Bureau of Land Management (BLM) must consider environmental impacts duringland-use planning when RMPs are developed and implemented. RMPs can cover large areas, oftenhundreds of thousands of acres across multiple counties. FLPMA requires that RMPs reflect diverse uses -- such as timber, grazing, wildlifeconservation, recreation, and energy -- and consider the needs of present and future generations. (7) Impacts of various uses areidentified early in the process so that they can be weighed equitably against one another. The plansare also intended to weigh the various benefits associated with public lands to best serve thecommunity. RMPs must be consistent with environmental regulations and allow meaningful publicparticipation. Through the land-use planning process, the BLM determines which lands with oil andgas potential will be made available for leasing. The Mineral Leasing Act of 1920, as amended, requires that all public lands available forlease be offered initially to the highest responsible qualified bidder by oral competitive bidding.These auctions are held quarterly by the BLM. The objective of the competitive bid is to provide a"fair market value" return to the federal government for its resources. If no bids are received or thehighest bid is less than the $2/acre national minimum acceptable bid, oil and gas leases on theselands are offered on a noncompetitive basis within 30 days. The tracts remain available on anoncompetitive basis for two years. Tracts available for noncompetitive leasing may be obtained by the first qualified applicantupon payment of a nonrefundable application fee of at least $75. Simultaneous (SIMO)noncompetitive lease applications filed on the day following the competitive lease sale are prioritizedthrough a lottery system. Lease applicants filing on subsequent days are given priority according tothe time of filing. (For more details on leasing terms, see Appendix A.) Geophysical exploration permits on unleased public lands may be issued by BLM. Suchexploration does not include drilling for core samples or drilling for oil and gas. The permittee mustfile a notice of intent with the BLM and must comply with specific practices and procedures spelledout by the surface managing agency (SMA). (8) Once a lease is obtained, the lessee is given exclusive rights tofurther explore, develop, and produce on that land. Drilling Permits After a lease has been obtained, either competitively or noncompetitively, an Application fora Permit to Drill (APD) must be approved for each oil and gas well. (9) As noted in the MineralLeasing Act, section 226 (g), "no permit to drill on an oil and gas lease issued under this chapter maybe granted without the analysis and approval by the Secretary concerned of a plan of operationscovering proposed surface-disturbing activities within the lease area." The application form (APD form 3160-3) must include a drilling plan, a surface use plan,and evidence of bond/surety coverage. The surface use plan should contain information on drillpadlocation, pad construction, the method for containment and waste disposal, and plans for surfacereclamation. The APD is posted for review for 30 days. Within 5 working days after the 30-day period,the BLM consults with the surface managing agency, whose consent is also required, then notifiesthe applicant of the results. BLM is required to process the application within the 35-day period. Theapplication may be approved, approved with stipulations, rejected, or delayed for additional analysisor information. The applicant is informed when final action is expected. Despite the 35-day review requirement, a recent study by a trade association, the IndependentPetroleum Association of Mountain States (IPAMS), found that in its region it took an average of137 days to approve an APD in 2002, up from an average of 84 days in 2001. (10) Delays in the Permitting Process One of the major reasons for delays in the issuance of drilling permits cited by both BLM andIPAMS is the need to rewrite outdated RMPs because the surface disturbance anticipated underapproved activities may exceed the limits in the old plan because increased natural gas leasing anddevelopment is taking place. In these cases, oil and gas leases may have been awarded under an oldRMP that must be revised before a drilling permit can be issued. According to the BLM, there areseveral such plans currently being revised. Under FLPMA, section 1712, regarding Land Use Plans: "the Secretary [of the Interior] shallwith public involvement and consistent with the terms and conditions of this Act, develop, maintainand, when appropriate, revise land use plans which provide by tracts or areas for the use of the publiclands." Current planning regulations require preparation of an environmental impact statement (EIS)under the National Environmental Policy Act (43 C.F.R. 1601.06). After a draft EIS is issued for public comment, an RMP can be approved by the BLM StateDirector and published with an EIS and record of decision and filed with the EnvironmentalProtection Agency (EPA). In testimony before the House Committee on Resources, IPAMS asserted that rewritingRMPs can take as long as three years, when less than a decade ago the average time was less thanone year. The Association contends that the usefulness of an RMP is now seven years, when in thepast they may have been in place for as long as 20 years. (11) The rapid pace of coalbed methane (CBM) development, inparticular, has generated new land use concerns that some argue have not been previouslyincorporated in the RMPs. Environmentalists contend that 20-year-old plans are not a good basisfor land management decisions. The need for a revised/amended RMP would necessarily delay anysite-specific analysis conducted in the drilling permit process by the BLM and the surface managingagency. Thus, even when an application for a permit to drill (APD) is in process, the BLM oftenwaits until the new RMP and EIS are complete before proceeding to any site-specific analysis neededto grant the permit. In April 2003, BLM announced new strategies to expedite the APD process. These includeprocessing and conducting environmental analyses on multiple permit applications with similarcharacteristics, implementing geographic area development planning for an oil or gas field or an areawithin a field, establishing a standard operating practice agreement that identifies surface and drillingpractices by oil and gas operators, allowing for a block survey of cultural resources, promotingconsistent procedures, and revising relevant BLM manuals. (12) Leasing Restrictions on Oil and Gas Resources The availability of public lands for oil and gas leasing can be divided into three categories:lands open under standard lease terms, open to leasing with restrictions, and closed to leasing. Areasare closed to leasing pursuant to land withdrawals or other mechanisms. Much of this withdrawnland consists of wilderness areas, national parks and monuments, and other unique andenvironmentally sensitive areas that are unlikely to ever be reopened to oil and gas leasing. (13) Some lands are closed toleasing pending land use planning or NEPA compliance, while other areas are closed because offederal land management decisions on endangered species habitat or historical sites. Some of thoserestricted areas may be opened by future administrative decisions. A BLM study (14) determined that of the approximately 700 million acres of federal subsurface minerals under theagency's jurisdiction in 2000, approximately 165 million acres have been withdrawn from mineralentry, leasing, and sale, subject to valid existing subsurface mineral rights. (15) Lands in the National ParkSystem (except National Recreation Areas), Wilderness Preservation System, and the Arctic NationalWildlife Refuge (ANWR) are among those that are statutorily withdrawn. Also of the 700 millionacres, mineral development on another 182 million acres was subject to the approval of the surfacemanagement agency, and must not be in conflict with land designations and plans, according to theBLM. Wildlife refuges (except ANWR), wilderness study areas, and roadless areas are examples oflands in this category, although many other wildlife refuges also are withdrawn from leasing. Public lands that are open to leasing may be subject to a variety of restrictions imposed bythe Department of the Interior. Such restrictions include leasing with no surface occupancy, areasgenerally off-limits with the exception of directional drilling; leasing with timing limitations, whichprotect wildlife during certain times of the year; and leasing with controlled surface use, whichrequires a mitigation plan for specific areas under the lease. Industry sources claim some of theselease stipulations are so stringent that they constitute "de facto" closures to oil and gas development. However, development has proceeded under some of these stipulations. Energy and mineral industry representatives maintain that federal withdrawals inhibitexploration and limit the reserve base even when conditions are favorable for production. Theindustry argues that substantial amounts of public land have been unnecessarily withdrawn throughadministrative actions to pursue preservation goals. However, environmental groups and othersgenerally contend the withdrawals are the most effective protection for the non-mineral values ofpublic lands. Rocky Mountain Region The Rocky Mountain region accounts for 37% of the natural gas and 17% of the crude oilprojections of the technically recoverable resource base on public lands in the lower 48 states. (16) According to the EPCAstudy noted below, 60% of the undiscovered resource base in the five basins studied in the RockyMountain region is on public lands and about 40% of that amount is not accessible or is subject tolease stipulations and restrictions. (17) Because of increased interest in access to natural gas, theprotection of public lands and Bush Administration policies, the Rocky Mountain region has becomea focal point for U.S. oil and gas policy. Three recent reports have studied restrictions on natural gas in the Rocky Mountain region: Natural Gas, Volume 1 Summary Report by the National Petroleum Council(NPC); 1999. Energy Policy and Conservation Act Amendments (EPCA) study, 2003; (18) U.S. Natural Gas Markets: Mid-term Prospects for Natural Gas Supply, 2001, by the EIA. While the EIA and NPC studies include data for total domestic natural gas supplies, theEPCA Report more narrowly confines itself to five major geologic basins within the RockyMountain region. (19) Themost direct comparison of data on the Rocky Mountain region would be between the EIA and NPCstudies because they define the region as essentially the same. (20) Even though the resource base was different in each of the three studies, the relative amountsof natural gas on federal lands found to be either closed, restricted, or open to development wasabout the same. Data from the 1999 NPC study indicate the natural gas resource base in the Rocky Mountainregion is 335 trillion cubic feet (tcf). More recent data from EIA estimates technicallyrecoverable (21) naturalgas resources, excluding reserves, to be 293.6 tcf. (22) The EPCA study found 138.5 tcf in the five major geologicbasins in the region. Although oil and gas reserves are not included in the EIA report, the relative amounts ofnatural gas closed and restricted is similar to the amounts found in the other studies. For example,the NPC reports that 9% of the region's natural gas resource base is closed and 32% restricted, whilethe EIA data shows that 11.5% is closed and 37% restricted (see Table 1 ). The NPC and EIAstudies report a more significant difference between the amount of natural gas open to leasing: 60%and 51.5% respectively, also shown in Table 1. This difference is probably because a larger portionof the proven reserves (excluded from the EIA report) are available for leasing. For instance, theEPCA study found that about 26 tcf of proven reserves are on federal lands out of 43 tcf total in thefive major geologic basins. Of this total, 63% is open under standard lease terms. If the RockyMountain reserves were included in the EIA report, then the percentage of natural gas open understandard lease terms would likely increase, and the percentage of natural gas characterized as underrestrictions would likely decline. Oil resources in the Rocky Mountains that were examined in the EPCA study have somewhatless significance relative to U.S. oil supply. The study concludes that about 600 million barrels ofoil resources (about 30 days of total U.S. consumption) fall under the "no access" category. Another3.2 billion barrels would be available for leasing, of which one-third have restrictions. About 2.5billion barrels of oil are estimated to be available on non-federal lands in the basins studied. Thetotal oil resource included in the EPCA study represents about 7% of all technically recoverable oilin the United States. As mentioned earlier, the numbers in the EPCA study are based on a much more selectivearea of the Rockies that included the five major geologic basins, and thus the numbers were smaller.However, as shown in Table 1, the relative rate with no access was similar to the other reports(11.6%), the amount of restricted gas was less (26%), and the amount of natural gas under standardlease terms was slightly higher (62.4%). Both the NPC and EIA studies conclude that development of natural gas in the restricted landuse category would be -- at a minimum -- likely to face costly delays. The EIA also concludes thatif there were greater flexibility in some of the federal regulations, about 29 tcf could becomeimmediately available from this restricted category. Additionally, if certain lease stipulations wereremoved, about 51 tcf would be less costly to develop, thus freeing up a total of 80 tcf, according tothe EIA report. Environmental groups argue that there is an ecological basis for most of theserestrictions and that environmental assessments or impact statements are incomplete. From thisperspective, to relax these development restrictions would put the environment at greater risk. Table 1. Rocky Mountain Natural GasResources a The NPC study estimates that 41% (137 tcf) of the total amount of gas resources in the RockyMountain region is either closed (29 tcf) or restricted (108 tcf). Thus, 335 tcf would be the estimatedtotal amount of natural gas resources in the region as of 1999. Significance of Access Restrictions Substantial oil and gas reserves are located on public lands, but there are major policydisagreements about the potential importance of those reserves in meeting U.S. energy needs. TheRocky Mountain region represents an estimated 37% (293 tcf/788 tcf) of the unproved technicallyrecoverable natural gas resource base in the United States, onshore lower 48. (24) If the estimated 108 tcfof natural gas in the Rocky Mountain region currently restricted were produced, it could last between20-30 years, assuming a production rate of about 4 tcf to 5 tcf per year, according to the EIA; thiswould meet about 15% of projected annual U.S. demand. Currently, U.S. natural gas demand isbeing met with supplies from the outer continental shelf (OCS) (25%), imports (15%), the RockyMountain region (15%) and other onshore (45%). (25) Testimony by The Wilderness Society (TWS) before the House Subcommittee on Energy andMineral Resources, March 15, 2001, based on the NPC report, asserted that the United States hassufficient natural gas supply to meet domestic needs for the next 40 years. (26) This conclusion was basedon annual demand growing from 22 tcf in 2001 to 31 tcf in 2015. Also, based on the NPC figure of1,466 trillion cubic feet as "technically recoverable resources in the U.S.," (27) of which 115 tcf isclassified as off-limits (39 tcf onshore, 76 tcf offshore), TWS concludes that 1,351 tcf of natural gascould be available for development in the future. In other words, from this perspective ample supplyis available now and possibly in the future without disturbing the resources in restricted or no-accessareas. The NPC report estimated that about 16% of the 1,351 tcf cited by TWS is subject torestrictions that may prevent development. (28) The NPC argues that 70 tcf of Rocky Mountain natural gas is under restriction or leasestipulations and otherwise could be brought into production in the near term. The NPC contends thatthere are a number of impediments that could be resolved to ensure access to this gas in a timelyfashion, and proposes relaxing certain land-use constraints that would allow for more drilling onfederal lands in the intermountain west. Among these constraints include the use of "no surfaceoccupancy"designations that make resources "effectively" off-limits, use of stipulations to protectenvironmental resources that it believes are too restrictive, and old access restrictions that do notconsider new technology that could minimize damage to the environment. (29) The RAND Corporation produced an Issue Paper in 2002 (30) asserting that the debateneeds to be more focused on the reserve category of the resource base. RAND's view is that accessrestrictions should be considered only for the resource category that is most viable -- or most likelyto be produced. Under this view, the amount of the resource considered to be restricted becomesmuch less. However, the analysis would be complicated by the rate at which oil and gas resourceswere assumed to be converted to reserves during the next 15-20 years. Oil and Gas Resources and Production on Public Lands Federal Onshore Oil and Gas Production Total U.S. oil production was nearly 1.9 billion barrels in 2002, down from 2.5 billion barrelsin 1991. Oil production is forecast to fall by 0.4% annually, from 5.8 million barrels per day (mbd)in 2002 to 5.3 mbd in 2025. And oil imports are estimated to account for nearly 65% of total U.S.supply in 2025. Total production of natural gas was 19.4 tcf in 2002, up from 17.8 tcf in 1993. (31) In 2002, oil production from federal onshore leases was estimated at 5.4% of all U.S. oilproduction (see Table 2 ). (32) Federal onshore oil production is concentrated in three stateswhich produce 79% of onshore federal oil: Wyoming (33%), New Mexico (29%), and California(17%). Oil production from onshore federal leases has fluctuated over the years but has generallybeen in decline over the past 10 years, falling from 133.5 million barrels in 1992 to about 100million barrels in 2002. According to the EIA, U.S. production of natural gas varied between 18-20 tcf annuallybetween the years 1993-2002. Various projections show U.S. natural gas production reachingbetween 20 tcf - 24.3 tcf by 2025. (33) Imports from Canada are forecast to rise to 3.7 tcf in 2010, thenfall to 2.6 tcf in 2025. Higher EIA forecasts of Canadian natural gas for the year 2025 were adjusteddownward because of Canadian reports of declining gas production, less certain offshore suppliesand greater use domestically in the production of oil sands, expected to triple by 2025. Imports ofliquefied natural gas (LNG) were projected to rise from 170,000 bcf in 2002 to 4.8 tcf in 2025,according to the EIA. (34) Table 2. U.S. Oil Production, 2002 Source : EIA, 2002, p. 22. * Based on an Minerals Management Service (MMS) estimate for FY2003. Gas production on public lands has increased to 2.2 tcf in 2002 from 1.7 tcf in 1993 andaccounts for 11.5% of all U.S. production (see Table 3 ). Of the 2.2 tcf total, New Mexico accountsfor 50% and Wyoming 35%; these rank as the top two states in natural gas production on publiclands, accounting for 85% (1.87 tcf) of the total. The federal onshore share of total U.S. domesticoil and gas production is not expected to change significantly in the near term. (35) Table 3. U.S. Natural Gas Production,2002 * Based on MMS FY2003 estimate from Mineral Revenues Report.. Source : EIA Annual, 2002, p. 30. U.S. Oil and Gas Reserves and Resources Proved U.S. oil reserves (36) were 22.7 billion barrels of oil (BBO) as of December 31, 2002;natural gas liquids were estimated at 8 billion barrels and natural gas (dry) reserves are 187 tcf (37) according to EIA (see Table 4 ). Texas leads the United States in both oil and natural gas reserves (see Table 5 ). U.S. oilreserves have declined by 1.2 billion barrels over the past 10 years, while U.S. production declinedby 500 million barrels. The 2.5 billion barrels of recoverable oil discovered in 2001 was three times greater than theaverage annual discovery since 1976 (890 million barrels). (38) In 2002, the discoverieswere about 950 million barrels or 6% over the annual discovery average since 1976. There are stillsubstantial amounts of oil available and likely to be produced from existing fields and fromundiscovered reserves in the United States, but the rate of production will likely continue decliningover the long term. As indicated by EIA, technically recoverable onshore and state offshore oilresources are estimated at 92 billion barrels, not all of which is likely to be recoverable. (39) Table 4. U.S. Proved Oil and Gas Reserves and Production,1993-2002 Source : EIA, U.S. Crude Oil and Natural Gas, Annual Report, 2002. Table 5. U.S. Proved Oil and Gas Reserves, by State,2002 Source : EIA, U.S. Crude Oil and Natural Gas and NGL Reserves 2002, Annual Report. The natural gas story may be different, as the United States has seen its gas reserves increaseby 16.5 tcf (10%) since 1991; production has also risen. At the same time, U.S. gas imports haverisen to 17% from about 9% in 1991. (42) Annual discoveries were up 70% above the average since 1976(i.e., 22.8 tcf compared to12.7 tcf). Technically recoverable gas resources onshore and state offshoreare estimated by the EIA to be about 1,000 tcf, over five times the amount of current provedreserves. Over two-thirds of the total amount of onshore natural gas (proven and undiscovered) ison nonfederal land and may be available for exploration and development. The 2002 oil and gas resource assessment records an estimated 1.9 billion barrels of oil, 183tcf of natural gas and 3.1 billion barrels of natural gas liquids as undiscovered resources locatedwithin five priority basins in the Rocky Mountain West. Over 90% of the undiscovered gas isclassified as unconventional; 25% (42 tcf) is coalbed methane. Of the proven reserves in five majorbasins in the Rocky Mountain region, oil and natural gas liquids (43) on public lands accountedfor 53.6%, while 60.1% of natural gas was on public lands (see Table 6 ). Table 6. Rocky Mountain Proved Reserves (Five major basins) Source : EPCA Study, p. A6-18, January 2003. Recent estimates by the EIA indicate that federal onshore oil is 12.5% of all technicallyrecoverable oil. Natural gas on public lands is estimated to account for 22.3% of all technicallyrecoverable gas. EIA estimates undiscovered conventional oil to be 30.1 billion barrels andundiscovered conventional natural gas resources at 319.7 trillion cubic feet. The estimate forundiscovered unconventional natural gas is even greater at 358.7 tcf (see Table 7 ). Table 7. Total Onshore Technically Recoverable Resources,2002 Source : EIA, Annual Report, 2002. Growing Role of Coalbed Methane Coalbed methane gas is natural gas dissolved in water and trapped in a coalbed. There areseveral important variables that determine the quantity of methane gas, including the depth of coal,pressure, temperature, thickness, and composition. To extract coalbed methane (CBM), water must be removed from the coal by pumping,which drops the water pressure that traps the gas and allows the gas to flow. Some operators fracturecoal formations and allow water and gas to move out of the coal. Concerns have arisen concerninggroundwater contamination. The USGS reports that the water pumped out of coal beds can vary inquality. Some water can be discharged near the surface for reuse if "sufficiently fresh," or if the waterdoes not meet reuse standards, it can be disposed of by subsurface injection or surface discharge intowetlands, streams, or impoundments. (44) Water quality and water disposal have become central concernsin the production of CBM. A 1980 tax credit (section 29) for unconventional fuel production provided a major incentivefor CBM development. Significant production of CBM began in 1987. Production has increasedfour-fold since 1991, and coalbed gas accounted for about 8% (1.6 tcf) of the 18.8 tcf of natural gasproduced in 2002 in the United States. (45) In 2002 there were 10,000 CBM wells also producing 1.65million barrels of water (46) per day. The leading producers are in New Mexico, Colorado,and Wyoming. Production rates vary widely because of the heterogenous geology of coalbeds. DOEestimates that out of the 39,000 new wells anticipated by 2010, 23,900 will be on federal lands. (47) CBM reserves are still largely undeveloped. Of the estimated 700 tcf of coalbed methane inthe United States, only about 100 tcf are classified as economically recoverable. The previouslydiscussed EIA study of U.S. oil and gas resources found that of the 293 tcf of unproved technicallyrecoverable unconventional fuels in the Rocky Mountain region, about 46 tcf are coalbed methane,of which about 20% would fall under the "no access" category. Coalbed methane proved reserveswere 18.5 tcf in 2001, which was 10% of U.S. dry gas reserves. CBM reserves have more thandoubled since 1991. Two states, Colorado and New Mexico, account for more than half of U.S.CBM reserves. Wyoming, Utah, and Alabama also have significant reserves. The San JuanBasin (48) is the mostproductive. It contains 65% of known reserves and 80% of production. The Warrior Basin inAlabama is the second most productive, claiming 9% of U.S. production and 8% of reserves. (49) USGS estimates CBMresources in the Powder River Basin (PRB) at 39 tcf. (50) The federal government owns over half the mineral rights in the PRB, while the majority ofthe surface rights are held privately, resulting in spilt-estates. However, most of the currentproduction of CBM is taking place on private lands. Over 80% of the land overlying of CBM wellsis privately or state held in Wyoming, and some surface owners oppose development and otherscontend they are not compensated fairly for surface use. (51) A number of concerns has come up regarding surface useagreements between the surface owner and the mineral lessee or mineral owner. The central concernfor the surface owner is receiving adequate compensation for damages from CBM or productionfrom other extractive industries. In Wyoming, stakeholders such as the Petroleum Association,ranchers and the Farm Bureau Federation established the Wyoming Split-Estate Initiative in 2002.They have created a new framework to help resolve conflicts between surface owners and mineralowners or lessees. (52) CBM Environmental Issues Environmental concerns about CBM production focus primarily on land disturbance andwater -- both surface and ground water issues. Production of CBM can involve not only wells butalso access roads, power lines, compressor stations, and waste water impoundments. Major issuesinclude surface infrastructure, the net amount of water removed, effects on the water table, and thesalinity levels and disposal of the water removed, which may affect wildlife, land and surface waterresources. The process of hydraulic fracturing (53) for CBM production has come under closer scrutiny because ofconcerns over the possible impact of the injected fluids (such as diesel fuel) used in the process onunderground drinking water. A draft EPA report (54) concluded that there is no evidence of contamination of drinkingwater wells from CBM hydraulic fracturing. However, the EPA did express concern over the use ofdiesel fuel as an injection fluid because it contains many of the EPA's "constituents of concern",(chemicals). Thus, the EPA and the major companies using diesel fuel entered into anMemorandum of Agreement (MOA) in December 2003, to end the use of diesel fuel as an injectingfluid. Proposed energy legislation ( H.R. 6 and S. 2095 ) include provisionsthat would prohibit EPA from regulating underground injection of fluids for hydraulic fracturingpurposes under the Safe Drinking Water Act. (See CRS Report RS21673.) Dennis Hemmer of the Wyoming Department of Environmental Quality explained in anenergy newsletter that most water from CBM production does not flow to surface supplies but ratherseeps into underground aquifers and formations. (55) As a result, wells being used for drinking water may becomepolluted with sodium-tainted water. CBM production resulted in water discharges of 602 million barrels annually or 1.65 millionbarrels per day in 2002, typically into surface waters or holding ponds. Water is also reinjectedunderground. Environmentalists contend that holding ponds are like wastewater treatment pondsthat are unlined and leak into groundwater. There is concern about the lowering of the water tableand the effects on wells and water sources used by wildlife. The Wildlife Management Institute ofWashington D.C. argues that CBM production and the disposal of high volumes of water may leadto, among others things, the depletion of underground aquifers, the loss of natural vegetation, andaquatic life within waterways that receive CBM water. Further, the infrastructure required by CBMproduction may threaten wildlife habitats. (56) In response to concerns over the impact of CBM on groundwater quality and quantity, BLMhas required CBM producers to drill two monitoring wells per township with CBM leases since1992. The cost of drilling each well is about $50,000, plus an additional $5,000 for monitoringequipment. After BLM review, it was established that one set of wells (one shallow and one deep)is required per four townships with CBM leases. The wells monitor both the water quality and waterlevels from CBM production. On private lands, monitoring wells are not required (57) . The Interior Board of Land Appeals (IBLA) invalidated three leases in April 2002 becauseenvironmental issues related to CBM production, as discussed above, were not evaluatedsufficiently. Supplemental environmental assessments (EA) were prepared for the Powder RiverBasin to help determine where to develop CBM in areas already approved for leasing. (58) Generally, the results haveallowed more CBM drilling to occur; however, there have been new conditions imposed upon someproducers. An environmental group, the Wyoming Outdoor Council (WOC), sued BLM to withdrawadditional leases -- four parcels totaling 3,800 acres -- from a June 2002 sale in Wyoming becauseit violated an April 26, 2002, IBLA ruling that directed the BLM to update a 1985 resourcemanagement plan (RMP) before offering CBM leases in the Powder River Basin. After the suit,BLM did not proceed with any lease sales on public lands with high CBM content, including the fourparcels that prompted the suit, while the IBLA ruling was being interpreted by Bureau attorneys. TheIBLA dismissed the case December 18, 2003. The Wyoming BLM office finalized a new EA andRMP and reportedly is anticipating approving 39,000 permits for new wells over a 10- year period.A decision to begin issuing permits was made by the DOI in July 2003. (59) Outlook for Oil and Gas Development on Public Lands Demand for oil is forecast to rise 1.6% annually to 28 mbd by 2025 in the EIA reference case.Because consumption would rise faster than domestic production, imports are projected to reachnearly 65%. U.S. demand for natural gas is forecast to rise 1.4% annually, reaching 31.4 tcf by 2025. The outlook is mixed for increased oil and natural gas production from leases on U.S. publiclands or areas where the United States holds mineral rights. While domestic natural gas productionand natural gas imports are expected to rise, it is unclear how much of the domestic supply will comefrom public lands that are currently restricted or off-limits. The Bush Administration has initiatedactions to ease restrictions in instances where this can be done administratively. How muchopposition these initiatives will generate is unclear. The media has reported challenges based onalleged violations of BLM's multiple-use mandate. Areas statutorily removed would requirecongressional action to change their status. On available lands, production of conventional naturalgas is expected to remain steady, even though significantly more wells and higher-cost deeper wellswill be drilled. Onshore unconventional natural gas (over 70% located in the Rocky Mountainregion) is forecast to increase its share from 32% in 2002 to 43% of production in the lower 48 by2025. The central concern for industry is to have greater access to federal lands believed to possessoil and gas potential and to expedite the permitting process. Environmental groups and some surfaceowners are concerned that drilling and production would damage sensitive lands, wildlife habitat andsurface water and groundwater quality and quantity. Meeting U.S. energy demand will likely occur by using a mix of increased domestic outputplus higher imports. The Rocky Mountain region might account for as much as 40% of U.S. naturalgas production in 2025, up from about 25% in 2002. (60) The United States will likely rely more on natural gas imports,primarily LNG from stable countries, as well as increased production from the deepwater OCS. A proposed Alaskan natural gas pipeline, if built, could provide 2.71 tcf by 2025. Oil and gas firms continue worldwide exploration and development seeking the bestreturn for their investment; a significant resource base, political stability, and financing arefactors considered when making investment decisions. The United States scores well for politicalstability and its resource endowment is still attractive, but other concerns such as the impact onthe environment, on residents and society must be weighed in making public land use decisions. Appendix A. Terms of an Oil and Gas Lease The terms for a competitive lease are: Maximum acreage -- 2,500 acres, except Alaska -- 5,760acres $2/acre minimum bonus bid five-year term Bond requirement -- $10,000 For noncompetitive leases, the terms are: Maximum acreage -- 10,240 acres in all states No minimum bonus bid 10-year term $75 application filing fee Bond requirement -- $10,000 Rents and royalties on competitive and noncompetitive leases are: Rentals -- not less than $1.50/acre for 1-5 years Rentals -- not less than $2/acre each year thereafter Royalty -- not less than 12.5% in amount or value of the productionremoved or sold from the lease Table 8. Oil and Natural Gas Production in U.S. OnshoreFederal Lands, 1991-2000 Source: MMS, Mineral Reserves, 2000, p.80. The onshore leasing program brings in significant annual revenues to the U.S. Treasury.Revenues include bonus bids, rents and royalties (see Table 8 ). The revenues are collected by theMinerals Management Service (MMS, an agency within the Interior Department) and distributed tostates, the General Fund of the U.S. Treasury, and other designated programs. All states exceptAlaska receive 50% of the revenues collected from public land oil and gas leases within theirboundaries. Alaska receives 90% of all revenues collected. Revenues from federal leases varywidely over the years because of price fluctuations; for example, revenues increased significantlyin 2000 over 1999 because of higher oil and gas prices. The number of federal oil and gas leasesstood at 23,000 and encompassed over 17 million acres of federal public lands in 2001. Appendix B. History of Public Land Withdrawals The first public lands withdrawal took place in 1872 to establish Yellowstone National Park,and since that time Congress has created other national parks at regular intervals. (61) The National Park System(NPS) was created in 1916 to "conserve the scenery and the natural and historic objects and the wildlife [in national parks] and to provide for the enjoyment of the same in such a manner and by suchmeans to leave them unimpaired for the enjoyment of future generations" (16 U.S.C. 1). (62) In the early days of theNPS, its philosophy was not synchronized with the Forest Service (FS). The FS philosophy was that"all the resources of the forest reserves are for use and where conflicting interests exist the issue willbe resolved based on the greatest good for the greatest number of people in the long run." Earlytension arose between "conservationists" promoting National Parks and "utilitarians" promotingNational Forests. (63) Sources of Withdrawal Authority During the early 1900s the focus of the public lands withdrawal debate was on whether theCommander-in-Chief had authority to make the withdrawal order based on national security. Withdrawals were defined as an administration action/order that changed the designation of aspecific parcel of land from available to unavailable for activities ranging from homesteading toresource exploitation. The President acted as chief custodian of the public lands and with tacitapproval of Congress withdrew public land from entry or location by the private sector. TheConstitution vests authority over public lands in Congress rather than with the Executive, butPresidents have repeatedly exercised "an inherent power to withdraw" or reserve some lands. Aprime example is the establishment of military reservations out of public lands. Withdrawals also occurred under the Antiquities Act of 1906 (16 U.S.C.A. 88, 433-431), theTaylor Grazing Act of 1934 (43 U.S.C. 315 et. seq.), the Organic Act of 1897 (16 U.S.C.A. 473),the Alaska Native Claims Settlement Act of 1971 (43 U.S.C.A. 1601 et. seq.) and the WildernessAct of 1964 (16 U.S.C.A. 1131-36). National monuments can be created by the executive branchthrough statutory delegation under the Antiquities Act. The President can reserve the "smallest areacompatible with the proper care and management" of the protected sites on federal lands that containhistoric landmarks, prehistoric structures, and other objects of scientific interest. Under the TaylorGrazing Act, 140 million acres were withdrawn from homesteading laws. The Organic Act was usedto regulate and designate recreation and "primitive areas." Under FLPMA, withdrawals can be madeby the executive branch or the Congress. Congressional designations as "wilderness" were later considered essential by many becausean administrative wilderness designation could be revoked administratively any time. The AlaskaNative Claims Settlement Act withdrew large areas of Alaska from availability for resource use ordevelopment pending congressional disposition. The Wilderness Act required that the Forest Servicestudy 5.4 million acres of designated primitive areas and report on wilderness suitability. Wildernessis generally defined as an area "off limits to development to avoid destruction of pristinecharacteristics of nature." (64) The Wilderness Act states that "no federal lands shall bedesignated as wilderness areas except as provided for in the Wilderness Act or by an Act ofCongress" (16 U.S.C. 1131 (a)). Currently, there are four types of withdrawal: First, there are instances where Congress hasthe sole authority to withdraw or reserve public lands. For example, creating National Parks andwilderness areas and in some cases national wildlife refuges can only be done by an act of Congress. Second, the executive branch has used power delegated to it by Congress under the previouslymentioned Antiquities Act of 1906 and the Pickett Act of 1910. Third, Congress may withdrawspecific resources such as when oil, gas, coal, and like minerals were removed from the GeneralMining Law of 1872. Lastly, there is the "general congressional" withdrawal, (65) which allows lands to beremoved from potential development pending "final disposition." (66) Withdrawals Under FLPMA Modern executive withdrawals are governed by FLPMA. (67) FLPMA (68) established a federal landuse management policy that includes land use planning based on a multiple-use approach that allowsfor significant public and congressional input. Sections of FLPMA detail procedures (see 43 U.S.C.1714 (d)) for the sales and acquisition of public lands, withdrawals, and exchanges of public lands.Under FLPMA, withdrawals can be made by the executive or the Congress. The withdrawal can betemporary or permanent. FLPMA replaced the implied authority of the executive branch to withdraw public lands withspecifically defined procedures. Withdrawals of parcels exceeding 5,000 acres requirecongressional approval. The land can be withdrawn for 20 years subject to renewal. Proposedwithdrawals must be submitted to Congress with a report explaining the reasons for the withdrawalin detail, effects on the economy and environment, alternatives to withdrawal, how BLM isconsulting with other agencies and groups, and the geological and mineral potential of the areasproposed. The Secretary of the Interior, however, can make emergency withdrawals of any size forup to three years. A report must be available three months following a withdrawal. FLPMA mandated a review of public land withdrawals in 11 Western states to determinewhether, and for how long, existing withdrawals should be continued (43 U.S.C. 1714(l)). Therewere millions of acres withdrawn prior to FLPMA. Under the law, the Secretary of the Interior candetermine whether and for how long the continuation of existing withdrawals are consistent withstatutory objectives of the programs under which lands were dedicated in the first place. BLM continues to review approximately 70 million withdrawn acres, giving priority to about26 million acres that are expected to be returned by another agency to BLM, or, in the case of BLMwithdrawals, become available for one or more uses. As of November 2000, BLM had completedreviewing approximately 7 million withdrawn acres, mostly BLM and Bureau of Reclamation land;the withdrawals on more than 6 million of these acres have been revoked. According to the BLM Manual, retention of a withdrawal requires a compelling show of need, and an agency manager"recommending that lands not be opened to multiple use, particularly mining and mineral leasing.That manager must convince the BLM Director, the Secretary, and watchful segments of the public,that there is no reasonable alternative to continued withdrawal or classification." The review processis continuous over the next several years, in part because the withdrawals must be considered inBLM's planning process and be supported by documentation under the National EnvironmentalPolicy Act (NEPA). Some lands, through revocation and terminations, could be developed for oil and gasresources. Other areas deemed not suitable for mineral development, will likely remained closed orrestricted.

The U.S. Congress and the Administration are involved in a major policy debate over oil andgas development from federal lands and from federal mineral estate underlying certain privatelyowned lands. Within the framework of U.S. public lands policy, restrictions and withdrawals haveaffected the amount of land that can be developed. The Energy Policy and Conservation ActAmendments of 2000 (EPCA) mandated a study which was released in January 2003 to assess theoil and gas resource potential underlying restricted federal lands. It concluded that although theamount of land prospected for natural gas that was completely "off-limits" for development was35.6%, other restrictions and lease stipulations are in place. The conference report to the EnergyPolicy Act of 2003 ( H.R. 6 ) as well as the scaled-back Senate version of the bill( S. 2095 ) contains provisions that would address restrictions and impediments to oil andgas development on public lands. The Bush Administration has its own initiatives to expedite thepermitting process -- considered by some to be a major impediment -- on federal lands. As part of the oil and gas leasing system, lessees must file an application for a permit to drill(APD) for each well. The Bureau of Land Management (BLM) is required to process the APD in 30days but delays may occur, extending the average approval time to over 120 days. Some approvalshave taken over three years. A new process to expedite the APDs has been established at the BLMthat includes, among other features, the processing and conducting of environmental analyses onmultiple permit applications with similar characteristics. Energy and mineral industry representatives maintain that federal withdrawals and/orrestrictions inhibit mineral exploration and limit the reserve base even when conditions are favorablefor development. They further contend that sufficient environmental standards are in place to protectpublic lands. Critics who oppose opening up more federal lands or the mineral estate under privatelands argue that the general environmental requirements are not adequate and that some forms ofdevelopment threaten water quality and quantity; therefore, certain restrictions and withdrawals areappropriate. Concern exists regarding natural gas supply and declining production rates. As a result, thereis increased interest in potential gas supplies in the Rocky Mountain region. Several resourceestimates suggest significant amounts of natural gas on public and private lands in the region, andRocky Mountain natural gas may become much more important to the overall supply picture. Elsewhere, the outlook is mixed for increased oil and natural gas production on U.S. publiclands. While domestic natural gas production and natural gas imports are expected to rise, it isunclear whether much of the domestic supply will come from public lands that are currentlyrestricted or off-limits. This report will not be updated.

Most Recent Developments On November 18, 2011, President Obama signed into law the Consolidated and Further Continuing Appropriations Act, 2012 ( P.L. 112-55 ), which includes the Commerce, Justice, Science, and Related Agencies Appropriations Act, 2012 (Division B). The act includes $60.91 billion for CJS, of which $7.808 billion is for the Department of Commerce, $27.408 billion is for the Department of Justice, $24.838 billion is for the science agencies, and $856.6 million is for the related agencies. FY2012 Appropriations This report provides an overview of actions taken by Congress to provide FY2012 appropriations for CJS accounts. It also provides an overview of FY2011 appropriations for agencies and bureaus funded as a part of the annual appropriation for CJS. The source for the FY2011-enacted amounts, the FY2012-requested amounts, and the House Committee on Appropriations-recommended amounts is H.Rept. 112-169 . The Senate-passed amounts were taken from H.R. 2112 , as passed by the Senate. FY2012-enacted amounts were taken from H.Rept. 112-284 . The Commerce, Justice, Science, and Related Agencies Appropriations Act, 2012 includes a total of $60.91 billion for the bureaus and agencies funded as a part of the act. The FY2012-enacted amount is 0.4% more than what would have been provided by the Senate-passed CJS bill and 5.1% more than what the House Committee on Appropriations recommended for CJS. However, the FY2012-enacted amount is 6.3% below the Administration's request for CJS and 0.5% less than the FY2011-enacted amount. The act includes $7.808 billion for the Department of Commerce, $27.408 billion for the Department of Justice, $24.838 billion for the science agencies, and $856.6 million for the related agencies. The Senate amended the House-passed version of H.R. 2112 , which originally was the appropriations bill for the Department of Agriculture and related agencies, to include appropriations for CJS. The Senate-passed version of the bill would have provided a total of $60.664 billion for the bureaus and agencies funded by the bill. The Senate-passed amount was 4.7% more than the amount recommended by the House Committee on Appropriations, but it was 6.7% below the Administration's request and 0.9% less than the FY2011-enacted appropriation. The bill included $8.192 billion for the Department of Commerce, $26.925 billion for the Department of Justice, $24.643 billion for the science agencies, and $903.9 million for the related agencies. H.R. 2596 would have provided a total of $57.949 billion for CJS. The amount recommended by the committee was 10.9% less than the Administration's FY2012 request for CJS and 5.3% below the FY2011-enacted level. The bill included $7.161 billion for the Department of Commerce, $26.323 billion for the Department of Justice, $23.649 billion for the science agencies, and $814.8 million for the related agencies. During the committee's markup of the bill, the committee adopted an amendment that increased funding for the National Oceanic and Atmospheric Administration's (NOAA's) Operations, Research, and Facilities account by $48.0 million. The increase was offset by applying a 0.1% rescission to all other discretionary accounts in the bill. The amounts included in this report reflect the 0.1% rescission even though the committee's bill and report did not include the rescinded amounts. For FY2012, the Administration requested a total of $64.93 billion for the agencies and bureaus funded as a part of the annual CJS appropriations bill. The FY2012 request was $3.839 billion, or 6.3%, more than the FY2011-enacted amount of $61.092 billion. The Administration's FY2012 request included $8.761 billion for the Department of Commerce, $28.68 billion for the Department of Justice, $26.498 billion for the science agencies, and $991.4 million for the related agencies. The Department of Defense and Full-Year Continuing Appropriations Act, 2011 ( P.L. 112-10 ) provided a total of $61.092 billion for CJS, which includes $7.578 billion for the Department of Commerce, $27.281 billion for the Department of Justice, $25.315 billion for the science agencies, and $917.9 million for the related agencies. The amounts in this report reflect only new budget authority. Therefore, the amounts do not include any rescissions of unobligated or deobligated balances that may be counted as offsets to newly enacted budget authority. Table 1 shows the FY2011-enacted appropriations, the Administration's FY2012 request, the House Committee on Appropriations-recommended appropriations, the Senate-passed, and the FY2012-enacted appropriations for the Department of Commerce, the Department of Justice, the science agencies, and the related agencies. Survey of Selected Issues Department of Commerce Congress considered the following issues as part of the Department of Commerce FY2012 appropriations process: whether to fund the Obama Administration's proposed 17.2% increase in funding for the International Trade Administration for FY2012 as part of the Administration's goal of doubling exports over the next five years through the National Export Initiative; oversight of the President's Export Control Reform Initiative—under the Bureau of Industry and Security—the end goal of which is to create a single licensing authority for both dual-use and munitions exports; whether to approve, as a cost-control measure, the Administration's proposed termination of two Census Bureau programs: (1) the Statistical Abstract Program, which would eliminate both the print and online versions of Statistical Abstract , as well as the County and City Data Book , State and Metropolitan Area Data Book , and USA Counties Web database; and (2) the Federal Financial Statistics Program, which would terminate the Consolidated Federal Funds Report ; whether to provide the U.S. Patent and Trademark Office with the authority to use all the fees it collects in a fiscal year; whether to continue and expand support for the extramural programs of the National Institute of Standards and Technology aimed at the development of "pre-competitive" generic technologies; whether to approve the proposed establishment of a Climate Service line office and the related changes to the administrative structure of NOAA; whether to accept the Administration's proposal to transfer funds from public works to economic adjustment assistance under the Economic Development Administration to help distressed areas affected by unemployment as a result of the recession; funding levels and oversight of the new inter-agency Regional Innovation Program, a proposal for a new national competition to identify 20 growth zones across the country; whether to increase funding for the activities and outreach of the Minority Business Development Agency's (MBDA's) Office of Native American Business Development to support research on Native American trade promotion and economic disparities, and whether to increase funding for MBDA to monitor and provide technical assistance for minority businesses seeking federal contracts; and whether to accept the Administration's proposal to omit expenditures for Public Telecommunications Facilities, Planning and Construction from the National Telecommunications and Information Administration budget. In 2010, Congress provided $20.0 million for the program and omitted it in the 2011-enacted budget. Department of Justice (DOJ) Some issues Congress might have considered while determining funding levels for DOJ accounts include the following: the extent to which DOJ as a whole and its components have prepared to respond to potential weapons of mass destruction (WMD) incidents under the National Response Framework; whether certain functions of the National Drug Intelligence Center (NDIC) are redundant with duties of other federal agencies, and consequently, whether funding for the NDIC should be adjusted accordingly; whether to increase funding for the Organized Crime Drug Enforcement Task Force (OCDETF) program to enhance investigations and prosecutions along the Southwest border; the Federal Bureau of Investigation's (FBI's) progress in developing a computerized case management system for investigations known as Sentinel, which is behind schedule and over budget; the rate at which the FBI has utilized funding and staffing resources for national security matters and other national priorities (counterterrorism, counterintelligence, cybercrime, and civil rights), as compared to traditional crime matters (organized crime, gangs, drug-related crime, white collar crime, and violent crime); the Bureau of Alcohol, Tobacco, Firearms and Explosives' (ATF's) efforts to reduce gun trafficking across the Southwest border to Mexico under Project Gunrunner and the bureau's efforts to share criminal intelligence with the Department of Homeland Security; efforts made by DOJ, FBI, and ATF to harmonize overlapping, interagency jurisdictions over criminal matters related to explosives; the ability of the Bureau of Prisons (BOP) to properly manage and care for the federal prison population; and whether to increase or decrease federal assistance levels for state and local criminal justice systems at a time when states are facing budget shortfalls, but also at a time when the federal budget deficit continues to increase. Science Agencies Among the issues facing the science agencies that Congress may have opted to address in the FY2012 appropriations process are the following: whether the new direction for the U.S. human spaceflight program, established in October 2010 by the National Aeronautics and Space Administration Authorization Act of 2010 ( P.L. 111-267 ), can be implemented successfully in a period of increased budgetary constraint; whether to increase funding at the National Science Foundation (NSF) as proposed by the Administration; and if so, at what pace, and how will any increase be distributed among NSF accounts; whether to expand NSF's funding for three multi-agency R&D initiatives: the National Nanotechnology Initiative (NNI), Networking and Information Technology Research and Development (NITRD) program, and the U.S. Global Change Research Program; and whether to reduce funding for the Office of Science and Technology Policy as requested by the Administration, and if so, by how much. Related Agencies Some issues Congress might have considered while debating FY2012 funding level for related agencies include the following: whether to approve the Administration's request for increased appropriations for the Equal Employment Opportunity Commission (EEOC) to hire additional staff to address the expected increase in the agency's private sector charge backlog and support enforcement of systemic discrimination cases; whether to approve the Administration's proposal that Legal Services Corporation restrictions on class action suits be eliminated; whether the Legal Services Corporation could save money by encouraging private attorneys to help legal services programs by providing pro bono services; and whether to provide additional funding to the Office of the U.S. Trade Representative, as requested by the Administration, to aid it in promoting U.S. trade initiatives and conducting negotiations. Department of Commerce2 The Department of Commerce (Commerce Department) originated in 1903 with the establishment of the Department of Commerce and Labor. The separate Commerce Department was established on March 4, 1913. The department's responsibilities are numerous and quite varied; its activities center on five basic missions: (1) promoting the development of U.S. business and increasing foreign trade; (2) improving the nation's technological competitiveness; (3) encouraging economic development; (4) fostering environmental stewardship and assessment; and (5) compiling, analyzing, and disseminating statistical information on the U.S. economy and population. The following agencies within the Commerce Department carry out these missions: International Trade Administration (ITA) seeks to develop the export potential of U.S. firms and to improve the trade performance of U.S. industry; Bureau of Industry and Security (BIS) enforces U.S. export laws consistent with national security, foreign policy, and short-supply objectives; Economic Development Administration (EDA) provides grants for economic development projects in economically distressed communities and regions; Minority Business Development Agency (MBDA) seeks to promote private- and public-sector investment in minority businesses; Economic and Statistics Administration (ESA) , excluding the Bureau of the Census, provides (1) information on the state of the economy through preparation, development, and interpretation of economic data; and (2) analytical support to department officials in meeting their policy responsibilities; Bureau of the Census , a component of ESA, collects, compiles, and publishes a broad range of economic, demographic, and social data; National Telecommunications and Information Administration (NTIA) advises the President on domestic and international communications policy, manages the federal government's use of the radio frequency spectrum, and performs research in telecommunications sciences; United States Patent and Trademark Office (USPTO) examines and approves applications for patents for claimed inventions and registration of trademarks; National Institute of Standards and Technology (NIST) assists industry in developing technology to improve product quality, modernize manufacturing processes, ensure product reliability, and facilitate rapid commercialization of products on the basis of new scientific discoveries; and National Oceanic and Atmospheric Administration (NOAA) provides scientific, technical, and management expertise to (1) promote safe and efficient marine and air navigation; (2) assess the health of coastal and marine resources; (3) monitor and predict the coastal, ocean, and global environments (including weather forecasting); and (4) protect and manage the nation's coastal resources. FY2011 and FY2012 Appropriations Table 2 presents the following funding information for the Commerce Department as a whole and for each of its agencies or bureaus: the FY2011-enacted funding, the Administration's FY2012 request, the House Committee on Appropriations-recommended appropriations, the Senate-passed appropriations, and FY2012-enacted funding. The FY2012-enacted amount for the Department of Commerce is $7.808 billion, an amount that is 4.7% below the Senate's mark, but 9.0% more than the amount the House Committee on Appropriations recommended for the department. The department's FY2012-enacted funding is 11.3% below the Administration's request, but it is 3.0% more than the FY2011-enacted amount. The Senate-passed bill included $8.192 billion for the Department of Commerce for FY2012, an amount that was 14.4% greater than the amount recommended by the House Committee on Appropriations, 8.1% more than the FY2011 appropriation, but 6.9% less than the Administration's FY2012 request. The bill reported by the House Committee on Appropriations included a total of $7.161 billion for the Department of Commerce, an amount that was $1.641 billion (18.6%) below the Administration's FY2012 request and $419.6 million (5.5%) below the FY2011-enacted amount for the department. The Administration requested a total of $8.803 billion for the Commerce Department for FY2012, a proposed 16.1% increase in funding compared to the FY2011-enacted amount of $7.581 billion. International Trade Administration (ITA)5 ITA provides export promotion services, works to ensure compliance with trade agreements, administers trade remedies such as antidumping and countervailing duties, and provides analytical support for ongoing trade negotiations. ITA's mission is to improve U.S. prosperity by strengthening the competitiveness of U.S. industry, promoting trade and investment, and ensuring compliance with trade laws and agreements. ITA strives to accomplish this through the following organizational units: (1) the Manufacturing and Services Unit, which is responsible for certain industry analysis functions and promoting the competitiveness and expansion of the U.S. manufacturing sector; (2) the Market Access and Compliance Unit, which is responsible for monitoring foreign country compliance with trade agreements, identifying compliance problems and market access obstacles, and informing U.S. firms of foreign business practices and opportunities; (3) the Import Administration Unit, which is responsible for administering the trade remedy laws of the United States; (4) the Trade Promotion/U.S. Foreign Commercial Service program, which is responsible for conducting trade promotion programs, providing U.S. companies with export assistance services, and leading interagency advocacy efforts for major overseas projects; and (5) the Executive and Administrative Directorate, which is responsible for providing policy leadership, information technology support, and administration services for all of ITA. The FY2012-enacted amount for ITA is $455.6 million, of which $9.4 million is to be derived from estimated fee collections, raising available funds to $465.0 million. The enacted amount is 5.5% more than the Senate recommendation of $431.7 million and 1.2% greater than the House recommendation of $450.2 million. The Senate recommendation was 16.4% less than the Administration's FY2012 request of $516.7 million and 2.0% less than the 2011-enacted level of $440.7 million. The Administration's request anticipated the collection of $9.4 million in fees, the same as the enacted amount and the FY2011 funding level, which would have raised available FY2012 funds to $526.1 million. The requested increase in the FY2012 budget was part of the Obama Administration's multiyear plan to double U.S. exports over a period of five years. The Administration is requesting a total of $78.5 million over several years for a National Export Initiative (NEI) to promote growth in the U.S. economy and create jobs by increasing the volume of U.S. exports and the number of U.S. firms that export. The Administration anticipates that the initiative will help U.S. companies be more competitive in the global market and that jobs created through export growth will be associated with higher wages. Bureau of Industry and Security (BIS)6 BIS administers export controls on dual-use goods and technology through its licensing and enforcement functions. It cooperates with other nations on export control policy and provides assistance to the U.S. business community to comply with U.S. and multilateral export controls. BIS also administers U.S. anti-boycott statutes and is charged with monitoring the U.S. defense industrial base. Authorization for the activities of BIS, the Export Administration Act (50 U.S.C. Ap p. 2401 , et seq .), last expired in August 2001. On August 17, 2001, President George W. Bush invoked the authorities granted by the International Economic Emergency Powers Act (50 U.S.C. 1703(b)) to continue in effect the system of controls contained in the act and in the Export Administration Regulations (15 C.F.R., Parts 730-799), and these authorities have been renewed yearly. The Administration's FY2012 request for BIS was $111.2 million, an $11.0 million (11.0%) increase from the FY2011-enacted funding level of $100.1 million. The House Committee on Appropriations recommended $100.0 million, 0.1% less than the FY2011-enacted level and a 10.0% decrease from the Administration's FY2012 request. The Senate recommended $98.1 million, an 11.7% reduction from the Administration's request, and a further 1.9% reduction from the House committee's recommendation. The FY2012-enacted level for BIS is $101.0 million, which represents a 0.9% increase from the FY2011-enacted level and a 1.0% and 2.9% increase from the House committee-recommended and Senate-passed amounts, respectively, yet it is a 9.2% decrease from the FY2012 Administration request. The Administration's FY2012 funding request for BIS was divided among licensing activity ($54.0 million), enforcement activity ($51.0 million), and management and policy coordination ($6.2 million). Of these amounts, $14.8 million was requested for Chemical Weapons Convention (CWC) enforcement. The $11.0 million increase in the BIS request would have been primarily for additional resources to increase the number of positions in the Office of Export Enforcement (OEE) to support enhanced counter-proliferation, counterterrorism, and national security initiatives and investigations. BIS sought an additional 28 FTE positions and $10.4 million to staff these programs. BIS sought budget authority for 394 positions for FY2012. Economic Development Administration (EDA)7 EDA was created pursuant to the enactment of the Public Works and Economic Development Act (PWEDA) of 1965, with the objective of fostering growth in economically distressed areas characterized by high levels of unemployment and low per-capita income levels. Federally designated disaster areas and areas affected by military base realignment or closure (BRAC) are also eligible for EDA assistance. EDA provides grants for public works, economic adjustment in case of natural disasters or mass layoffs, technical assistance, planning, and research. P.L. 112-55 provides $457.5 million in EDA assistance and salaries and expenses, including $200.0 million in supplemental disaster assistance for states and communities in presidentially declared disaster areas, and $37.5 million for EDA salaries and expenses. The act also provides $220.0 million for EDA assistance programs, including $111.6 million for public works projects, $50.0 million for economic adjustment assistance activities, and $29.0 million for planning grants. The act includes several set asides within the economic adjustment assistance subaccount. Specifically, the act directs EDA to allocate up to $5.0 million for each of these activities: $5.0 million in support of the repatriation of jobs of small to mid-size U.S. companies, particularly those involved in manufacturing, research, or services; $5.0 million in credit subsidies in support of loan guarantees to small or medium-size manufacturers involved in the use of or production of innovative technologies; and $5.0 million in grants or loan guarantee credit subsidies in support of the creation of regional innovation clusters. The act limits the loan guarantee commitments for innovative technologies and regional clusters to no more than $70.0 million. The conference report accompanying the act directs EDA to commission a review of the University Centers program funded under the Technical Assistance subaccount; directs EDA to focus trade adjustment assistance on manufacturers impacted by trade; and encourages EDA to use a portion of funds allocated for regional innovation program activities in support of science parks. The Senate recommended $757.2 million for EDA in FY2012, including $37.2 million for EDA salaries and expenses. The bill, as passed by the Senate, also included $500.0 million for disaster recovery activities targeted to areas included in 2011 presidential disaster declarations. The Senate bill would have exempted a portion ($365.0 million) of the $500.0 million in EDA assistance targeted to disaster areas from the sequestration process outlined in the Budget Control Act of 2011. Excluding the $500.0 million for disaster activities, the Senate recommended $257.2 million for EDA activities and salaries and expenses. This amount was $500,000 less than the $257.7 million recommended by the House Committee on Appropriations, $67.8 million less than the $324.9 million requested by the President, and $26.3 million less than the $283.4 million enacted for FY2011. The bill recommended $20.0 million in support of the Administration's Regional Innovation Program, which was $20.0 million less than requested by the Administration. The House did not include a recommended FY2012 appropriation for this program. The House Committee on Appropriations' recommendation for EDA was 20.7% less than the Administration's FY2012 request and 9.1% less than the FY2011-enacted amount. The committee recommended $219.8 million for Economic Development Assistance Programs, which was $25.7 million below the FY2011-enacted amount and $64.5 million below the Administration's request. The committee recommended $37.9 million for EDA salaries and expenses, which was the same as the FY2011 amount and $2.7 million below the Administration's request. The Administration's FY2012 request for EDA was a 14.6% increase from the FY2011-enacted funding level. The FY2012 request would have provided $40.6 million for the salaries and expenses account and $284.3 million for Economic Development Assistance Programs. These programs include the 21 st Century Innovation Infrastructure program (the proposed successor to the long-standing EDA Public Works program); the Economic Adjustment Assistance program; the new Regional Innovation Program established under the America COMPETES Act ( P.L. 111-358 ); the Partnership Planning program (the proposed successor to the EDA Planning program); Technical Assistance; the Sustainable Economic Development program (the proposed successor to the Global Climate Change program); and the Research and Evaluation program. No funding was requested for the Trade Adjustment Assistance program. Minority Business Development Agency (MBDA)10 MBDA, established by Executive Order 11625 on October 13, 1971, is charged with the lead role in coordinating all of the federal government's minority business programs. As part of its strategic plan, MBDA seeks to develop an industry-focused, data-driven, technical assistance approach to give minority business owners the tools essential for becoming first- or second-tier suppliers to private corporations and the federal government in the new procurement environment. Progress is measured in increased gross receipts, number of employees, and size and scale of firms associated with minority business enterprise. P.L. 112-55 appropriated $30.3 million for MBDA activities. This amount is the same as what was enacted for FY2011, $2.0 million (6.1%) less than the $32.3 million the Administration requested, $607,000 (2.0%) more than the Senate-approved $29.7 million, and $30,000 (0.1%) more than the $30.3 million recommended by the House Committee on Appropriations. The Senate approved $2.6 million (8.0%) less than requested, $607,000 (2.0%) less than enacted for FY2011, and $577,000 (1.9%) less than recommended by the House committee. The House committee's recommendation was $2.0 million (6.2%) below the request and $30,000 (0.1%) less than what was enacted for FY2011. The Administration's FY2012 request for MBDA was a 6.5% increase from the FY2011-enacted funding level. Economic and Statistics Administration (ESA)12 ESA provides economic data, analysis, and forecasts to government agencies and, when appropriate, to the public. ESA includes the Bureau of the Census (discussed separately), the Bureau of Economic Analysis (BEA), and STAT-USA. ESA has three core missions: to maintain a system of economic data, to interpret and communicate information about the forces at work in the economy, and to support the information and analytical needs of the executive branch. Funding for ESA includes two primary accounts: ESA headquarters and BEA. ESA headquarters staff provide economic research and policy analysis in support of the Secretary of Commerce and the Administration. The BEA account funds BEA activities, among which are producing estimates of national gross domestic product and related measures. Congress approved an FY2012 funding level of $96.0 million for ESA, $16.9 million (15.0%) below the Administration's requested $112.9 million, $1.1 million (1.1%) less than the FY2011-enacted amount of $97.1 million, $881,000 (0.9%) more than the $95.1 million approved by the Senate, and $963,000 (1.0%) less than the $97.0 million recommended by the House Committee on Appropriations. The Senate-approved amount for ESA in FY2012 was $17.8 million (15.8%) less than requested, $1.9 million (2.0%) under the FY2011-enacted amount, and $1.8 million (1.9%) less than recommended by the House Committee on Appropriations. The House committee's recommendation was $16.0 million (14.1%) below the FY2012 request and $97,000 (0.1%) less than the FY2011-enacted amount. The Administration's FY2012 request for ESA exceeded the FY2011-enacted amount by $15.9 million (16.4%). Bureau of the Census14 The U.S. Constitution requires a population census every 10 years, to serve as the basis for apportioning seats in the House of Representatives. Decennial census data also are used for within-state redistricting and in certain formulas that determine the annual distribution of more than $400 billion in federal funds to states and localities. The Bureau of the Census, established as a permanent office on March 6, 1902, conducts the decennial census under Title 13 of the U.S. Code, which also authorizes the Census Bureau to collect and compile a wide variety of other demographic, economic, housing, and governmental data. To fund the Census Bureau in FY2012, Congress approved $888.3 million, $136.4 million (13.3%) less than the Administration's request of $1.025 billion, $261.4 million (22.7%) below the $1.150 billion FY2011-enacted amount, and $55.0 million (5.8%) less than the Senate-approved $943.3 million, but $33.8 million (4.0%) more than the House Committee on Appropriations' $854.5 million recommendation. The total for the Bureau includes $253.3 million for the salaries and expenses account, and $635.0 million for the periodic censuses and programs account. The enacted amount for salaries and expenses is $18.7 million (6.9%) less than the requested $272.1 million, $5.2 million (2.0%) less than the $258.5 million enacted for FY2011, and the same as what the Senate approved for FY2012, but is $4.9 million (1.9%) below the House committee-recommended $258.2 million. For periodic programs, the enacted amount is $117.7 million (15.6%) less than the request of $752.7 million, $256.2 million (28.7%) below the FY2011-enacted funding level of $891.2 million, and $55.0 million (8.0%) less than the Senate-approved $690.0 million for FY2012, but is $38.8 million (6.5%) more than the $596.2 million recommended by the House committee. The Senate's recommendation for the Bureau in FY2012 was $88.8 million (10.4%) more than that of the House Committee on Appropriations, but $81.4 million (7.9%) less than the Administration's request, and $206.4 million (18.0%) below the FY2011-enacted amount. The Senate-approved FY2012 amount for salaries and expenses was $4.9 million (1.9%) below the funding level recommended by the House committee for this account, $18.7 million (6.9%) below the budget request, and $5.2 million (2.0%) less than the FY2011-enacted amount. The Senate-approved amount for periodic censuses and programs in FY2012 was $93.8 million (15.7%) more than the House committee's recommendation, but $62.7 million (8.3%) below the request for this account, and $201.2 million (22.6%) less than the FY2011-enacted amount. With respect to the periodic censuses and programs account, the Senate Committee on Appropriations directed "the Bureau to consider budgeting for the 2020 decennial census at a level less than the 2010 Census and ... spending less than the 2000 census, not adjusting for inflation." The committee further noted that it "strongly" supported the Economic Census, and directed "the Bureau to preserve funding when considering reductions." The 2012 economic census was jeopardized, according to the House Committee on Appropriations' minority views, as well as the Census Bureau's assessment, by the House committee's recommended decrease for the periodics account. The House Committee on Appropriations' recommendation for the Bureau was $170.3 million (16.6%) lower than the budget request and $295.2 million (25.7%) below the FY2011-enacted amount. The salaries and expenses account was to receive $13.8 million (5.1%) less than requested and $259,000 (0.1%) less than enacted for FY2011. The periodic censuses and programs account was to receive $156.5 million (20.8%) less than requested and $295.0 million (33.1%) below the FY2011-enacted funding level. The Administration's FY2012 request for the Census Bureau was $125.0 million (10.9%) lower than the FY2011-enacted amount, largely due to fewer 2010 census activities. The decennial census, funded under the periodic censuses and programs account, is the Bureau's most expensive program. The $138.5 million difference between the FY2012 request and FY2011-enacted funding level for this account ($752.7 million versus $891.2 million, a 15.5% decrease) reflected the completion of most aspects of the 2010 census. The Bureau will continue to release 2010 census data products and to evaluate census accuracy, and it has begun planning for the 2020 census. The periodics account also funds the American Community Survey (ACS), a continuous-measurement survey that has replaced the decennial census long form. Approval of the periodics request was to enable the Bureau to proceed with its expansion of the ACS sample size from approximately 3.0 million to 3.5 million housing units a year and its other activities to improve ACS data quality. For FY2012, the Administration's requested a $13.5 million (5.2%) increase in the salaries and expenses account, which included $9.0 million to facilitate the use of administrative records in the federal statistical system. The Administration also proposed, as a cost-control measure, the termination of two programs under salaries and expenses: (1) the Statistical Abstract Program, to discontinue both the print and online versions of Statistical Abstract , as well as the County and City Data Book , State and Metropolitan Area Data Book , and USA Counties Web database, for savings of $2.9 million; and (2) the Federal Financial Statistics Program, to discontinue the Consolidated Federal Funds Report , for $700,000 in savings. National Telecommunications and Information Administration (NTIA)22 NTIA is the executive branch's principal advisory office on domestic and international telecommunications and information technology policies. Its mandate is to provide greater access for all Americans to telecommunications services, support U.S. attempts to open foreign markets, advise on international telecommunications negotiations, fund research grants for new technologies and their applications, and assist nonprofit organizations converting to digital transmission in the 21 st century. NTIA manages the distribution of funds for several key grant programs. Its role in federal spectrum management includes acting as a facilitator and mediator in negotiations among the various federal agencies regarding usage, priority access, causes of interference, and other radio spectrum questions. In recent years, one of the responsibilities of the NTIA has been to oversee the transfer of some radio frequencies from the federal domain to the commercial domain. Many of these frequencies have subsequently been auctioned to the commercial sector and the proceeds paid into the U.S. Treasury. Enacted legislation for FY2012 provides $45.6 million to the NTIA for salaries and expenses, an increase over the previous year of 9.6% but 18.4% less than requested by the Administration. The Administration had requested $55.8 million for Salaries and Expenses for FY2012, an increase of $14.3 million over FY2011-enacted appropriations of $41.6 million. The Administration's request of $55.8 million represented a significant increase over the $21.8 million requested for FY2011 and the $20.0 million appropriated in FY2010 for Salaries and Expenses. The increase was largely attributable to the costs of administration and oversight of the $4.4 billion Recovery Act program for broadband technologies and deployment mapping, as required by the American Recovery and Reinvestment Act of 2009 ( P.L. 111-5 ). Requests for all oversight programs administered by the NTIA totaled $32.3 million for FY2012. In addition, the Administration requested new funding for the NTIA of $1.7 million to support efforts to foster new wireless broadband technologies and of $1.0 million for its Internet Innovation initiative to address Internet-based privacy principles. For FY2012, the House Committee on Appropriations recommended $40.5 million for Salaries and Expenses, 27.4% less than the Administration's request and 2.5% less than the funding level for FY2011. The Senate Committee on Appropriations recommended $45.6 million, the amount enacted; this was 12.4% greater than the amount approved by the House committee. The House committee made no provision for Public Telecommunications Facilities, Planning, and Construction (PTFPC) in FY2012. Expenditures for PTFPC were omitted from the Administration's FY2012 request. The enacted funding level for PTFPC in FY2011 was zero. FY2010 appropriations of $40.0 million included $20.0 million for PTFPC. The bill reported by the Senate committee required that funds appropriated in prior years to PTFPC remain available for the administration of all open grants until their expiration. This provision was included in the bill as enacted. U.S. Patent and Trademark Office (USPTO)23 The USPTO examines and approves applications for patents on claimed inventions and administers the registration of trademarks. It also helps other federal departments and agencies protect American intellectual property in the international marketplace. The USPTO is funded by user fees paid by customers that are designated as "offsetting collections" and subject to spending limits established by Congress. P.L. 112-55 provides the USPTO with the budget authority to spend $2.706 billion in fees collected during FY2012, the same figure as the original Senate-passed legislation, as well as in H.R. 2596 , as reported by the House Committee on Appropriations, and the Administration's budget request. This amount is 29.5% above the FY2011-enacted figure of $2.090 billion. The act mandates that "any amount received in excess of $2,706,313,000 in fiscal year 2012 and deposited in the Patent and Trademark Fee Reserve Fund [as per P.L. 112-29 ] shall remain available until expended." The Director of the USPTO is required to submit a spending plan for these excess fees to the House and the Senate Committees on Appropriations; the planned spending is to be treated as "a reprogramming," and any excess fees shall be used solely for the activities of the USPTO. National Institute of Standards and Technology (NIST)25 NIST is a laboratory of the Department of Commerce with a mandate to increase the competitiveness of U.S. companies through appropriate support for industrial development of pre-competitive, generic technologies and the diffusion of government-developed technological advances to users in all segments of the American economy. NIST research also provides the measurement, calibration, and quality assurance techniques that underpin U.S. commerce, technological progress, improved product reliability, manufacturing processes, and public safety. The final FY2012 appropriation for NIST totals $750.8 million, essentially the same as the $750.1 million provided in FY2011. This amount is 10.4% more than H.R. 2112 as originally passed by the Senate, 7.2% above H.R. 2596 , as reported from the House Committee on Appropriations, and 25.0% below the Administration's request. Support for research and development under the Scientific and Technical Research and Services (STRS) account increases 14.0% from the FY2011 appropriation of $497.4 million to $567.0 million. This figure represents a 13.4% increase from the amount in the initial Senate-passed version of H.R. 2112 , is 9.7% more than that contained in H.R. 2596 , but is 16.5% below the President's proposal. Under the Industrial Technology Services (ITS) account, the Manufacturing Extension Partnership (MEP) program receives $128.4 million, the same appropriation as FY2011, 7.0% above H.R. 2112 as first passed by the Senate, identical to the support included in H.R. 2596 , and 10.0% less than the budget request. No funding is provided for the Technology Innovation Program (TIP), the Baldrige National Quality Program, or a new program proposed in the President's budget called the Advanced Manufacturing Technology Consortia (AMTech). The construction budget is $55.4 million, 20.7% less than in FY2011, 7.7% less than in the original Senate-passed version of H.R. 2112 , the same as in H.R. 2596 , and 34.5% below the budget proposal. The original Senate-passed version of H.R. 2112 would have funded NIST at $680.0 million, 2.9% below the amount in H.R. 2596 , 32.1% below the Administration's budget request, and 9.3% below the FY2011 appropriation of $750.1 million. The STRS account would have totaled $500.0 million, 3.2% below the figure in H.R. 2596 , 26.4% less than the budget request, and 1.4% below the $507.0 million appropriated in FY2011. Under the ITS account, $120.0 million was to be provided for the MEP program. This amount was 6.5% less than that recommended in H.R. 2596 and that appropriated for FY2011, as well as 15.8% less than the Administration's budget figure. No funding was provided for TIP, the Baldrige National Quality Program, or the proposed AMTech Consortia. Construction support would have totaled $60.0 million, 8.3% more than the amount included in the House bill, 29.1% below the President's budget number, and 14.2% below the FY2011 appropriation of $69.9 million. H.R. 2596 , as reported from the House Committee on Appropriations, would have provided $700.1 million for NIST, 30.1% below the President's budget request and 6.7% below the FY2011 figure. Funding for the STRS account would have totaled $516.5 million, 23.9% below the proposed budget number, but 1.9% over the FY2011 appropriation. The $128.3 million recommended for MEP was 0.1% less than the FY2011-enacted amount and 10.0% less than the Administration's request. No funding was provided for TIP, the Baldrige program, or AMTech. Support for construction, at $55.3 million, would have been 34.6% below the budget proposal and reflected a 20.8% decrease from the FY2011 figure. The Administration's FY2012 budget proposed $1.001 billion in funding for NIST, a 33.5% increase over the FY2011 appropriation. Support for the STRS account would have increased 33.9% to $678.9 million. Included in the ITS account, the MEP program would have received $142.6 million, 11.1% more than the amount appropriated in FY2011, while financing for TIP would have increased to $75.0 million, 67.4% over the FY2011 figure of $44.8 million. Also to be budgeted under ITS (and moved from the STRS account), support for the Baldrige program would have decreased 19.8% from $9.6 million in FY2011 to $7.7 million. A new program, AMTech, was to be created and funded at $12.3 million. Support for construction would have increased 21.0% to $84.6 million. National Oceanic and Atmospheric Administration (NOAA)27 The National Oceanic and Atmospheric Administration (NOAA) conducts scientific research in areas such as ecosystems, climate, global climate change, weather, and oceans; supplies information on the oceans and atmosphere; and manages coastal and marine resources. NOAA was created in 1970 by Reorganization Plan No. 4. The reorganization plan was designed to unify a number of the nation's environmental activities and to provide a systematic approach for monitoring, analyzing, and protecting the environment. NOAA's current administrative structure has evolved into five line offices, which include the National Environmental Satellite, Data, and Information Service (NESDIS); the National Marine Fisheries Service (NMFS); the National Ocean Service (NOS); the National Weather Service (NWS); and the Office of Oceanic and Atmospheric Research (OAR). In addition to NOAA's five line offices, Program Support (PS), a cross-cutting budget activity, includes the NOAA Education Program, Corporate Services, Facilities, and the Office of Marine and Aviation Operations (OMAO). NOAA's FY2012 budget request proposed a budget neutral reorganization of its administrative structure by establishing a Climate Service line office. The reorganization would have brought together existing climate related capabilities and related funding from NWS, NESDIS, and OAR. Of the $346.2 million NOAA requested to fund the Climate Service, $225.9 million would have been transferred from OAR. According to NOAA, the main goal of establishing a Climate Service is to strengthen and expand NOAA's contributions to climate science by creating a more efficient and effective management structure. NESDIS would have been renamed as the National Environmental Satellite Service (NESS), while NOS and NMFS would have remained unchanged. Section 1348 of the Department of Defense and Full-Year Continuing Appropriations Act, 2011 ( P.L. 112-10 ) blocked funding to implement, establish, or create a NOAA Climate Service during FY2011. For FY2012, the House Committee on Appropriations rejected the NOAA reorganization request and instead recommended funding NOAA programs in accordance with the current organizational structure. The Senate Committee on Appropriations included a Climate Service line office in its budget recommendation, but proposed a lower funding level of $161.5 million. The committee recommended retaining much of the agency's climate research funding in OAR. The committee also expressed concerns related to maintaining a research line office (OAR) and the future of research in the agency. The conference agreement ( P.L. 112-55 ) funded NOAA in accordance with its current organizational structure and the conference report ( H.Rept. 112-284 ) included language stating that the conference agreement does not establish the NOAA Climate Service as proposed by the Senate. For FY2012, P.L. 112-55 provides a total of $4.894 billion for NOAA. This amount is 2.6% less than the Senate's recommendation, 8.0% more than the House Committee on Appropriations' recommendation, 10.8% less than the Administration's request, and 6.7% more than the FY2011-enacted amount. For FY2012, the Senate recommended $5.022 billion for NOAA. This amount was 10.8% more than the House Committee on Appropriations' recommendation, 8.4% less than the Administration's request, and 9.5% more than the FY2011-enacted amount. For FY2012, the House Committee on Appropriations recommended $4.531 billion for NOAA. This amount was 17.4% less than the Administration's FY2012 request and 1.2% less than the FY2011-enacted amount. For FY2012, the Administration requested $5.486 billion for NOAA, a 19.6% increase over the FY2011 funding level of $4.588 billion. The NOAA budget is divided into two main accounts: Procurement, Acquisition, and Construction (PAC); and Operations, Research, and Facilities (ORF). For FY2012, P.L. 112-55 provides $3.022 billion for the ORF account. This amount is 3.6% less than the Senate recommendation, 8.9% more than the House Committee on Appropriations' recommendation, 10.5 % less than the Administration's request, and 5.0% less than the FY2011-enacted amount. For FY2012, the Senate recommended $3.134 billion for the ORF account. This amount was 12.9% more than the House Committee on Appropriations' recommendation, 7.2% less than the Administration's request, and 1.5% less than the FY2011-enacted amount. The House Committee on Appropriations recommended $2.776 billion for the ORF account in FY2012. This amount was 17.8% less than the Administration's FY2012 request and 12.8% less than the FY2011-enacted amount. The Administration's request for the ORF account in FY2012 was $3.378 billion, 6.1% more than the FY2011-enacted funding level of $3.183 billion. For FY2012, P.L. 112-55 provides $1.817 billion for the PAC account. This amount is 0.9% less than the Senate recommendation, 6.8% more than the House Committee on Appropriations' recommendation, 11.5% less than the Administration's request, and 36.3% more than the FY2011-enacted amount. The Senate recommended $1.834 billion for the PAC account. This amount was 7.8% more than the House Committee on Appropriations' recommendation, 10.7% less than the Administration's FY2012 request, and 37.6% more than the FY2011-enacted amount. The House Committee on Appropriations recommended $1.701 billion for the PAC account in FY2012. This amount was 17.1% less than the Administration's FY2012 request, but 27.6% more than the FY2011-enacted amount. The Administration's request for the PAC account in FY2012 was $2.053 billion, 54.0% more than the FY2011-enacted funding level of $1.333 billion. For FY2012, P.L. 112-55 provides approximately $924.0 million for the Joint Polar Satellite System (JPSS), which is over half of NOAA PAC funding. This amount is 0.3% more than the Senate's recommendation, 2.6% more than the House Committee on Appropriations' recommendation, 13.6% less than the Administration's request, and 95.8% more than the FY2011-enacted amount. The Senate recommended $920.8 million of PAC funding for JPSS. This amount was 2.3% more than the House Committee on Appropriations' recommendation, 13.9% less than the Administration's FY2012 request, and 95.1% more than the FY2011-enacted amount. The House Committee on Appropriations recommended $900.4 million for JPSS. This was 15.8% less than the Administration's FY2012 request and 90.8% above the FY2011-enacted amount. The Administration's request for JPSS was $1.070 billion, 126.7% more than the FY2011-enacted amount of $471.9 million. The JPSS program has been troubled by missed deadlines and higher than anticipated costs. Although program funding has been increased relative to FY2011, the Senate Committee on Appropriations expressed deep concern about the long-term drain that JPSS could have on NOAA's other commitments. Department of Justice30 Established by an act of 1870 with the Attorney General at its head, DOJ provides counsel for the government in federal cases and protects citizens through law enforcement. It represents the federal government in all proceedings, civil and criminal, before the Supreme Court. In legal matters, generally, the department provides legal advice and opinions, upon request, to the President and executive branch department heads. The major functions of DOJ agencies and offices are described below. United States Attorneys prosecute criminal offenses against the United States; represent the federal government in civil actions; and initiate proceedings for the collection of fines, penalties, and forfeitures owed to the United States. United States Marshals Service provides security for the federal judiciary, protects witnesses, executes warrants and court orders, manages seized assets, detains and transports unsentenced prisoners, and apprehends fugitives. Federal Bureau of Investigation (FBI) investigates violations of federal criminal law; helps protect the United States against terrorism and hostile intelligence efforts; provides assistance to other federal, state, and local law enforcement agencies; and shares jurisdiction with Drug Enforcement Administration over federal drug violations. Drug Enforcement Administration (DEA) investigates federal drug law violations; coordinates its efforts with state, local, and other federal law enforcement agencies; develops and maintains drug intelligence systems; regulates legitimate controlled substances activities; and conducts joint intelligence-gathering activities with foreign governments. Bureau of Alcohol, Tobacco, Firearms and Explosives (ATF) enforces federal law related to the manufacture, importation, and distribution of alcohol, tobacco, firearms, and explosives. It was transferred from the Department of the Treasury to the DOJ by the Homeland Security Act of 2002 ( P.L. 107-296 ). Federal Prison System ( Bureau of Prisons, BOP ) provides for the custody and care of the federal prison population, the maintenance of prison-related facilities, and the boarding of sentenced federal prisoners incarcerated in state and local institutions. Office on Violence Against Women (OVW) coordinates legislative and other initiatives relating to violence against women and administers grant programs to help prevent, detect, and stop violence against women, including domestic violence, sexual assault, and stalking. Office of Justice Programs (OJP) manages and coordinates the activities of the Bureau of Justice Assistance, Bureau of Justice Statistics, National Institute of Justice, Office of Juvenile Justice and Delinquency Prevention, and the Office of Victims of Crime. Community Oriented Policing Services (COPS) advances the practice of community policing by awarding grants to law enforcement agencies to hire and train community policing professionals, acquire and deploy crime-fighting technologies, and develop and test innovative policing strategies. Most crime control has traditionally been a state and local responsibility. With the passage of the Crime Control Act of 1968 (P.L. 90-351), however, the federal role in the administration of criminal justice has increased incrementally. Since 1984, Congress has approved five major omnibus crime control bills, designating new federal crimes, penalties, and additional law enforcement assistance programs for state and local governments. FY2011 and FY2012 Appropriations The Commerce, Justice, Science, and Related Agencies Appropriations Act, 2012 includes $27.408 billion for DOJ, an amount that is 1.8% greater than what the Senate would have provided for the department, 4.1% above the amount recommended by the House Committee on Appropriations, and 0.1% above the FY2011-enacted amount. However, the FY2012 appropriation is 4.6% below the Administration's request. The Senate-passed bill included $26.925 billion for the Department of Justice. The amount recommended by the Senate was 4.7% above the House Committee on Appropriations' recommended funding, but it was 6.7% less than the Administration's request and 0.9% below the department's FY2011 appropriation. The House Committee on Appropriations recommended a total of $26.323 billion for DOJ. This amount was 8.4% less than the Administration's FY2012 request and 3.9% below the FY2011-enacted level. For FY2012, the Administration requested a total of $28.724 billion for DOJ. The Administration's request was $1.335 billion, or 4.9% more than the FY2011-enacted amount of $27.389 billion. General Administration The General Administration account provides funds for salaries and expenses for the Attorney General's office, the Inspector General's office, and other programs designed to ensure that the collaborative efforts of DOJ agencies are coordinated to help represent the government and fight crime as efficiently as possible. The FY2012-enacted appropriation provides almost $2.228 billion for the General Administration account. This is 0.9% more than what would have been provided by the Senate-passed amount of nearly $2.208 billion and 5.6% more than $2.11 billion recommended by the House Committee on Appropriations. The FY2012-enacted appropriation is 4.2% less than the $2.325 billion that the Administration had requested for FY2012 but 0.9% more than the FY2011-enacted appropriation of $2.208 billion. The Senate recommended a total of almost $2.208 billion for FY2012, which would have been equal to the FY2011-enacted appropriation. This recommended amount would have been 5.1% less than the Administration's FY2012 request but 4.6% more than the amount recommended by the House Committee on Appropriations. The House Committee on Appropriations recommended a total of $2.11 billion for FY2012. This amount would have been 9.2% less than the Administration's FY2012 request and 4.4% below the FY2011-enacted level. The Administration's request included $2.325 billion for FY2012. This amount would have been $117.2 million (or 5.3%) more than the enacted FY2011 appropriation of almost $2.208 billion. Described below are several General Administration subaccounts, such as the Office of the Inspector General. General Administration The General Administration account includes funding for Salaries and Expenses for DOJ administration, as well as for the National Drug Intelligence Center (NDIC), Justice Information Sharing Technology, and Tactical Law Enforcement Wireless Communications. For FY2012, Congress provides $262.1 million. This is 2.9% less than the Senate-passed amount of nearly $269.9 million, but 21.2% more than the House Committee on Appropriations recommended amount of $216.2 million. The FY2012-enacted appropriation is 17.1% less than the almost $316.3 million that the Administration had requested and 16.0% less than the FY2011-enacted appropriation of nearly $312.2 million. The Senate would have provided a total of almost $269.9 million for FY2012. This would have been 13.5% less than the FY2011-enacted appropriation of almost $312.2 million. This would also have been 14.7% less than the Administration's FY2012 request, but 24.8% more than the amount recommended by the House Committee on Appropriations. The House Committee on Appropriations recommended a total of $216.2 million for FY2012. This amount was 31.6% less than the Administration's FY2012 request and 30.7% below the FY2011-enacted level. The House Committee-reported bill did not include funding for the NDIC. For DOJ's General Administration, the FY2012 budget request included $316.3 million, what would have been an increase of $4.1 million (or 1.3%) over the FY2011 appropriation. As part of the FY2012 request, the Administration proposed to reduce funding for the NDIC by almost $9.0 million (26.4%) to $25.0 million. In its request, the Administration indicated that NDIC's functions may be duplicative of other federal, state, and local drug intelligence centers. The idea that NDIC's functions may overlap with those of other agencies has been an issue of interest to policymakers in the past several Congresses and continues to be of concern to some. The FY2012-enacted appropriation includes $20.0 million for the NDIC, 20% lower than the amount requested by the Administration. Administrative Review and Appeals (ARA) ARA includes the Executive Office of Immigration Review (EOIR) and the Office of the Pardon Attorney (OPA). The Attorney General is responsible for the review and adjudication of immigration cases in coordination with the Department of Homeland Security's (DHS's) efforts to secure the nation's borders. The EOIR handles these matters, and the OPA receives and reviews petitions for executive clemency. The FY2012-enacted appropriation includes $301.0 million for ARA. This is 3.8% more than the Senate-passed amount of nearly $290.1 million and 1.8% more than the House Committee on Appropriations recommended amount of almost $295.8 million. It is 8.4% less than the $328.6 million requested by the Administration but 1.7% more than the FY2011-enacted level of almost $296.1 million. The Senate approved a total of almost $290.1 million for FY2012. This amount would have been 2.0% less than the FY2011-enacted amount, 11.7% less than the Administration's FY2012 request, and 1.9% less than the House Committee on Appropriations' recommended amount. The House Committee on Appropriations recommended a total of almost $295.8 million for FY2012. This amount would have been 10.0% less than the Administration's FY2012 request and 0.1% less than the FY2011-enacted level. The Administration's request included $328.6 million for ARA funding for FY2012. The requested amount exceeded the FY2011 funding level by almost $32.5 million, representing an increase of 11.0%. Office of the Federal Detention Trustee (OFDT) The OFDT provides overall management and oversight for federal detention services relating to federal prisoners in nonfederal institutions or otherwise in the custody of the U.S. Marshals Service. The FY2012 appropriation for the OFDT account is $1.581 billion, which is 1.1% more than the amount recommended by the Senate, 4.4% more than the House Committee on Appropriation's recommendation, and 4.3% more than the FY2011 appropriation. However, the FY2012-enacted amount is 0.9% below the Administration's request. The Senate recommended $1.563 billion for the OFDT, which was 3.3% more that the amount recommended by the House Committee on Appropriation and 3.2% more than the FY2011-enacted funding, but it was 2.0% less than the Administration's request. The bill reported by the House Committee on Appropriations included $1.514 billion for the OFDT. This amount was 5.1% less than the Administration's FY2012 request and 0.1% less than the FY2011-enacted amount. The Administration requested $1.595 billion for this account for FY2012. The FY2012 request was 5.3% more than the $1.516 billion Congress appropriated for FY2011. Office of the Inspector General (OIG) The OIG is responsible for detecting and deterring waste, fraud, and abuse involving DOJ programs and personnel; promoting economy and efficiency in DOJ operations; and investigating allegations of departmental misconduct. The FY2012-enacted appropriation provides almost $84.2 million for the OIG. This is equal to the amount that would have been provided by the Senate-passed amount and 0.1% more than $84.1 million recommended by the House Committee on Appropriations. The FY2012-enacted appropriation is 1.0% less than the nearly $85.1 million that the Administration had requested for FY2012 and equal to the FY2011-enacted appropriation. The Senate approved a total of nearly $84.2 million for FY2012. This amount would have been equal to the FY2011-enacted appropriation, 1.0% less than the Administration's FY2012 request and 0.1% more than the amount recommended by the House Committee on Appropriations. The House Committee on Appropriations recommended a total of nearly $84.1 million for FY2012. This amount would have been 1.1% less than the $85.1 million requested by the Administration and 0.1% less than the FY2011-enacted appropriation. The Administration's FY2012 request for the OIG was 1.0% greater than the FY2011 appropriation. U.S. Parole Commission The U.S. Parole Commission adjudicates parole requests for prisoners who are serving felony sentences under federal and District of Columbia code violations. Congress provides $12.8 million for the U.S. Parole Commission for FY2012, an amount that is 2.0% more than the amount that the commission would have received under the Senate-passed bill and is approximately the same as the amount recommended by the House Committee on Appropriations. The FY2012 appropriation for the commission is the same at the FY2011 appropriation, but it is 2.9% below the Administration's request. The Senate-passed amount for the U.S. Parole Commission was $12.6 million, an amount that was 1.9% less than the amount recommended by the House Committee on Appropriations, 4.8% less than the Administration's request and 2.0% less than the FY2011 appropriation. The House Committee on Appropriations recommended $12.8 million for the commission, an amount that was 3.0% below the Administration's request and 0.1% less than the FY2011-enacted amount. For FY2012, the Administration requested $13.2 million for the commission, 3.0% more than the FY2011 appropriation of $12.8 million. Legal Activities The Legal Activities account includes several subaccounts: general legal activities, U.S. Attorneys, and other legal activities. The FY2012-enacted appropriation provides $3.187 billion for Legal Activities. This is 2.8% more than what would have been provided by the Senate-passed amount of $3.101 billion and 1.6% more than the $3.136 billion recommended by the House Committee on Appropriations. The FY2012-enacted appropriation is 4.1% less than the almost $3.323 billion that the Administration had requested for FY2012 but 0.3% more than the FY2011-enacted appropriation of $3.177 billion. The Senate approved $3.101 billion for FY2012. This amount would have been 2.4% less than the FY2011-enacted amount, 6.7% less than the Administration's FY2012 request, and 1.1% less than the amount recommended by the House Committee on Appropriations. For the Legal Activities account, the House Committee on Appropriations recommended a total of $3.136 billion for FY2012. This amount would have been 5.6% less than the Administration's FY2012 request and 1.3% below the FY2011-enacted level. The President's FY2012 budget request included $3.323 billion for the Legal Activities account, $145.4 million (or 4.6%) more than the FY2011-enacted appropriation. Some of the Legal Activities subaccounts are described below. General Legal Activities The General Legal Activities account funds the Solicitor General's supervision of the department's conduct in proceedings before the Supreme Court. It also funds several departmental divisions (tax, criminal, civil, environment and natural resources, legal counsel, civil rights, INTERPOL, and dispute resolution). The FY2012-enacted appropriation provides almost $863.4 million for General Legal Activities. This is 2.0% more than what would have been provided by the Senate-passed amount of nearly $846.1 million and 2.7% more than the $840.9 million recommended by the House Committee on Appropriations. The FY2012-enacted appropriation is 9.6% less than the almost $955.4 million that the Administration had requested for FY2012 and equal to the FY2011-enacted appropriation. The Senate approved $846.1 million for this account for FY2012. The Senate-passed amount would have been 0.6% more than the amount recommended by the House Committee on Appropriations, but 11.4% less than the Administration's request and 2.0% less than the FY2011-enacted amount. The House Committee on Appropriations recommended a total of almost $840.9 million for FY2012. This amount would have been 12.0% less than the Administration's FY2012 request and 2.6% below the FY2011-enacted level. The Administration's FY2012 request proposed almost $955.4 million for General Legal Activities, $92.0 million more than the enacted FY2011 appropriation of almost $863.4 million. The requested amount would have increased FY2012 funding by 10.7% compared to the FY2011-enacted appropriation level. Office of the U.S. Attorneys The U.S. Attorneys enforce federal laws through prosecution of criminal cases and represent the federal government in civil actions in all of the 94 federal judicial districts. The FY2012 appropriation for the U.S. Attorneys is $1.96 billion. The FY2012 appropriation is 3.6% more than the Senate-passed amount, 1.6% more than the amount recommended by the House Committee on Appropriations, and 1.5% more than the FY2011 appropriation, but it is 1.8% below the Administration's FY2012 request. The Senate-passed bill included $1.892 billion for the U.S. Attorneys. The Senate recommended amount was 1.9% below the House Committee on Appropriations' mark, 5.2% below the Administration's request, and 2.0% below the FY2011 appropriation. The House Committee on Appropriations recommended $1.928 billion for the U.S. Attorneys. The House committee-recommended amount was 3.4% below the Administration's FY2012 request and 0.1% below the FY2011-enacted amount. The Administration's FY2012 request would have provided the U.S. Attorneys with $1.995 billion, or a $65.0 million increase (3.4%) over the amount appropriated for FY2011 ($1.93 billion). The requested FY2012 budget enhancement included $2.0 million for new data analysis capabilities that could enable the U.S. Attorneys to identify and assess cost-effective crime reduction strategies. The balance of the difference between the FY2012 requested and FY2011-enacted appropriation consisted of base adjustments, as well as offsets. Other Legal Activities Other Legal Activities includes the Antitrust Division, the Vaccine Injury Compensation Trust Fund, the U.S. Trustee System Fund (which is responsible for maintaining the integrity of the U.S. bankruptcy system by, among other things, prosecuting criminal bankruptcy violations), the Foreign Claims Settlement Commission, the Fees and Expenses of Witnesses, the Community Relations Service, and the Assets Forfeiture Fund. The FY2012-enacted appropriation provides $363.8 million for the Other Legal Activities account. This is nearly equal to the $363.7 million that would have been provided by the Senate and 0.9% less than the nearly $367.0 million recommended by the House Committee on Appropriations. The FY2012-enacted appropriation is 2.2% less than the $372.1 million that the Administration had requested for FY2012 and 5.2% less than the FY2011-enacted appropriation of almost $383.8 million. The Senate approved $363.7 million for other legal activities for FY2012. This amount would have been 5.2% less than the FY2011-enacted level, 2.3% less than the Administration's FY2012 request, and 0.9% less than the amount recommended by the House Committee on Appropriations. The House Committee on Appropriations recommended a total of almost $367.0 million for FY2012. This amount would have been 1.4% less than the Administration's FY2012 request and 4.4% below the FY2011-enacted level of almost $383.8 million. For FY2012, the Administration's request included $372.1 million for Other Legal Activities, $11.6 million, or 3.0%, more than FY2011 funding. U.S. Marshals Service (USMS) The USMS is responsible for the protection of the federal judicial process, including protecting judges, attorneys, witnesses, and jurors. In addition, USMS provides physical security in courthouses, safeguards witnesses, transports prisoners from court proceedings, apprehends fugitives, executes warrants and court orders, and seizes forfeited property. For FY2012, Congress appropriated $1.189 billion for the U.S. Marshals Service. This amount is 5.1% greater than the amount recommended by the Senate, 4.9% greater than the amount recommended by the House Committee on Appropriations, and 4.3% greater than the FY2011 appropriation. However, the FY2012 appropriation for the USMS is 5.6% below the Administration's request. The Senate recommended $1.131 billion for the USMS, an amount that was 0.2% below the amount recommended by the House Committee on Appropriations, 10.2% less than the Administration's request and 0.8% less than FY2011-enacted funding. The House committee-recommended amount for the USMS was $1.133 billion. The amount recommended by the House Committee on Appropriations would have been 10.0% less than the FY2012 request and 0.6% below the USMS's FY2011 appropriation. The Administration requested a total of $1.259 billion for the USMS for FY2012. The FY2012 request was $119.1 million, or 10.4%, more than the FY2011 appropriation of $1.14 billion. National Security Division (NSD) The NSD coordinates DOJ's national security and terrorism missions through law enforcement investigations and prosecutions. The NSD was established in DOJ in response to the recommendations of the Commission on the Intelligence Capabilities of the United States Regarding Weapons of Mass Destruction (WMD Commission), and authorized by Congress on March 9, 2006, in the USA PATRIOT Improvement and Reauthorization Act of 2005. Under the NSD, the DOJ resources of the Office of Intelligence Policy and Review and the Criminal Division's Counterterrorism and Counterespionage Sections were consolidated to coordinate all intelligence-related resources and to ensure that criminal intelligence information is shared, as appropriate. For FY2012, Congress appropriated $87.0 million for the NSD. This amount is $762,000 (0.9%) less than the FY2011-enacted amount, $882,000 (1.0%) less than the President's request, $674,000 (0.8%) less than the House-reported amount, and $993,000 (1.2%) less than the Senate-passed amount. By comparison, the Senate-passed bill would have provided $86.0 million for the NSD, nearly $1.8 million (2.0%) less than the FY2011-enacted amount, nearly $1.9 million (2.1%) less than the President's request, and $1.7 million (1.9%) less than the House mark. The House-reported bill would have provided $87.7 million for the NSD, $88,000 (0.1%) less than the FY2011-enacted amount and $208,000 (0.2%) less than the FY2012 request. The Administration's FY2012 request of $87.9 million for the NSD was almost the same amount as appropriated for FY2011. Notwithstanding that the request includes no net funding increase, requested FY2012 budget enhancements included $274,000 for counterterrorism investigations and prosecutions, $298,000 for export enforcement and counterespionage prosecution, and $157,000 for strengthening international partnerships to advance U.S. national security interests. To the extent that these requested budget enhancements have been funded under the FY2012 appropriation, they are to be offset by other savings and efficiencies, which were identified by the Administration in its budget request. Interagency Law Enforcement The Interagency Law Enforcement account reimburses departmental agencies for their participation in the Organized Crime Drug Enforcement Task Force (OCDETF) program. Organized into nine regional task forces, this program combines the expertise of federal agencies with the efforts of state and local law enforcement to disrupt and dismantle major narcotics-trafficking and money-laundering organizations. From DOJ, the federal agencies that participate in OCDETF are the DEA; the FBI; the ATF; the USMS; the Tax and Criminal Divisions of DOJ; and the U.S. Attorneys. From the Department of Homeland Security, Immigration and Customs Enforcement and the U.S. Coast Guard participate in OCDETF. In addition, from the Department of the Treasury, the Internal Revenue Service and Treasury Office of Enforcement also participate in OCDETF. Moreover, state and local law enforcement agencies participate in approximately 90% of all OCDETF investigations. The FY2012-enacted appropriation provides $527.5 million for the Interagency Law Enforcement account. This is 2.0% more than the nearly $517.0 million that would have been provided by the Senate and 0.1% more than the nearly $527.0 million recommended by the House Committee on Appropriations. The FY2012-enacted appropriation is 2.5% less than the almost $541.0 million that the Administration had requested for FY2012 and equal to the FY2011-enacted appropriation. The Senate recommended almost $517.0 million for FY2012. This amount would have been 2.0% less than the FY2011-enacted level, 4.4% less than the Administration's FY2012 request, and 1.9% less than the House Committee on Appropriations' recommendation for FY2012. The House Committee on Appropriations recommended a total of $527.0 million for FY2012. This amount would have been 2.6% less than the Administration's FY2012 request and 0.1% less than the FY2011-enacted level. For FY2012, the Administration proposed almost $541.0 million for OCDETF. The proposed FY2012 funding level was almost $13.5 million, or 2.6%, more than the FY2011-enacted funding level. The Administration requested an increase in funding for OCDETF operations relating to the Southwest border. In response to concerns that the escalating drug trafficking-related violence in Mexico could spread into the United States, the Administration proposed an increase in funding to enhance investigations (an increase of almost $1.2 million) and prosecutions (an increase of $8.1 million) along the Southwest border as part of the Southwest Border Violence Initiative. The majority of the funding was requested to ensure that resources would be available to provide adequate legal oversight of cases and to prosecute fully those drug trafficking and money laundering organizations. The House committee-reported amount did not include the Administration's requested increase for Southwest border activities. Federal Bureau of Investigation (FBI) The FBI is the lead federal investigative agency charged with defending the country against foreign terrorist and intelligence threats; enforcing federal laws; and providing leadership and criminal justice services to federal, state, municipal, tribal, and territorial law enforcement agencies and partners. Since the September 11, 2001, terrorist attacks, the FBI has reorganized and reprioritized its efforts to focus on preventing terrorism and related criminal activities. From FY2001 through FY2010, Congress has more than doubled direct appropriations for the FBI from $3.32 billion to $7.899 billion, or a 137.9% increase. For FY2011, Congress appropriated $7.926 billion for the FBI (an increase of less than 0.4%). For FY2012, Congress has appropriated 8.118 billion for the FBI. This amount is $191.7 million (2.4%) greater than the FY2011-enacted amount, $42.0 million (0.5%) greater than the President's request, $50.1 million (0.6%) greater than the House-reported amount, and $258.0 million (3.3%) greater than Senate-passed amount. By comparison, the Senate-passed bill would have provided $7.86 billion for the FBI, $66.3 million (0.8%) less than the FY2011 appropriation, $216 million (2.7%) less than the request ($8.076 billion), and $207.9 million (2.6) less than the House mark. The House-reported bill would have provided $8.068 billion for the FBI, $141.6 million (1.8%) more than the FY2011 appropriation, but $8.1 million (0.1%) less than the request. The FBI appropriation is provided in two accounts. One for salaries and expenses. The other for construction. For FBI salaries and expenses, Congress has appropriated $8.037 billion for the FBI. This amount is $217.8 million (2.8%) greater than the FY2011-enacted amount, $42.0 million (0.5%) greater than the President's request, $50.0 million (0.6%) greater than the House-reported amount, and $252.0 million (3.2%) more than the Senate-passed amount. By comparison, the Senate-reported bill would have provided $7.785 billion, $34.2 million (0.4%) less than the FY2011 appropriation ($7.819 billion), $210 million (2.6%) less than the request ($7.995 billion), and $202 million (2.5%) less than the House mark. The House-reported bill would have provided $7.987 billion, $167.8 million (2.1%) greater than the FY2011 appropriation, but $8.0 million (0.1%) less than the request. The President's FY2012 request included an increase of $175.8 million (2.2%) greater than the FY2011 appropriation. The FY2012 request included $131.5 million in the following budget enhancements: $48.9 million to improve national security surveillance capabilities, $40 million for aircraft to support the FBI's Weapons of Mass Destruction (WMD) Render Safe mission, $18.6 million for cybersecurity/computer intrusion investigations, $12.5 million for FBI participation in the Domestic Communications Assistance Center, a DOJ initiative to increase electronic surveillance capabilities nationally, $9 million to address further violent crime in Indian Country, and $2.5 million for increased analytical training. Because Congress has appropriated $8.037 billion, or $42.0 million more than requested, for the FBI salaries and expenses account, it is likely that all of the requested budget enhancements were fully funded. Indeed, conference report language indicates that all of the above requested enhancements are fully funded, except for the last two (Indian Country and analytical training). In addition, conference report language directs the FBI to report back to the Appropriations Committees within 120 day of enactment on "agent utilization and overall staff resources" allocated for human trafficking and intellectual property investigations, as well as interagency information sharing initiatives for the purposes of identifying criminal aliens. Also, in report language, conferees encouraged the FBI to facilitate familial searches of the Combined DNA Index System of convicted offenders, directed the FBI to increase its efforts to investigate human rights abuses that were committed by foreign nationals who are now residing in the United States, and supported an FBI policy prohibiting any formal, non-investigative cooperation with unindicted co-conspirators in terrorism cases. Senate report language indicated that $18.6 million and $12.5 million in requested budget enhancements for cybersecurity and electronic surveillance capabilities, respectively, would have been fully funded under the recommendation. It also indicated that $40.9 million, instead of the requested $48.9 million, would have been provided to improve national security surveillance capabilities. In addition, Senate report language indicated that budget authority to use existing funding to buy aircraft for the Render Safe mission was provided for FY2011 and additional funding would not be provided under the FY2012 mark. Senate report language was silent regarding specific amounts for other requested funding enhancements, although it addressed several concerns (e.g., computer intrusions, civil rights enforcement, intellectual property rights, child exploitation, mortgage fraud, gang enforcement, border violence, and severe forms of human trafficking). Furthermore, Senate report language indicated that the Senate mark would have provided $644.7 million for the FBI Criminal Justice Information Services Division, an amount that includes $350.8 million in user fees. (Conference report language indicates that the full amount for CJIS in terms of both direct funding and user fees has been provided for FY2012.) Notwithstanding the House 0.1% rescission ($8.0 million), the House bill would have funded all of the requested FY2012 budget enhancements. For FBI construction, Congress has matched the President's FY2012 request and appropriated nearly $81.0 million. This amount is $26.1 million (24.4%) less than the FY2011-enacted amount. By comparison, the Senate bill would have provided $75 million for FY2012, or $32.5 million (30%) less than the FY2011 appropriation ($107.1 million), nearly $6.0 million (7.4%) less that the FY2012 request ($81 million), and $5.9 million (7.3%) less than the House mark. The House-reported bill would have provided $80.9 million, or $26.2 million (24.5%) less than the FY2011 appropriation and $81,000 (0.1%) less than the President's request. Regarding FBI appropriations and oversight, in March 2010, the DOJ OIG reported on the FBI's efforts to develop a computerized case management system for investigations known as Sentinel. At that time, the final costs for Sentinel were expected to exceed $451 million, and the OIG expressed "significant concern" about system's cost and rate progress. In February 2011, the acting OIG testified that Sentinel was at least two years behind schedule and $100 million over budget. Regarding Sentinel, the FY2012 appropriation includes a provision (§213) that statutorily requires the FBI to report to the Appropriations Committees on a "cost and schedule estimate for the final operating capability." In addition, the OIG testified that the FBI had taken appropriate steps to respond to potential WMD incidents under the National Response Framework, but DOJ as a whole and its other components were not as adequately prepared. Furthermore, in April 2010, the OIG issued an audit of the FBI personnel resource allocations, including how the FBI used field agents and intelligence analysts for counterterrorism and other investigative matters. The OIG audit found that, from FY2005 through FY2009, the FBI used greater resources than had been originally allocated for national security matters and other national priorities (counterterrorism, counterintelligence, cybercrime, and civil rights). Consequently, fewer resources than had been originally allocated were used for traditional crime matters (organized crime, gangs, drug-related crime, white collar crime, and violent crime). However, the underutilization of allocated resources for traditional crime trended downward over those years. Nonetheless, according to the FBI, for FY2010, under its S&E account, $4.762 billion (62%) and 18,547 fulltime equivalent (FTE) positions (58.7%) were allocated for the counterterrorism/counterintelligence and intelligence budget decision units. Drug Enforcement Administration (DEA) The DEA is the only single-mission federal agency tasked with enforcing the nation's controlled substance laws in order to reduce the availability and abuse of illicit drugs and the diversion of licit drugs for illicit purposes. DEA's enforcement efforts include the disruption and dismantling of drug trafficking and money laundering organizations through drug interdiction and seizures of illicit revenues and assets derived from these organizations. DEA continues to face evolving challenges in limiting the supply of illicit drugs as well as reducing drug trafficking across the Southwest border with Mexico into the United States. DEA plays a key role in the Administration's Southwest Border Initiative to counter drug-related border violence, focusing on the convergent threats of illegal drugs, drug-related violence, and terrorism in the region. The FY2012-enacted appropriation provides $2.035 billion for the DEA. This is 6.5% more than the $1.910 billion that would have been provided by the Senate and 2.6% more than the nearly $1.984 billion recommended by the House Committee on Appropriations. The FY2012-enacted appropriation is 0.3% less than the $2.042 billion that the Administration had requested for FY2012 but 1.0% more than the FY2011-enacted appropriation of almost $2.016 billion. The Senate recommended $1.910 billion for the DEA for FY2012. This amount would have been 5.2% less than the FY2011-enacted level, 6.5% less than the Administration's FY2012 request, and 3.7% less than the House Committee on Appropriations' recommended amount. The House Committee on Appropriations recommended a total of almost $1.984 billion for FY2012. This amount would have been 2.9% less than the Administration's FY2012 request and 1.6% below the FY2011-enacted level. For FY2012, the President's budget request included $2.042 billion for DEA. The requested amount represented an increase of almost $26.5 million, or 1.3% greater than the FY2011-enacted level of almost $2.016 billion. The FY2012 budget request included the following: Almost $30.9 million to support regulatory and enforcement efforts within the Diversion Control Program, $10.0 million to provide construction funding to expand the El Paso Intelligence Center (EPIC) facility, $1.5 million to establish a Domestic Communications Assistance Center to enhance law enforcement electronic surveillance capabilities, and Eliminating ($39.1 million) the Mobile Enforcement Team program and reassigning agents to fill other vacancies within DEA. Bureau of Alcohol, Tobacco, Firearms and Explosives (ATF) The ATF enforces federal criminal law related to the manufacture, importation, and distribution of alcohol, tobacco, firearms, and explosives. ATF works both independently and through partnerships with industry groups; international, state, and local governments; and other federal agencies to investigate and reduce crime involving firearms and explosives, acts of arson, and illegal trafficking of alcohol and tobacco products. From FY2001 through FY2010, Congress has increased the direct appropriation for ATF, from $771.0 million to $1.121 billion, a 45.4% increase. For FY2011, Congress appropriated $1.113 billion for ATF. For FY2012, Congress has appropriated ATF $1.152 billion. This amount is $39.5 million (3.5%) greater than the FY2011-enacted amount, $4.7 million (0.4%) greater that the FY2012 request, $40.6 million (3.7%) greater than the House-reported amount, and $61.7 million (5.7%) greater than Senate-passed amount. Congress also included "futurity" language in three long-standing annual appropriations riders, which make those funding restrictions permanent law. For FY2012 and every year thereafter, these riders prohibit DOJ from consolidating or centralizing any records maintained by federally licensed gun dealers related to the acquisition and disposition of firearms; ATF from electronically retrieving firearm transfer records that have been submitted to ATF, when federally licensed gun dealers go out business, by searching those out-of-business records by any individual's name or other personal identification code; and the FBI from charging a fee in connection with a Brady background checks for firearms transfer and possession eligibility, and requires further that the FBI destroy all Brady background check records related to approved firearm transfer records within 24 hours. Conference report language also directs ATF to report to the House and Senate Appropriations Committees annually on firearm trace requests processed for Mexican authorities. Regarding allegations that ATF mishandled Southwest border gun trafficking investigations, conference report language does not call for an independent investigator, but it does call on both DOJ and ATF to fully cooperate with congressional oversight efforts. As discussed below, a related provision prevents any expenditure of funding provided under the act to allow operable firearms to be delivered to persons connected to drug cartels. The act also includes a provision that is similar to House language that prohibits ATF from implementing additional restrictions on the importation of shotguns. However, it does not include House language that would prohibit ATF from collecting multiple rifle sales reports from federally licensed gun dealers. For FY2012, the Senate recommended $1.09 billion for ATF, $22.3 million (2.0%) less than the FY2011-enacted amount, $57 million (5.0%) less that the Administration's request of $1.147 billion, and $21.1 million (1.9%) less than the House mark. The House Committee on Appropriations recommended $1.111 billion for ATF, $1.1 million (0.1%) less than the FY2011-enacted amount and $35.9 million (3.1%) less than the Administration's FY2012 request. The FY2012 request would have provided a $34.8 million increase (3.1%) over ATF's enacted FY2011 appropriation. This increase included a $1.5 million budget enhancement to allow ATF to participate in the Domestic Communications Assistance Center, a DOJ initiative to increase electronic surveillance capabilities nationally. This increase was to be offset by other savings and efficiencies identified by the Administration. Both the Senate and House marks would have resulted in reductions in ATF services and activities in FY2012. In the past year, ATF's efforts to reduce illegal gun trafficking from the United States to Mexico under Project Gunrunner have generated controversy on two counts. First, the DOJ and ATF obtained approval from the Office of Management and Budget (OMB) for an information collection initiative, under which federally licensed gun dealers in Southwest border states are required to submit multiple sales reports on certain rifles, as a means of more readily identifying possible straw purchasers and gun traffickers. Second, ATF is alleged to have allowed firearms to be transferred to suspected straw purchasers. Then, either intentionally or unintentionally, ATF allowed those suspected criminals or their associates to smuggle those firearms across the border, in an effort to build more complex investigations designed to uncover and dismantle larger gun trafficking conspiracies. In a tragic twist of fate, some of those firearms were allegedly used in the deaths of two U.S. federal agents and perhaps hundreds of these firearms have been seized by authorities in Mexico. In November 2010, the DOJ Office of the Inspector General (OIG) released an evaluation of Project Gunrunner and, among other things, recommended that ATF work with DOJ to develop a reporting requirement for multiple long gun sales because Mexican Drug Trafficking Organizations have demonstrated a marked preference for military-style firearms capable of accepting high-capacity magazines. The OIG also recommended that ATF focus its investigative efforts on more complex criminal conspiracies involving high-level traffickers rather than on low-level straw purchasers. Multiple Rifle Sales Reports On December 17, 2010, DOJ and ATF published a "60-day emergency notice of information collection" in the Federal Register , in which they requested that OMB review and clear a proposed information collection initiative by January 5, 2011, on an emergency basis under the Paperwork Reduction Act of 1995. While OMB initially denied ATF emergency approval, it later approved the initiative on July 11, 2011. Under this initiative, ATF is poised to require federal firearms licensees (FFLs) in Southwest border states to report to ATF whenever they make multiple sales or other dispositions of more than one rifle within five consecutive business days to an unlicensed person. Such reporting would be limited to firearms that are (1) semiautomatic, (2) chambered for ammunition of greater than .22 caliber, and (3) capable of accepting a detachable magazine. In addition, while ATF originally requested a one-year "pilot" program, OMB approved the initiative for a three-year period (through July 31, 2014). However, some Members of Congress oppose the multiple rifle sales reporting requirement. They maintain that if Congress authorized multiple handgun sales reporting in statute in 1986, then it is incumbent upon ATF to request that Congress provide it with similar statutory authority for a multiple rifle sales reporting requirement. During House markup of H.R. 2596 , the House Committee on Appropriations adopted an amendment that would have prohibited ATF from implementing its multiple rifle sales reporting requirement. However, the conference agreement did not include this House language. Operation Fast and Furious In February 2011, ATF and Project Gunrunner came under renewed scrutiny for a Phoenix, AZ-based investigation known as Operation Fast and Furious. ATF whistleblowers have alleged that suspected straw purchasers were allowed to amass relatively large quantities of firearms as part of long-term gun trafficking investigations. As a consequence, some of these firearms are alleged to have "walked," meaning that they were trafficked to gunrunners and other criminals before ATF moved to arrest the suspects and seize all of their contraband firearms. Some of these firearms were possibly smuggled into Mexico. Two of these firearms—AK-47 style rifles—were reportedly found at the scene of a shootout near the U.S.-Mexico border where U.S. Border Patrol Agent Brian Terry was shot to death. Press accounts assert that ATF has acknowledged that as many as 195 firearms that were purchased by persons under ATF investigation as part of Operation Fast and Furious were recovered in Mexico. Questions, moreover, have been raised about whether a firearm—an AK-47 style handgun—that was reportedly used to murder U.S. ICE Special Agent Jamie Zapata and wound Special Agent Victor Avila in Mexico on February 15, 2011, was initially trafficked by a subject of a Houston, TX-based ATF Project Gunrunner investigation. On June 14, 2011, Representative Darrell E. Issa and Senator Charles E. Grassley issued a joint staff report on Operation Fast and Furious, which chronicled that ATF line supervisors became increasingly concerned when they witnessed hundreds of firearms being illegally transferred during surveillance operations, but they were reportedly directed not to arrest the suspects and interdict those firearms. Those agents contend that this was a questionable departure from past investigative practices. On June 15, 2011, the House Committee on Oversight and Government Reform held a hearing on these matters. Representative Issa, chairman of the committee, expressed his concern that DOJ had not been entirely cooperative with his committee's efforts to investigate how some of those firearms found their way to crime scenes in Mexico and on the Southwest border. Following the hearing, on June 29, 2011, Representative Elijah E. Cummings, the committee's ranking minority Member, issued a report and held a forum during which the minority explored issues raised by some of those same ATF line supervisors, who had suggested during the House hearing that the penalties for firearm straw purchases under current law are arguably not stringent enough. The minority also discussed other gun control proposals related to gun shows, semiautomatic assault weapons, .50-caliber sniper rifles, and additional penalties for gun trafficking offenses. On July 26, 2011, the House Committee on Oversight and Government Reform held a follow-up hearing on Operation Fast and Furious. As preceded the earlier hearing, a joint staff report was issued. This report found that ATF and DOJ leadership had not informed its own Attaché serving in Mexico City, the U.S. Ambassador to Mexico, nor the Mexican authorities about the investigation. As recovered firearms in Mexico increased, the ATF Attaché in Mexico City became more alarmed and contacted his superiors at ATF headquarters to express his grave concerns about the implications that this increased flow of illegal firearms could have for both Mexican and U.S. law enforcement officers as well as the public on both sides of the border. He and others were told by both ATF and DOJ officials that the investigation was under control and was having positive results. As noted above, however, Border Patrol Agent Terry was killed in a firefight in December 2010, and firearms connected to Operation Fast and Furious were found at the site of that firefight. According to the Washington Post , the investigation ultimately involved 2,020 firearms, of which 227 have been recovered in Mexico and 363 have been recovered in the United States. So far, Operation Fast and Furious has resulted in indictments of 20 individuals on multiple counts of straw purchasing and other federal offenses. ATF officials maintain that the investigation has yet to be concluded and additional arrests of "high-level traffickers" may be forthcoming. As Senator Grassley originally called for, the House Committee on Appropriations included report language that recommends the appointment of "an outside, independent investigator," who would be charged with conducting "a thorough investigation of the allegations against ATF with respect to Operation Fast and Furious and policies guiding this and similar operations." In addition, the committee called on both DOJ and ATF to cooperate fully with related oversight investigations, whether they be conducted by congressional committees, the DOJ OIG, or an independent investigator. In report language, the Senate Committee stated that the OIG would fulfill its oversight duties, and that Operation Fast and Furious was but a small part of ATF's Southwest border operations, which should not detract from the agency's efforts to protect Americans from illegal gun trafficking and other forms of cross-border crime. Nevertheless, Operation Fast and Furious has led to the reassignment of Acting ATF Director Kenneth Melson to another part of DOJ. Conference report language ( H.Rept. 112-284 ) included language that is similar to the Senate language, so an independent investigator was not called for. However, conference report language followed House report language and called on DOJ and ATF to fully cooperate with congressional oversight efforts. During Senate consideration of H.R. 2112 , the Senate adopted an amendment ( S.Amdt. 775 ) that was included in the act that prohibits the expenditure on any funding provided under that act (see §219) by a federal law enforcement officer to facilitate the transfer of an operable firearm to a person known or suspected to be connected to a drug cartel without that firearm being continuously monitored or controlled. Importability of Certain Shotguns In addition, in January 2011, ATF released a report on the importability of certain shotguns that include features (e.g., pistol grips, folding or collapsible stocks, laser sights, and the ability to accept large capacity ammunition feeding devices) that ATF has determined to be non-sporting. In the past, ATF issued similar reports on semiautomatic firearms that were considered to be "assault weapons," which foreshadowed and justified further restrictions on the importation of such firearms. Some observers anticipated that ATF was poised to implement similar restrictions on the importation of shotguns. To prevent this from happening, the House Committee on Appropriations adopted an amendment during the committee's markup that would prevent ATF from implementing new restrictions on the importation of shotguns. Reflecting House language, the enacted FY2012 CJS appropriations act includes a provision (§541) that is similar to House language that prohibits ATF from implementing additional restrictions on the importation of certain shotguns. Other Possible Oversight Issues Finally, the DOJ OIG reported on two other oversight issues that could have arisen during congressional consideration of the ATF FY2012 request. Those issues included ATF's shared jurisdiction with the FBI for explosives investigations, and its efforts to fulfill its Emergency Support Function (ESF) #13 obligations under the National Response Framework. With regard to explosives, the OIG found that DOJ's ability to respond effectively to crimes involving explosives had been hindered, because the ATF and FBI had developed parallel capabilities, but had not adequately coordinated investigations. With regard to ESF #13, the OIG found that ATF had drafted a concept of operations plan, but it was incomplete as of March 2010. As a consequence, national and regional coordinators had not been appointed, operational training had not been provided, available resources had not been catalogued (including law enforcement officers who would be available for deputization), and preparedness had not been tested as part of any national level exercises. Federal Prison System (Bureau of Prisons) The Bureau of Prisons (BOP) was established in 1930 to house federal inmates, to professionalize the prison service, and to ensure consistent and centralized administration of the federal prison system. The mission of BOP is to protect society by confining offenders in prisons and community-based facilities that are safe, humane, cost-efficient, and appropriately secure, and that provide work and other self-improvement opportunities for inmates so that they can become productive citizens after they are released. BOP currently operates 117 correctional facilities across the country. BOP also contracts with Residential Re-entry Centers (RRC) (i.e., halfway houses) to provide assistance to inmates nearing release. RRCs provide inmates with a structured and supervised environment along with employment counseling, job placement services, financial management assistance, and other programs and services. Congress funds BOP's operations through two accounts under the Federal Prison System heading: Salaries and Expenses (S&E) and Buildings and Facilities (B&F). The S&E account (i.e., the operating budget) provides for the custody and care of federal inmates and for the daily maintenance and operations of correctional facilities, regional offices, and BOP's central office in Washington, DC. It also provides funding for the incarceration of federal inmates in state, local, and private facilities. The B&F account (i.e., the capital budget) provides funding for the construction of new facilities and the modernization, repair, and expansion of existing facilities. In addition to appropriations for the S&E and B&F accounts, Congress usually places a cap on the amount of revenue generated by the Federal Prison Industries (FPI) that can be used for administrative expenses in the annual CJS appropriations bill. Although Congress does not appropriate funding for the administrative expenses of FPI, the administrative expenses cap is scored as enacted budget authority. For FY2012, Congress provides a total of $6.644 billion for BOP, which includes $6.551 billion for S&E and $90.0 million for B&F. The FY2012 appropriation for BOP is 0.6% less than the amount recommended by the Senate, but it is 3.7% above the House committee-recommended amount. In addition, the amount is 2.7% below the Administration's request, but it is 4.1% above the FY2011 appropriation. The Senate-passed bill included $6.682 billion for BOP, which included $6.59 billion for the S&E account and $90.0 million for the B&F account. The amount recommended by the Senate was 4.3% more than the amount included in the House committee-reported bill and 4.7% more than the bureau's FY2011 appropriation, but it was 2.1% less than the Administration's FY2012 request. The House committee-reported bill included $6.408 billion for BOP, which included $6.306 billion for the S&E account and $98.9 million for the B&F account. The committee's recommendation for BOP was 6.1% below the Administration's FY2012 request, but 0.4% greater than BOP's FY2011 appropriation. For FY2012, the Administration requested a total of $6.826 billion for BOP, which included $6.724 billion for the S&E account and $99.4 million for the B&F account. The FY2012 request was $442.3 million above the FY2011-enacted amount of $6.384 billion, or 6.9% more than FY2011-enacted funding. The growing federal prison population and prison crowding continue to be a major concern for BOP. The number of inmates held in BOP facilities grew from 125,560 in FY2000 to 177,934 in FY2011. During that same time period, prison crowding grew from 32% over rated capacity to 39% over rated capacity, even though the number of facilities operated by BOP increased from 97 to 117. BOP estimates that by FY2018 the federal prison system will be operating at 41% over rated capacity. The growing federal prison population has not only resulted in more crowded prisons, but it has also strained BOP's ability to properly manage and care for federal inmates. BOP reports that the staff-to-inmate ratio has increased from 3.57 to 1 in FY1997 to 4.82 to 1 in FY2010. As a point of comparison, BOP reports that in FY2007, the five states with the largest prison populations had a staff-to-inmate ratio of 3.33 to 1. The growing federal prison population has also required BOP to dedicate more resources to caring (e.g., providing health care, food, and clothing) and providing programming (e.g., substance abuse treatment, educational programming, and work/vocational opportunities) for inmates. In addition, the Second Chance Act of 2007 ( P.L. 110-199 ) required BOP to develop comprehensive reentry planning for federal inmates. In order to meet the demands placed on it by a growing inmate population and legislative requirements, the Administration requested $256.0 million in program changes. The additional funding would be used to cover costs associated with more inmates in the federal system ($32.4 million), activate three new facilities ($140.4 million), increase staffing levels in existing federal prisons ($109.8 million), and expand residential substance abuse treatment and vocational education ($22.2 million). The House committee-reported bill did not contain funding for most of these activities. As noted above, the House Committee on Appropriations proposed to increase BOP's FY2012 appropriation by $30.0 million, which was less than the amount the Administration requested to cover the costs associated with the growing federal prison population. The committee directed BOP to prioritize the activation of two completed federal prisons within the amounts that would have been provided by the committee. As noted above, the Senate would have increased BOP's S&E account by nearly $308 million compared to FY2011 funding. The Senate Committee on Appropriations noted in its report that it was providing BOP with enough funding to fill 274 vacant correctional worker position, so that BOP can safely manage the federal prison population and hire enough correctional staff to meet the 90% on-board level of staffing recognized by BOP as the minimal level of staffing required to properly administer the federal prison system. The committee also included funding for BOP to activate prisons that have been built but have not been opened due to current budgetary constraints. The FY2012 appropriation for BOP includes a $268.9 million increase for BOP's S&E account, an amount approximately equal to the Administration's requested program changes. Congress provides funding so that the bureau activate prison that have been built but which are not currently taking inmates because they are not properly staffed. Office on Violence Against Women (OVW) The OVW was created to administer programs created under the Violence Against Women Act (VAWA) of 1994 and subsequent legislation. These programs provide financial and technical assistance to communities around the country to facilitate the creation of programs, policies, and practices designed to improve criminal justice responses related to domestic violence, dating violence, sexual assault, and stalking. The FY2012-enacted appropriation for OVW is $412.5 million, an amount that is 1.2% below the Senate recommendation, 1.1% less than the House committee-recommendation, 4.5% less than the Administration's request, and 1.2% below the FY2011 appropriation. The Senate-passed bill included a total of $438.2 million for OVW, which included $417.7 for OVW grant programs, and $20.6 million in a separate account for OVW's salaries and expenses. The total amount recommended by the committee was 0.2% less than the amount recommended by the House Committee on Appropriations, 1.5% more than the Administration's request and 4.9% more than the FY2011 appropriation. The House Committee on Appropriations recommended $437.2 million for OVW for FY2012, but this included $20.0 million for OVW's salaries and expenses, which were funded out of a separate appropriation for FY2011 (see Table 4 ). The committee-recommended amount was 1.3% above the FY2012 request and 4.7% more than the FY2011-enacted appropriation. The Administration requested $431.8 million for OVW for FY2012, which was 3.4% more than the FY2011-enacted appropriation of $417.7 million. As a part of the FY2012 request for OVW, the Administration proposed to consolidate four existing grant programs—Services to Advocate for and Respond to Youth ($3.5 million), Services for Children Exposed to Violence ($3.0 million), Engaging Men and Youth in Prevention ($3.0 million), and Supporting Teens Through Education and Protection ($2.5 million)—into one competitive grant program. According to the Administration, the program would allow OVW to "leverage resources for maximum impact in communities by funding comprehensive projects that include both youth service and prevention components." The Administration requested $14.0 million for this proposed competitive grant program. The House Committee on Appropriations did not follow the Administration's proposal. Rather, the committee recommended appropriating funding for each program the Administration sought to consolidate. The Senate recommended $10.0 million for the Administration's proposed program. Congress ultimately accepted the Administration's proposal to consolidate the four programs into one competitive grant program. The FY2012 appropriation for OVW includes $10.0 million for the President's consolidated youth oriented program. Office of Justice Programs (OJP) The OJP manages and coordinates the National Institute of Justice, Bureau of Justice Statistics, Office of Juvenile Justice and Delinquency Prevention, Office of Victims of Crimes, Bureau of Justice Assistance, and related grant programs. OJP will receive a total of $1.616 billion for FY2011. This amount is 1.0% below the Senate's mark, but it is 23.5% greater than the amount recommended by the House Committee on Appropriations. The FY2012 appropriation for OJP is 5.5% below the Administration's request and 4.8% less than the FY2011 appropriation. The Senate recommended a total of $1.632 billion for OJP, an amount that is 24.7% greater than the amount recommended by the House Appropriations Committee, but 4.6% less than the Administration's request and 3.9% less than the FY2011 appropriation. The House Committee on Appropriations recommended $1.309 billion for OJP for FY2012, an amount that is 23.5% less than the Administration's FY2012 request and 22.9% less than the FY2011 appropriation for OJP. The committee also proposed to consolidate funding for juvenile justice and COPS programs under the State and Local Law Enforcement Assistance account. The FY2012 requested appropriation for OJP was $1.715 billion. The request was $17.4 million, or 1.0%, more than what was appropriated for FY2011. One issue Congress considered as it debated FY2012 funding for OJP was whether to reduce funding for some or all grant programs. Recently, Congress has sought to reduce non-security discretionary spending as a means of reigning-in federal deficits and accounts that fund DOJ grant programs have been targeted for potential cuts. Proposals to reduce or eliminate funding for DOJ grant programs has stirred some measure of controversy. In general, opponents of cuts assert that these grant programs provide assistance to state and local governments to fight crime and provide for the safety of the American populace and this aid is needed more now than ever given that many states are facing budget shortfalls. Proponents for cuts to DOJ grant programs argue that states are responsible for the administration of their criminal justice systems and it is not the federal government's role to support state efforts to investigate crimes and prosecute and sanction offenders, especially at a time when the federal government is borrowing to finance the annual budget. As noted above, Congress reduced OJP's funding by 5.5% compared to the FY2011 appropriation, and as outlined below, few programs received increased funding in FY2012. Congress chose to eliminate funding for some programs for FY2012 (e.g., the Statewide Automated Victim Notification System and the Safe Start programs) and it also consolidated funding for the Northern and Southwest Border Prosecution Initiatives into a Border Prosecution Initiative. Justice Assistance The Justice Assistance account, among other things, funds the operations of the Bureau of Justice Statistics and the National Institute of Justice, along with providing assistance to missing and exploited children programs. The FY2012 appropriation for the Justice Assistance account is $113.0 million, an amount that is 6.6% below the Senate recommendation, 38.0% below the House committee-recommendation, 36.7% less than the Administration's request, and 51.8% below the FY2011 appropriation. For FY2012, Congress moved funding for the Missing and Exploited Children programs from the Justice Assistance account to the Juvenile Justice Programs account, which partially explains the large reduction in funding for this account compared to the FY2011 appropriation. The Senate-passed bill included $121.0 million for the Justice Assistance account, which was 33.7% less than the House committee-reported amount, 32.2% less than the Administration's request and 48.4% less than the FY2011 appropriation. The House committee-reported bill included $182.4 million for the Justice Assistance account. The committee's proposal was 2.2% greater than the Administration's request, but 22.2% below the FY2011-enacted amount. For FY2012, the Administration requested $178.5 million for the Justice Assistance account, which was 23.9% less than the FY2011 appropriation of $234.5 million. State and Local Law Enforcement Assistance The State and Local Law Enforcement Assistance account includes funding for a variety of grant programs to improve the functioning of state, local, and tribal criminal justice systems. Some examples of programs that have traditionally been funded under this account include the Edward Byrne Memorial Justice Assistance Grant (JAG) program, the Drug Courts program, and the State Criminal Alien Assistance Program (SCAAP). Congress provides $1.163 billion for the State and Local Law Enforcement Assistance account for FY2012. This amount is 9.3% more than the Senate's mark, 20.1% more than the House committee recommendation, and 4.0% more than the FY2011 appropriation. However, the FY2012 appropriation is 0.9% less than the Administration's request. As a part of the FY2012 appropriation, Congress moved funding for DNA backlog reduction programs and the Bulletproof Vests Grant program from the Community Oriented Policing Services account to the State and Local Law Enforcement Assistance account. The Senate-passed bill included $1.063 billion for the State and Local Law Enforcement Assistance account, an amount that was 9.9% more than the amount recommended by the House Committee on Appropriations, but 9.4% less than the Administration's request and 4.9% less than the FY2011-enacted appropriation. The House Committee on Appropriations recommended $1.048 billion for the State and Local Law Enforcement Assistance account for FY2012, which included $79.9 million for OJP's salaries and expenses. This amount was 10.7% less than the Administration's FY2012 request and 6.3% less than the FY2011 appropriation. The Administration requested a total of $1.174 billion for the State and Local Law Enforcement Assistance account for FY2012, which was $55.7 million, or 5.0%, more than the FY2011 appropriation for this account ($1.118 billion). As a part of the FY2012 request for the State and Local Law Enforcement Assistance account, the Administration did not request funding for both the drug court and mental health court programs. Rather, the Administration requested $57.0 million for a proposed drug, mental health, and problem-solving courts program. Under the program, OJP would have had, according to the Administration, "increased flexibility in funding innovative projects [to] help state, local, and tribal governments develop and implement evidence-based problem solving courts strategies to address their unique needs." Congress ultimately rejected the Administration's proposal and chose to provide $9.0 million for mental health courts and $35.0 million for drug courts. The Administration also requested funding a proposed Byrne Criminal Justice Innovation (BCJI) program. This program would replace and build upon the Weed and Seed program (the Weed and Seed program was not funded for FY2011). Like Weed and Seed, the proposed BCJI program is a community-based strategy to control and prevent violent crime, drug abuse, and gang activity in designated high-crime neighborhoods by providing funding to support partnerships between law enforcement agencies and community-based organizations that provide prevention, intervention, and neighborhood restoration services. The program will utilize evidence-based strategies in order to expand knowledge of what efforts and services do and do not work to prevent crime. The program will also include a significant emphasis on interagency collaboration. Congress accepted the Administration's proposal and provided $15.0 million for the BCJI program for FY2012. Juvenile Justice Programs The Juvenile Justice Programs account includes funding for grant programs to reduce juvenile delinquency and help state, local, and tribal governments improve the functioning of their juvenile justice systems. The FY2012-enacted appropriation provides $262.5 million for the Juvenile Justice Programs account. This is 4.6% more than the $250.0 million that would have been provided by the Senate. The FY2012-enacted appropriation is 6.3% less than the $280.0 million that the Administration had requested for FY2012 and 4.7% less than the FY2011-enacted appropriation of $275.4 million. The Senate recommended $251.0 million for juvenile justice programs for FY2012. This amount would have been 8.9% less than the FY2011-enacted level of $275.4 million and 10.4% less than the $280.0 million requested by the Administration for FY2012. See Table 8 for details on the Senate Committee on Appropriations' recommendations for FY2012 juvenile justice funding. For FY2012, the House Committee on Appropriations did not recommend funding for juvenile justice programs under a separate Juvenile Justice Programs account. Instead, several programs that had been previously funded under this account—including the Juvenile Justice and Delinquency Prevention Act (JJDPA) Part B Formula Grants, Juvenile Justice Youth Mentoring Grants, and Investigation and Prosecution of Child Abuse Programs—would have been funded under the Office of Justice Programs' State and Local Law Enforcement Assistance account. See Table 7 for proposed funding. For FY2012, the Administration's request included $280.0 million for the Juvenile Justice Programs account, almost $4.6 million (or 1.7%) more than the $275.4 million appropriated for this account for FY2011. For FY2012, the Administration's request included a proposal for a new Race to the Top-style Juvenile Incentive System Improvement Grant that would have consolidated existing juvenile justice formula funding from the JJDPA Part B Formula Grants program as well as the Juvenile Accountability Block Grant (JABG) program. This new program would have been aimed at incentivizing states for making progress on certain indicators in the juvenile justice system. Proposed funding would only have been available for states in compliance with core mandates from the JJDPA. Congress did not accept the Administration's proposal. Public Safety Officers Benefits Program (PSOB) The PSOB program provides three different types of benefits to public safety officers and their survivors: death, disability, and education. The PSOB program is intended to assist in the recruitment and retention of law enforcement officers, firefighters, and first responders and to offer peace of mind to men and women who choose careers in public safety. Congress provides $78.3 million for this program for FY2012, the same as the amount recommended by both the Senate and the House Committee on Appropriations and the same as the Administration's request. The FY2012 appropriation for PSOB is 11.7% more than the FY2011 appropriation of $70.1 million. Community Oriented Policing Services (COPS) The COPS Office awards grants to state, local, and tribal law enforcement agencies throughout the United States so they can hire and train law enforcement officers to participate in community policing, purchase and deploy new crime-fighting technologies, and develop and test new and innovative policing strategies. Some examples of grant programs traditionally funded under this account include the Law Enforcement Technology grant program, the Methamphetamine Hot-Spots Initiative, and grants to reduce the DNA backlog. For FY2012, Congress provides $198.5 million for the Community Oriented Policing Services account, an amount that is 14.3% less than the Senate's recommendation, 70.4% less than the Administration's request, and 59.9% less than the FY2011-enacted appropriation. As mentioned above, Congress provided funding for DNA backlog reduction programs and the Bulletproof Vests Grant program, both of which have traditionally been funded under the Community Oriented Policing Services account, under the State and Local Law Enforcement Assistance account for FY2012. The Senate recommended $231.5 million for COPS for FY2012. This amount was 65.4% less than the Administration's request and 53.2% less than the FY2011-appropriation. The House Committee on Appropriations did not include any funding for the Community Oriented Policing Services account in the FY2012 CJS bill. Rather, the committee recommend funding for some traditional COPS programs under the State and Local Law Enforcement Assistance account. For FY2012, the Administration requested $669.5 million for COPS, which was 35.3% more than the FY2011 appropriation of $494.9 million. The Administration, as a part of its $669.5 million request for COPS for FY2012, requested $600.0 million for hiring programs, compared to the $246.8 million Congress appropriated for the same purpose for FY2011. One issue before Congress as it considered the FY2012 appropriation for COPS was whether to fund the Administration's request for $600.0 million for hiring programs. The COPS Office reported that it received nearly 7,300 applications requesting a total of $8.3 billion to fund the hiring or retention of 39,000 police officers when it opened a solicitation to award the $1.0 billion it received under the American Recovery and Reinvestment Act of 2009 ( P.L. 111-5 ). The COPS Office used the $298.0 million Congress appropriated for hiring programs for FY2010 to award grants to the more than 6,100 agencies that applied for stimulus funding but did not receive awards. However, as discussed above, there has been debate about funding for non-security discretionary spending, and if Congress chooses to reduce funding for DOJ, appropriations for some programs will have to be reduced or eliminated. Opponents of continuing funding for the COPS hiring program assert that law enforcement is largely the providence of state and local governments; therefore, they should be responsible for paying the salaries of police officers. Proponents of continuing funding for the program argue that there is a national interest in providing for the safety and security of U.S. citizens, hence Congress should help state and local governments hire new police officers. Ultimately Congress chose to provide some funding for hiring programs ($166.0 million), though it was 72.3% below the Administration's request of $600.0 million. Salaries and Expenses for OVW, OJP, and COPS This account provides for the salaries and expenses of OVW, OJP, and COPS. This account was funded for the first time in FY2009. Congress established a Salaries and Expenses account for OVW, OJP, and COPS to "achieve greater transparency, efficiency and accountability in the management, administration and oversight of the Justice Department grant programs." Congress did not provide any funding for this account for FY2012. In addition, neither the Senate or House Committee on Appropriations proposed funding for a separate salaries and expenses account for OVW, OJP, and COPS. Rather, the Senate-passed bill included funding for OVW, OJP, and COPS salaries and expenses under separate accounts while the House committee-reported bill included funding for OVW and OJP's salaries and expenses under, respectively, the OVW and State and Local Law Enforcement Assistance accounts. The FY2012 request for this account was $271.8 million, or 45.7% more than the FY2011 appropriation of $186.6 million. Science Agencies111 The Science Agencies fund and otherwise support research and development (R&D) and related activities across a wide variety of federal missions, including national competitiveness, climate change, energy and the environment, and fundamental discovery. FY2011 and FY2012 Appropriations The FY2012-enacted appropriation for the science agencies is $24.838 billion. This amount is 0.8% more than the amount recommended by the Senate and 5.0% more than the House Committee on Appropriation's recommendation. However, the FY2012 appropriation is 6.3% below the Administration's request and 1.9% below the FY2011 appropriation. The Senate recommended a total of $24.643 billion for the science agencies, which was 4.2% more than the amount recommended by the House Committee on Appropriations, but 7.0% less than the Administration's FY2012 request and 2.7% below the FY2011 appropriation. The bill reported by the House Committee on Appropriations included a total of $23.649 billion for the science agencies. This amount was $2.848 billion, or 10.7%, less than the Administration's FY2012 request and $1.665, or 6.6%, less than the FY2011-enacted amount. For FY2012, the Administration requested a total of $26.498 billion for the science agencies, which included $18.724 billion for the National Aeronautics and Space Administration and $7.767 billion for the National Science Foundation. The FY2012 request was 4.7% greater than the FY2011 appropriation of $25.315 billion. Office of Science and Technology Policy (OSTP)112 Congress established the Office of Science and Technology Policy (OSTP) through the National Science and Technology Policy, Organization, and Priorities Act of 1976 ( P.L. 94-282 ). The act states that "the primary function of the OSTP director is to provide, within the Executive Office of the President, advice on the scientific, engineering, and technological aspects of issues that require attention at the highest level of Government." The OSTP director, often referred to informally as the President's science advisor, also manages the National Science and Technology Council (NSTC), which coordinates science and technology policy across the federal government, and co-chairs the President's Council of Advisors on Science and Technology (PCAST), a council of external advisors that provides advice to the President on matters related to science and technology policy. OSTP is one of two offices in the Executive Office of the President (EOP) that is funded in the CJS appropriations bill. Section 1340(a) of the Department of Defense and Full-Year Continuing Appropriations Act, 2011 ( P.L. 112-10 ) prohibited OSTP from expending funds to develop, design, plan, promulgate, implement, or execute a bilateral policy, program, order, or contract of any kind to participate, collaborate, or coordinate bilaterally in any way with China or any Chinese-owned company unless such activities are specifically authorized by a law enacted after the date of enactment of this division. According to OSTP Director John Holdren, OSTP had concluded after consultation with the Department of Justice that "certain applications of section 1340 ... would infringe upon the President's constitutional authority to conduct foreign diplomacy." In October 2011, the Government Accountability Office (GAO) concluded that OSTP's use of appropriations to fund its participation in the [U.S.-China Dialogue on Innovation Policy] and [U.S.-China Strategic and Economic Dialogue] violated the prohibition in section 1340. In addition, because section 1340 prohibited the use of OSTP's appropriations for this purpose, OSTP's involvement in the Innovation Dialogue and the S&ED resulted in obligations in excess of appropriated funds available to OSTP; as such, OSTP violated the Antideficiency Act, 31 U.S.C. § 1341(a)(1)(A). The chairman of the House Committee on Appropriations, Subcommittee on Commerce, Justice, Science, and Related Agencies, has written the Attorney General conveying his expectation that the Attorney General will ensure comprehensive enforcement of Section 1340(a) of P.L. 112-10 and hold OSTP Director Holdren to full account for his actions. For FY2012, the conference agreement provides $4.5 million for OSTP. This amount is 25.0% less than provided by the Senate, 50.2% greater than recommended by the House Committee on Appropriations, 32.3% less than the Administration's FY2012 request, and 32.3% less than the FY2011-enacted amount. Both report and statutory language continue the prohibition restricting any OSTP activities that would carry the risk of transfer of sensitive technology to China. In contrast with the FY2011 language, Section 539 allows OSTP to proceed with activities that it certifies pose no risk of transfer. Such certification must be submitted to the House and Senate Committees at least 14 days prior to the activity in question. The conference agreement supports OSTP efforts to develop a federal science, technology, engineering, and mathematics (STEM) education strategic plan and encourage inclusion of goals for improved dissemination of STEM education research results and best practices. The conference agreement also encourages OSTP to establish an NSTC working group to coordinate federal investments in neuroscience research. The Senate would have provided $6.0 million for OSTP. This amount would have been 100.2% greater than recommended by the House Committee on Appropriations, 9.8% less than the Administration's FY2012 request, and 9.7% less than the FY2011-enacted amount. The Senate committee report directs OSTP to remain engaged with international partners in order to pursue large projects "frugally, in partnership." The House Committee on Appropriations would have provided $3.0 million for OSTP. This amount would have been 54.9% less than the Administration's FY2012 request and 54.9% less than the FY2011-enacted amount. The House committee report directs OSTP to prioritize its funding toward coordinating and improving government programs in STEM education. For FY2012, the Administration requested $6.7 million, $3,000 (0.0%) above its FY2011-enacted level. According to OSTP Director John Holdren, the request recognized "the need for shared sacrifice to freeze non-security discretionary spending." The request would have supported four Senate-confirmed associate directors. The NSF again requested FY2012 funding for the Science and Technology Policy Institute (STPI, $3.1 million, an increase of $100,000 (3.3%) from FY2010), a federally-funded research and development center that supports OSTP. FY2011-enacted appropriations for OSTP were $6.6 million. Appropriations for STPI fall below the appropriations-account level and thus were not identified. National Aeronautics and Space Administration (NASA)121 NASA was created by the 1958 National Aeronautics and Space Act (P.L. 85-568) to conduct civilian space and aeronautics activities. The agency is managed from headquarters in Washington, DC. It has nine major field centers around the country, plus the Jet Propulsion Laboratory, which is operated under contract by the California Institute of Technology. The Administration requested $18.724 billion for NASA for FY2012. This was 1.5% more than the $18.448 billion appropriated for FY2011 and 3.7% less than the $19.450 billion authorized for FY2012 in the NASA Authorization Act of 2010 ( P.L. 111-267 ). The House Committee on Appropriations recommended $16.793 billion. The Senate bill would have provided $17.939 billion. The final appropriation was $17.800 billion. See Table 11 for a breakdown of each of these amounts by appropriations account. The Administration's $5.017 billion request for NASA's Science account in FY2012 was a 1.6% increase from the enacted FY2011 amount. Within this total, the $1.797 billion requested for Earth Science included continuation of a global climate research initiative first proposed in FY2011 and support for the development and launch of several missions recommended by the National Academies in the 2007 decadal survey. An independent review of the James Webb Space Telescope (JWST) in October 2010 estimated that the project was 15 months behind schedule and $1.4 billion over budget. The revised JWST program NASA developed in response to this finding includes an estimated total lifecycle cost of $8.835 billion and a launch date in 2018. The House committee recommended $4.499 billion for Science, including $1.697 billion for Earth Science and no funding for JWST. The Senate bill would have provided $5.100 billion for Science, including $1.766 billion for Earth Science and $530 million for JWST (more than the FY2012 request of $355 million). The final bill provided $5.090 billion, including the same amount as the Senate bill for both Earth Science and JWST. It capped the formulation and development cost of JWST at $8 billion and directed GAO to assess the JWST program continuously and report on it annually. The request for Aeronautics was $569 million, an increase of 6.6% from the FY2011-enacted amount. The request included increases for selected research topics in categories identified by the 2010 authorization act ( P.L. 111-267 , §902). The requested funding for hypersonics was reduced and focused on foundational research. The House committee recommended the requested amount. It supported NASA's plan to reduce hypersonics funding and increase funding for other topics. The Senate bill would have provided $501 million. The Senate Committee on Appropriations stated that this amount included full funding for aviation safety and unmanned aircraft systems. It did not state which other research areas should receive less than the request. The final appropriation was $570 million. For Space Technology, the Administration requested $1.024 billion. About half of this total ($497 million) was for Crosscutting Space Technology Development, a mostly new activity. The request for this activity was comparable to the amount authorized for Space Technology by the 2010 authorization act ($486 million). Most of the remainder of the request for Space Technology would be for two activities transferred from other accounts: Exploration Technology Development from the Exploration account and Small Business Innovation Research from the Cross-Agency Support account. The request proposed roughly doubling the funding for both these transferred activities. The House committee recommended $375 million for Space Technology. It suggested that ongoing planning and prioritization efforts "will put the program in a stronger position to seek additional resources in future requests." The Senate bill would have provided $637 million, including $210 million for Crosscutting Space Technology. The Senate committee expressed regret at "not being able to fund this promising new program more robustly." The final appropriation was $575 million, to be "prioritized toward the continuation of ongoing programs and activities." The Administration's request for Exploration in FY2012 was $3.949 billion, a 3.9% increase over FY2011. In recent years, the bulk of this account funded the Constellation program, including development of the Orion crew vehicle and Ares I rocket for carrying humans into low Earth orbit and the heavy-lift Ares V cargo rocket and other systems needed for a human mission to the Moon. In FY2012, the account instead funds development of the Multipurpose Crew Vehicle (MPCV) and heavy-lift Space Launch System (SLS) mandated by the 2010 authorization act. Although this is a substantial change, many elements of Orion and Ares are included in the MPCV and SLS. The request included $916 million for the MPCV and $1.690 billion for the SLS, substantially less than the authorized amounts of $1.400 billion and $2.650 billion. On the other hand, it also included $850 million to help companies develop commercial crew transport services to low Earth orbit, substantially more than the authorized amount of $500 million. The House committee recommended $3.645 billion for Exploration, including $1.062 billion for the MPCV, $1.983 billion for the SLS, and $312 million for commercial crew. The Senate bill would have provided $3.775 billion, including $1.2 billion for the MPCV, $1.8 billion for the SLS, and $500 million for commercial crew. The final appropriation was $3.771 billion, including $1.200 billion for the MPCV, $1.860 billion for the SLS, and $406 million for commercial crew. The conference report directed NASA to develop "a set of science-based exploration goals; a target destination or destinations that will enable the achievement of those goals; a schedule for the proposed attainment of those goals; and a plan for any proposed collaboration with international partners." The FY2012 request of $4.347 billion for Space Operations, which funds the space shuttle, the International Space Station (ISS), and the Space and Flight Support program, was a 20.9% decrease from the FY2011-enacted amount, but 5.0% more than the authorized amount. The requested funding for the space shuttle program was $665 million, a reduction of 58.3%. The last shuttle flight was completed in July 2011. Most FY2012 funding for the space shuttle program will be devoted to covering a shortfall in the defined benefit pension plan of the contractor that managed shuttle operations. The House committee recommended $4.060 billion for Space Operations, including $547 million for the shuttle program. The Senate bill would have provided $4.285 billion, including $651 million for the shuttle program. The final appropriation was $4.234 billion, including $573 million for the shuttle program. National Science Foundation (NSF)125 The National Science Foundation (NSF) supports basic research and education in the non-medical sciences and engineering. Congress established the Foundation as an independent federal agency in 1950 and directed it to "promote the progress of science; to advance the national health, prosperity, and welfare; to secure the national defense; and for other purposes." The NSF is a primary source of federal support for U.S. university research. It is also responsible for significant shares of the federal science, technology, engineering, and mathematics (STEM) education program portfolio and federal STEM student aid and support. P.L. 112-55 provides a total of $7.033 billion for the NSF in FY2012. This amount is $335.0 million (5.0%) more than the Senate-passed total of $6.698 billion, $180.1 million (2.6%) more than the House Committee on Appropriations' recommendation of $6.853 billion, $733.9 billion (9.4%) less than the President's request for $7.767 billion, and $173.2 million (2.5%) more than the FY2011-enacted amount of $6.860 billion. Compared to the distribution of enacted funding across NSF accounts in FY2011, P.L. 112-55 shifts about 0.9% of the Foundation's budget to research and construction activities from education and agency operations. This change appears to reflect the position of the House Appropriations Committee's recommendation, which increased funding for the research, combined with the Senate's position, which increased funding for construction. The Administration's FY2012 request for NSF increased all major accounts over FY2011 levels. A primary concern in the FY2012 congressional debate about funding for NSF centered on the so-called "doubling path" policy. Since 2006, federal policymakers have sought to increase support for research in the physical sciences and engineering. To that end, they have sought to double aggregate funding for the NSF, NIST laboratories and construction accounts, and the DOE Office of Science (collectively, the "targeted accounts"), which many policymakers perceive as key to U.S. innovation and competitiveness. The status of the doubling path policy for NSF and the other targeted accounts is now uncertain. FY2011-enacted funding for the targeted accounts set a pace for a 15-year doubling—more than twice the length of time originally envisioned in the 2007 America COMPETES Act and about a third longer than the doubling period established by the America COMPETES Reauthorization Act of 2010. Although the President's FY2012 budget request initially sought funding for targeted accounts consistent with a 12-year doubling period, the Administration's September 1, 2011, Mid-Session Review acknowledged that the doubling goal would need to be delayed. Enacted and proposed FY2012 appropriations for targeted accounts would reduce the average annual growth rate from the FY2011 pace. The aggregate FY2012-enacted and currently proposed appropriations levels for the targeted accounts would result in a doubling pace in excess of 17 years. Another issue raised in the congressional debate about funding for NSF focused on the Foundation's ability to effectively manage expenditures. In a February 10, 2011, House hearing, NSF's Inspector General Allison C. Lerner testified that—among other issues—NSF's grant oversight program has limited practical effect and that the Foundation faces ongoing challenges in ensuring that grant recipients comply with grant terms and conditions. According to Lerner's testimony, the NSF attributes this problem, at least in part, to staffing constraints. However, Lerner postulated that, "If the Foundation's budget continues to grow, the resulting increase in awards to monitor will compound this challenge." The Senate Committee on Appropriations raised related concerns about accountability at NSF in its report on S. 1572 ( S.Rept. 112-78 ). Consistent with the committee's general concerns about waste, fraud, and abuse at all the "departments, agencies, boards and commissions funded in this bill," the Senate provided a $200,000 increase (1.6%) over FY2011-enacted levels ($14.0 million) for the Foundation's Office of the Inspector General (OIG) "to enhance accountability at the NSF." The final agreement on FY2012 CJS appropriations reflects the Senate position and provides the OIG with $14.2 million in FY2012. The Administration's FY2012 request for the OIG was $15.0 million. The House Committee on Appropriations' recommended holding the OIG account at FY2011 levels and encouraged the OIG to focus on oversight activity with potential monetary ramifications. NSF organizes its budget into six primary accounts: Research and Related Activities (RRA), Education and Human Resources (EHR), Major Research Equipment and Facilities Construction (MREFC), Agency Operations and Award Management (AOAM), the National Science Board (NSB), and the OIG. The RRA, EHR, and MREFC accounts represent the core of the NSF's research and education program activities and funding. P.L. 112-55 provides $5.719 billion for the RRA account in FY2012. This amount is $276.0 million (5.1%) more than the Senate-passed total of $5.443 billion, $117.6 million (2.1%) more than the House Committee on Appropriations' recommendation of $5.601 billion, $534.5 billion (8.5%) less than the President's request for $6.254 billion, and $155.1 million (2.5%) more than the FY2011-enacted amount of $5.564 billion. P.L. 112-55 provides $150.9 million in RRA funds for the Experimental Program to Stimulate Competitive Research (EPSCoR) program ($4.1 million more than FY2011 enacted), permits NSF to transfer up to $50.0 million from the RRA account to MREFC, and allows NSF to use RRA funds to reimburse other federal agencies for support of the U.S. Antarctic program. The conference report on H.R. 2112 (which became P.L. 112-55 ) endorses Administration-proposed reductions to RRA programs in FY2012 except for the proposed changes to the Radio Astronomy program. It also adopts language from H.Rept. 112-169 that supports planned NSF activities in advanced manufacturing and agrees to language from S.Rept. 112-78 that provided $165.6 million for cybersecurity research. Other RRA account provisions included in FY2012 CJS appropriations bill reports include provisions encouraging the Foundation to sustain and increase investments in neuroscience; directing the NSF to report on its plans to offer innovation prizes and on ways to balance access to, and protection of, scientific data; and attending to the Foundation's astronomy activities, as well as its support for scientific facilities and instrumentation. The Administration's FY2012 request for NSF highlighted research in cyber-infrastructure, clean energy, nanotechnology, robotics, and the SEES (Science, Engineering, and Education for Sustainability) portfolio, among others. For EHR, P.L. 112-55 provides $829.0 million in FY2012. This amount is equal to the Senate-passed total, $5.2 million (0.6%) less than the House Committee on Appropriations' recommendation of $834.2 million, $82.2 million (9.0%) less than the President's request for $911.2 million, and $32.0 million (3.7%) less than the FY2011-enacted amount of $861.0 million. P.L. 112-55 also provides at least $54.9 million for EHR's Robert Noyce Scholarship (Noyce) program. The Administration's FY2012 EHR request sought significant program changes in EHR accounts, including adding, altering, and terminating programs. It also reorganized the EHR directorate, including restructuring minority-serving institution programs. The conference report on H.R. 2112 endorses the Administration's proposed terminations and reductions in EHR except for proposed reductions to the Math and Science Partnership and Robert Noyce Scholarship programs. It also adopts FY2011 funding levels for NSF's Broadening Participation at the Core programs (e.g., the Tribal Colleges and Universities Program), directs the NSF to report on how it will address the needs of Hispanic-Serving Institutions, provides $20.0 more than the requested level of funding for the Federal Cyber Service: Scholarships for Service program ($45.0 million, total), and directs the NSF to both ensure that a report on STEM education best practices is disseminated widely and to begin working on methods for tracking and evaluating the implementation of the report's recommendations. Among other things, both H.Rept. 112-169 and S.Rept. 112-78 urged the NSF to ensure that Graduate Research Fellowship program applicants are not rejected for reasons unrelated to the merits of their proposed research (e.g., an applicant's major). H.Rept. 112-169 also encouraged NSF to continue cooperating with other federal agencies in the ongoing effort to identify, coordinate, and reduce duplication in federal STEM education programs; while S.Rept. 112-78 strongly encouraged NSF to continue support for undergraduate STEM education and the Professional Science Master's program. P.L. 112-55 provides $167.1 million in FY2012 for MREFC. This amount is $50.0 million (42.7%) more than the Senate-passed total of $117.1 million, $67.2 million (67.2%) more than the House Committee on Appropriations' recommendation of $99.9 million, $57.6 million (25.6%) less than the President's request for $224.7 million, and $50.0 million (42.7%) more than the FY2011-enacted amount of $117.1 million. In addition, P.L. 112-55 gives the Foundation the option of transferring as much as $50.0 million from RRA to MREFC. The conference report on H.R. 2112 directs the NSF to prioritize MREFC projects that are near completion and raises concerns about construction funding management at the Foundation (particularly the management of contingency funds). S.Rept. 112-78 stated that its recommendation includes funding for certain ongoing projects (e.g., Atacama Large Millimeter Array) and for continued construction of the Ocean Observatories Initiative (OOI). S.Rept. 112-78 also indicated that the NSF may use funds transferred from the RRA account to fully fund OOI or begin work on NEON. H.Rept. 112-169 raised concerns about project contingency funding. The Administration's FY2012 MREFC request included funding for the National Ecological Observatory Network (NEON, $87.9 million), OOI ($102.8 million), and other projects. The Administration requested no new MREFC funds for the Alaska Region Research Vessel or IceCube Neutrino Observatory in FY2012, both of which are now fully funded. P.L. 112-55 provides $299.4 million for the AOAM account in FY2012. This amount is $9.0 million (3.1%) more than the Senate-passed total of $290.4 million, $0.3 million (0.1%) more than the House Committee on Appropriations' recommendation of $299.1 million, $58.3 million (16.3%) less than the President's request for $357.7 million, and is equal to the FY2011-enacted amount. The Administration's requested increase for AOAM included funding for a new NSF headquarters. The President also sought an increase of $0.3 million for the NSB in FY2012. P.L. 112-55 provides $4.4 million for this account in FY2012, 2.0% less than the FY2011-enacted level. The Senate and the House Committee on Appropriations accepted the Administration's FY2012 NSF budget request to eliminate six NSF programs: Deep Underground Science and Engineering Laboratory, Graduate STEM Fellow in K-12 Education, National STEM Distributed Learning Program, Research Initiation Grants to Broaden Participation in Biology, Science Learning Centers, and the Synchrotron Radiation Center. Related Agencies The Commerce, Justice, Science, and Related Agencies Appropriations Act, 2012 includes $856.6 million for the related agencies. The FY2012 appropriation is 5.2% below the amount recommended by the Senate, but it is 5.1% more than the House Committee on Appropriation's recommendation. The amount included in the act is 13.6% below the Administration's request and 6.7% less than the FY2011 appropriation. The Senate recommended a total of $901.1 million for the related agencies, an amount that was 10.6% more than the amount recommended by the House Committee on Appropriations, but 9.1% less than the Administration's FY2012 request and 1.8% less than the FY2011 appropriation. The House Committee on Appropriations recommended a total of $814.8 million for the related agencies, an amount that was 17.8% less than the Administration's FY2012 request and 11.2% less than the FY2011-enacted level. For FY2012, the Administration requested a total of $991.4 million for the related agencies. The Administration's proposed funding was 8.0% more than the $917.9 million Congress appropriated for the related agencies for FY2011. Commission on Civil Rights Established by the Civil Rights Act of 1957, the U.S. Commission on Civil Rights (the Commission) investigates allegations of citizens who may have been denied the right to vote based on color, race, religion, or national origin; studies and gathers information on legal developments constituting a denial of the equal protection of the laws; assesses the federal laws and policies in the area of civil rights; and submits reports on its findings to the President and Congress when the Commission or the President deems it appropriate. Congress provides $9.2 million for the Commission for FY2012. This amount is the same as the Senate's recommendation, but it is 2.5% less than the Administration's request and 2.0% less than the FY2011 appropriation. The Senate recommended $9.2 million for the Commission, which was 15.0% more than the amount in the House committee-reported bill, but 2.5% below the Administration's request and 2.0% less than the FY2011 appropriation. The House Committee on Appropriations recommended $8.0 million for the Commission, an amount that was 15.2% less than the Administration's request and 14.8% less than the FY2011 appropriation. The Administration requested $9.4 million for the Commission for FY2012, which is $48,000, or 0.5%, more than the Commission's FY2011 appropriation. Equal Employment Opportunity Commission (EEOC)137 The EEOC enforces several laws that ban employment discrimination based on race, color, national origin, sex, age, or disability. In the past few years, appropriators were particularly concerned about the agency's implementation of a restructuring plan, initiated in 2005, that included the creation of a National Call Center, realignment of field structure and staff, and restructuring of headquarters operations. The FY2012 appropriation for the Equal Employment Opportunity Commission is $360.0 million, which is: 0.2 % more than the Senate passed amount of $359.2 million, 1.7 % less than the House Appropriations committee reported amount of $366.2 million, 6.6% less than the Administration's FY2012 request of $385.5 million, and 1.8% less than the FY2011-enacted appropriation of $366.6 million. The FY2012 appropriation includes $29.5 million for payments to state and local entities (i.e., Fair Employment Practices Agencies, FEPAs, and Tribal Employment Rights Organizations, TEROs). The Senate recommended a total appropriation of $359.2 million the Equal Employment Opportunity Commission for FY2012. The Senate recommendation was 2.0% less than the FY2011 amount of $366.6 million, 1.9% less than the House Committee on Appropriations FY2012 recommendation of $366.2 million, and 6.8% less than the Administration's FY2012 request of $385.5 million. The House committee-reported amount was $366.2 million, which was 5.0% below the Administration's request and 0.1% below the FY2011 appropriation. The Administration requested $385.5 million for the EEOC for FY2012. The Administration's request was 5.2% greater than the FY2011 appropriation of $366.6 million. The conference agreement expects the EEOC to prioritize efforts for addressing the continued backlog of pending private sector charges by hiring or backfilling frontline staff positions and by examining new ways to increase productivity. The conference agreement also directs the EEOC to submit quarterly staffing reports, consistent with language in P.L. 111-117 . The EEOC projects the pending case inventory to increase from 100,000 in FY2011 to 108,000 by the end FY2012—an 8% rise. According to the EEOC, the forecasted growth partly reflects the transition from a contractor-operated to an in-house call center, which allows the public to begin the charge process online. Additionally, the EEOC attributes the anticipated increase to case filings arising under recently enacted legislation such as: Title II of the Genetic Information Nondiscrimination Act (GINA), which became effective in November 2009; the Lilly Ledbetter Fair Pay Act of 2009; and amendments to the Americans with Disabilities Act (ADA), which became effective in January 2009. The EEOC federal sector hearings workload is estimated to increase from 7,164 pending hearings in FY2010 to 7,950 in FY2012, a 11% increase. The Commission continues to implement technology initiatives to support the federal sector program. U.S. International Trade Commission (ITC)141 The ITC is an independent, quasi-judicial agency established by Congress that advises the President and Congress on U.S. foreign economic policies. In its Strategic Plan for 2009-2014, the ITC identified the following five strategic operations, which define the functions of the agency: (1) import injury investigations, (2) intellectual property-based imports investigations, (3) industry and economic analysis, (4) tariff and trade information services, and (5) trade policy support. As a matter of policy, its budget request is submitted to Congress by the President without revision. The FY2012-enacted amount for ITC is $80.0 million. This amount is 0.1% less than the Senate recommendation, 2.0% less than the House recommendation, 8.0% less than the Administration's FY2012 request, and 2.1% less than the FY2011-enacted amount. The Senate recommended $80.1 million for ITC. The Senate-recommended amount was 1.9% less than the House Committee on Appropriations recommended amount of $81.6 million. The Senate-recommendation would have been 8.0% less than the Administration's FY2012 request and 2.0% less than the FY2011-enacted amount. The FY2012 budget request for ITC was $87.0 million, a $5.3 million (6.5%) increase from the FY2011-enacted appropriation of $81.7 million. The budget request stated that the requested increase in the budget was driven largely by increases in salaries, benefits, and rent costs. Legal Services Corporation (LSC)143 The LSC is a private, nonprofit, federally funded corporation that provides grants to local offices that, in turn, provide legal assistance to low-income people in civil (noncriminal) cases. The LSC has been controversial since its incorporation in the early 1970s and has been operating without authorizing legislation since 1980. There have been ongoing debates over the adequacy of funding for the agency and the extent to which certain types of activities are appropriate for federally funded legal aid attorneys to undertake. In annual appropriations bills, Congress traditionally has included legislative provisions restricting the activities of LSC-funded grantees, such as prohibiting any lobbying activities or prohibiting representation in certain types of cases. Although the authorization of appropriations for the LSC expired at the end of FY1980, the LSC has operated for the past 31 years under annual appropriations laws. The LSC was funded at $404.2 million for FY2011, which surpassed the LSC's previous highest funding level of $400.0 million in FY1994 and FY1995. For FY2012, the LSC is funded at $348 million. The FY2012-enacted amount for the LSC is $348 million. This amount is 12.1% less than the amount recommended by the Senate, 16.1% more than the House Committee on Appropriation recommendation, 22.7% less than the Administration's FY2012 budget request, and 13.9% less than the FY2011-enacted amount. The FY2012 appropriation for the LSC includes $322.4 million for basic field programs and required independent audits, $17.0 million for management and grants oversight, $3.4 million for client self-help and information technology, $4.2 million for the Office of the Inspector General, and $1.0 million for loan repayment assistance. All existing restrictions on LSC activities would still be in effect. The conference report conferees urged that the LSC continue to encourage the involvement of private attorneys in the delivery of pro bono services to its clients. The conferees also directed the LSC to conduct a study of the implementation and costs of a legal aid fellowship program that would provide incentives for retirees and/or recent law school graduates to commit to working in legal services programs for a specified period of time. The LSC is required to report the findings of the study to the Committees on Appropriations no later than March 17, 2012 (i.e., 120 days after enactment). In addition, the conferees encouraged the LSC Inspector General to conduct annual audits of LSC grantees to make sure that they are not using LSC funds in violation of the prohibition against engaging in political activities or any of the other restrictions on LSC activities. The conferees recommended that funds be withdrawn from any LSC grantee found engaging in political activity. For FY2012, the Senate recommended $396.1 million for the LSC. This amount is 32.2% more than the amount recommended by the House Committee on Appropriation, 12.0% less than the Administration's FY2012 budget request, and 2.0% less than the FY2011-enacted amount. The Senate's recommendation for the LSC for FY2012 included $370.5 million for basic field programs and required independent audits, $17.0 million for management and grants oversight, $3.4 million for client self-help and information technology, $4.2 million for the Office of the Inspector General, and $1.0 million for loan repayment assistance. The Senate Committee on Appropriations (1) directed the LSC to continue its collaboration with the Department of Justice to conduct a national study of the cost-effectiveness of a legal services program patterned after existing state models; (2) encouraged the LSC to have its grantees improve and/or increase private attorney pro bono participation; and (3) directed LSC to conduct a study of the implementation and costs of a legal aid fellowship program that would provide incentives for retirees and/or recent law school graduates to commit to working in legal services programs for a specified period of time. The committee also recommended that all the restrictions on the use of private funds for the LSC, except those associated with abortion-related cases, be eliminated. The restrictions on the use of public funds for the LSC would remain in effect. For FY2012, the House Committee on Appropriations recommended $299.7 million for the LSC. This amount is 33.4% less than the Administration's FY2012 budget request and 25.9% less than the FY2011-enacted amount. The committee also encouraged the LSC Inspector General to conduct annual audits of LSC grantees to make sure that they are not using LSC funds in violation of the prohibition against engaging in political activities or any of the other restrictions on LSC activities. The committee recommended that funds be withdrawn from any LSC grantee found engaging in political activity. For FY2012, the Obama Administration requested $450.0 million for the LSC. This amount is $45.8 million (11.3%) above the FY2011 appropriation of $404.2 million for the LSC. The Administration's FY2012 budget request included $420.2 million for basic field programs and required independent audits, $19.5 million for management and grants oversight, $5.0 million for client self-help and information technology, $4.4 million for the Office of the Inspector General, and $1.0 million for loan repayment assistance. The Obama Administration also proposed that LSC restrictions on class action suits and attorneys' fees be eliminated. Marine Mammal Commission (MMC)145 The Marine Mammal Commission is an independent agency of the executive branch, established under Title II of the Marine Mammal Protection Act (MMPA; P.L. 92-522). The Marine Mammal Commission (MMC) and its Committee of Scientific Advisors on Marine Mammals provide oversight and recommend actions on domestic and international topics to advance policies and provisions of the Marine Mammal Protection Act. As funding permits, the Marine Mammal Commission supports research to further the purposes of the MMPA. Congress provided $3.0 million for the MMC for FY2012, concurring with the Senate-passed amount and the Administration's FY2012 request. FY2012 funding is 0.1% more than the House Committee on Appropriations recommended amount for FY2012 and it represents a 6.7% reduction compared to FY2011-enacted funding of $3.2 million. The Senate recommended amount for the MMC was the same as the Administration's FY2012 request and 6.7% less than the FY2011-enacted amount. The House Committee on Appropriations recommended amount for the MMC was 0.1% less than the Administration's FY2012 request and 6.8% less than the FY2011-enacted amount. The Administration's FY2012 request for the MMC was $3.0 million, which would have represented a 6.7% reduction compared to FY2011-enacted funding of $3.2 million. Office of the U.S. Trade Representative (USTR)146 The USTR, located in the Executive Office of the President, is responsible for developing and coordinating U.S. international trade and direct investment policies. The USTR is the President's chief negotiator for international trade agreements, including commodity and direct investment negotiations. USTR also conducts U.S. affairs related to the World Trade Organization. The FY2012-enacted amount for USTR is $51.3 million. This amount is the same as the Administration's request and the Senate recommended amount, and 0.1% less than the House-recommended amount. The enacted amount is $3.5 million, or 7.4%, more than the FY2011 funding level of $47.7 million. The Senate recommended $51.3 million for USTR, which was 0.1% less than the House Committee on Appropriations recommended amount of $51.2 million. The Senate recommendation would have been the same as the Administration's FY2012 request and 7.4% more than the FY2011-enacted amount of $47.7 million. The FY2012 budget request was $51.3 million, a $3.5 million (7.4%) increase from the FY2011 funding level. The President's budget request stated that the requested increase reflected the need for additional staffing and travel requirements to achieve critical U.S. trade initiatives and negotiations, as well as to support the cost escalation in overseas operations and federal protective services. State Justice Institute (SJI) The SJI is a nonprofit corporation that makes grants to state courts and funds research, technical assistance, and informational projects aimed at improving the quality of judicial administration in state courts across the United States. It is governed by an 11-member board of directors appointed by the President and confirmed by the Senate. Under the terms of its enabling legislation, SJI is authorized to present its budget request directly to Congress, apart from the President's budget. For FY2012, SJI will receive an appropriation of $5.1 million, which is 2.0% more than the Senate's mark, 0.1% more than the House committee-recommendation, and the same as the FY2011 appropriation. However, this amount is 0.2% less than the FY2012 request. The Senate recommended $5.0 million for SJI, an amount that was 1.9% below the House Committee on Appropriation's mark, 2.2% less than the request and 2.0% less than the FY2011 appropriation. The House Committee on Appropriations recommended $5.1 million for SJI for FY2012. The committee-reported amount was 0.3% less than the FY2012 request and 0.1% less than the FY2011-enacted appropriation. The FY2012 request for SJI was $5.1 million. The request is $10,000 more than the FY2011 appropriation for SJI.

This report provides an overview of actions taken by Congress to provide FY2012 appropriations for Commerce, Justice, Science, and Related Agencies (CJS) accounts. On November 18, 2011, President Obama signed into law the Consolidated and Further Continuing Appropriations Act, 2012 (P.L. 112-55), which includes the Commerce, Justice, Science, and Related Agencies Appropriations Act, 2012 (Division B). The act includes $60.91 billion for CJS, of which $7.808 billion is for the Department of Commerce, $27.408 billion is for the Department of Justice, $24.838 billion is for the science agencies, and $856.6 million is for the related agencies. On November 1, 2011, the Senate passed an amended version of H.R. 2112, which included the Senate's proposed funding for the agencies and bureaus funded as part of the annual CJS appropriations bill. H.R. 2112, as passed by the Senate, would have provided $60.664 billion for CJS. This included $8.192 billion for the Department of Commerce, $26.925 billion for the Department of Justice, $24.643 billion for the science agencies, and $903.9 million for the related agencies. On July 20, 2011, the House Committee on Appropriations reported the Commerce, Justice, Science, and Related Agencies Appropriations Act, 2012 (H.R. 2596). The bill would have provided a total of $57.949 billion for CJS. The bill included $7.161 billion for the Department of Commerce, $26.323 billion for the Department of Justice, $23.649 billion for the science agencies, and $814.8 million for the related agencies. For FY2012, the Administration requested a total of $64.93 billion for the agencies and bureaus funded as part of the annual CJS appropriations bill. The Administration's FY2012 request included $8.761 billion for the Department of Commerce, $28.68 billion for the Department of Justice, $26.498 billion for the science agencies, and $991.4 million for the related agencies. On April 15, 2011, President Obama signed into law the Department of Defense and Full-Year Continuing Appropriations Act, 2011 (P.L. 112-10). The act provided a total of $61.092 billion for agencies and bureaus funded as part of the annual appropriations for CJS for FY2011. The $61.092 billion provided by the act includes $7.578 billion for the Department of Commerce, $27.281 billion for the Department of Justice, $25.315 billion for the science agencies, and $917.9 million for the related agencies. The source for the FY2011-enacted amounts, the FY2012-requested amounts, and the House Committee on Appropriations-recommended amounts is H.Rept. 112-169. The Senate-passed amounts were taken from H.R. 2112, as passed by the Senate. FY2012-enacted amounts were taken from H.Rept. 112-284.

Legislative Issues in the 108th Congress Proposals to Extend Unemployment Compensation Benefits The EB program provides for additional weeks of UC benefits up to a maximum of 13 weeks during periods of high unemployment, and up to a maximum of20 weeks in certain states with extremely high unemployment. EB benefits are funded half (50%) by the federalUTF while states fund the other half (50%). The EB program is triggered when a state's insured unemployment rate (IUR (2) ) or total unemployment rate (TUR (3) ) reaches certain levels. Congress has actedfive times -- in 1971, 1974, 1982, 1991, and 2002 -- to establish temporary programs of extended UC benefits. (4) The Temporary Extended Unemployment Compensation (TEUC) Program. The TEUC program wasenacted on March 9, 2002, as part of the Job Creation and Worker Assistance Act of 2002 ( P.L. 107-147 ). TheTEUC program provided up to 13 weeks offederally funded benefits for unemployed workers who had exhausted their regular UC benefits. In addition, up toan additional 13 weeks were provided incertain high unemployment states that had an IUR of 4% or higher and met certain other criteria(TEUC-X). P.L. 107-147 also provided for a one-time $8billion distribution to states known as Reed Act funds. (5) TEUC benefits were payable to individuals who, in addition to meeting other applicable state UClawprovisions: (1) filed an initial claim that was in effect during or after the week of March 15, 2001; (2) exhaustedregular benefits or had no benefit rights due tothe expiration of a benefit year ending during or after the week of March 15, 2001; (3) had no rights to regular orextended benefits under any state or federallaw; and, (4) were not receiving benefits under Canadian law. (6) In addition, individuals must also have had 20 weeks of full-time work, or the equivalent inwages, in their base periods. (7) These temporary benefits ended on December 28, 2002; however, the 108th Congress extended TEUC twice (through P.L. 108-1 (8) and P.L. 108-26 ). Thus,TEUC eligibility was possible through the week ending before December 31, 2003, and TEUC benefits were paidthrough the week of April 3, 2004. A number of bills were introduced in the 108th Congress to further extend and expand the TEUC program. While some bills were superceded by P.L. 108-1 ,others went beyond the provisions of P.L. 108-1 . Some would have extended the program beyond the end of May2003; others would have provided foradditional weeks of benefits for unemployed who have exhausted their benefits; some would have temporarilyestablished alternative triggers for qualifyingstates as high-unemployment for the TEUC-X program. In addition, some bills would have also temporarilyexpanded regular UC eligibility in all states toinclude part-time and low-wage unemployed workers. After the enactment of P.L. 108-26 on May 28, 2003, severalbills were introduced to further extend andexpand TEUC. On February 4, 2004, the House passed an amendment to the Community Services Block Grant program reauthorization bill, H.R. 3030 ( H.Amdt. 462 ), administered by the Department of Health and Human Services, that would have provideda six-month extension of TEUCbenefits. It was received in the Senate and referred to the Committee on Health, Education, Labor, and Pensions. No further action was taken. Benefits for Certain Workers Unemployed by Terrorist Attack and The War on Iraq. In response to theunemployment of airline and airline related workers resulting from the September 11, 2001 terrorist attacks,subsequent security measures taken, and the warwith Iraq, P.L. 108-11 , was signed into law on April 16, 2003. This temporary program provided up to 39 weeksof extended benefits to qualified individualswhose regular UC claim is based in whole, or in part, on qualifying employment with a certified air carrier, at afacility in an airport, or with a producer orsupplier of products or services for an air carrier. (9) The program had two tiers of benefits, known as TEUC-A and TEUC-AX. These programs were authorizedthrough the week ending before December 29, 2003, and there was a phaseout period for individuals with anexisting claim that ran through the week endingbefore December 26, 2004. H.R. 3405 , which did not pass either house, would have made employees offoreign air carriers eligible for TEUC-Aand TEUC-AX. Other Proposals in Unemployment Compensation Tax Avoidance and Other Abuses of the UC system. In 2004, the Administration proposed to require statesto amend their state unemployment tax laws to deter schemes to avoid paying UC taxes through such means astransfers from businesses to shell companies(commonly referred to as State Unemployment Tax Acts, or SUTA, dumping) and to reduce UC benefitoverpayments and fraud and abuse. On August 28, 2004, the SUTA Dumping Prevention Act of 2004 ( P.L. 108-295 ) was enacted. The law amended Title III of the Social Security Act (SSA), requiring the states to amend their UC laws to provide substantial penalties for SUTA Dumping Activities. Itdirected the Secretary of Labor to study and reporton implementation of the requirement. P.L. 108-295 also revised Title IV part D of the SSA, directing the Secretaryof Health and Human Services to discloseinformation on individuals and their employers in the National Directory of New Hires to a state agency for purposesof UC administration. The Secretary is toprovide states access to the directory of the names and Social Security account numbers for faster detection ofindividuals who have gone back to work, but whocontinue to collect UC benefits. Personal Reemployment Accounts. The Bush Administration initially proposed Personal ReemploymentAccounts (10) (PRAs) in its 2003 economic stimuluspackage. On January 29, 2003, H.R. 444 , the Back to Work Incentive Act was introduced. A$3.6 billion proposal, this would have amended the Workforce Investment Act (WIA) of 1998 and authorized theSecretary of Labor to establish a personalreemployment accounts (PRAs) grant program. A voucher program, it would have made individuals eligible fora PRA who (1) were identified as likely toexhaust UC benefits and in need of job search assistance to make a successful transition to new employment; (2)were receiving regular UC under any federal orstate UC program administered by the state; and, (3) were eligible for at least 20 weeks of regular UC benefits. Itwould have allowed PRAs to be used topurchase intensive services, training services, or supportive services through the existing Employment Service'sone-stop delivery system on a fee-for-servicebasis, or through other providers. It would have provided cash reemployment bonuses consisting of 60% of thebalance of their PRAs, to recipients whoobtained full-time employment before the end of the 13th week of unemployment for which UCbenefits were paid, and the remaining 40% if recipientsremained in those jobs for six months. On March 20, 2004, H.R. 4444 , Worker Reemployment Accounts Act of 2004, was introduced. The bill amended WIA to authorize the Secretaryof Labor to establish and implement a demonstration project on PRAs. H.R. 444 was amended by the Committeeon Education and the Workforce bysubstituting the language of H.R. 4444. Also inserted in H.R. 444, as passed by the House, were the texts of H.R. 4409 (Teacher TrainingEnhancement Act) and H.R. 4411 (Priorities for Graduate Studies Act). On June 3, 2004, the House passedH.R. 444 as amended by H.R. 4444. The bill was received in the Senate and referred to the Committee on Health, Education, Labor, and Pensions. Nofurther action was taken. Expansion of Eligibility. H.R. 1802 , introduced on April 11, 2003, would have required statesto expand eligibility for UC benefits to workers seeking part-time work and to use an individual's most recentearnings in determining UC eligibility (oftenreferred to as the alternate base period ), which would have made it easier for certain new or low-wageworkers to qualify for UC benefits. States would havebeen prohibited from denying UC benefits to individuals solely because they were seasonal workers, because theyleft employment due to sexual harassment,because of loss of adequate child care for children under age 13, or because the individual was a victim of domesticviolence. The bill expanded the UC taxwage base from the first $7,000 of employee wages to the taxable wage base used for Social Security taxes ($87,000in 2003), and lowered the gross FUTA taxfrom 6.2% to 5.59%. No action on the bill was taken. H.R. 2188 (in addition to extending and expanding TEUC ) would have provided several reforms to the UC system. The bill would have loweredthe permanent EB program's insured unemployment rate (IUR) triggers from 5% to 4%, provided for variableearnings to be credited to state UC trust fundaccounts depending on the state's ability to meet certain funding goals, and provided interest-free advances to stateUC accounts only to states which metcertain funding goals. The bill would have also provided a two-year suspension of federal income tax on UCbenefits for taxable years beginning afterDecember 31, 2002, and permitted states to collect FUTA taxes from employers in the state instead of FUTA taxesbeing sent to the Secretary of Labor fortaxable years beginning after December 31, 2003. No action on the bill was taken. Footnotes 1. (back) The maximum duration of UC benefitsin Washington for laid-off workers who file new claims on Apr. 4, 2004, or later was 26 weeks. 2. (back) The IUR is the ratio of UC claimantsdivided by individuals in UC covered jobs. 3. (back) The TUR is the ratio of unemployedworkers to all workers in the labor market. 4. (back) For more information on extended UCbenefits, see CRS Report RL31277, Temporary Programs to Extend Unemployment Compensation ,by Jennifer E.Lake. 5. (back) For more information on the Reed Act,see CRS Report RS22006(pdf) , The Unemployment Tax Fund and Reed Act Distributions , by Julie M.Whittaker. 6. (back) DOL, Unemployment Insurance ProgramLetter No. 17-02. 7. (back) A worker's benefit rights are determinedon the basis of his/her employment in covered work over a prior period, called the base period. In most states, anindividual's base period is a four- quarter, 52-week period that depends on when the worker first applies for benefitsor first begins drawing benefits. However,several states lengthen the base period under specified conditions. 8. (back) See CRS Report RS21397, Unemployment Benefits: Temporary Extended Unemployment Compensation (TEUC) Program , by[author name scrubbed] for additionaldetails. 9. (back) For more detailed information, see U.S.Department of Labor, Special Temporary Extended Unemployment Compensation for Displaced AirlineRelatedWorkers , at http://www.workforcesecurity.doleta.gov/unemploy/factsheetteuc_a.asp . 10. (back) For more information on PRAs andsubsequent activity in the 108th Congress, see CRS Report RL31825 , Personal ReemploymentAccounts: Results fromBonus Experiments , by [author name scrubbed] and [author name scrubbed].

Changes in the federal-state unemployment compensation (UC) system wereconsidered during the 108th Congressas legislation was introduced to reform and expand the UC system. The 107th Congress enacted the Temporary Extended Unemployment Compensation (TEUC) program ( P.L. 107-147 ), which included a 13-week extension of UC benefits, an $8 billion distributionto states, and 13 additional weeks of extendedUC benefits in high unemployment states. These temporary benefits were extended twice during the108th Congress, ( P.L. 108-1 and P.L. 108-26 ) extendingeligibility through the week ending before December 31, 2003. The 108th Congress enacted specialTEUC benefits for displaced airline related workers, knownas TEUC-A ( P.L. 108-11 ). The 108th Congress also enacted the SUTA Dumping Prevention Act of2004 ( P.L. 108-295 ). This report will not be updated.

Overview of the Order and Related Materials The questions and answers in this section provide an overview of Executive Order 13673 and related guidance and regulations, including (1) the basic requirements of the order; (2) the 14 federal labor laws to be considered in assessing vendors' responsibility; (3) what state laws are to be seen as equivalent to the specified federal laws; and (4) the responsibilities of the labor compliance advisors whom the order requires to be appointed within procuring agencies. What does the executive order require? Executive Order 13673 imposes three obligations on federal contractors and subcontractors. First, the order requires contractors and subcontractors to disclose to the government certain violations of federal and state labor laws. Second, the order obligates contractors to take steps to increase paycheck transparency. Finally, the order limits contractors' ability to require arbitration to resolve certain employment disputes. Note, however, that these obligations have not yet been applied to contractors and subcontractors. The order itself was effective immediately as of the date of its issuance (i.e., July 31, 2014), but implementing guidance and regulations are still being developed. In a written statement also issued on July 31, 2014, the White House indicated that it anticipates that the order's requirements will be implemented as to new contracts "in stages," beginning in 2016. Disclosure Obligations Perhaps most notably, Executive Order 13673 contains disclosure requirements for contractors and subcontractors. These requirements will obligate contractors bidding or offering on contracts valued over $500,000 to certify, to the best of their knowledge and belief, whether there has been any administrative merits determination, arbitral award or decision, or civil judgment against them within the past three years resulting from violations of federal or state labor laws. (Contractors who make false certifications could be subject to certain penalties, as discussed below. See " What would happen if a contractor falsely certifies as to its labor law violations? "). Agency contracting officers will then have to consider any such violations when considering whether a contractor is eligible for a contract award. More specifically, agency contracting officers must affirmatively determine that a contractor is "responsible" before the contractor can receive a contract, and Executive Order 13673 will require contracting officers to consider labor law violations when making this responsibility determination. The order will further require contractors to certify that they will have subcontractors with contracts exceeding $500,000 to disclose labor violations from the past three years. Contractors will then have to consider such disclosures in determining subcontractor responsibility. After contract award (i.e., during contract performance), contractors and subcontractors that are required to make pre-award disclosures will have to provide, at six-month intervals, updated information on new labor violations. These post-award disclosures could lead to, among other things, remedial measures, compliance assistance, or contract termination. Paycheck Transparency Requirements Executive Order 13673 requires, for work under a contract that is subject to the disclosure requirements discussed above, that contractors provide employees with documentation of "hours worked, overtime hours, pay, and additions to or deductions from pay" in each pay period. This requirement will apply only to contractors that are required to maintain wage records under the Fair Labor Standards Act, Service Contract Act, or equivalent state laws. Further, this requirement will be deemed met if a contractor complies with state or local laws that are substantially similar to the order's requirements, as determined by the Secretary of Labor. Mandatory Arbitration Prohibition Executive Order 13673 prohibits mandatory arbitration of claims under Title VII of the Civil Rights Act of 1964 (Title VII) and any torts arising from sexual assault or harassment. The order will require government contracts and subcontracts valued over $1 million to incorporate clauses providing that employees must voluntarily consent to arbitration of such claims. However, the order contains three exceptions to this prohibition on mandatory arbitration. First, the prohibitory contract clause will not be included in contracts for acquisition of commercially available off-the-shelf items. Second, the prohibition will not extend to employees who are covered by a collective bargaining agreement. Finally, the prohibition generally will not apply to contractor employees who entered mandatory arbitration agreements before their employers bid on contracts covered by the prohibition. What federal labor laws are covered? Executive Order 13673 requires covered contractors and subcontractors to disclose violations of the following 14 federal labor laws (although this requirement has yet to be implemented): The Fair Labor Standards Act (FLSA). The FLSA contains minimum wage, overtime pay, and child labor standards applicable to most public and private employers. The Department of Labor's Wage and Hour Division (WHD) is tasked with enforcing the FLSA, which it does through, for example, investigations, actions to recover back wages, injunctions to prevent FLSA violations, and civil penalties. The act also provides employees with a private right of action to recover back wages. Additionally, willful or repeated violations of the act can result in criminal prosecution. The Occupational Safety and Health Act of 1970 (OSH Act). Congress enacted the OSH Act to protect worker safety. The OSH Act contains two primary enforcement provisions, each of which places a unique obligation upon employers. First, Section 5(a)(1) of the act—the so-called "General Duty Clause"—requires all employers to provide workplaces that are free of potentially harmful hazards. Second, the act mandates employer compliance with the Occupational Safety and Health Administration's (OSHA's) workplace safety standards. OSHA is responsible for enforcing the OSH Act, which it does by promulgating such workplace safety standards, conducting workplace inspections, and issuing citations to employers found to have violated the act. The Migrant and Seasonal Agricultural Worker Protection Act (MSPA). The MSPA generally protects migrant and seasonal workers in their dealings with agricultural employers, agricultural associations, and farm labor contractors. These protections include, for example, requiring payment of worker wages when due, requiring that workers receive itemized statements of earnings and deductions, and ensuring that any housing provided to workers complies with safety standards. The WHD administers and enforces the MSPA. Enforcement occurs through investigations, penalties, and petitions in district courts for injunctive relief. Additionally, the MSPA creates a private right of action for those aggrieved by violations of the act. Willful and knowing violations of the MSPA can lead to criminal penalties. The National Labor Relations Act (NLRA). The NLRA provides private sector employees the right to unionize and engage in collective bargaining. The act is enforced by the National Labor Relations Board, which can, among other things, investigate charges of violations of the act, decide cases through orders, and seek enforcement of such orders in the appropriate U.S. Courts of Appeal. The Davis-Bacon Act. The Davis-Bacon Act generally requires those who have contracts with the federal government or District of Columbia valued in excess of $2,000 for the construction of public buildings or public works to pay locally prevailing minimum wages and fringe benefits. Both the WHD and the relevant contracting agency are responsible for enforcing the Davis-Bacon Act. Enforcement can occur through investigations, withholding or suspending contract payments, or contract termination. The Service Contract Act. The Service Contract Act generally applies to service contracts valued over $2,500 with the federal government or District of Columbia. The act requires covered contractors to pay service employees locally prevailing wages and fringe benefits, and to provide workplaces that are sanitary and free of hazards. As with the Davis-Bacon Act, both the WHD and the contracting agency enforce the Service Contract Act. Enforcement occurs through investigations, withholding of contract payments, or contract termination. Executive Order 11246 on Equal Employment Opportunity. Executive Order 11246 prohibits covered contractors from discriminating in employment decisions based on race, color, religion, sex, sexual orientation, gender identity, or national origin. Regulations implementing the order also require contractors with 50 or more employees and $50,000 or more in contracts to have affirmative action plans to recruit and advance qualified minority and women workers. The Office of Federal Contract Compliance Programs (OFCCP) enforces Executive Order 11246 through compliance reviews, complaint investigations, and administrative or judicial proceedings. Section 503 of the Rehabilitation Act of 1973 (Rehab Act). The Rehab Act requires covered contractors and subcontractors to take affirmative action to employ and advance qualified individuals with disabilities. The act also prohibits covered contractors and subcontractors from discriminating in employment decisions based on disability. OFCCP enforces the Rehab Act through compliance reviews, complaint investigations, and administrative or judicial proceedings. The Vietnam Era Veterans' Readjustment Assistance Act of 1974 (VEVRA). VEVRA requires covered contractors and subcontractors to take affirmative action to employ and advance qualified veterans and prohibits these contractors and subcontractors from discriminating against veterans in employment decisions. OFCCP enforces VEVRA through compliance reviews, complaint investigations, and administrative or judicial proceedings. The Family Medical Leave Act (FMLA). The FMLA generally entitles eligible employees to take 12 workweeks of job-protected, unpaid leave during a 12-month period for specified family and medical reasons with continued group health insurance. WHD is responsible for enforcing the FMLA, which it does by, for example, investigating complaints or bringing actions against employers to ensure compliance and recover damages. The FMLA also provides employees a private cause of action against employers that violate the FMLA. Title VII of the Civil Rights Act of 1964 (Title VII). Title VII makes it illegal for an employer to discriminate against an employee on the basis of race, color, religion, national origin, or sex. The Equal Employment Opportunity Commission (EEOC) generally enforces Title VII, which it does through investigating complaints, seeking settlement, and, where appropriate, civil action in federal courts. The Americans with Disabilities Act of 1990 (ADA). The ADA prohibits discrimination against individuals with disabilities in a range of activities, including transportation, public accommodations, communications, employment, and government services. Four agencies enforce the ADA. The EEOC enforces the provisions on employment, the Department of Transportation enforces provisions related to transit, the Federal Communications Commission enforces provisions covering telecommunication services, and the Department of Justice enforces the act's protections against discrimination in public accommodations and state and local government services. The Age Discrimination in Employment Act of 1967 (ADEA). The ADEA prohibits age discrimination in employment against individuals who are at least 40 years old. The ADEA refers to FLSA's enforcement provisions, discussed above, and the two are enforced in similar ways—through investigations of complaints, actions to recover back wages, and injunctions to prevent additional violations. The act also provides employees with a private right of action. Executive Order 13658 Establishing a Minimum Wage for Contractors. Executive Order 13658 requires that employees working under a service or construction contract or subcontract be paid a minimum wage of at least $10.10 per hour. The WHD is responsible for enforcing Executive Order 13658. What state laws are to be seen as equivalent to covered federal laws? Executive Order 13673 also calls for covered contractors and subcontractors to disclose violations of state laws that are equivalent to the 14 federal laws discussed above. The order does not identify state laws that are equivalent to these federal laws. The recently issued guidance and regulations partially implementing the order provide no additional clarity other than observing that OSHA-approved state health and safety regulatory plans are equivalent state laws. Both the order and the recently issued Department of Labor guidance anticipate future guidance identifying the state laws that are equivalent to the 14 earlier-mentioned federal laws. What are labor compliance advisors (LCAs)? Executive Order 13673 directs agencies to create a new senior position within each agency—the labor compliance advisor, or LCA. The order seems to anticipate LCAs having knowledge of labor laws that contracting officers and contractors may not have and using this knowledge to assist agency contracting personnel and contractors in complying with the order. LCAs will have two primary responsibilities: (1) they will guide agency contracting officers on proper courses of action after pre- and post-award disclosures of labor law violations; and (2) they will consult with contractors on compliance with labor laws and proper handling of subcontractor labor violations. These responsibilities relate entirely to the order's disclosure requirements, and have nothing to do with the order's paycheck transparency or arbitration requirements. As mentioned previously in this report, prior to contract award, agency contracting officers will have to consider any disclosed labor law violations when determining contractor responsibility. Once the order is implemented, LCAs will advise contracting officers in evaluating whether these labor law violations render a contractor nonresponsible or warrant any other action (e.g., remedial measures, compliance assistance, action to prevent further violations, or referral to agency suspending and debarring officials). During contract performance, LCAs will similarly advise contracting officers of appropriate courses of action when contractors disclose violations of labor laws to the agency through their biannual updates. These courses of action can include appropriate remedial measures, compliance assistance, resolving issues to avoid further violations, contract termination, non-exercise of contract options, and referral to agency suspending and debarring officials. In addition to aiding agency contracting officers, LCAs will be available to assist contractors in meeting their obligations under Executive Order 13673. Unlike agency contracting personnel, who generally will be required to consult with LCAs under the order, contractors will have no obligation to solicit LCA guidance. Rather, LCAs will be available to contractors who wish to use them. LCAs can "coordinate assistance" between contractors that want help in addressing and preventing violations of labor laws and relevant enforcement agencies, and, along with agency contracting officers and the Department of Labor, can assist contractors in handling subcontractor disclosures of labor violations. The Order in Comparison to Existing Law The questions and answers in this section examine how the requirements of Executive Order 13673 compare to current law and what, if any, changes the order may make to the implementation of federal procurement law. They address (1) agencies' authority to consider violations of labor law in the procurement process prior to Executive Order 13673; (2) the factors agencies have historically considered when assessing vendors' integrity and business ethics in the responsibility determination process; (3) whether labor law violations will factor directly into source selection when Executive Order 13673 is implemented; (4) whether the order will result in prequalification of vendors; (5) whether vendors who disclose labor law violations will be debarred or suspended from government contracts; and (6) whether the order will result in any changes to the Certificate of Competency (COC) process used in determining the responsibility of small businesses. Did agencies have the authority to consider labor law violations in the procurement process prior to Executive Order 13673? As previously noted, Executive Order 13673 requires contractors to disclose information regarding their compliance with 14 federal labor laws and their state equivalents, which procuring agencies are then required to consider when making responsibility determinations. (See " What does the executive order require? "). Neither the disclosure of labor law violations, per se , nor the consideration of such violations in the responsibility determination process was required prior to the issuance of the executive order. However, the absence of such requirements does not mean that agencies lacked the authority to consider contractors' compliance with labor laws before the order was issued. Rather, as discussed below, agencies could have considered at least certain labor law violations pursuant to their authority to (1) make responsibility determinations; (2) establish qualification requirements and evaluation factors; and (3) debar and suspend contractors. Any consideration given to labor law violations was, however, generally within agency officials' discretion prior to the issuance of Executive Order 13673, rather than required, as it is under the order. Also, the types of violations considered prior to the order tended to be more limited than those to be considered under the order. Responsibility Determinations Prior to Executive Order 13673, agencies had discretion to consider labor law violations while making contractor responsibility determinations during the procurement process. As previously noted, agency contracting officers are generally required to determine that prospective vendors are "affirmatively responsible" for purposes of each individual contract prior to contract award. Vendors who are not seen as affirmatively responsible are "nonresponsible," and are ineligible to be awarded a contract. Responsibility has historically been determined by considering seven "general standards" prescribed in statute and the Federal Acquisition Regulation (FAR), which assess whether the vendor has the requisite facilities, personnel, experience, financial resources, and personal attributes to perform the contract. Depending upon the facts and circumstances of the case, labor law violations could be relevant to any of these factors. Most commonly, though, labor law violations appear to have been considered in determining whether contractors satisfied the general standard of having a "satisfactory record of integrity and business ethics." This is because, as discussed below, in assessing this standard, agency contracting officers historically considered whether the contractor, or its principals, officers, or employees, had been convicted or indicted for criminal offenses. (See " What has historically been considered in assessing integrity in the responsibility determination process? "). Such offenses could have involved labor laws; however, contracting officers were generally seen to have broad discretion as to whether they considered criminal offenses, indictments, or other violations involving labor laws in the responsibility determination process prior to 2008. They were not required to consider this information, as they are under Executive Order 13673. In 2008, Congress established the Federal Awardee Performance and Integrity Information System (FAPIIS) and required contracting officers to consult the information contained in it when making responsibility determinations. FAPIIS includes, among other things, information on convictions and certain findings of fault or liability involving federal contractors or grantees holding awards valued in excess of $10 million (total), or their principal officers, within the past five years "in connection with the award ... or performance ... of a Federal contract or grant." While the creation of FAPIIS may have made it more likely that contracting officers would consider certain labor law violations, FAPIIS's information is more limited than the information that would be considered under Executive Order 13673. FAPIIS includes only convictions and certain findings of fault or liability involving "larger" contractors and grantees within the past five years "in connection with" the award or performance of a federal contract or grant. The labor law violations to be disclosed under Executive Order 13673, in contrast, are not limited to ones "in connection with" a federal contract or grant. Executive Order 13673's disclosure requirements also apply to vendors that do not have contracts or grants valued in excess of $10 million, so long as the vendor has one contract whose value exceeds $500,000. Specifications and Evaluation Factors Other authorities that agencies could potentially have relied upon to consider labor law violations prior to Executive Order 13673 are those regarding agency specifications and evaluation factors. Specifications are descriptions of agencies' technical requirements for supplies or services that include criteria for determining whether those requirements are met , while evaluation factors are factors used by agencies in so-called "negotiated procurement" to determine which proposal represents the "best value" for the government. Prior to Executive Order 13673, agencies could have drafted specifications that took vendors' compliance with labor laws into account, which, in turn, could have resulted in the bids or offers of vendors who had committed certain violations being found to be nonresponsive and thus ineligible for selection. Agencies could similarly have drafted evaluation factors that gave certain weight in the selection process to vendors' compliance with labor laws, making vendors with poor records of compliance less likely to be selected for award. In practice, however, consideration of labor law violations in these contexts appears to have been limited, in part, because of certain legal requirements regarding specifications and evaluation factors. Specifically, the Competition in Contracting Act (CICA) of 1984, as amended, generally requires agencies to "develop specifications in the manner necessary to obtain full and open competition with due regard to the nature of the property or services to be acquired." The regulations implementing CICA further require that the evaluation factors developed by procuring agencies represent "key areas of importance and emphasis to be considered in the source selection decision" and "support meaningful comparison and discrimination between and among competing proposals." In other words, agencies' use of specifications or evaluation factors taking into consideration labor law violations could generally withstand legal challenges only if such consideration was seen as reasonably related to the agency's minimum needs, and not an attempt to "prefer" one vendor or group of vendors over others for reasons unrelated to the agency's specific needs. Debarment and Suspension Certain labor law violations could also have been considered in the procurement process prior to Executive Order 13673 pursuant to agencies' authority to debar or suspend (collectively known as "exclude") contractors. The FAR expressly authorizes debarment from government contracting—or exclusion for a prescribed period of time (often three years)—for "any ... cause of so serious or compelling a nature that it affects the present responsibility of the contractor or subcontractor," as well as for other grounds discussed below. (See " Will contractors who disclose violations be debarred or suspended? "). It similarly authorizes suspension—or temporary exclusion pending the outcome of an investigation of the vendor's conduct or legal proceedings—on this ground. These grounds could have resulted in the exclusion of contractors who committed certain violations of labor laws prior to Executive Order 13673. In addition, some federal labor laws—including the Davis-Bacon, Service Contract, Walsh-Healy, and Drug-Free Workplace Acts—specifically require or authorize exclusion from government contracts for convictions or other violations. However, whether any labor law violations are considered in exclusion proceedings is generally seen to be within agency officials' discretion. Agency officials generally also have discretion as to whether vendors are debarred or suspended. What has historically been considered in assessing integrity in the responsibility determination process? Federal statutes and regulations do not define what is meant by "integrity" in the responsibility determination process. Instead, the term has been interpreted by judicial and administrative tribunals to have "its generally accepted connotation of uprightness of character, moral soundness, honesty, probity, and freedom from corrupting influence or practice." Consistent with this interpretation, one prominent treatise on government procurement has noted that "most cases" in which a contractor was determined to be nonresponsible based on lack of integrity have involved criminal offenses by the contractor or the contractor's employees. For example, in one early decision, Domco Chemical Corporation , the Government Accountability Office (GAO) denied a protest of a nonresponsibility determination based on lack of integrity where a contractor employee had been convicted for criminal offenses, income tax evasion, and fraud, and an officer had been indicted. Subsequently, in Traffic Moving Systems, Inc. , GAO similarly denied a protest of a nonresponsibility determination based on the criminal conviction of the corporation's president. In other cases, nonresponsibility determinations based on lack of integrity have resulted where an agency finds grounds for suspension, typically involving violations of criminal statutes; or criminal investigation reports suggest wrongdoing. Additional grounds have been raised in specific cases, although non-criminal-related grounds seem to have resulted in determinations of nonresponsibility based on lack of integrity less frequently than criminal-related grounds have. Will labor violations factor directly into source selection? Executive Order 13673 and its proposed implementing guidance and regulations do not contemplate that contractors' labor violations (or lack thereof) will factor directly into the source selection process in the sense that the vendor with the better record as to labor violations necessarily wins. Instead, under the proposed FAR amendments implementing the order, prospective vendors would be required to represent, as part of their bid or offer, and semiannually thereafter, whether any administrative merits determination, arbitral award or decision, or civil judgment [was] rendered against [them] within the three-year period prior to the date of [their] offer for violations of labor laws. Any contractors that fail to make the requisite representation would apparently be ineligible for an award insofar as their bids or offers would be nonresponsive to the terms of the solicitation. The contracting officer would then review the bids or offers to determine which one is the lowest priced or represents the "best value" for the government. It is at this point that the contracting officer would assess the responsibility of the vendor(s) in line for the proposed award and, in the case of contractors who had represented that they had been implicated in covered labor violations, the contracting officer would request or review information regarding the law(s) violated. The contracting officer would also invite the vendor to submit any additional information that it deems necessary to establish its responsibility (e.g., mitigating circumstances, remedial measures). The contracting officer would consider all this information in determining whether the vendor is to be seen as responsible for purposes of the contract award. If the vendor were deemed nonresponsible, the contracting officer would turn to the next lowest priced bidder, in the case of procurements conducted via sealed bidding, or the next most highly rated offeror, in the case of negotiated procurements, and assess that vendor's responsibility. (The contracting officer could also refer the vendor to agency suspending and debarring officials for exclusion, as discussed below. See " Will contractors who disclose violations be debarred or suspended? "). At no point in this process would the contracting officer weigh Vendor A's record of compliance with labor laws against Vendor B's record in determining which bid is the lowest priced, or which offer represents the "best value." Some commentators have called for vendors' record of compliance with labor and employment laws to be utilized in this way. However, to date, this is not the approach the Obama Administration has adopted. Will the executive order result in prequalification of contractors? Executive Order 13673 does not appear to contemplate the prequalification of vendors, or the development of a qualified bidders list, based on contractors' disclosures. Prequalification involves the determination of a vendor's responsibility prior to any solicitation; that is, the "determination of an offeror's eligibility to compete for a government contract." Some states that currently require consideration of contractors' labor law violations in the award of contracts, as Executive Order 13673 does through the responsibility determination process, also rely upon prequalification of vendors. For example, Connecticut bars the award of contracts to persons who have "been cited for three or more willful or serious violations of any occupational safety or health [(OSH)] act" or meet certain other criteria. It also generally provides for persons to apply for prequalification for state contracts, a process that includes consideration of whether the applicant is disqualified for OSH violations, among other things. Federal law, however, arguably calls for a different approach, particularly when the executive acts without express statutory authority requiring or permitting the use of prequalification. This is because the Competition in Contracting Act of 1984, as amended, generally constrains agencies' use of qualification requirements , or "requirements for testing or other quality assurance demonstration that must be completed by an offeror before award of a contract." Among other things, CICA prescribes that agencies take specified steps prior to enforcing any qualification requirement. These steps include (1) preparing a written justification stating the necessity for the requirement and why the requirement must be demonstrated before award; and (2) specifying in writing all requirements that offerors (or products) must satisfy to become qualified, with these "requirements to be limited to those least restrictive to meet the purposes necessitating the establishment of the ... requirement." CICA's provisions here have generally been seen to limit (although not prohibit) the use of prequalification by federal agencies. Will contractors who disclose violations be debarred or suspended? Contractors who disclose violations of labor laws pursuant to Executive Order 13673 could potentially face debarment or suspension (collectively known as exclusion) as a result of their disclosures, but would not necessarily be excluded as a consequence of disclosing one or more violations. ( Debarment is an exclusion from government contracting for a prescribed period of time (often three years), while suspension is a temporary exclusion, pending an investigation of the vendor's conduct or legal proceedings involving the vendor.) Executive Order 13673 contemplates agency contracting officers and labor compliance advisors referring matters disclosed to them by contractors to agency suspending and debarring officials for consideration "in accordance with agency procedure." However, it does not purport to require such referral in every case, or in any specific case or cases. Instead, it leaves contracting officers and labor compliance advisors with discretion to determine if and when particular disclosures should be referred to the suspending and debarring officials. Once a referral is made, suspending and debarring officials would consider whether the disclosed information involves a ground for exclusion under the FAR. As previously noted, these grounds encompass "any ... cause of so serious or compelling a nature that it affects the present responsibility of the contractor or subcontractor," as well as other grounds noted in Table 1 below. One or more of these grounds could potentially be found to apply depending upon the facts and circumstances of the case. However, any debarment or suspension proceeding that is conducted would have to comport with the requirements of the FAR, which generally provides for contractors to receive notice and an opportunity for a hearing regarding their exclusion. Such hearings are to take place before any debarment, although they could potentially take place after a suspension. These procedural requirements are intended to protect contractors' due process rights in the exclusion process. Where the facts and circumstances of the case are such that multiple determinations of nonresponsibility might be made over time based on the same information, agency officials could potentially be inclined toward exclusion in order to avoid the allegations of impermissible de facto debarment that could follow from repeated determinations of nonresponsibility, as discussed below. (See "" What is de facto debarment, and will implementation of the order result in de facto debarment of contractors? ""). In other cases, however, agency officials may be more likely to encourage contractors whose disclosed violations could constitute grounds for exclusion to enter into labor compliance agreements than they are to debar or suspend them. Several provisions in the proposed materials implementing Executive Order 13673 could be read to suggest a preference for such agreements, rather than for exclusion. Will there be changes in the Certificate of Competency process used in determining the responsibility of small businesses? The standard responsibility determination process, previously noted (see " Did agencies have the authority to consider labor law violations in the procurement process prior to Executive Order 13673? "), is somewhat different in cases involving "small businesses." While the contracting officers of the procuring agencies are the arbiters of whether other-than-small businesses are seen to be responsible sources, Section 8(b)(7) of the Small Business Act of 1958, as amended, provides that the Small Business Administration (SBA)—not the contracting officer—is to determine whether small businesses constitute responsible sources. In particular, Section 8(b)(7) requires that agency contracting officers refer the cases of any "otherwise qualified" small businesses that may be seen as nonresponsible to the SBA, which is to investigate the matter and may then certify to the procuring agency as to "all elements of [the firm's] responsibility, including, but not limited to, capability, competency, capacity, credit, integrity , perseverance, and tenacity." If the SBA issues such a certification, known as a Certificate of Competency, the procuring agency is required to accept the SBA's judgment, and may not require the small business to meet "any other requirements of responsibility." Neither Executive Order 13673 nor its proposed implementing materials, to date, appear to contemplate any changes in the Certificate of Competency process. This process could potentially serve to lessen somewhat any adverse effects of the order on small businesses—a topic of concern to some commentators —by providing a check upon agency contracting officers and labor compliance advisors and protecting small businesses from nonresponsibility determinations in borderline cases. However, it seems likely that the SBA would continue to base its determinations as to whether to grant certificates of competency upon the same general standards of responsibility used by the procuring agencies and, thus, would also take any reported violations of labor law into consideration when determining whether to issue a certificate of competency. Other Questions The questions and answers in this section address the President's authority to impose the requirements of Executive Order 13673, as well as de facto debarment, challenges to responsibility determinations, contractor representations and disclosures on other matters, and penalties for false certifications. This section also addresses the relationship between Executive Order 13673 and certain amendments made to the FAR by the Clinton Administration and subsequently revoked, and potential congressional responses to the executive order. What is the President's authority to impose these requirements? When issuing Executive Order 13673, President Obama expressly noted the authority of 40 U.S.C. §121 and the promotion of "economy and efficiency" in federal contracting. In so doing, he referenced the specific citation to and general language of provisions of the Federal Property and Administrative Services Act of 1949 (FPASA), as amended, which authorize the President to "prescribe policies and directives that [he] considers necessary" to provide the "Federal Government with an economical and efficient system for ... [p]rocuring and supplying property and ... services," among other things. This is the same authority that President Obama and other Presidents have previously relied upon when imposing requirements upon the procurement process, as Table 2 illustrates. Many requirements imposed by Presidents under the authority of FPASA have been seen to involve "housekeeping" matters, and have not been subject to legal challenge. However, certain requirements have been challenged on the grounds that they exceed the President's authority. Such challenges have generally failed where a "sufficiently close nexus" between the challenged requirements and economy and efficiency in federal procurement is seen to exist. In applying this "nexus test" in AFL-CIO v. Kahn , the U.S. Court of Appeals for the District of Columbia Circuit expressly noted that economy and efficiency are "not narrow terms," and can encompass factors such as "price, quality, suitability, and availability of goods or services." Subsequent courts have taken a similarly broad view, finding that challenged requirements have the requisite nexus if they can be said to have an "attenuated link" to economy and efficiency in procurement, or if the President's explanation for how an order promotes efficiency and economy is "reasonable and rational." Only those requirements which are seen to have too attenuated a link to economy and efficiency, or which are specifically barred by a federal statute, will generally be invalidated. Neither seems likely here under current precedents, at least as to the labor violation provisions that are generally the focus of discussions of Executive Order 13673. President Obama, the Department of Labor, and the FAR Council have all proffered explanations of how disclosure of contractors' labor law violations will promote economy and efficiency in procurement. For example, in issuing its proposed guidance regarding what violations are to be considered in implementing the order, DOL emphasized that contractors' labor law violations create risks to the timely, predictable, and satisfactory delivery of goods and services to the Federal Government, and federal agencies risk poor performance by awarding contracts to companies with histories of labor law violations. Poor workplace conditions lead to lower productivity and creativity, increased workplace disruptions, and increased workforce turnover. For contracting agencies, this means receipt of lower quality products and services, and increased risk of project delays and cost overruns. Given such statements, the link between the labor law disclosure requirements and economy and efficiency appears unlikely to be seen as too attenuated—or unreasonable or irrational—under current precedents, which have opined that an alleged link to procurement is not to be seen as too attenuated just because "one can with a straight face advance an argument claiming opposite effects or no effects at all." The Kahn court similarly noted that economy and efficiency can be said to result even if challenged requirements could result in higher prices. Also, no conflicts between specific statutory requirements and the disclosure or consideration of labor law violations in the responsibility determination process have been noted to date. What is de facto debarment, and will implementation of the order result in de facto debarment of contractors? The term de facto debarment generally refers to exclusion outside of the formal suspension and debarment process. It can be seen as improper on this basis alone, because it involves agency action that is not in compliance with the law. In addition, conduct that constitutes de facto debarment can be seen to violate contractors' rights to due process by depriving them of protected liberty interests in being able to challenge allegations about their integrity that could deprive them of their livelihood without notice or an opportunity for a hearing. As was previously discussed, notice and an opportunity for a hearing are provided in exclusion proceedings. (See " Will contractors who disclose violations be debarred or suspended? "). However, they are generally not provided in the responsibility determination process. Repeated determinations of nonresponsibility made upon the same basis have been found to constitute impermissible de facto debarment, as have agency statements or conduct evidencing a refusal to do business with a contractor without formally excluding the contractor. Some commentators have expressed concern that implementation of Executive Order 13673 will result in the de facto debarment of contractors who disclose labor law violations. Others disagree, arguing that vendors will receive more procedural protections under the executive order than under current law, which, as previously noted, generally does not provide for vendors to receive notice or an opportunity for a hearing before being determined to be nonresponsible. Which of these two views proves to be correct seems likely to depend upon how Executive Order 13673 is implemented by the procuring agencies. The potential for impermissible de facto debarment could be said to exist, particularly insofar as the order can be seen as an attempt to standardize agencies' consideration of labor law violations in the responsibility determination process. Standardization could make it more likely for multiple contracting officers to make the same determination as to responsibility based on the same information. Multiple determinations of nonresponsibility based on the same information are not necessarily impermissible, particularly if that information is the most recent information available. However, the order expressly calls for contracting officers to consider labor law violations over the past three years when making responsibility determinations, and determinations based on the same older information could be more likely to be seen as a systematic attempt to exclude a vendor outside the formal exclusion process, than as the result of individual contracting officers independently reaching the same conclusion. On the other hand, agencies could potentially develop practices or procedures whereby they routinely pursue exclusion or labor compliance agreements in situations where there could be multiple determinations of nonresponsibility based on the same older information. If that were the case, de facto debarment could potentially be avoided, although labor rights activists and competing vendors might then raise concerns about the award of contracts to entities that they believe ought to have been found nonresponsible based on their labor law violations. (See below " Can nonresponsibility determinations be challenged? "). Can nonresponsibility determinations be challenged? As previously noted, contractors are generally not entitled to notice and an opportunity for a hearing prior to being found nonresponsible for the award of a federal contract (see " What is de facto debarment, and will implementation of the order result in de facto debarment of contractors? "). The cases of any "otherwise qualified" small business contractors who might be found nonresponsible must be referred to the SBA, which may certify as to the firm's responsibility (see " Will there be changes in the Certificate of Competency process used in determining the responsibility of small businesses? "). Outside of the SBA Certificate of Competency process, however, the FAR does not make any provisions for review or appeal of contracting officers' determinations as to responsibility within (or outside) the procuring agency. These determinations could, however, potentially be challenged in the course of a bid protest before the procuring agency, the Government Accountability Office, or the U.S. Court of Federal Claims, the three forums with jurisdiction over bid protests. In such a protest, a vendor that was denied an award because it was found to be nonresponsible could contest that determination on the grounds that the determination is arbitrary, capricious, an abuse of discretion, or otherwise not in accordance with law. Alternatively, a vendor that lost an award to a competitor which was found to be affirmatively responsible could seek to challenge that determination, although GAO regulations, in particular, permit challenges to affirmative determinations of responsibility only in narrow circumstances. Prevailing in such bid protests could be difficult, though, because the reviewing tribunals afford substantial deference to the contracting officers' determinations as to responsibility on the grounds these determinations are committed to agency discretion by law, and the procuring agencies "must bear the brunt of any difficulties experienced during performance." This generally means that the protester must show that the contracting officer's determination lacked "any reasonable basis," or was arbitrary or made in bad faith. Moreover, in cases of nonresponsibility determinations, review is generally limited to the information available to the contracting officer at the time of the determination. The review could potentially encompass information not considered by the contracting officer in cases where the contracting officer has made an affirmative determination of responsibility. However, affirmative determinations of responsibility are not necessarily seen as invalid just because information exists that is adverse to the contractor, so long as this information was known to and not ignored by the contracting officer when making the determination. Limitations on jurisdiction and standing could also effectively limit vendors' ability to challenge responsibility determinations in certain cases, since the protest forums will generally only hear protests that are seen to be timely. The protester may also be required to show that any alleged violations of the law are prejudicial to it, in the sense that the protester would be in line for the award but for the alleged violation. Are government contractors required to make other representations or disclosures? The proposed FAR amendments implementing Executive Order 13673 call for contractors to represent whether there has been any "administrative merits determination, arbitral award or decision, or civil judgment, rendered against [them] within the three-year period preceding the date of the offer for violations of labor laws." In addition, in cases where a contractor which has represented that there has been such a determination or judgment is the subject of a responsibility determination because the contractor is line for an award, that contractor must disclose "[t]he labor law violated" and other information to the contracting officer. If these proposed requirements are implemented, the representations and disclosures as to labor law violations would not be the only representations or disclosures that federal contractors are required to make in responding to solicitations or as terms of their contracts. Currently, contractors are required to make representations or certifications regarding whether, among other things, they (1) are inverted domestic corporations; (2) have delinquent federal taxes in an amount greater than $3,000; or (3) have been convicted of or subject to a civil judgment for specified offenses, including fraud or a criminal offense in obtaining a government contract or subcontract. Federal contractors are also required to disclose certain information, including information "sufficient" to identify the nature and extent of any human trafficking offense and the individual(s) responsible for the conduct; any personal conflict-of-interest violation by a contractor employee performing acquisition functions closely associated with inherently governmental functions; and "credible evidence" that a principal, employee, agent, or subcontractor of the contractor has committed a violation of federal criminal law involving fraud, conflict of interest, bribery, or gratuity violations found in Title 18 of the United States Code, a violation of the civil False Claims Act, or significant overpayments in connection with the award, performance, or closeout of the contract or any subcontract thereunder. What would happen if a contractor falsely certifies as to its labor law violations? The government has a number of potential avenues of recourse if a contractor were to falsely represents that "[t]here has been no administrative merits determination, arbitral award or decision, or civil judgment, rendered against [it] within the three-year period preceding the date of the offer for violations of labor laws," as is required under the proposed FAR clause. This proposed clause expressly states that If it is later determined that the Offeror knowingly rendered an erroneous representation, in addition to other remedies available to the Government, the Contracting Officer may [but is not required to] terminate the contract resulting from this solicitation in accordance with the procedures set forth in [the FAR]. Depending upon the facts and circumstances of the case, "other remedies" could include, but are not limited to, liquidated damages, equitable reductions in price or other consideration, reprocurement at the contractor's expense, and reduction or withholding of award or incentive fees. The contractor could also be subject to negative performance evaluations or debarment or suspension. Monetary damages for fraud are also possible, under the civil False Claims Act, the Contract Disputes Act, or the Program Fraud Civil Remedies Act, as discussed in CRS Report R43460, Contractor Fraud Against the Federal Government: Selected Federal Civil Remedies , by [author name scrubbed]. How does Executive Order 13673 compare to the Clinton Administration's contractor responsibility regulation? Commentators have noted similarities between the Fair Pay and Safe Workplaces order and certain amendments that were made to the FAR by the Clinton Administration and subsequently revoked by the George W. Bush Administration. The Clinton Administration's amendments could be said to resemble the Fair Pay and Safe Workplaces order in that they called for contracting officers to consider prospective vendors' "compliance" with legal requirements in determining whether vendors have a satisfactory record of integrity and business ethics, as Executive Order 13673 does (see " What does the executive order require? "). The Clinton-era amendments also called for vendors to make certain representations and disclosures about whether they have been subject to specified legal actions related to violations of covered laws, as the FAR amendments proposed by the Obama Administration would do. On the other hand, there are some notable differences between the Clinton Administration's amendments to the FAR and the FAR amendments proposed, to date, by the Obama Administration to implement the Fair Pay and Safe Workplaces order. For example, the Clinton Administration considered compliance with the broad categories of "tax laws, labor and employment laws, environmental laws, antitrust laws, and consumer protection laws," while the Obama Administration focuses upon compliance with 14 specific federal labor and employment laws and their state equivalents. The Clinton Administration also amended the "general standards" of responsibility in Section 9.104-1 of the FAR to prescribe that vendors [h]ave a satisfactory record of integrity and business ethics including satisfactory compliance with the law including tax laws, labor and employment laws, antitrust laws, and consumer protection laws. The Obama Administration, in contrast, does not propose to amend these standards, but instead would address compliance with labor laws primarily in a new Subpart 22.20 of the FAR, one provision of which would specify that [t]he contracting officer['s] duty to consider labor violations under this paragraph [which addresses pre-award evaluation of an offeror's labor violations] is in addition to the contracting officer['s] duties under 9.104-5 and 9.104-6 [which are among the FAR provisions addressing responsibility determinations generally]. In addition, the Clinton Administration amended the FAR provisions regarding the rejection of bids and notifications to unsuccessful offerors to require that contracting officers promptly notify vendors of nonresponsibility determinations and the basis for such determinations. The Obama Administration has not proposed any such changes to date, instead leaving in place the preexisting rules regarding notifications of nonresponsibility determinations (i.e., such notifications are generally not made). The Clinton Administration's amendments were revoked by the George W. Bush Administration shortly after their effective date, making it difficult to assess what their effects on the procurement process would have been. Subsequently, on December 1, 2011, the Department of Agriculture promulgated regulations calling for the incorporation into its contracts of standard terms regarding "labor law violations," which would have specified that, In accepting this contract award, the contractor certifies that it is in compliance with all applicable labor laws and that, to the best of its knowledge, its subcontractors of any tier, and suppliers, are also in compliance with all applicable labor laws. Under these terms, the contractor would also have agreed to "promptly report" to the contracting officer any "formal allegations" or "formal findings" of "non-compliance" with labor laws. However, like the Clinton Administration's FAR amendments, these regulations were withdrawn prior to their effective date. What are Congress's options in response to the order? Congress could potentially take various actions—or no action—in response to Executive Order 13673, depending upon its policy preferences. If opposition to the order and its requirements is sufficiently widespread, Congress could enact legislation that would bar implementation of the order. Such legislation could take the form of an appropriations rider, barring the use of appropriated funds to promulgate the proposed FAR amendments or to implement any FAR provisions requiring that contractors disclose violations of labor laws. Alternatively, Congress could amend existing procurement or other statutes in such a way that these statutes would be contrary to the requirements of the executive order, as Congress did in 2011 in response to a draft executive order reportedly being considered by the Obama Administration that would have required contractors to disclose their political contributions. As previously discussed, the President's authority under FPASA has not been seen to permit the President to impose requirements upon the procurement process that conflict with statutory enactments. (See " What is the President's authority to impose these requirements? "). On the other hand, if Congress were to favor the disclosure requirements, it could enact legislation to codify these requirements, thereby ensuring that they are not repealed by a subsequent administration. Certain procurement-related executive orders issued by prior Presidents have been revoked by later Presidents. Supporters of the policies underlying the executive order could also enact legislation to make any desired expansions, clarifications, or refinements of the labor violation disclosure or other requirements. For example, in 2008, Congress enacted legislation that extended the so-called "mandatory disclosure rule," which requires contractors to disclose "credible evidence" of certain criminal violations, among other things, then being developed by the executive, to encompass contracts for commercial items or performed overseas. Such contracts had been excluded by the executive in earlier versions of the rule.

On July 31, 2014, President Obama issued Executive Order 13673, Fair Pay and Safe Workplaces, with the stated intent of "increas[ing] efficiency and cost savings in the work performed by parties who contract with the Federal Government by ensuring that they understand and comply with labor laws." The order requires that executive branch procurement contractors disclose information about their compliance with 14 specified federal labor laws and their state equivalents as part of the award process. It also requires that agency contracting officers take these disclosures into consideration when assessing whether prospective vendors have a "satisfactory record of integrity and business ethics" as part of the responsibility determination process. Agencies generally cannot award a procurement contract without determining that the prospective vendor is "affirmatively responsible" for purposes of the contract. In addition, the order imposes certain requirements intended to promote "paycheck transparency" for contractor employees and limit mandatory arbitration of employee claims. Subsequently, on March 6, 2015, the Department of Labor (DOL) issued guidance regarding the roles and responsibilities of the labor compliance advisors whom the order requires to be appointed within procuring agencies. Then, on May 28, 2015, DOL issued proposed guidance regarding the specific labor law violations to be considered when assessing vendors' responsibility, and the Federal Acquisition Regulatory Council (FAR Council) proposed amendments to the Federal Acquisition Regulation (FAR) to implement Executive Order 13673. Executive Order 13673 and its proposed implementing guidance and regulations have prompted debate about both the specific labor and employment policies they seek to promote, as well as the general practice of using the federal procurement process to further social and economic objectives that some have described as "only indirectly related to conventional procurement considerations." In particular, there have been questions about the President's authority to impose the requirements of Executive Order 13673; how the requirements of the order compare to preexisting law; and whether the order will result in blacklisting or the de facto debarment of government contractors. The term blacklisting is sometimes used to describe a practice of formally or informally identifying—sometimes through the compilation of lists—disfavored vendors with whom the government will not do business. The term de facto debarment describes the effective exclusion of vendors from the procurement process without the procedural protections afforded to them in formal debarment and suspension proceedings. Depending upon the facts and circumstances of the case, both blacklisting and de facto debarment could, if they occur, be found to have deprived contractors of due process in violation of the Fifth Amendment to the U.S. Constitution. This report provides the answers to these and other questions about Executive Order 13673 and its proposed implementing guidance and regulations. The questions and answers are organized into three sections. The first section provides an overview of the executive order and related materials; the second discusses the order's relationship to existing law; and the third addresses other questions, including the President's authority to issue the order. In considering these questions and answers, note that certain DOL guidance and the proposed FAR amendments implementing Executive Order 13673 have not been finalized, and the order is not scheduled to be implemented until 2016, at the earliest.

Introduction This report discusses the temporary change in the tax law governing charitable donations of food. Recent legislation expanded the existing tax incentive for firms that are C corporations to all businesses that donate food to charity. In response to the devastation from Hurricane Katrina, the Katrina Emergency Tax Relief Act of 2005 (KETRA, P.L. 109-73 ) was enacted. That legislation included a temporary expansion of the tax deduction for charitable contributions of food inventory. The law allowed all donors of wholesome food inventory to benefit from the enhanced deduction for donations made between August 28, 2005, and January 1, 2006. The Pension Protection Act of 2006 ( P.L. 109-280 ) extended the temporary expansion through January 1, 2008. The Emergency Economic Stabilization Act of 2008 ( H.R. 1424 ; P.L. 110-343 ), which was signed into law on Friday, October 3, 2008, retroactively extends the temporary expansion of eligible donors through December 31, 2009. In the 110 th Congress, the Good Samaritan Hunger Relief Tax Incentive Extension Act of 2007 ( S. 689 ) proposes to permanently extend and expand the charitable deduction for contributions of food inventory. H.R. 3976 proposes making the provision permanent. H.R. 3996 , the Temporary Tax Relief Act of 2007, and H.R. 6049 , the Renewable Energy and Job Creation Act of 2008, which were passed by the House, both include a provision to retroactively extend the temporary expansion of eligible donors through December 31, 2008, as do H.R. 3970 , the Tax Reduction and Reform Act of 2007; S. 3335 , the Jobs, Energy, Families, and Disaster Relief Act of 2008; and S. 3125 , the Energy Independence and Tax Relief Act of 2008. Proposals to retroactively extend the temporary expansion of eligible donors through December 31, 2009, have been made in S. 2886 , the Alternative Minimum Tax and Extenders Tax Relief Act of 2008; S. 3098 , also titled the Alternative Minimum Tax and Extenders Tax Relief Act of 2008; and S. 3322 and its companion H.R. 6587 , the Midwestern Disaster Tax Relief Act of 2008. H.R. 3628 , the Promoting Charitable Actions Act of 2007, proposes extension through 2011. Additionally, S. 1132 proposes to qualify Indian tribes as eligible recipients of tax deductible contributions of food inventory. S. 2420 , the Federal Food Donation Act of 2008, which became law in June 2008 ( P.L. 110-247 ), revised the Federal Acquisition Regulation to require certain contracts to private entities to include a clause that encourages the donation of food. Specifically, the law requires that all contracts above $25,000 for the provision, services, or sale of food in the United States, or for the lease or rental of Federal property to a private entity for events at which food is provided in the United States, shall include a clause that encourages the donation of excess, apparently wholesome food to nonprofit organizations that provide assistance to food-insecure people. The legislation does not address the tax treatment of those donations. Tax Law A discussion of the tax treatment for contributions made by all types of businesses is provided. Generally, these contributions may be made only to certain types of nonprofit organizations, may be deductible for income tax purposes only up to specified limits, and may be in the form of either cash or property. The charitable contribution deduction is allowed only for the taxable year in which the contribution is made; any unpaid subscriptions or pledges are not deductible until actually fulfilled. Some of the more typical organizations to which contributions are deductible include churches, universities, schools, and hospitals, as well as many other public assistance charities (such as food pantries, soup kitchens, homeless shelters, etc). If a contribution is made to an individual, such as a homeless family living on the street, that contribution is not deductible even though actuated by charitable motives. In order to qualify as an organization to which contributions are deductible, the recipient must be organized or incorporated in the United States or in one of its possessions and certified as a charitable organization by the Internal Revenue Service. Contributions to foreign charitable organizations are not deductible. A donation, however, to an otherwise qualified organization is deductible even though some portion of the funds of such organization are used in foreign countries for charity. Limitation on the Amount Deductible The deduction for contributions (either in cash or in property) made by corporations is limited to 10% of taxable income (computed with adjustments). The 10% cap was raised from 5% by the passage of the Economic Recovery Tax Act of 1981 . The legislative history of the 1981 Act indicates that Congress was hopeful that corporate charitable contributions would be stimulated by the increase in the cap. Carryforward Although the deductible portion of any contribution by corporations may not exceed 10% of taxable income in any given year, if contributions exceed this limitation, the excess may be carried forward to future tax years. Corporations may carry over excess charitable contributions and compute tax as though the excess gifts were actually made in such subsequent years. Thus, when charitable contributions in one year exceed the limitation, a corporation might ultimately secure the full benefit (taxwise) of the contribution even though denied part of it in the year in which the contribution was initially made. The law allows that excess charitable contributions may be carried forward for a five-year period. This carryforward provision applies to both gifts of cash or property. Contributions of Property—Including Food Products In general, if a charitable contribution is made in the form of property, the basis for the charitable deduction is dependent on the type of taxpayer (i.e., individual or form of business entity), to whom the property is donated, and for what purpose the donated property is to be used. Corporate gifts of property that would generate capital gains if sold (e.g., stocks and bonds) are deductible by corporations at market value. However, gifts of depreciable property are deductible at the corporation's basis rather than fair market value. Thus, under current tax law, the deduction is reduced by previously taken depreciation. In the case of fully depreciated machinery and equipment, the allowable charitable contribution deduction would be zero. Under current tax law, C corporations are provided more favorable tax treatment of contributions of certain types of inventory and other ordinary-income property to specified charitable organizations. This provision is temporarily available to S corporations , partnerships, and sole proprietorships. Through 2007, all donors are allowed to deduct their cost plus one-half the difference between their cost and the market value of the donated goods. However, in no case may the deduction's value exceed twice the cost basis. This special tax inducement is provided for capital assets defined in Internal Revenue Code §1221(1) or (2). Thus, this provision allows very large corporations a bigger deduction for charitable contributions of qualified tangible personal property. For a donor to receive this enhanced deduction, the gift must be made to a "qualified" tax exempt organization. Further, the property must be "used by the donee solely for the care of the ill, the needy, or infants." The donee is not permitted to exchange what has been transferred for money, other property, or services. The donee must furnish the donor with a statement that it does not intend to transfer the donation and that it will be used for the care of the ill, the needy, or infants. If the property is subject to regulation by the Federal Food, Drug, and Cosmetic Act it must satisfy the requirements on the date of transfer and for 180 days prior thereto. The enhanced deduction for food is available only for food that qualifies as "apparently wholesome food." "Apparently wholesome food" is defined under the Katrina Emergency Tax Relief Act of 2005 (KETRA) as food intended for human consumption that meets all quality and labeling standards imposed by federal, state, and local laws and regulations even though the food may not be readily marketable due to appearance, age, freshness, grade, size, surplus, or other conditions. Summary of Restrictions In summary, current law provides that the charitable deduction for contributions of inventory and other property is as follows: The gift must be made to a U.S. charitable organization; There is a 10% limitation on the total amount a corporation can deduct as charitable contributions; Contributions made in excess of this limitation may be carried forward for the next five years; Special rules are available for gifts made by C corporations of tangible personal property (inventory) when donated to qualified charitable organizations for the care of the ill, the needy, or infants. It must be established that the fair market value of the product exceeds basis in order to use the enhanced deduction. Past Legislative Proposals As noted earlier in this report, current law provides an enhanced deduction for donations made by C Corporations of property, which includes food products, for the care of the ill, the needy, or infants. This enhanced deduction available for food products is used primarily by businesses for unsaleable products. The most frequent reasons for products not being sold at market are errors in labeling, merchandise that has been crushed or dented, or products that may be too close to the expiration date recommended for sale. There have been four parts to legislation proposing to change the tax law for donated food products, two of which were addressed in the 109 th Congress. Typically, the proposals would extend the enhanced deduction for food inventory to all taxpayers engaged in a trade or business. Secondly, the enhanced deduction would be available only for "apparently wholesome food" which is newly defined under some of the legislative proposals. Third, the determination of basis of the qualified contributions would be set as a percentage of the food's fair market value. Finally, some proposals have set the fair market value of donated foods to be the same price as similar food items sold by the taxpayer at the time of the contribution, or, in the recent past. Apparently Wholesome Food Typically, legislative proposals have defined "apparently wholesome food" to include food that "may not be readily marketable due to appearance, age, freshness, grade, size, surplus, or other conditions." The new law provides a slightly more rigorous definition. The inclusion of the definition and the discussion of how fair market value is to be determined is designed to lessen valuation problems for taxpayers caused by a lack of clarity in the regulations. A court case in the 9 th Circuit was also at odds with the regulations regarding donation valuation as issued by the Internal Revenue Service and the findings in that case clarified the issue. The court case held that the value of surplus bread inventory donated to a qualified charity was determined to be the same as the full retail price of the bread. The Internal Revenue Service (IRS) contended that the retail value of the bread was half the normal sales price since the industry practice of major bakers is to discount four-day-old bread, but if the court had ruled the value of the bread was half the retail selling price, the donor would have received no tax benefit and, thus, no encouragement to make such charitable donations. The court's findings contradicted regulations issued by IRS. The new definition of "apparently wholesome food" parallels the definition included in the Bill Emerson Good Samaritan Food Donation Act (42 U.S.C. 1791(b)(2)). That act defines the term "apparently wholesome food" as food that meets all quality and labeling standards imposed by federal, state, and local laws and regulations even though the food may not be readily marketable due to appearance, age, freshness, grade, size, surplus, or other conditions. This definition was also used in the temporary law enacted by the Katrina Emergency Relief Act ( P.L. 109-73 ). Abbreviated History Prior to the passage of the Tax Reform Act of 1969 , the general rule was that taxpayers who contributed appreciated property to charities were allowed a charitable contribution for the fair market value of the property. Moreover, no tax was imposed or collected on the appreciation. As an example, a farmer making a charitable contribution of a portion of his crop not only received a tax deduction of the fair market value of the donated crops, but also escaped the tax on the difference between his crop production costs and fair market value. Because the tax savings from the charitable deduction (in the case of ordinary income property) was measured by the taxpayer's marginal tax rate, it was possible for taxpayers to make contributions which permitted a greater after-tax benefit than would have been received if the crop had been sold and the farmer allowed to keep the proceeds after paying tax on the gain. It should be remembered that tax rates at that time were much higher than today's rates. Since this provision was seen as unfair when compared with those making charitable cash gifts, the Tax Reform Act of 1969 changed the law so that the appreciated value was to result in a reduction of the contribution deduction to the extent of the appreciation. It was with passage of the Tax Reform Act of 1976 ( P.L. 94-455 ) that corporations were provided more favorable tax treatment of contributions of inventory (such as food) to certain charitable organizations. The 1976 Act provided that such gifts by corporations were to be based on the taxpayer's basis in the property and one-half of the unrealized appreciation as long as the deduction did not exceed twice the property's basis. In a summary of the act, it was stated that the enactment of the Tax Reform Act of 1969 had resulted in reduced contributions of certain types of property to charitable institutions. In particular, those charitable organizations that provide food, clothing, medical equipment, and supplies, etc. to the needy and disaster victims had found that contributions of such items to those organizations were reduced. It was stated in the general explanation of the law that Congress believed that it was desirable to provide a greater tax incentive than in prior law for contributions of certain types of ordinary income property which the donee charity uses in the performance of its exempt purposes. However, Congress believed that the deduction allowed should not be such that the donor could be in a better after-tax situation by donating the property than by selling it. Statistical Trends In 2006, total charitable giving was estimated to have reached $295 billion. Corporations and their foundations contributed $12.7 billion in cash and in-kind donations. Two predictors of corporate giving, corporate pretax profits and the gross domestic product both rose in 2006. Individual giving represented 75.6% of total giving and corporate gifts were 4.3% of the total (with foundations and bequests representing the remainder). However, these numbers mask the importance of corporate charitable gifts because religious organizations receive little funding from either corporate donors or their foundations since individuals are the primary support of religious institutions. The American Association of Fund-Raising Counsel (AAFRC) Trust for Philanthropy, Inc. found that for 2006, contributions to religion represented 32.8% of all charitable gifts. It is important to remember that companies support non-profits through cause-related marketing, public relations, sponsorships, contracts, and other joint promotional activities as well as through advertising expenditures. These types of expenditures are not shown as charitable gifts. In an earlier edition of Giving USA , the AAFRC Trust for Philanthropy, Inc. made the following four points: Corporate giving has ranged from a low point of 0.7% to a high of 2.3% of pretax income over 30 years, with historical variation largely due to changes in tax law. Profits grow fastest in the service industries, like banking and telecommunications. Non-manufacturing companies cannot take advantage of tax-deductible gifts of inventory that make up much of the manufacturing sector's charitable activity, even though non-manufacturers make up a large component of profit growth. There is a trend toward strategic corporate support, which is not counted as a charitable gift by the company, the IRS, or Giving USA. Nonetheless, this activity appeals to both companies and non-profits and may be a mutually satisfactory substitute for charitable giving. There is no practical reason why companies should use pretax income as the basis for determining their charitable contribution levels. There is no reason not to pursue a strategy in which charitable support to non-profits increases without consuming an increasing share of corporate profits. The Conference Board, which has surveyed the charitable giving behavior of firms, wrote that, in 1999, "companies reported that 28% of their contributions were in forms other than cash donations, the highest level of non-cash expenditures ever reported by companies in the Conference Board Analyses of cash and non-cash giving." Among the industries reporting the largest non-cash percentages were "chemical companies, which donated 68% of their 1999 contributions in forms other than cash; pharmaceutical companies, with 64%; manufacturers of computer and office equipment, with 59%; printing, publishing and medical firms with 48%." In a table of cash and non-cash contributions by industry, it was reported that the 10 companies in the Food/Beverage/Tobacco industrial classification gave 28% of their contributions in in-kind giving. An article which appeared in Worth magazine provided information on the 50 companies that gave the most in 1999. The table which follows is a subset of the five food concerns which appear in the complete listing of 50 companies. Several observations may be made by comparing the companies in Table 1 with the statistics of the remaining 45 companies that made the largest charitable gifts. In general, giving by food companies as a percentage of profits is high. In Table 1 , it is shown that Sara Lee gave 3.3% of profits (the lowest percentage of the firms listed in the chart). According to the article in Worth , only four nonfood related companies gave a greater percentage of their profits than Sara Lee (Dupont; J.C. Penney; Target, and the United Parcel Service). All of the food companies showed substantial in-kind giving while 15 of the remaining 45 companies showed no in-kind giving at all. With the exceptions of Gannett and Dupont, all companies that provided greater in-kind giving than cash giving also benefit from the enhanced deduction provision in the Internal Revenue Code. Those companies are pharmaceutical/health care or computer/information technology firms. Issues and Observations Corporate charitable contributions are rarely a prominent issue in consideration of U.S. tax policy. First, corporate managers have been careful about making charitable contributions since their responsibility is to provide the highest rate of return that is legally possible to those who have invested in the corporation. Often, making charitable contributions conflicts with this mandate. Having said that, corporations do make charitable gifts all the time. It is also true that their contributions are usually intended to enhance the corporation's visibility or image before the consuming public. That is, goodwill is a valuable asset for a corporation, and charitable contributions help to create that goodwill. However, it generally makes no difference to a corporation whether it deducts its payment as a charitable contribution or as a business advertising expense because either deduction lowers its federal income tax by the same amount. Only when the special rules for contributions of inventory come into play does it make a difference as to how the gift is viewed and how the value of the contribution changes under current tax law. Equity Concerns There are equity challenges to extending the current enhanced tax deduction for corporate contributions of food to all taxpayers engaged in a trade or business, such as small family farms and family operated restaurants (sometimes referred to as entrepreneurs in this report). A primary obstacle is that the cost basis could be higher for corporations than for a small business. This result can be caused by the inclusion of wages and germane taxes (such as Social Security, unemployment taxes, etc.) that are paid by corporations, but are not always included in the cost basis of small businesses such as farmers who grow crops or owner-chefs who own individual restaurants. Since it can be expected that (one-half of the) appreciation of the crops generally would be lower for corporations, with the full deductibility of the cost basis, than for individual farmers, an inherent advantage would still be given corporate farmers with their higher cost basis. For example, if a corporation has a cost basis of $7,000 with appreciation of $3,000, this equals a market price of $10,000. A small entrepreneur would more likely have a cost basis of $3,000 and an appreciation rate of $7,000 for the same $10,000 market price. In the corporate case, one-half of the appreciation ($1,500) and the cost basis ($7,000) is equal to $8,500. In the case of the entrepreneur, one half the appreciation ($3,500) plus the cost basis ($3,000) is equal to $6,500. Thus, the corporation would receive nearly $2,000 more in deductibility. It can be argued that the temporary law provides more equity among all taxpayers engaged in a trade or business than the current, permanent law which provides the enhanced deduction only to C corporations and does not include provisions for S businesses or individuals. Tax Rate Differentials In addition, it should be noted that tax rates and the graduation of those rates are different for individuals and corporations. Current law provides for corporate tax rates which range between 15% and 35% depending on the company's taxable income (phase-outs can make the effective rates for certain corporations rise as high as 39%). In tax year 2005, individuals will be subject to six tax rates ranging from 10% to 35%. In all cases, whether corporate or individual, the value of the enhanced deduction is dependent on the applicable tax rate. Typically, those with higher incomes would receive more advantage than those with lower incomes under the proposal. Thus, it does not appear that full equity can be achieved through the extension of the current enhanced deduction for corporate gifts of food inventory to all taxpayers engaged in a trade or business. For example, a large corporation will most likely have a 35% rate. A small farmer filing a joint return whose income is less than $182,800 would be subject to a 28% rate. It may also be noted that the law applies only to food inventory, and as such, may discriminate against other similar forms of charitable contributions (such as gifts of clothing for the poor). An Alternative Possibility: Tax Credit From an economic perspective, the use of a tax credit, rather than a deduction, would better promote equity among all business taxpayers. Tax deductions are useful in defining income that should be taxable. For instance, in the case of individuals, it is typically argued that charitable contributions are made using funds that are no longer within the taxpayer's control and, thus, monies to which the taxpayer may no longer lay real claim. In this instance, the deduction helps to define the income that should be subject to tax. Tax credits are subtracted from tax liability, whereas tax deductions are subtracted from income to determine the amount subject to tax. The net result is that for each $1 of tax credit the tax liability is reduced by $1. Deductions reduce tax liability by only a percentage of the deduction, depending upon the tax rate of the taxpayer. Tax credits are used primarily to reduce taxes directly rather than to define the base on which taxes should be collected and are frequently used as incentives. Further, tax credits can be used by all eligible taxpayers (who owe taxes) since they are subtracted directly from tax liability. Other Issues We have assumed that farmers may donate crops to qualified organizations for gleaning, which is defined as the act of a tax-exempt organization that either harvests the crop or gathers the grain or other produce left in the field after an initial harvest. A farmer's decision to abandon crops in the field is typically made at the time of harvest. Fixed costs such as seed, fertilizer, and other costs such as purchased irrigation water (typically referred to as sunk costs) are not taken into consideration when making the decision to harvest. The decision to move a crop to market is based on whether the farmer will receive a market price for the crop that exceeds his cost for harvesting, packing and transporting the crop. In those cases where the decision is marginal (i.e., the point at which the farmer may break even) to harvest or not to harvest, it would be to the farmer's advantage to make use of the proposed enhanced deduction. By opting to have the crop gleaned by an exempt organization, no expenses associated with the harvest would be incurred, while a deduction would be available to offset taxation of the farmer's other taxable funds. Alternatively, the use of a carryover of the deduction for offsetting taxable funds could be available for up to five future tax years. Appropriate Valuation of Donated Goods A primary problem with products that have shelf lives is determining an appropriate value for the goods donated. Under certain proposals, the fair market value can be determined by the price of the same or similar food items sold by the taxpayer at the time of the contribution (or, sold in the recent past). Prior legislative language provided a safe harbor for taxpayers by defining "apparently wholesome food" that is eligible for donation. Under this proposed definition, the food may be apparently wholesome even if it is not readily marketable "due to appearance, age, freshness, grade, size, surplus, or other conditions." This definition is the same as provided in the Bill Emerson Good Samaritan Food Donation Act . In discussing this valuation problem, which is now a part of the legislative history, a court case was cited where the Tax Court held the value of surplus bread inventory donated to a qualified charity was determined to be the same as the full retail price of the bread. The Internal Revenue Service (IRS) contended that the retail value of the bread was half the normal sales price since the industry practice of major bakers is to discount four-day-old bread. If the court had ruled the value of the bread was half the retail selling price (following industry practice), then Lucky Stores would have received no tax benefit and, thus, no encouragement to make such charitable donations. The court's findings contradicted regulations issued by IRS. One effect of passage of the proposed legislation would be to make the ruling in the Lucky Stores case the law of the land rather than being applicable only in the 9 th Circuit. Opponents of the provision may argue that there are economic incentives (rather than tax incentives) for stores to continue to make such gifts. For example, there are costs associated with disposal of product. Obviously, the gifting of products reduces disposal costs. In addition, companies can expect goodwill (commonly referred to as "cause marketing"). High profile contributions can contribute to image building for the firm and influence public opinion. It is anticipated that opponents of the legislation may argue that the changes would reduce revenues to the federal government. The Joint Committee on Taxation estimated that enactment of the provision in the "Care" legislation introduced during the 108 th Congress would have resulted in a revenue loss of $255 million over the five-year period of 2002-2006, with an estimated increase to $626 million over the 10-year period of 2002-2011. It was expected that other industries would have requested similar tax treatment, which, if granted, would have lead to an additional reduction in tax receipts at a time of increasing budget deficits. Direct Subsidy Programs as an Alternative In the past, some have argued that it would be preferable for the government to pay directly for the additional support of food programs rather than creating expenditures through the tax system. Direct government subsidies would assure that such funds were likely to be allocated under objective procedures and would, therefore, go to all the poor strictly based on need. Further, it is argued that a direct government spending program would assure that expenditures would be subjected to periodic review under the budgetary process. Some feel that the expansion of the charitable deduction to all taxpayers engaged in a trade or business provides greater (food) benefits to people living near farm production areas where the food is harvested, more so than to people living far from farm areas in large cities. Further, gifts made by farms are likely to be seasonal. Others note that more restaurants are located in populated areas and that they may be the primary beneficiaries of the provision. Proponents of the proposals are most likely to argue that more food would be available to the elderly, poor, and infants for each tax expenditure dollar than through other direct government food expenditure programs. Another argued advantage would be that, most likely, there would be minimal federal government involvement in administering the program. Both sides have agreed that the proposed change would add complexity to the tax return filing process for a greater number of taxpayers in the charitable contribution arena. Some have suggested that since there is a sunset provision Congress would have an opportunity to evaluate the success of the change.

Tax law provides an enhanced deduction for certain charitable contributions of food inventory. The value of the existing deduction is the corporation's basis in the donated product plus one half of the amount of appreciation, as long as that amount is less than twice the basis in the product. This deduction has generally been limited to contributions made by a certain type of corporation, C corporations. The Katrina Emergency Tax Relief Act of 2005 (KETRA, P.L. 109-73) temporarily extended the enhanced deduction to include contributions made by other types of businesses, sole proprietors, partnerships, and S corporations in particular. The Pension Protection Act of 2006 (P.L. 109-280) further extended the temporary expansion of qualified donors through January 1, 2008. The Emergency Economic Stabilization Act of 2008 (H.R. 1424; P.L. 110-343), which was signed into law on Friday, October 3, 2008, retroactively extends the temporary expansion of eligible donors through December 31, 2009. Other legislation in the 110th Congress has also proposed changes to the deduction. S. 689 proposes to permanently extend and expand the charitable deduction for contributions of food inventory, while H.R. 3976 proposes making the provision permanent. H.R. 3996 and H.R. 6049, both passed by the House, include provisions to retroactively extend the temporary expansion of eligible donors through December 31, 2008, as do H.R. 3970, S. 3335, and S. 3125. S. 2886, S. 3098, and S. 3322 and its companion H.R. 6587 H.R. 3628 proposes extension through 2011. Additionally, S. 1132 proposes to qualify Indian tribes as eligible recipients of tax deductible contributions of food inventory. S. 2420, the Federal Food Donation Act of 2008, which became law in June 2008 (P.L. 110-247), revised the Federal Acquisition Regulation to require certain contracts to private entities to include a clause that encourages the donation of food. A review of charitable giving by the 50 companies that were the largest corporate donors revealed that five food concerns in that group showed substantial in-kind giving in 1999. Other companies in the pharmaceutical/health care or computer/information technology industries also made substantial in-kind gifts. These firms, like food companies, are provided an enhanced deduction for in-kind gifts. It appears that in the case of large firms, the enhanced deduction has stimulated contributions. Although the temporary expansion of the enhanced deduction may have the effect of reducing equity differences between C corporations and other business concerns, it may not entirely eliminate them. If the intent is to resolve the equity issues, transforming the deduction to a credit might be more effective. Unlike deductions, whose value is based on the tax rate of the taxpayer, tax credits provide dollar-for-dollar value and do not fluctuate with the taxpayer's marginal tax bracket. This report will be updated to reflect major legislative developments.

Introduction The Child and Family Services Review (CFSR) is the central and most comprehensive component of federal efforts to determine state compliance with federal child welfare policies and, equally, to help ensure that positive outcomes are achieved for the children and families served by state child welfare programs. The review intends to gauge state efforts and ability to achieve the primary goals of safety and permanence for children, along with well-being for children and their families. The U.S. Department of Health and Human Services (HHS) began the first onsite reviews in March 2001 and, as of March 2004, had completed the initial round of the CFSR in all states, the District of Columbia and Puerto Rico. In this report, both the District of Columbia and Puerto Rico will be referred to as "states." Many states were found to have substantially achieved the goal of safety, permanence, or well-being for a majority of the cases reviewed and to have in place systems adequate to achieve positive outcomes for children. At the same time, the initial round of CFSRs found that no state's child welfare programs met the criteria that HHS established as demonstrating "substantial conformity" with all of federal child welfare policy requirements. As a result, all states have or are implementing Program Improvement Plans (PIPs). To avoid financial penalties associated with noncompliance, states must meet the improvement goals established in their PIP. Although the final CFSR regulation states that a subsequent full CFSR is to occur in each state two years after the approval of a state PIP, in practice this has been judged impossible (e.g., such a time frame would mean that a state's second-round CFSR performance would be based on the same data that are used to assess the success of the initial PIP). The second round of CFSRs is now being planned with 15 states (DE, NC, VT, IN, NM, GA, KS, DC, TX, MA, AZ, AL, OK, OR, and MN) slated for an onsite review from March through September 2007. This report begins with a short history of the legislation and other factors that led to the creation of the current CFSR and then briefly describes how a CFSR is conducted and what "substantial conformity" with federal child welfare policy means in the context of this review. Much has been made of the fact that no state was found to be in substantial conformity with all aspects of federal policy reviewed during the initial (FY2001-FY2004) round of the CFSRs. This report seeks to better understand that fact by looking closely at state performance on each of the performance indicators that determined compliance. Taking apart this general "not in substantial conformity" finding permits a more complex understanding of state performance, and the report uses this analysis to identify and discuss those areas in which states showed the greatest inability to achieve compliance with federal policy. (Readers should note that in addition to the text describing state performance, tables included in Appendices B and C of the report provide detailed ratings information for each state and Appendix D presents information on the case characteristics (e.g., age or race/ethnicity of child in case being reviewed vis-à-vis outcome achievement)). Finally, the report concludes with a brief discussion of 1) how penalties for non-compliance are assessed; 2) the requirement that states not in compliance with federal policy develop Program Improvement Plans (PIPs) ( Appendix A shows the status of PIP implementation); 3) some of the criticisms of how the initial CFSR assessed state performance (especially with regard to the national standards); and 4) planning for the second round of CFSRs. Origins of the CFSR With the 1980 Adoption Assistance and Child Welfare Act ( P.L. 96-272 ), Congress established the basic framework for the current federal-state child welfare programs. That legislation created a set of federal protections applicable to all children in foster care (e.g., a written case plan and regular case review). States were required to provide these protections, without regard to a child's eligibility for federal foster care funding, if they wished to ensure receipt of their full funding for Child Welfare Services (authorized under Title IV-B of the Social Security Act). To determine if states were indeed providing these protections to all children and were thus eligible for their full Child Welfare Services allotment HHS created "427 reviews," (which were named for the Section of the Social Security Act that established certain voluntary protections for all foster care children). The 427 review process was established without formal regulations and it came to be viewed as arbitrary, designed only to check policies on paper not in practice, and interested in identifying weaknesses for the purpose of punishment only (not for designing improvements). As a part of the Social Security Amendments of 1994 ( P.L. 103-432 ) Congress required HHS to develop a new system of review for state child welfare programs that focused on outcomes achieved for children and families and that would replace the older, and discredited, process-driven reviews. The same 1994 legislation also repealed the former Section 427 but made each of its formerly voluntary protections a part of the Title IV-B state plan requirements. This made the protections mandatory for all foster care children in all states. P.L. 103-432 (1994) further provided that the newly designed review system must cover the full range of statutory and regulatory child welfare policies and that the criteria used to measure states' compliance with specific factors were to be spelled out in formal regulations. It added that these regulations were also to detail what the penalties were, tie the amount of any financial penalty assessed to the degree of noncompliance found, suspend withholding of any penalties while states take corrective action, and further, rescind the penalties if a state successfully implemented corrective action. Finally, the legislation required HHS to offer technical assistance to any state needing to take corrective action. During the last half of the 1990s HHS consulted with child welfare administrators and conducted 13 pilot reviews. In January 2000, the Department released its final regulation on the Child and Family Services Review (CFSR). Guided in part by the 1997 passage of the Adoption and Safe Families Act ( P.L. 105-89 ), HHS established the overall goals of safety and permanency for children, and well-being for children and families, as the overarching aims of each state child welfare program. To achieve substantial conformity with federal child welfare policy, the final review regulation lists seven specific outcomes that a state must achieve and seven specific systems that a state must demonstrate are in operation. A CFSR Procedures Manual was subsequently produced and listed 45 items—or performance indicators—which were associated with the seven outcomes and seven systems and used to guide the review team through an evaluation of the state's performance. HHS also issued separate policy guidance on six national standards , the concept of which was outlined in the formal regulations, and which were developed as complimentary performance indicators using statewide data. Table 1 provides definitions for certain key terms used in this report. How Is a CFSR Conducted, and What Is Assessed? The CFSR begins with a state's own assessment of its child welfare programs. This self-assessment is followed by an onsite review conducted by a team of federal and state investigators. The final determination of substantial conformity with specific outcomes and systems is made following the onsite review and is based on information gathered during the onsite review as well as the analysis of statewide data for the period for which the state is under review. Statewide Assessment During the statewide assessment, a state must review and prepare a report on all aspects of its program performance, including its provision of services to children in foster care and those who have been reported to the child welfare system but who have not been removed from their homes. As an important part of this self-assessment, the state must analyze certain statewide program data and measure its own performance for the period under review against established national standards. The statewide assessment must include consultation with non-agency and community stakeholders in the system. The report prepared from this assessment serves as a basis for the state's onsite review but does not constitute a final determination of substantial conformity. Onsite Review The onsite review, conducted by a team of federal and state members, follows the statewide assessment and occurs simultaneously in three locations in the state (including the largest city or metropolitan area). It includes intensive review of a sample of cases (usually a total of 50, roughly half in foster care and half in-home cases) and interviews with a variety of stakeholders (both statewide and local), who have particular experience with or knowledge of the state child welfare programs. Stakeholders that must be interviewed include children, parents, foster parents, case workers and other service providers in the individual cases being reviewed and, with regard to the local or state program more generally, the child welfare director, case workers, foster parents, dependency or juvenile court judges, guardians ad litem , and other representatives of groups that the state consults with to design its child welfare program and services. What Does "Substantial Conformity" Mean? Both qualitative and quantitative information is solicited and analyzed to determine whether or not a state is in substantial conformity with federal child welfare policy. States were assessed on both the outcomes they achieved and the systems they had in place to achieve those outcomes. Outcomes State conformity with the seven specific outcomes is measured via case reviews and the national standards. These outcomes are: Children are first and foremost protected from abuse and neglect; Children are maintained in their own homes whenever possible and appropriate; Children have permanence and stability in their living situations; Family relationships and connections are preserved for children; Families have enhanced capacity to provide for their children's needs; Children receive appropriate services to meet their educational needs; and Children receive adequate services to meet their physical and mental health needs. In the initial round of CFSRs a state needed to achieve the desired outcome in 90% of the applicable cases reviewed. Whether a state achieved one or more of the seven outcomes in a given case was based on an onsite review of the case records combined with interviews of case-specific individuals (e.g., the foster parents, case worker, and/or child). Using a standardized survey instrument reviewers then determined whether or not each specific outcome was achieved in the case by rating each of the applicable case review indicators. (See also Table 3 .) In addition to achieving an outcome in 90% of the cases, for a state to be found in substantial conformity with two of the outcomes (one associated with safety, the other with permanency) it also needed to meet each of the six national standards (data indicators). The national standards used in the initial round of the CFSR were based on state administrative data regarding recurrence of maltreatment, incidence of maltreatment while in foster care, the rate of re-entries to foster care, the stability of foster care placements, and the state's achievement of adoptions and reunifications on a "timely" basis. For a state to meet the required national standards, an analysis of statewide administrative data for the 12 months (generally) that were a part of the formal review period must indicate that the state matched or exceeded each of the established national standards. The national standards and a description of the data used to determine a state's performance with regard to these standards is provided in Table 2 . (New data measures have been developed for use in the second round of the CFSR.) Systems State compliance with certain "system" requirements was also rated and a state was found in substantial conformity with a given system requirement if that system was in place and functioning. The systems assessed were— Statewide information system; Case review system; Quality assurance system; Staff training; Service array; Agency responsiveness to community; Foster and adoptive parent licensing, recruitment, and retention. Using a standardized survey instrument, reviewers rated 22 system indicators—one or more of which was linked to each of these systems—as either a "strength" or an "area needing improvement." In general, for a state to have a system found in substantial conformity all of the indicators associated with the system must be in place and no more than one of those same indicators can be functioning below the level described by the requirements. (Only one indicator was associated with the statewide information system so that states needed to achieve a strength rating on that single indicator to be found in substantial compliance with that system requirement.) Table 3 shows the overarching goals of the review, with the seven outcomes and seven systems, and each of the associated performance indicators, including the national standards (as they were configured for the initial review). Aggregate State Performance on Outcomes in the Initial CFSR In general both the onsite case review and the analysis of statewide data showed that states performed best with regard to safety outcomes, had greatest difficulty with most of the permanency outcomes and showed more mixed results in relation to the well-being outcomes. Case review only The case reviews indicate that, as a whole, states performed most successfully in protecting children from abuse and neglect (outcome substantially achieved in 85% of cases nationally) and in ensuring that children receive appropriate services to meet their educational needs (outcome substantially achieved in 84% of cases nationally). They were least successful in ensuring that families have enhanced capacity to provide for their children's needs (outcome achieved in 55% of cases nationally) and in providing that children have permanence and stability in their living situations (outcome substantially achieved in 56% of cases nationally). Figure 1 illustrates the percentage of cases in which states, cumulatively, were found to have substantially achieved the desired outcome, partially achieved the outcome, or not achieved or addressed the outcome. (For a list of states that achieved substantial conformity with each outcome, see Appendix B , Table B -1 . ) National standards only Table 4 shows how states performed vis-à-vis the national standards. No state met all six of the national standards. The percentage of states achieving any one of the standards ranged from about half to a little better than one out of four. As measured against the national standards used in the initial round of the CFSR, states were most successful in protecting children from maltreatment while in foster care and in ensuring a low rate of children re-entering foster care. Conversely, states were least successful at ensuring stability of placements and timely adoptions for foster care children. (For a list of states that met or did not meet each of the national standards see Appendix B , Table B -3 ). State Performance by Outcome Outcomes Assessed by Case Review and National Standards To be found in substantial compliance with two outcomes: 1) children are first and foremost protected from abuse and neglect, and 2) children have permanence and stability in their living arrangement, states must have achieved the outcome in 90% of the applicable cases and also must have met the applicable national standards. Protecting Children from Maltreatment Although the states scored relatively well on both the case reviews and national standards for this outcome, when the two tests were combined, just six states (AL, AZ, AR, DC, PA, SC) were determined to have substantially achieved the goal of protecting children from abuse and neglect. Nationally there were close to 2,350 applicable cases rated on this safety outcome. The share of cases in which individual states achieved this outcome ranged from a low of 62% (AK) to a high of 100% (NY); the median state performance was 86%. Beyond the case reviews, to determine conformity with this outcome, statewide data were examined to measure 1) the incidence of children who were the found to be the victims of child abuse or neglect more than once in a six month period; and 2) the incidence of child maltreatment occurring in foster care. Twelve states met both of these national standards. (See Appendix C , Table C -2 for information on this outcome by each state.) Permanency and Stability in Living Arrangement In general, states scored relatively poorly on both the case review and data measures used to determine conformity with this outcome and no state was found to be in conformity with this permanency outcome. This outcome was applicable only to those cases reviewed in which the children were in foster care. Nationally there were close to 1,500 applicable cases rated on this outcome. The share of cases in which individual states achieved this outcome ranged from a low of 7% (KY) to a high of 92% (ND); the median state performance was 51%. Beyond the case reviews used to determine conformity with this outcome, statewide data were examined to measure 1)for children entering foster care, the percentage of those who were re-entering care within 12 months of a prior entry to foster care; 2) for foster care children who were reunified with their parents or a caretaker, the percentage of those reunifications happening within 12 months; 3) for foster care children who were adopted, the percentage of those adoptions happening within 24 months; and 4) for children in foster care less than 12 months, the percentage who were placed in no more than two settings during that time. No state met all four of those standards. However more than half of the states (28) met the standard related to foster care re-entries and no standard was achieved by fewer than one in four of the states. (See Appendix C , Table C -4 for information on this outcome by each state.) Outcomes Assessed by Case Review Alone Five outcomes were not associated with any national standards and states were determined to be in conformity, or not, solely on the basis of whether 90% or more of the applicable cases reviewed had substantially achieved the outcome. Although the number of states that received a substantial conformity rating for any given outcome was quite low, the range of performance on each outcome was considerable. Families have enhanced capacity to provide for their children's needs No state substantially achieved this outcome in 90% or more of its case review sample and thus no state achieved substantial conformity with this outcome. Nationally there were more than 2,500 cases given a performance rating for this well-being outcome. The share of cases in which individual states achieved this outcome ranged from a low of 18% (NJ) to a high of 86% (NY); the median state performance was 66%. Children receive adequate services to meet their physical and mental health needs Reviewers determined that only one state (DE) substantially achieved this outcome for 90% or more of its case review sample; thus it was the only state found in substantial conformity with this outcome. Nationally there were more than 2,400 cases given a performance rating for this well-being outcome. The share of cases in which individual states substantially achieved this outcome ranged from a low of 51% (PR) to a high of 92% (DE); the median state performance was 70%. Children are safely maintained in their own homes whenever possible and appropriate Reviewers determined that 6 states (AZ, IA, KS, NM, NY, UT) substantially achieved this outcome in 90% or more of their case review sample and thus these states were found in substantial conformity with the outcome. Nationally there were close to 2,400 cases given a performance rating on this safety outcome. The share of cases in which individual states achieved this outcome ranged from a low of 48% (NJ) to a high of 93% (IA); the median state performance was 81%. The continuity of family relationships and connections is maintained for children in foster care Reviewers determined that 7 states (FL, ID, LA, MA, ND, OR, TX) substantially achieved this outcome in 90% or more of their case review samples and thus these states were found in substantial conformity with the outcome. This permanency outcome applies to children who are in foster care only. Nationally there were close to 1,500 cases rated on this outcome. The share of cases in which individual states achieved this outcome ranged from a low of 38% (TN) to a high of 94% (TX and OR); the median state performance was 77%. Children receive appropriate services to meet their educational needs Reviewers rated 16 states (CO, CT, HI, ID, IA, KS, KY, ME, MT, NH, NY, ND, UT, VT, VA, WI) as having substantially achieved this outcome in 90% or more of their case review sample and thus these states were found in substantial conformity with the outcome. Nationally there were more than 2,000 cases rated on this well-being outcome. The share of cases in which individual states achieved this outcome ranged from a low of 65% (NJ) to a high of 100% (UT); the median state performance was 83%. State Performance on Individual Case Review Indicators An additional view on the areas that showed the greatest strength or need for improvement can also be gained by studying whether each of the items, or performance indicators, associated with the case review process was rated as an overall "strength" or an "area needing improvement" for the state. The "strength" or "area needing improvement" ratings for a given state represent aggregate performance across all applicable cases for a single one of these items (performance indicators). Because these ratings are not case-specific findings, they do not directly affect the determination of a state's conformity or nonconformity with a particular outcome. Nonetheless, these aggregate item ratings are discussed in the state final report and may be used to understand what contributed to a state's overall rating on an outcome (and consequently what areas should be addressed in the state PIP.) Ranking state outcome performance by case review indicators, produces a pattern of strengths and weakness similar to what the case-by-case analysis suggests. As discussed earlier no state was found to be in substantial conformity with two outcomes: 1) families have enhanced capacity to provide for the needs of their children and 2) (foster care) children have permanent and stable living arrangements. Seven of the 10 separate case review indicators associated with achieving these two outcomes were rated as a "strength" in 14% or fewer of the states. At the same time, state performance on two of the case review indicators associated with the outcome ensuring permanent and stable living arrangements for foster care children far outstripped the number of strength ratings determined for any other performance indicators. Sixty-nine percent of the states received a "strength" rating for their efforts at "keeping brothers and sisters together in foster care" and 94% received a strength rating for "placing children close to their birth parents or their own communities." Table 5 lists each of the case review indicators assessed from those least likely to receive a strength rating to those most likely to receive a strength rating. State System Performance in the Initial CFSR Reviewers also rated state performance based on the state's policy and practice with regard to seven federally required "systems." This part of the CFSR is intended to measure a state's capacity to achieve positive outcomes related to safety, permanency and well-being for the children and families its serves. Ratings for this part of the review are largely based on interviews with state and local stakeholders in the child welfare system. Overall states were more likely to be assessed as having the capacity to produce positive outcomes for children than they were to have been rated as achieving these outcomes. At the same time, because these systems are intended to work together, a poor rating on any one of the systems may affect a state's ability to achieve one or all of the outcomes assessed. Further, state capacity was judged weakest with regard to case review system and service array and these systems are arguably keystones of a successful child welfare program. Of the 52 states, 49 were found to have child welfare agencies that were "responsive to the community," 45 were judged in substantial compliance with federal requirements for a statewide information system, and 43 were found to have adequate recruitment, retention, and licensing programs for foster and adoptive parents. A less substantial majority of states were found to have a functioning quality assurance system in place (35) and to adequately meet the federal staff training requirements (34). States had more difficulty meeting the system requirements related to service array and case review. Less than half of states (23) were judged to have a service array system in compliance with federal policy and just 13 states were found in compliance with the case review system requirements. Compliance with the system requirements of federal child welfare policy was determined based on stakeholder interviews and the number of "strength" or "area needing improvement ratings" given to each of the items associated with the implementation and proper functioning of a system. Figure 2 shows a composite (national) rating for each system—with 100% representing a strength rating for each of the items associated with an outcome for all states. The figure illustrates again that service array and case review system were determined to be the most significant areas of weaknesses in state efforts to achieve positive outcomes for children. The findings also suggests that performance in each of these areas may be more nearly equal than would appear simply by looking at the number of states in compliance with each system. Compliance with a particular system is directly determined by the number of associated indicators that are given a strength rating. Table 6 ranks each of the indicators associated with this compliance determination, from those least likely to receive a strength rating to those most likely to receive this rating. As might be expected, it shows that items associated with the service array and case review system are more likely to be rated as areas needing improvement than are most of those items associated with agency responsiveness to the community and foster and adoptive parent recruitment, retention and licensing. However, a few items run counter to this trend. For instance, despite being an indicator related to the case review system, the large majority of states (42 states – 81%) received a strength rating for the case review item that sought to assess how good a state was at conducting a periodic review of the status of each child in foster care. By contrast just 21 states (40%) received a strength rating for their efforts to ensure the diligent recruitment of potential foster and adoptive families that reflect the ethnic and racial diversity of children needing those homes, although the vast majority of states were found in substantial conformity with the overall system related to licensing, recruitment and retention of foster care and adoptive parents. A Closer Look at the Weaknesses Identified by the CFSR The following discussion looks more closely at each of the indicators explicitly associated with the two outcomes for which no state was found to be in substantial conformity; it also examines indicators associated with systems that might be expected to affect state performance on those two outcomes. Many of those indicators are related to the case review and service array systems on which states were the least likely to have been found in substantial conformity. Permanent and Stable Living Arrangements Nationally, of the 1,479 foster care cases reviewed, permanent and stable living arrangements were determined to have been substantially achieved in 56% (822) of the cases and only partially achieved in 37% (548) of the cases. Reviewers rated 7% of the cases (109) as not having achieved or addressed this outcome at all. In assessing how well a state assists children in achieving permanent and stable living arrangements, the CFSR looks at six performance indicators for each applicable case and also examines statewide data to judge its performance with regard to four national standards. Two states substantially achieved the outcome of permanent and stable living arrangement in 90% or more of the cases (DE and ND) but no state achieved compliance with all four of the national standards associated with this outcome. The indicators associated with this outcome were— number of re-entries into foster care (case review and national standard); stability of placements (case review and national standard); timeliness and appropriateness of permanency goals (case review); timeliness of reunification (case review and national standard); timeliness of adoption (case review and national standard); and appropriate use of the permanency goal "another planned permanent living arrangement" (case review). Of these indicators, states were most successful at limiting re-entries to foster care. Half of the states (26) met the national standard—meaning that statewide data showed that 8.6% or less of the children who were entering foster care in the year under review had entered foster care previously within the past 12 months—and close to half (24) received a "strength" rating for this indicator based on the applicable case reviews. Based on the case reviews, states were least successful in meeting the indicators regarding minimizing the number of placements for children and developing appropriate permanency goals for foster care children on a timely basis. Only five states received a strength rating for either one of these indicators and just 14 states met the national standard of 86.7% (or more) of the children who were in care for 12 months or less experiencing two or fewer placements. Among the indicators related to specific permanency goals, achieving timely adoption (within 24 months of foster care entry) was the most difficult for states to achieve—only six states achieved a strength rating in this area based on the case reviews while 14 met the associated national standard. With regard to reunification with a parent or caretaker within 12 months of entering foster care, 19 met the associated national standard. Finally, 16 states received a strength rating for their use of the permanency goal, another planned permanent living arrangement. The case review system, which is spelled out in detail in Section 475 of the Social Security Act, is a key part of federal child welfare policy designed both to ensure the protection of children while in care and to enable them to achieve stable and permanent living arrangements. States had the most difficulty achieving strength ratings for indicators associated with implementing parts of the case review system at the case level. Only six states received a strength rating for development of written case plans, which are intended to guide the work done with children and families, and which federal law states must be created jointly with parents. Less than half of the states (22) received a strength rating for complying with the termination of parental rights (TPR) procedures outlined in the Adoption and Safe Families Act (ASFA), including identifying children who have been in foster care for 15 of the past 22 months, pursuing TPR for these children and reviewing and documenting exceptions to seeking TPR. While 41 states (81%) received a strength rating for holding (administrative or court) review of the status of each foster child no less frequently than every six months, only one-half of the states (26) achieved a strength rating for assuring that children in foster care received the required court permanency hearing within 12 months of entering foster care and holding subsequent court permanency hearings no less frequently than every 12 months thereafter. Half of the states (26) received a strength rating for ensuring that foster parents, pre-adoptive parents and relative care givers received notice of hearings or reviews held with respect to the child in their care (and had an opportunity to be heard). Common challenges to achieving permanent and stable living arrangements In a report providing general findings on the initial CFSRs, HHS identified "common challenges" that were related to 5 of the 6 indicators used to assess state compliance with the outcome: children have permanent and stable living arrangements. To ensure comparability, this content analysis was based only on states that were reviewed in FY2002-FY2004 (35 states); a "common challenge" is defined as one noted in the final report of at least one-third of those 35 states. Close to three-fourths of the states noted that efforts to identify adoptive or other permanent placement settings at the same time as reunification efforts continued (concurrent planning) did not consistently occur and more than two-thirds of them reported that reconsideration of the goal of reunification is too often delayed. More than half of the states suggested that placement instability is related to insufficient provision of services to foster parents, not enough placement options for certain special needs children, placements made based on availability rather than suitability and frequent use of emergency shelters for temporary placements. More than half of these states also cited inconsistent access to or provision of services to parents to enable timely family reunification. Table 7 lists each of the reported challenges associated with achieving a permanent and stable living arrangement for children in foster care. Enhancing Families' Capacity to Meet the Needs of Their Children The performance indicators associated with the outcome discussed above, "achieving a permanent and stable living arrangement," applied only to children in foster care and outcome compliance was determined via case reviews and comparison of statewide data with the national standards. By contrast, while no statewide data indicators were used to assess compliance with the outcome, "families have enhanced capacity to meet the needs of their child," virtually all of the case review sample—in-home cases and foster care cases—was assessed with regard to this well-being outcome. Nationally of the 2,571 cases reviewed 55% (1,426) were rated as having substantially achieved this goal, 28% (727) were found to have partially achieved the goal, while 16% (418) were found to have not addressed or achieved this goal. In assessing how well a state meets this outcome in each of these cases, the CFSR looks at four specific indicators: assessment of the needs of children, parents and foster parents and matching the appropriate services with those individuals; involving parents and children in the case planning process; conducting regular and quality visits with children; and conducting regular and quality visits with parents, pre-adoptive parents, and permanent relatives or guardians of children in care. Only one state received a strength rating for the outcome indicator concerning assessment of the child and parents needs and provision of needed services. States did relatively better on the remaining three indicators associated with the outcome "enhancing a families' capacity to provide for their children's needs"—but no more than 12 states received a strength rating for any one of these indicators.(See Table 3 above.) Common challenges to enhancing the capacity of families to meet the needs of their children In its content analysis of the final reports of all CFSRs conducted in FY2002-FY2004 (35 states), HHS identified 11 "common challenges" states had that were related to enhancing a family's capacity to provide for the needs of its children. All 35 states reported insufficient involvement of mothers, fathers, and children (if age-appropriate) in case planning and all but one of them cited insufficient frequency of face-to-face contacts between the case worker and the parents as a concern. A large majority of the 35 states also reported inconsistent assessments of the needs of children, parents and/or foster parents and that even when the needs are identified appropriate services are not always provided. Table 8 lists each of the reported challenges. Do States in System Compliance Achieve Better Outcomes? Federal child welfare policy requires states to have certain systems in place that are intended to improve how the child welfare agency functions. If these systems do increase the ability of a state to achieve positive outcomes for a state, and assuming that the CFSR accurately measures how well a state implements a given system, then states that achieved higher system compliance might be expected to have achieved the CFSR outcomes for a greater share of the cases reviewed. Statistical analysis of the relationship between system compliance and achievement of the desired outcomes for children shows that states whose array of available services was determined in substantial compliance with federal policy had a significantly higher percentage of cases in which families were found to have enhanced capacity to meet the needs of their children and in which foster children experienced permanent and stable living arrangements (when compared to states found out of compliance with the service array requirement). Additionally, states determined to have adequately implemented a quality assurance system had a significantly higher percentage of cases in which families were found to have enhanced capacity to meet the needs of their children. There were too few states in compliance with all of the case review system requirements to allow for a statistical comparison based on compliance with this system. However, achievement of a "strength" rating for several of the performance indicators used to assess compliance with the case review system was associated with higher performance on certain outcomes and for other performance indicators associated with the case level review. States that received a strength rating for their implementation of termination of parental rights (TPR) proceedings in compliance with the provisions of the Adoption and Safe Families Act (ASFA) had a significantly higher percentage of cases that substantially achieved the outcome of permanent and stable living arrangements for children in foster care than did those states that were not in compliance with the ASFA TPR provisions. States that received a strength rating for ensuring periodic review of all cases no less often than every 6 months had a significantly higher percentage of cases rated as having substantially achieved the outcome of enhanced family capacity to provide for children's needs. Finally, states that received a strength rating for the 6-month case review and those that received a strength rating for implementing the required 12-month permanency hearings had a significantly higher percentage of cases that received a strength rating for achieving timely adoptions. Assessing Penalties In mandating the creation of the new review system, Congress required HHS to specify in regulations how financial penalties would be determined for states found to be out of conformity with federal child welfare policy and to make those penalties commensurate with the degree of nonconformity. At the same time, it required HHS to allow states found out of conformity with federal policy to develop and implement a corrective action plan and to rescind any penalties if that plan was successfully implemented. Financial penalties for non-conformity with federal child welfare policy are to be withheld from a specific pool of child welfare funds that, as defined in the regulation, includes all Title IV-B funds to the state (funding for both Child Welfare Services and Promoting Safe and Stable Families) and 10% of the foster care administrative costs claimed by the state under Title IV-E for the specified penalty period. For the state's initial review, penalties may range from 1% of the specified penalty pool (for failure to achieve a specified level of conformity with one of the outcomes or one of the systems studied) up to 14% (for failure to achieve a specified level of conformity with each of the 14 outcomes or systems studied). The regulations also specify that if a state reaches the end of its required Program Improvement Plan (PIP) and fails to have successfully completed the plan, HHS must withhold funds from a state (based on the number of outcomes and systems that were found not in substantial conformity during the CFSR and for which the state did not successfully complete the level of improvement outlined in its PIP). This withholding is to begin with the last specified completion date in the PIP and continue until the state successfully achieves the relevant PIP goal or is found in substantial conformity by a subsequent full review. HHS has at times stressed that the CFSR process is about program improvement—not recoupment of federal funds. Through May 2005 it had completed evaluation of PIP implementation by eight states and determined that each of them had met their PIP goals and that therefore no penalties would be assessed. Evaluation of additional states (10 through May 2005) that had completed their PIPs continues. (For state-by-state information on PIP implementation and status see Appendix A .) Did the Initial CFSR Accurately Measure State Performance? State officials, advocates and researchers have raised a number of concerns about how "substantial conformity" was measured in the initial CFSR. Several of the measurement concerns are related to the national standards and might call into question the accuracy of the overall assessment that no state was found in substantial conformity with federal child welfare policy. For instance, some researchers and state officials argue that in certain cases what is actually measured does not accurately reflect what HHS intended to measure. They further argue that accurate measures are necessary not only to ensure correct penalty assessment but, as important, to ensure that the required Program Improvement Plans (PIPs) are properly focused. Other concerns raised about the CFSR raise questions about what is not measured and ensuring that accountability for outcomes is properly assigned. National standards The national standards are an early effort to establish a quantitative benchmark by which to judge state child welfare performance. State conformity with the national standards directly effects a state's performance rating on just two of the seven outcomes; none of the seven systems that are assessed in the CFSR are directly affected by a state's rating on the national standards. Thus the ability to meet or not meet the national standards might be understood as a relatively small factor in achieving CFSR compliance. At the same time, no state can be found in complete substantial conformity with federal policy until it meets each of the six national standards. Further, if the national standards are not designed in a way that truly measures state performance for a given issue, they might lead HHS to incorrectly require program improvements (or not require improvements) of states who risk financial harm if they do not comply. A number of critiques of these standards have been offered. HHS, which provided in the final regulations that it could "add, amend, and suspend any such statewide data indicator(s)" has announced revised national standards for the second round of the CFSR and these seek to respond to at least some of the criticisms discussed here. State variation in policy and caseload Child welfare systems are administered differently by each state, and, sometimes, by each county within a state, and this can be a problem if each state is judged by a single federal standard. For instance, the federal government largely defers to the states with regard to a definition of child abuse and neglect and state definitions of what constitutes child abuse and neglect; thus, how reports of child abuse and neglect are classified varies significantly. This is a concern for some, who argue that requiring all states to meet the same national standard for preventing recurrence of maltreatment in foster care might unduly punish states that have enacted broader definitions of child maltreatment and/or that have a well-developed system of reporting and investigation while allowing states with more narrow definitions or less efficient reporting and investigating systems to more easily achieve federal compliance. During the course of the initial review and analysis HHS uncovered a separate example of how varied state policy might affect a state's ability to meet the national standards established with regard to recurrence of maltreatment. Close to half of the states reviewed in FY2002-FY2004 (35 states) indicated that child abuse and neglect allegations for families with open child welfare cases (e.g., in-home cases) are not reported as new allegations of abuse or neglect and therefore there is no formal assessment of the validity of the allegation. Instead state policy or practice usually provides that the caseworker assigned to the family would informally assess the information and act to protect the children if necessary. In short, if child maltreatment is identified, this information—while it is likely acted on—would not be reported to the state's National Child Abuse and Neglect Database and thus would not be a part of the statewide data used to determine whether or not a state meets the standard on recurrence of maltreatment. The composition of a state's caseload may also vary for reasons that are not in control of the child welfare agency or, again, because of state policy decisions. Some researchers have called for "risk-adjusted" standards, although they acknowledge that not enough is known about, for instance demographic characteristics and achievement of certain outcomes to allow for such adjustments. In reviewing findings from the initial CFSR, the report General Findings from the Federal Child and Family Services Review, analyzed certain characteristics of the case review sample and the degree of success achieved on certain outcomes. For the most part this analysis found that a state's overall performance on the CFSR outcomes—when compared to all other states—was largely unaffected by the significant state variation in the case sample demographics (including age, race/ethnicity, primary reason for case opening, and geographic location). The single exception to this overall finding was in regard to the age of children in a state's case review sample, and state performance on the safety outcome: children are safely maintained in their own homes whenever appropriate and possible. States with a higher percentage of children in their case review sample that were younger than age six at the time of their entry into foster care had a lower percentage of cases rated as substantially achieving that outcome. At the same time, many more significant relationships were established when the lens of the analysis was shifted from a comparison between states' performance to the relationship between the particular characteristics of a child in a given case and the performance ratings for cases with children of similar or different characteristics. (For more information on these specific findings see Appendix D .) Accuracy of data Closely related to the issue of state variation are certain concerns about data used to determine compliance with the national standards. The most basic concerns the accuracy and comparability of the data. The majority of the data used to set the national standards as well as to assess state performance on those standards are collected via the Adoption and Foster Care Analysis and Reporting System (AFCARS). An analysis by the HHS Office of the Inspector General found that the federal "guidance on reporting AFCARS data supports states beliefs that the lack of clear definitions leads to inconsistent reporting. States believed AFCARS data elements were not clearly and consistently defined and expressed concerns about foster care placement definitions, which potentially affect child welfare performance measures. In addition, differences in states' methods of reporting dates of discharge and juvenile justice populations may further inhibit uniform performance measures." The March 2003 Inspector General report recommended that HHS provide more precise definitions for data elements, increase accessibility of technical assistance on data collection, and other provisions. An April 2004 report from the U.S. General Accounting Office (GAO) reported some of the same concerns about data inaccuracies and also made similar recommendations. HHS has and continues to work on providing more guidance, assessing what states are doing and improving state data collection systems. The agency has also solicited comments on revisions to the AFCARS data collection system. Nonetheless, the national standards used for the initial CFSR were derived from data collected via AFCARS in the early years of the system's operation in most states. Although the department worked closely with each state to ensure that the data used to measure the state against the standards were the best possible data available, some find this troubling. Supporters of the policy to use statewide data measured against a national standard, however, argue that no data system is perfect, that improved data collection is a by-product of using the data (or, in essence that you have to start somewhere, sometime), and that the CFSR assessed state performance in multiple ways (using both qualitative and quantitative data) so that no state could be judged on all of the measures purely by quantitative data. What is measured versus what is meant to be measured Researchers have taken particular issue with three of the data indicators that are used in the national standards. These indicators seek to ensure that states 1) are reuniting children with their families in a timely manner or, 2) are finding timely adoptive placements for children who cannot be reunited with their parents; and 3) do not allow children to exit foster care to placements that are not permanent and simply result in the return of these children to foster care. While researchers generally applaud the intent of these measures—that is the effort to use quantitative data to determine how quickly and effectively states re-establish a permanent home for children who come into care—they argue that some of the measures used in the initial round of reviews might penalize a state even if its performance was improving. Timely adoption and timely reunification The national standards for both of these measures look at only children who exit foster care in a given year. They determine of those who were reunited with their parents, what share were reunited within 12 months of entering care and, of those who were adopted, what share were adopted within 24 months of entering care. Some researchers have argued that the focus exclusively on children who exit foster care means that the overall likelihood of a child being adopted or reunited is not being measured—i.e. the measure does not look at all children who have been in care during the year but only those who exit that care. Further, in the case of adoption, they note that if a state did the hard work of moving many of its longer-staying and likely more difficult to place children into adoptive homes, even if it held steady or improved the rate at which newer entrants moved to adoption, it might perform badly on the official measure. That is the longer staying children moved to adoption—and who presumably were a legacy of older agency practice—would necessarily reduce the share of children adopted within two years. Rather than looking at children who exit foster care, one alternative measure of time to reunification or adoption might follow the group of children (or "cohort" in researcher lingo) who entered foster care in a given year to determine how many were adopted within two years or reunited within one year. This kind of measure however would require the administrative data to follow a single child's records across more than one fiscal year (i.e., it requires longitudinal data) and AFCARS is currently not set up to enable this kind of analysis. Another alternative might group certain measures together. For instance, with regard to timely adoption, in addition to recording the share of children who exited foster care to adoption within 24 months of entering care, the measure would also look at overall likelihood of adoptions (e.g., total children served in given fiscal year divided by number of adoptions in that year). Foster care re-entry rate Criticism of the national standard that looks at the foster care re-entry rate focuses on the fact that changes in a state's caseload size in the given fiscal year affect state performance in this area—even though those caseload changes may be unrelated to how well a state did at achieving permanency for children in the previous year. This is because the current measure looks at all the children who enter foster care in the given year and asks what percentage of them are re-entering care within 12 months of their prior entry to foster care. This means that a state that experiences a decline in new entries to care may have fewer—or at least no greater number of children re-entering than in previous years but its performance might nonetheless be rated as worse than the previous year. By contrast a state with an increasing number of entries to foster care might increase the number of re-entries but show no decline in its performance. One alternative measure might compare the number of children who re-entered care in a given year as a share of the number of children who left foster care (via reunification, adoption, or guardianship) in the previous year. Measuring Outcomes Some critics of the CFSR also believe it does not go far enough in its effort to measure outcomes versus processes. In particular they cite the measurement of child and family well-being outcomes as weak. The Pew Commission on Children in Foster Care recommended that Congress require the National Academy of Sciences to study and make recommendations for appropriate measures and outcomes—especially those related to child well-being and further, that HHS convene an ongoing advisory panel of experts to periodically review the measures to ensure that they remain timely and appropriate. Such a panel would however have to reconcile its ultimate recommendations with the federal policies currently in law. The criteria used to judge state performance is based on the federal statute, including its interpretation in regulation. Current law includes relatively limited child welfare provisions specifically related to, for instance, health treatment or education services. It requires that a child's updated health and education record be accessible to foster parents. While a logical interpretation of these requirements might be that these records are supposed to be current and accessible so that children can receive the education services and health services needed, this requires an interpretation. And an easier case might be made for measuring states compliance based on process. (For example: are the records up-to-date and available, as opposed to did the availability of the records lead to adequate health and education services for the child.) Who Is Accountable? This same concern might also be viewed as a question of accountability. A child welfare system must be able to count on other agencies and, especially the courts, if it is to successfully achieve positive outcomes for children. Is the state's failure to achieve "substantial conformity" with the performance measure related to the system "service array" and the well-being outcome related to providing adequate mental health services a true problem of the child welfare agency not making the appropriate services available and accessible? Or is it simply a lack of widely available child mental health services in the state? If a state is not in compliance with the statute's termination of parental rights (TPR) provisions, is this because the courts in the state have a tremendous backlog and cannot hear the cases on a timely basis or is it because the child welfare agency is not making an effort to begin these proceedings in a timely manner? The Next Round of CFSRs The regulation provides that for states not found in substantial conformity, a second full CFSR is to begin two years after the date HHS approves the state's PIP. However, HHS has since determined that state performance may not be reasonably re-reviewed until at least one year following the completion of its PIP. This time is necessary to ensure data used to measure state performance are based on a period after the state has completed its improvement plan. The second round of CFSRs is now scheduled t o begin in 2007 when 15 states (DE, NC, VT, IN, NM, GA, KS, DC, TX, MA, AZ, AL, OK, OR, and MN) will undergo an onsite review. In this second round of reviews, the regulations provide that the onsite case review must find that the desired outcome was substantially achieved in 95% of the cases reviewed (as opposed to 90% in the initial round). As mentioned above, HHS has revised the national standards that will be used for this round of the CFSR and may also revise its procedures manual and survey instruments for this round of reviews. Appendix A. Initial CFSR Review and PIP Implementation Schedule States generally have 90 days after the Final Report date to submit a Program Improvement Plan (PIP). There is no time frame for approval of the plan by HHS, and the Department may require changes before granting approval. The approval date is also the formal implementation date for the plan. States generally have two years in which to implement their PIP. In rare instances, the regulations provide that a state may receive approval from HHS for an additional year to complete their PIP. Florida, Louisiana and Mississippi were each granted an additional year to complete their PIPs. As of the end of September 2006, 42 states had reached the end of the PIP implementation period and for at least 20 of those states HHS had evaluated their success in meeting the agreed-upon level of improvements in those plans. In 19 of the states, the Department determined the goals of the PIP had been met and therefore all penalties that would have resulted from the state's initial CFSR were rescinded. In one jurisdiction (District of Columbia), HHS determined that not all of the agreed-upon improvements had been achieved and a fine of $135,285 has been assessed. Appendix B. Overview of State Performance on Outcomes, Systems, and National Standards This appendix includes three tables that summarize state performance in the initial round of Child and Family Services Reviews. Tables included are— Table B-1 . State Performance on Outcomes in the Initial Child and Family Services Review Table B-2 . State Performance on the National Standards in the Initial Child and Family Services Review Table B-3 . State Performance on Systems in the Initial Child and Family Services Review Appendix C. State Performance on Outcomes Assessed in the Initial Child and Family Services Review This appendix contains a summary table showing aggregate state performance on the case reviews along with detailed tables showing, for each state and each outcome, how many cases were found to have substantially achieved, partially achieved and not addressed or achieved a given outcome. Individual state performance on the national standards is also shown for the two outcomes where these standards were a part of determining the state's overall compliance. Tables included are— Table C-1 . Performance Ratings for Applicable Cases Reviewed in the Initial Child and Family Services Review Table C-2 . Safety Outcome 1: Children are First and Foremost Protected from Abuse and Neglect Table C-3 . Safety Outcome 2: Children are Safely Maintained in Their Own Homes Whenever Possible and Appropriate Table C-4 . Permanency Outcome 1: Children have Permanence and Stability in Their Living Situation Table C-5 . Permanence Outcome 2: The Continuity of Family Relationships and Connections is Preserved for Children Table C-6 . Well-Being Outcome 1: Families Have Enhanced Capacity to Meet Their Needs of Their Children Table C-7 . Well-Being Outcome 2: Children Receive Appropriate Services to Meet Their Education Needs Table C-8 . Well-Being Outcome 3: Children Receive Adequate Services to Meet Their Physical and Mental Health Needs Appendix D. Analysis of Case Characteristics and Ratings of Outcome Achievement As part of rating each case, reviewers collected certain data about the characteristics of the child whose case was under review (e.g. age, race/ethnicity). These case specific data are not available in the final reports but have been studied by HHS (via a contract with James Bell Associates) for statistically significant relationships between outcomes achieved and the characteristics of the case. The full report discussing these findings is available on the Children's Bureau web site. A synthesis of some of the key findings is provided below. Age of child Cases involving children under the age of 6 at the start of the CFSR review period were more likely to be rated as having substantially achieved permanency and stability in their living situations than cases involving children of all other ages. Age was independently established as significantly related to two of the performance indicators—placement stability and establishment of permanency goal—used to determine whether permanency and stability have been achieved for a child. These analyses generally supported the anecdotal information that placement stability is harder to achieve for adolescents and that establishing appropriate permanency goals for children in a timely manner is easier for younger children than for adolescents. The percentage of cases receiving a strength rating for placement stability decreased with increasing age until age of 16; for youth age 16-18 a strength rating for placement stability was as likely as it was for children younger than 9 at the start of the CFSR review period. The percentage of strength ratings related to establishment of the permanency goal was highest for children under the age of 6 at the start of the CFSR review period and lowest for children who were 10-12 years of age at that time. Race/ethnicity of child Cases involving white (non-Hispanic) children were more likely to be rated as having substantially achieved permanency and stability in their living situations than were cases involving children who are Alaska Native/Native American, Asian/Pacific Islander, or black (non-Hispanic). Separate analysis shows that cases involving children who are white (non-Hispanic) were significantly more likely than cases involving children of any other race/ethnicity to have been rated as substantially achieving the well-being outcome: children receive adequate services to meet their physical and mental health needs. Finally, cases involving children who were white (non-Hispanic), black (non-Hispanic), or of "two or more races" were significantly more likely to have substantially achieved the well-being outcome families have enhanced capacity to meet children's need than were cases involving children who are Alaska Native/Indian or Asian/Pacific Islander. Primary reason for case opening Cases opened primarily for issues related to a child's behavior (e.g. child's substance abuse or juvenile delinquency) were more likely to be rated as having substantially achieved permanency and stability than were cases opened for any other reason. Cases opened primarily for all other reasons (e.g. parent's substance abuse, abuse or neglect of the child, mental/physical health of family) were more likely to be rated as not having substantially achieved permanency and stability in living situation than to have been rated as substantially achieving this outcome. Location of case review As noted earlier, the onsite CFSR takes place at three locations in a state, including the most populous city or county. Other locations in each state varied from very rural to metropolitan/suburban. No significant relationship between case ratings for most outcomes and review location (largest population compared to smaller population sites) was found. However, for two of the well-being outcomes, families have enhanced capacity to meet the needs of their children, and children receive appropriate services for their physical and mental health needs, cases reviewed in smaller population sites were significantly more likely to have been found to have achieved these outcomes.

While child welfare programs are a primary responsibility of state and local governments, the federal government appropriates close to $7 billion annually to support these programs (primarily for foster care and adoption assistance) and states are required to meet certain federal policies in order to receive this funding. Child and Family Services Reviews (CFSRs) gauge state efforts and ability to achieve the primary goals of safety and permanence for children, and well-being for children and their families. The review is intended both to measure state compliance with federal child welfare policy and to strengthen and improve state child welfare programs. The Department of Health and Human Services (HHS) conducted the initial round of onsite reviews between March 2001 and March 2004. No state was found to be in substantial conformity with all of the outcomes and systems assessed. Some critics of the CFSR argue that while the outcomes reviewed are on target, the criteria established to determine state achievement of those outcomes may give misleading information about a state's performance. Although much attention has focused on states' uniform inability to meet all of the federal criteria, the reviews also showed certain relative strengths. States showed the greatest ability to ensure that children were not exposed to child abuse and neglect and remained safely in their homes whenever appropriate and possible, and in preserving their family relationships and connections. They had the most difficulty in achieving permanent and stable living arrangements for children, enhancing the capacity of families to meet the needs of their children and in seeing that appropriate mental and physical health services were available to children served. Information regarding ensuring provision of educational services to children was more mixed. In addition to reviewing outcomes, the CFSR assesses state compliance with federal child welfare policy by examining certain federally required systems. States were most likely to be found successful at operating a statewide information system; maintaining foster and adoptive parent licensing, training, recruitment and retention; and responding to community concerns. They were least likely to have a strong service array or case review system in place. Ratings of state quality assurance and training systems were more mixed. To avoid immediate assessment of penalties for failure to comply with federal policy, each state was required to develop a Program Improvement Plan (PIP). A PIP must address each one of the outcomes or systems with which a state was found to be out of substantial conformity and must describe the state's specific plan for moving toward full conformity with federal policy. A few states have successfully completed their PIPS but most are still in the process of implementing them. The Children's Bureau is preparing for a second round of CFSRs, and onsite reviews are scheduled to begin in early 2007. This report will describe the origins and design of CFSRs before turning to its primary discussion: state performance in the initial round of CFSRs. This report will not be updated.

Introduction The Child Support Enforcement (CSE) program was enacted in 1975 as a federal-state program (Title IV-D of the Social Security Act, P.L. 93-647 ). It is intended to help strengthen families by securing financial support for children from t heir noncustodial parent on a consistent and continuing basis and by helping some of these families to remain self-sufficient and off public assistance. Child support payments enable parents who do not live with their children to fulfill their financial responsibility to them by contributing to the payment of childrearing costs. When the program was first established its goals were to reimburse the states and the federal government for the welfare payments they provided families, in addition to helping families obtain consistent and ongoing child support payments from the noncustodial parent and helping some of these families remain self-sufficient and stay off welfare. Many commentators agree that the mission of the CSE program has changed over the years. It began as a program to recover the costs of providing cash welfare (AFDC ) to families with children. The amendments in the 1980s broadened the mission to reflect service delivery to both welfare and non-welfare families. Some commentators assert that the service-delivery goal was reemphasized in the 1996 welfare reform legislation, which established the "family first" policy. To help ensure that former welfare recipients stay off the TANF rolls, the "family first" policy requires that such families are to receive any child support arrearage payments collected by the state before the state and federal governments retain their share of collections. Moreover, it is widely agreed that since the late 1990s the CSE program has been effective in improving the well-being of families by making child support a more reliable source of income. The CSE program provides services to both welfare families (who are automatically enrolled free of charge) and non-welfare families (who must sign up and pay an application fee). Families who have never received welfare must also pay a $25 annual user fee if the CSE agency collects at least $500 per year for them. The program provides seven major services on behalf of children: (1) locating absent/noncustodial parents, (2) establishing paternity, (3) establishing child support orders, (4) reviewing and modifying child support orders, (5) collecting child support payments, (6) distributing child support payments, and (7) establishing and enforcing support for children's medical needs. All 50 states and four jurisdictions (the District of Columbia, Guam, Puerto Rico, and the U.S. Virgin Islands) operate CSE programs. They are generally operated at the county level of government. In addition, about 60 tribal nations operate CSE programs. The CSE program is administered by the federal Office of Child Support Enforcement (OCSE), which is in the Department of Health and Human Services' (HHS's) Administration for Children and Families (ACF). The federal government reimburses each state for 66% of all allowable expenditures on CSE activities. The federal government's funding is "open-ended," in that it pays its percentage of expenditures by matching the amounts spent by state and local governments with no upper limit or ceiling. Moreover, states collect child support on behalf of families receiving TANF to reimburse themselves (and the federal government) for the cost of TANF cash payments to the family. Federal law requires families who receive TANF cash assistance to assign their child support rights to the state in order to receive TANF (i.e., child support payments go to the state instead of the family, except for amounts that states choose to "pass through" to the family as additional income that does not affect TANF eligibility or benefit amounts). In addition, such families must cooperate with the state if necessary to establish paternity and secure child support. The federal government also gives states an incentive payment to encourage them to operate effective CSE programs. Federal law requires states to reinvest CSE incentive payments back into the CSE program or related activities. Child support collection methods used by state CSE agencies include income withholding; intercept of federal and state income tax refunds; intercept of unemployment compensation; liens against property; reporting child support obligations to credit bureaus; intercept of lottery winnings; sending insurance settlement information to CSE agencies; authority to withhold or suspend driver's licenses, professional licenses, and recreational and sporting licenses of persons who owe past-due support; and authority to seize assets of debtor parents held by public or private retirement funds and financial institutions. Federal law authorizes the Secretary of State to deny, revoke, or restrict passports of debtor parents. All jurisdictions also have civil or criminal contempt-of-court procedures and criminal nonsupport laws, and federal criminal penalties may be imposed in certain cases. Federal law requires states to enact and implement the Uniform Interstate Family Support Act (UIFSA) and expand full faith and credit procedures, and it also provides for international enforcement of child support. The CSE program has the potential to impact more children and for longer periods of time than most other federal programs. In FY2014, the program served 16.3 million children (22% of the 73.6 million children in the United States). Total CSE expenditures amounted to $5.7 billion and the program collected $28.2 billion in child support payments from noncustodial parents. The CSE program collected $5.25 for every $1 it spent in that year. According to Census Bureau data, 29% of custodial families have income below the federal poverty level. Child support represented 49% of family income for poor custodial families that received it. As noted, the CSE program began in part as a "welfare cost-recovery" program. For many years the program has been an integral part of helping families escape poverty. As part of its oversight duties, Congress periodically examines the effectiveness and efficiency of the CSE program. This report provides a description of the individual CSE provisions contained in the initial CSE law in 1975 and the changes and reforms to the program that occurred in the nearly 50 subsequent laws that included CSE provisions. Overview Since the late 1800s, state courts have allowed some newly divorced women to recover child support directly from their ex-spouses. However, it was not until 1950 that the federal government took its first steps into the child support arena. Despite legislation in 1950, as well as limited legislation in 1965 (P.L. 89-97) and 1967 (P.L.90-248), the number of families resorting to public welfare (i.e., the Aid to Families with Dependent Children (AFDC) program) continued to increase. By the early 1970s, Congress realized that the composition of the AFDC caseload had changed drastically. In earlier years, the majority of children needed financial assistance because their fathers had died; by the 1970s, the majority needed aid because their parents were separated, divorced, or had never married. Up until the mid-1970s, there was a fierce tug-of-war between the federal government and the states over child support. States maintained that child support was a family issue and it should be dealt with in the privacy of the family court system at the local level of government. In contrast, the federal government maintained that the high cost of supporting welfare families who had been abandoned by a parent, usually because fathers were not meeting their financial responsibility to support their children, made it a federal issue. In effect, the federal government won the debate. The CSE program was signed into law by President Ford in January 1975 as part of the Social Services Amendments of 1974 ( P.L. 93-647 ). The program was a response by Congress intended to reduce public expenditures on welfare, namely AFDC, by obtaining child support from noncustodial parents on an ongoing basis and by helping nonwelfare families get support so they could stay off welfare. Another goal of the program was to establish paternity for children born outside of marriage so that child support could be obtained for them. The CSE program is considered a federal-state program because it is financed in part by the federal government with federal rules and regulations but it is operated by the states. The chief sponsor of the 1975 CSE legislation was Senator Russell Long, who was at the time the chairman of the Senate Finance Committee. During the debate on the CSE legislation, Senator Long stated: Should our welfare system be made to support the children whose father cavalierly abandons them—or chooses not to marry the mother in the first place? Is it fair to ask the American taxpayer—who works hard to support his own family and, to carry his own burden—to carry the burden of the deserting father as well? Perhaps we cannot stop the father from abandoning his children, but we can certainly improve the system by obtaining child support from him and thereby place the burden of caring for his children on his own shoulders where it belongs. We can—and we must—take the financial reward out of desertions. President Ford expressed "reservations" when he signed the enacting legislation. While supporting the objectives of the amendments, he contended that certain provisions "go too far by injecting the Federal Government into domestic relations." He complained of "serious privacy and administrative issues," and promised to propose legislation to correct defects. In subsequent years, as Congress made changes to the CSE program, many presidents expressed support for holding parents accountable with respect to financially taking care of their children. Ten years after President Ford expressed his reservations regarding the CSE program, such concerns had for all intents and purposes disappeared. The Child Support Enforcement Amendments of 1984, P.L. 98-378 , were passed by the House unanimously on November 16, 1983, and by the Senate unanimously on April 24, 1984. The 1984 amendments had a wide range of support from such groups as the NOW Legal Defense and Education Fund, American Public Welfare Association, National Council of State Child Support Enforcement Administrators, National Governor's Association, and National Women's Law Center. Representative Barbara Kennelly, the sponsor of the bill, remarked during the House debate on the amendments that the reason traditionalists and feminists could support the bill was because both groups agreed that parents should take responsibility for their children seriously. When President Reagan signed the amendments into law on August 16, 1984, he hailed them as "legislation that will give children the helping hand they need." He also stated: The goal of our efforts is not just the transfer of funds. We also hope to discourage abandonment and, if families do split up, to encourage the absent parents to invest time and love in their children. Permitting individuals to ignore parental obligations and giving the bill to the taxpayers in the form of higher welfare costs have been tantamount to a stamp of approval. And this is not the kind of message public policy should be sending out. Four years later when President Reagan signed the Family Support Act of 1988 ( P.L. 100-485 ), into law, he said that the legislation represented: the culmination of more than 2 years of effort and responds to the call in my 1986 State of the Union Message for real welfare reform—reform that will lead to lasting emancipation from welfare dependency.… First, the legislation improves our system for securing support from absent parents. In 1996, President Clinton signed the Personal Responsibility and Work Opportunity Reconciliation Act of 1996 ( P.L. 104-193 ) into law. He stated: The bill I'm about to sign, as I have said many times, is far from perfect, but it has come a very long way. Congress sent me two previous bills that I strongly believe failed to protect our children and did too little to move people from welfare to work. I vetoed both of them. This bill had broad bipartisan support and is much, much better on both counts. He also said: It includes the tough child support enforcement measures that, as far as I know, every Member of Congress and everybody in the administration and every thinking person in the country has supported for more than 2 years now. It's the most sweeping crackdown on deadbeat parents in history. We have succeeded in increasing child support collection 40 percent, but over a third of the cases where there's delinquencies involve people who cross State lines. For a lot of women and children, the only reason they're on welfare today—the only reason—is that the father up and walked away when he could have made a contribution to the welfare of the children. That is wrong. If every parent paid the child support that he or she owes legally today, we could move 800,000 women and children off welfare immediately. With this bill we say, if you don't pay the child support you owe, we'll garnish your wages, take away your driver's license, track you across State lines, if necessary, make you work off what you pay—what you owe. It is a good thing, and it will help dramatically to reduce welfare, increase independence, and reinforce parental responsibility. In 1998, President Clinton signed the Deadbeat Parents Punishment Act of 1998 ( P.L. 105-187 ) into law. He stated: This bill today is a gift to our children and the future. The quiet crisis of unpaid child support is something that our country and our families shouldn't tolerate. Our first responsibility, all of us, is to our children. And today we all know that too many parents still walk away from that obligation. That threatens the education, the health of our children, and the future of our country.... The Deadbeat Parents Punishment Act of 1998 deals with child support evaders in the most serious cases. From now on if you flee across State lines and refuse to pay child support you may be charged with a Federal offense, a felony offense, and may land in jail for up to 2 years. One way or the other people who don't support their children will pay what they must. Less than one month later, President Clinton signed the Child Support Performance and Incentive Act of 1998 ( P.L. 105-200 ) into law. He stated: H.R. 3130 will build on this progress and help ensure that parents give their children all the support they need and deserve. First, the new law puts in place additional tough penalties for States that fail to automate their child support computer systems on time. Under this new law, States that fail to establish these State-wide systems face automatic and escalating penalties, ranging from 4 percent of Federal child support enforcement funds for the first year to 30 percent for the fifth year in which a State fails to meet national certification standards. Second, H.R. 3130 incorporates a proposal that my Administration sent to the Congress last year to reward States for their performance on a wide range of key child support goals, such as the number of paternity establishments and child support orders, rather than only on cost-effectiveness, as current law provides. Third, the law will make it easier for States to secure medical support for children in cases in which the non-custodial parent has private health coverage, by facilitating the creation of a medical support notice that all health plans will recognize. Since its enactment in 1975, almost 50 laws have made changes to the CSE program. This report provides a legislative history of the program. It includes a discussion of precursor legislation, describes the provisions that were part of the initial law, and describes the many subsequent provisions in other laws that made changes to the CSE program. It also includes a summary table of laws that pertain to the program. The information related to individual CSE provisions generally provides enough detail to demonstrate how some of the main provisions of the CSE program changed over time. Child Support Enforcement Laws Although the CSE program generally garners bipartisan support, it is hard to document congressional votes on specific CSE-related issues because most CSE legislation has not been in the form of stand-alone bills. For most of its history changes to the CSE program have been achieved in tandem with changes to other social welfare programs. As seen in Table 1 , many CSE provisions were incorporated in omnibus budget bills and legislation amending Social Security Act programs. Table 1 lists the federal laws that include CSE provisions. It is followed by a description of the individual CSE provisions in the listed CSE laws. The provisions reflect the changes in and/or expansion of the mission of the CSE program over the years. 1950 Social Security Amendments of 1950 The first federal child support enforcement legislation was P.L. 81-734, the Social Security Act Amendments of 1950, which added Section 402(a)(11) to the Social Security Act (42 U.S.C. 602(a)(11)). The legislation required state welfare agencies to notify appropriate law enforcement officials upon providing AFDC to a child who was abandoned or deserted by a parent. The intent of the provision was to enable law enforcement officials to locate absent parents and to prosecute them, if warranted, under the various state laws. In effect, this provision made it the job of the prosecutor rather than the AFDC agency to file a complaint or press a lawsuit against noncustodial parents who had deserted their families. The AFDC agency was only responsible for providing eligible children with welfare dollars; it was not responsible for enforcing child support. Uniform Reciprocal Enforcement of Support Act (URESA) Also in 1950, the National Conference of Commissioners on Uniform State Laws (NCCUSL) and the American Bar Association approved the Uniform Reciprocal Enforcement of Support Act (URESA).URESA, a model state law, was enacted in all 50 states, the District of Columbia, Guam, Puerto Rico, and the Virgin Islands. The act was amended in 1952 and 1958 and revised in 1968. In its early years URESA was often called the "Runaway Pappy Act." Its purpose was to provide a system for the interstate enforcement of child support orders without requiring the person seeking child support or her or his legal representative to go to the state in which the noncustodial parent resided. 1965 Social Security Amendments of 1965 P.L. 89-97, the Social Security Amendments of 1965, allowed a state or local welfare agency to obtain from the Secretary of Health, Education, and Welfare the address and place of employment of an absent parent who owed child support under a court order for support. 1967 Social Security Amendments of 1967 P.L. 90-248, the Social Security Amendments of 1967, allowed states to obtain from the Internal Revenue Service (IRS) the address of nonresident parents who owed child support under a court order for support. In addition, as part of its AFDC program, each state was required to establish a single organizational unit to establish paternity and collect child support for deserted children receiving AFDC. States were also required to work cooperatively with each other under child support reciprocity agreements and with courts and law enforcement officials. Recognizing that law enforcement officials were overwhelmed with an assortment of cases and that most of them gave finding absent/noncustodial parents low priority, the 1967 provisions gave the newly established organizational unit the responsibility of establishing paternity and collecting child support. The 1967 amendments also provided for federal reimbursement of costs related to paternity and child support activities at a 50% rate. 1975 Social Services Amendments of 1974 P.L. 93-647 , the Social Services Amendments of 1974, created part D of Title IV of the Social Security Act (Sections 451, et seq.; 42 U.S.C. 651, et seq.). The law contained key child support enforcement provisions, which reflected three years of intense congressional attention. The main CSE provisions are summarized below. Federal Requirements The Secretary of the Department of Health, Education, and Welfare (now the Department of Health and Human Services, or HHS) was given primary responsibility for the CSE program and was required to establish a separate organizational unit to operate it. Operational responsibilities included (1) establishing a Federal Parent Locator Service (FPLS); (2) establishing standards for state program organization, staffing, and operation; (3) reviewing and approving state plans for the program; (4) evaluating state program operations by conducting audits of each state's program; (5) certifying cases for referral to the federal courts to enforce support obligations; (6) certifying cases for referral to the IRS for support collections; (7) subjecting moneys due and payable to federal employees to garnishment for the collection of child support; (8) providing technical assistance to states and assisting them with reporting procedures; (9) maintaining records of program operations, expenditures, and collections; and (10) submitting an annual report to Congress. State Plan Requirements Primary responsibility for operating the CSE program was placed on the states pursuant to the state plan. The major requirements of a state plan were that (1) the state designate a single and separate organizational unit to administer the program; (2) the state undertake to establish paternity and secure support for individuals receiving AFDC and others who apply directly for child support enforcement services; (3) child support payments be made to the state for distribution; (4) the state enter into cooperative agreements with appropriate courts and law enforcement officials; (5) the state establish a State Parent Locator Service that uses state and local parent location resources and the Federal Parent Locator Service (FPLS); (6) the state cooperate with any other state in locating an absent parent, establishing paternity, and securing support; and (7) the state maintain a full record of collections and disbursements made under the plan. In addition, new eligibility requirements were added to the AFDC program requiring applicants for, or recipients of, AFDC to make an assignment of support rights to the state, to cooperate with the state in establishing paternity and securing support, and to furnish their Social Security numbers to the state. (Note that although these provisions are requirements for Title IV-A of the Social Security Act, they are a cornerstone of the Title IV-D program.) Moreover, each state/jurisdiction was required to make its CSE program available to individuals who were not recipients of AFDC if such individuals applied for CSE services. The state/jurisdiction was allowed to charge an application fee and could also recover costs that were in excess of the application fee from the amount of child support collected. Financing the CSE Program The 1975 law required that child support payments made on behalf of children receiving AFDC benefits had to be paid to the state rather than directly to the family. It also established procedures for the distribution of child support collections received on behalf of families on AFDC. These provisions together with the assignment of child support rights provision enabled states and the federal government to regain a portion of their AFDC expenditures. This meant that in cases where child support was collected on behalf of a child receiving AFDC and the amount of the child support was not enough to make the family ineligible for AFDC, the family continued to receive its full AFDC payment and the child support collection was used to reimburse the state and federal government to the extent of their participation in the financing of past and current AFDC payments. P.L. 93-647 also created an incentive system to encourage states to collect payments from parents of children on AFDC. Under this system, financial incentive payments were provided to localities of the state (i.e., political subdivisions of the state) that had collected child support payments on behalf of state CSE agencies. When more than one jurisdiction was involved the incentive payment was allocated among the jurisdictions. The incentive payment also applied to states enforcing and collecting child support payments on behalf of other states. The incentive amount was dependent on when the child support collection was made. For the first 12 months of collections for a particular case, the incentive was 25% of the amount that was used to reimburse AFDC payments. After 12 months of collections in a particular case, the incentive payment dropped to 10%. Incentive payments came out of the portion of child support collections sent to the federal government (thereby with zero cost to the states). P.L. 93-647 required the Secretary of the Department of Health, Education, and Welfare (HEW) to pay each state, on a quarterly basis, an amount equal to 75% of the total amount expended by the state on CSE expenditures, except that expenditures on behalf of non-AFDC families (i.e., families that were not required to assign their child support rights to the state) were to be eliminated after June 30, 1976. P.L. 93-647 also stipulated that if a state is found via the annual audit not to be in compliance with the CSE state plan, the state's AFDC reimbursement (i.e., the federal share of a state's AFDC expenditures) would be reduced by 5%. P.L. 94-46 Several problems were identified prior to July 1, 1975 (the effective date of P.L. 93-647 ) and Congress passed legislation, enacted as P.L. 94-46 , to delay the effective date of the CSE program to August 1, 1975. P.L. 94-88 To resolve some of the problems associated with P.L. 93-647 , P.L. 94-88 was enacted in August 1975 to allow states to obtain waivers from certain program requirements under certain conditions until June 30, 1976, and to receive federal reimbursement at a reduced rate (50% rather than 75%). P.L. 94-88 also eased the requirement for AFDC recipients to cooperate with state CSE agencies when such cooperation would not be in the best interests of the child, and provided for supplemental payments to AFDC recipients whose grants would be reduced due to the implementation of the CSE program. In addition, P.L. 94-88 provided for quarterly advances to the states for CSE programs. It also authorized the payment of funds to cover specified costs incurred by the states during July 1975 in a good faith effort to implement specified CSE programs. 1976 P.L. 94-365 P.L. 94-365 provided a one-year extension on funding of CSE services for non-AFDC families. The federal 75% matching rate was extended for CSE funding for non-AFDC families from June 30, 1976, through June 30, 1977. Unemployment Compensation Amendments of 1976 P.L. 94-566 , the Unemployment Compensation Amendments of 1976, required state employment agencies to provide absent parents' addresses to state CSE agencies. 1977 Tax Reduction and Simplification Act of 1977 P.L. 95-30 , the Tax Reduction and Simplification Act of 1977, made several amendments to Title IV–D of the Social Security Act. Provisions relating to the garnishment of a federal employee's wages for child support were amended to (1) include employees of the District of Columbia; (2) specify the conditions and procedures to be followed to serve garnishments on federal agencies; (3) authorize the issuance of garnishment regulations by the three branches of the federal government and by the District of Columbia; and (4) clarify several terms used in the statute. P.L. 95-30 also amended Section 454 of the Social Security Act (42 U.S.C. 654) to require the state plan to provide bonding for employees who receive, handle, or disburse cash and to ensure that the accounting and collection functions are performed by different individuals. In addition, the incentive payment provision, under Section 458(a) of the Social Security Act (42 U.S.C. 658(a)), was amended to change the rate to 15% of AFDC collections (from 25% for the first 12 months and 10% thereafter). Extension of Certain Social Welfare Programs P.L. 95-59 (Extension of Certain Social Welfare Programs) extended CSE funding for non-AFDC families from June 30, 1977, to September 30, 1978. Medicare-Medicaid Antifraud and Abuse Amendments P.L. 95-142 , the Medicare-Medicaid Antifraud and Abuse Amendments, established (in Section 11 of the law) a medical support enforcement program under which states could require Medicaid applicants and recipients to assign to the state their rights to medical support. State Medicaid agencies were allowed to enter into cooperative agreements with any appropriate agency of any state, including the CSE agency, for assistance with the enforcement and collection of medical support obligations. Incentives were also made available to localities making child support collections for states and for states securing collections on behalf of other states. 1978 Bankruptcy Reform Act of 1978 P.L. 95-598 , the Bankruptcy Reform Act of 1978, repealed Section 456(b) of the Social Security Act (42 U.S.C. 656(b)), which had barred the discharge in bankruptcy of assigned child support debts. Pursuant to P.L. 95-598 , a child support obligation assigned to a state by an AFDC applicant or recipient could be released/discharged in a bankruptcy proceeding. (Section 456(b) of the Social Security Act was restored in 1981 by P.L. 97-35 .) 1980 P.L. 96-178 P.L. 96-178 extended federal financial participation (FFP) (i.e., the federal matching rate) for CSE services on behalf of families not on AFDC to March 31, 1980, retroactive to October 1, 1978. Social Security Disability Amendments of 1980 P.L. 96-265 , the Social Security Disability Amendments of 1980, increased federal matching funds to 90%, effective July 1, 1981, for the costs of developing, implementing, and enhancing approved automated child support management information systems. Federal matching funds were also made available for child support enforcement duties performed by certain court personnel. In another provision, the law authorized the IRS to collect child support arrearages on behalf of non-AFDC families. Finally, the law provided state and local CSE agencies access to wage information held by the Social Security Administration and state employment security agencies for use in establishing and enforcing child support obligations. Adoption Assistance and Child Welfare Act of 1980 P.L. 96-272 , the Adoption Assistance and Child Welfare Act of 1980, contained four amendments to Title IV–D of the Social Security Act. First, the law made FFP for non-AFDC services available on a permanent basis (retroactive to October 1, 1978). Second, it allowed states to receive incentive payments on all AFDC collections, not just interstate collections. Third, as of October 1, 1979, states were required to claim reimbursement for expenditures within two years, with some exceptions. Fourth, the imposition of the 5% penalty on AFDC reimbursement for states not having effective CSE programs was postponed until October 1, 1980. 1981 Omnibus Budget Reconciliation Act of 1981 P.L. 97-35 , the Omnibus Budget Reconciliation Act of 1981, amended Title IV–D of the Social Security Act in five ways. First, the IRS was authorized to withhold all or part of certain individuals' federal income tax refunds for collection of delinquent child support obligations on behalf of AFDC families. Second, CSE agencies were permitted to collect spousal support for AFDC families. Third, for non-AFDC cases, CSE agencies were required to collect fees from absent parents who were delinquent in their child support payments. Fourth, child support obligations assigned to the state no longer were dischargeable in bankruptcy proceedings. Fifth, states were required to withhold a portion of unemployment benefits from noncustodial parents delinquent in their support payments. 1982 Tax Equity and Fiscal Responsibility Act of 1982 P.L. 97-248 , the Tax Equity and Fiscal Responsibility Act of 1982, included several provisions affecting the CSE program. FFP was reduced from 75% to 70%, effective October 1, 1982. Incentives were reduced from 15% to 12%, effective October 1, 1983 (such incentives are obtained from the federal share of CSE collections). The provision for reimbursement of costs of certain court personnel that exceed the amount of funds spent by a state on similar court expenses during calendar year 1978 was repealed. The mandatory fee to recover costs associated with CSE services in non-AFDC cases imposed by P.L. 97-35 was repealed (retroactive to August 13, 1981), and states were given the option of establishing an application fee on custodial parents who were not receiving AFDC benefits and recovering costs in excess of the fee from either the custodial or noncustodial (non-AFDC) parent. States were allowed to collect spousal support in certain non-AFDC cases. As of October 1, 1982, members of the uniformed services on active duty were required to make allotments from their pay when support arrearages reached the equivalent of a two-month delinquency. Beginning October 1, 1982, states were allowed to reimburse themselves for AFDC grants paid to families for the first month in which the collection of child support was sufficient to make a family ineligible for AFDC. Uniformed Services Former Spouses' Protection Act P.L. 97-252 , the Uniformed Services Former Spouses' Protection Act, authorized treatment of military retirement or retainer pay as property to be divided by state courts in connection with divorce, dissolution, annulment, or legal separation proceedings. It also allowed for the payment of child and/or spousal support (as specified in the court order) from the military retirement or retainer pay. Omnibus Budget Reconciliation Act of 1982 P.L. 97-253 , the Omnibus Budget Reconciliation Act of 1982, provided for the disclosure of information obtained under authority of the Food Stamp Act of 1977 to various programs, including state CSE agencies. 1984 Bankruptcy Amendments and Federal Judgeship Act of 1983 P.L. 98-353 , the Bankruptcy Amendments and Federal Judgeship Act of 1983, made nondischargeable in bankruptcy (1) any debt for child support ordered by a court (regardless of whether the debtor parent was ever married to the child's other parent); and (2) any such debt assigned to federal, state, or local government. In effect this provision stipulated that child support debts in the case of non-AFDC families could not be discharged in bankruptcy proceedings. Deficit Reduction Act of 1984 P.L. 98-369 , the Deficit Reduction Act of 1984, required states to pass through to the family, the first $50 of current monthly child support payments collected on behalf of an AFDC family and to disregard it as income to the family so that it did not affect the family's AFDC eligibility or monthly benefit amount. (This provision often referred to as the "$50 disregard" resulted in some AFDC families having up to $50 of additional disposable income each month.) The remaining amount was divided between the state and the federal governments according to the state's AFDC federal matching rate. P.L. 98-369 also provided that the $1,000 dependency exemption for a child of divorced or separated parents was to be allocated to the custodial parent unless the custodial parent signed a written declaration that she or he would not claim the exemption for the relevant year. For purposes of computing the medical expense deduction for years after 1984, each parent was allowed to claim the medical expenses that he or she paid for the child. Child Support Enforcement Amendments of 1984 P.L. 98-378 , the Child Support Enforcement Amendments of 1984, featured provisions that required improvements in state and local CSE programs in four major areas: Mandatory enforcement practices All states were required to enact statutes to improve enforcement mechanisms, including (1) mandatory income withholding procedures; (2) expedited processes for establishing and enforcing support orders; (3) state income tax refund interceptions; (4) liens against real and personal property, security, or bonds to ensure compliance with support obligations; and (5) reports of support delinquency information to consumer reporting agencies. State law had to allow for the bringing of paternity actions any time prior to a child's 18 th birthday and all support orders issued or modified after October 1, 1985, had to include a provision for wage withholding. Federal financial participation and audit provisions To encourage greater reliance on performance-based incentives, federal matching funds were reduced by 2% in 1988 (to 68%) and another 2% in 1990 (to 66%). Federal matching funds at a 90% rate were expanded to include computer hardware purchases, and at state option to facilitate income withholding and other newly required procedures. State incentive payments were reset at 6% for both AFDC and non-AFDC collections. These percentages could rise as high as 10% for each category for cost-effective states, but a state's non-AFDC incentive payments could not exceed its AFDC incentive payments. States were required to pass incentives through to local CSE agencies if these agencies had accumulated child support enforcement costs. Annual state audits were replaced with audits conducted at least once every three years. The focus of the audits was altered to evaluate a state's effectiveness on the basis of program performance as well as operational compliance. Penalties for noncompliance were from 1% to 5% of the federal share of the state's AFDC funds. The federal government could suspend imposition of a penalty based on a state's filing of, and complying with, an acceptable corrective action plan. Improved interstate enforcement States were required to apply a host of enforcement techniques to interstate cases as well as intrastate cases. Both states involved in an interstate case could take credit for the collection when reporting total collections for the purpose of calculating incentives. Special demonstration grants were authorized beginning in 1985 to fund innovative methods of interstate enforcement and collection. Federal audits were to be focused on states' effectiveness in establishing and enforcing obligations across state lines. Equal services for welfare and non-AFDC families Several specific requirements were directed at improving state services to non-AFDC families. All of the mandatory practices had to be made available for both types of cases. The interception of federal income tax refunds was extended to non-AFDC cases. Incentive payments for non-AFDC cases became available for the first time (to apply to refunds payable after December 31, 1985, and before January 1, 1991; this provision was made permanent by P.L. 101-508 ). States were required to continue child support services to families terminated from the welfare rolls without charging an application fee. States were required to charge an application fee not exceeding $25 for non-AFDC cases. States were required to publicize the availability of CSE services for non-AFDC parents. Other provisions States were required to (1) collect support in certain foster care cases; (2) collect spousal support in addition to child support where both are due in a case; (3) notify AFDC recipients, at least yearly, of the collections made on their behalf; (4) establish state commissions to study the operation of the state's child support system and report findings to the state's governor; (5) formulate guidelines for determining appropriate child support obligation amounts and distribute the guidelines to judges and other individuals who possess authority to establish obligation amounts; (6) offset the costs of the program by charging various fees to non-AFDC families and delinquent nonresident parents; (7) allow families whose AFDC eligibility was terminated as a result of the payment of child support to remain eligible to receive Medicaid for four months (expired on October 1, 1988; later made permanent by P.L. 101-239 ); (8) establish medical support orders in addition to monetary awards; and (9) provide waiver authority for the CSE program to operate approved research and demonstration projects under Section 1115 of the Social Security Act. The Federal Parent Locator Service was made more accessible and effective in locating absent parents. 1986 Omnibus Budget Reconciliation Act of 1986 P.L. 99-509 , the Omnibus Budget Reconciliation Act of 1986, included one child support enforcement amendment prohibiting the retroactive modification of child support awards. Under this new requirement, state laws had to provide for either parent to apply for modification of an existing order with notice provided to the other parent. No modification was permitted before the date of this notification. 1987 Omnibus Budget Reconciliation Act of 1987 P.L. 100-203 , the Omnibus Budget Reconciliation Act of 1987, included a provision that required states to provide CSE services to all families with an absent parent who received Medicaid and had assigned their support rights to the state, regardless of whether they were receiving AFDC. 1988 Family Support Act of 1988 P.L. 100-485 , the Family Support Act of 1988, emphasized the duties of parents to work and support their children and, in particular, emphasized child support enforcement as the first line of defense against welfare dependence. Key child support provisions included the following: Guidelines for child support awards Judges and other officials were required to use state guidelines for child support unless they rebutted the guidelines by a written finding that applying them would be unjust or inappropriate in a particular case. States were required to review guidelines for awards every four years. Beginning five years after enactment, states generally had to review and, if necessary, adjust individual case awards every three years for AFDC cases. The same applied to other CSE cases, except review and adjustment was at the request of a parent. Establishment of paternity States were required to meet federal standards for the establishment of paternity. States were given two options for determining the Paternity Establishment Percentage (PEP). They could use a PEP that was based on data that pertained solely to the CSE program or they could use a PEP that was based on data that pertained to the state population as a whole. In effect, the PEP compares paternities established during the fiscal year with the number of nonmarital births during the preceding fiscal year. To meet federal requirements, the PEP in a state was required to (1) be at least 50%; (2) be at least equal to the average for all states; or (3) have increased by 3% from FY1988 to FY1991 and by 3% each year thereafter. States were mandated to require all parties in a contested paternity case to take a genetic test upon request of any party. The federal matching rate for laboratory testing to establish paternity was increased to 90%. Disregard of child support The child support enforcement disregard authorized under the Deficit Reduction Act of 1984 was clarified so that it applied to a payment made by the noncustodial parent in the month it was due even if it was received in a subsequent month. Requirement for prompt state response The Secretary of HHS was required to set time limits within which states had to accept and respond to requests for assistance in establishing and enforcing support orders as well as time limits within which child support payments collected by the state CSE agency had to be distributed to the families to whom they were owed. Requirement for automated tracking and monitoring system Every state that did not have a statewide automated tracking and monitoring system in effect had to submit an advance planning document that met federal requirements by October 1, 1991. The Secretary was required to approve each document within nine months after submission. By October 1, 1995, every state had to have an approved system in effect. States were awarded 90% federal matching rates for this activity until September 30, 1995. Interstate enforcement A Commission on Interstate Child Support was created to hold national conferences on interstate child support enforcement reform and to report to Congress no later than October 1, 1990, on recommendations for improvements in the system and revisions in the Uniform Reciprocal Enforcement of Support Act. Computing incentive payments Amounts spent by states for interstate demonstration projects were required to be excluded from calculating the amount of the states' incentive payments. Use of INTERNET system The Secretaries of Labor and HHS were required to enter into an agreement to give the Federal Parent Locator Service prompt access to wage and unemployment compensation claims information useful in locating absent parents. Wage withholding With respect to CSE cases, each state was required to provide for immediate wage withholding in the case of orders that were issued or modified on or after the first day of the 25 th month beginning after the date of enactment unless (1) one of the parties demonstrated, and the court found, that there was good cause not to require such withholding; or (2) there was a written agreement between both parties providing for an alternative arrangement. Prior law requirements for mandatory wage withholding in cases where payments were in arrears applied to orders that were not subject to immediate wage withholding. States were required to provide for immediate wage withholding for all support orders initially issued on or after January 1, 1994, regardless of whether a parent had applied for CSE services. Work and training demonstration programs for noncustodial parents The Secretary of HHS was required to grant waivers to up to five states to allow them to provide services to noncustodial parents under the AFDC Job Opportunity and Basic Skills (JOBS) training program. No new power was granted to the states to require participation by noncustodial parents. Data collection and reporting The Secretary of HHS was required to collect and maintain state-by-state statistics on paternity establishment, location of absent parents for the purpose of establishing a support obligation, enforcement of a child support obligation, and location of absent parents for the purpose of enforcing or modifying an established obligation. Use of Social Security number Each state was mandated, in the administration of any law involving the issuance of a birth certificate, to require each parent to furnish his or her Social Security number (SSN), unless the state found good cause for not requiring the parent to furnish it. The SSN was required to be in the birth record but not on the birth certificate, and the use of the SSN obtained through the birth record was restricted to CSE purposes, except under certain circumstances. Notification of support collected Each state was required to inform families receiving AFDC of the amount of support collected on their behalf on a monthly basis, rather than annually as provided under prior law. States had the option to provide quarterly notification if the Secretary of HHS determined that monthly reporting imposed an unreasonable administrative burden. This provision was effective four years after the date of enactment. The Medicaid transition benefit in child support cases was extended from October 1, 1988 to October 1, 1989. 1989 Omnibus Budget Reconciliation Act of 1989 P.L. 101-239 , the Omnibus Budget Reconciliation Act of 1989, made permanent the requirement that Medicaid benefits continue for four months after a family loses AFDC eligibility as a result of collection of child support payments. 1990 Omnibus Budget Reconciliation Act of 1990 P.L. 101-508 , the Omnibus Budget Reconciliation Act of 1990, with respect to non-AFDC cases, permanently extended the federal provision that allowed states to ask the IRS to collect child support arrearages of at least $500 out of federal income tax refunds otherwise due to noncustodial parents. A federal income tax refund offset was not permissible if the relevant child had reached the age of majority, even if the arrearages accrued while the child was still a minor, unless the child (now adult) had a current support order and was disabled, as defined under the Old-Age, Survivors, and Disability Insurance (OASDI) or Supplemental Security Income (SSI) programs. The IRS offset could be used for spousal support when spousal and child support are included in the same support order. The existence of the Interstate Child Support Commission was extended from July 1, 1991, to July 1, 1992, and the commission was required to submit its report no later than May 1, 1992. The commission was allowed to hire its own staff. 1992 Child Support Recovery Act of 1992 P.L. 102-521 , the Child Support Recovery Act of 1992, imposed a federal criminal penalty for the willful failure to pay a past-due child support obligation for a child who resided in another state where the obligation had remained unpaid for longer than a year or was greater than $5,000. For the first conviction, the penalty was a fine of up to $5,000, imprisonment for not more than six months, or both; for a second conviction, the penalty was a fine of not more than $250,000, imprisonment for up to two years, or both. Ted Weiss Child Support Enforcement Act of 1992 P.L. 102-537 , the Ted Weiss Child Support Enforcement Act of 1992, amended the Fair Credit Reporting Act to require a consumer reporting/credit agency to include in a consumer credit report any information on the failure of a consumer to pay overdue child support if that information was: (1) provided by a state or local CSE agency or verified by any local, state, or federal government agency; and (2) not more than seven years old. 1993 Omnibus Budget Reconciliation Act of 1993 P.L. 103-66 , the Omnibus Budget Reconciliation Act of 1993, increased the percentage of children for whom the state was required to establish paternity from 50% to 75% (which was enforced by financial penalties linked to a reduction of federal matching funds for the state's AFDC program if the state did not meet the "paternity establishment percentage" requirement), and required states to adopt laws requiring civil procedures to voluntarily acknowledge paternity (including hospital-based programs). The act also required states to adopt laws to ensure the compliance of health insurers and employers in carrying out court or administrative orders for medical child support and included a provision that prohibited health insurers from denying coverage to children who were not living with the covered individual or born outside marriage. 1994 Full Faith and Credit for Child Support Orders Act P.L. 103-383 , the Full Faith and Credit for Child Support Orders Act, required each state to enforce, according to such state's terms, a child support order by a court (or administrative authority) of another state, with conditions and specifications for resolving issues of jurisdiction. The law did not amend Title IV-D of the Social Security Act and therefore did not directly change federal CSE program requirements. Nonetheless, P.L. 103-383 impacted the interstate processing of child support cases, including CSE cases. It required tribunals of each state to enforce, according to such state's terms, a child support order issued by a court (defined to also include an administrative authority) of another state, if (1) the issuing state's tribunal had subject matter jurisdiction to hear the matter and enter an order; (2) the issuing state's tribunal had personal jurisdiction over the parties; and (3) reasonable notice and the opportunity to be heard was given to the parties. The issuing tribunal retained continuing, exclusive jurisdiction over the order as long as the child or at least one of the parties resided in the issuing state, unless the tribunal of another state, acting in accordance with P.L. 103-383 , had modified the support order. However, the power to modify another state's support order was restricted. Bankruptcy Reform Act of 1994 P.L. 103-394 , the Bankruptcy Reform Act of 1994, stipulated that a filing of bankruptcy does not stay a paternity, child support, or alimony proceeding. In addition, child support and alimony payments were made priority claims and custodial parents were able to appear in bankruptcy court to protect their interests without paying a fee or meeting any local rules for attorney appearances. Small Business Administration Amendments of 1994 P.L. 103-403 , the Small Business Administration Amendments of 1994, made parents who failed to pay child support ineligible for small business loans. Social Security Act Amendments of 1994 P.L. 103-432 , the Social Security Act Amendments of 1994, included a provision that required states to implement procedures requiring periodic state reporting to consumer credit agencies of the names of debtor parents owing at least two months' of overdue child support and the amount of child support overdue. 1995 P.L. 104-35 P.L. 104-35 extended for two years the deadline (imposed by P.L. 100-485 ) by which each state was required to have in effect an automated data processing and information retrieval system for use in the administration of its CSE program (from October 1, 1995, to October 1, 1997). The 90% federal funding for this activity was not extended in a later law. 1996 Personal Responsibility and Work Opportunity Reconciliation Act of 1996 Title III of the Personal Responsibility and Work Opportunity Reconciliation Act of 1996 ( P.L. 104-193 , also known as the 1996 welfare reform bill) was devoted to major reforms of the CSE program. P.L. 104-193 contains nearly 50 changes, many of them major, to child support law. The summary below organizes these changes into several major categories. State obligation to provide services and distribution rules The rules governing how child support collections are distributed among the federal government, state governments, and families that are on or have been on welfare were substantially changed. The pass-through of the first $50 in child support collections to families on welfare was altered to no longer be a federal requirement. Instead, payments to families that leave welfare are more generous. By October 1, 1997, states had to distribute to the family current support and arrearages that accrued after the family left welfare before the state could be reimbursed for welfare costs. By October 1, 2000, states also were required to distribute to the family arrearages that accrued before the family began receiving welfare before the state could be reimbursed. These new rules, however, did not apply to collections made by intercepting tax refunds. The result of these changes was that states were required to pay a higher fraction of child support collections on arrearages to families that have left welfare by making those payments to families first (before the state). The new law required that if this change in policy resulted in states losing money relative to current law, the federal government would reimburse states for any losses. This section of the law also contained clarifications of the ''fill-the-gap'' policy so that states that operated such programs could continue to do so, provided safeguards against unauthorized use of paternity or child support information, required states to inform parents of proceedings in which child support might be established or modified, and required states to provide parents with a copy of any changes in the child support order within 14 days. Locate and case tracking The federal government made major new investments to help states acquire, automate, and use information. First, states had to establish a registry of all CSE cases and all other new or modified child support cases in the state. The registry had to contain specified minimum data elements for all cases. For cases enforced by the state CSE program, the registry also had to contain a wide array of information that was to be regularly updated, including the amount of each child support order and a record of payments and arrearages. In the case of orders that included income withholding but were not in the CSE system, the state also had to keep records of payments. In CSE cases, this information was used both to enforce and update child support orders by conducting matches with information in other state and federal data systems and programs. Second, states were mandated to create a centralized automated disbursement unit to which child support payments were paid and from which they were distributed, and that contained accurate records of child support payments. This CSE State Disbursement Unit was required to handle payments in all cases enforced by the CSE program and in all cases in the state with income withholding orders. In CSE cases requiring income withholding, within two days of receipt of information about a support order and a parent's source of income the automated system had to send an income withholding notice to employers. Third, states had to require employers to send information on new employees to a centralized State Directory of New Hires within 20 days of the date of hire; employers that report electronically or by magnetic tape could file twice per month. States had to routinely match the new hire information, which had to be entered into the state data base within five days, against the State Case Registry using Social Security numbers. In the case of matches, within two days of entry of data in the Registry, employers had to be notified of the amount to be withheld and where to send the money. Within three days, new employee information had to be reported by states to the National Directory of New Hires. New hire information had to be shared with state agencies administering unemployment, workers' compensation, welfare, Medicaid, food stamps, and other specified programs. States using private contractors could share the new hire information with the contractors, subject to privacy safeguards. States were required to have laws clarifying that child support orders not subject to income withholding were to immediately become subject to income withholding without a hearing if arrearages occur. The law included rules that clarified how employers were to accomplish income withholding in interstate cases and established a uniform definition of income. Employers had to remit withheld income to the State Disbursement Unit within seven days of the normal date of payment to the employee. All state and federal child support agencies must have access to the motor vehicle and law enforcement locator systems of all states. The Federal Parent Locator Service (FPLS) was given several new functions. The new law clarified that the purposes for which the FPLS could be used included establishing parentage; setting, modifying or enforcing support orders; and enforcing custody or visitation orders. In addition to being the repository for information from every state case registry and state directory of new hires (information on new hires had to be entered into the FPLS within two days of receipt), the FPLS had to match information from state case registries with information from state new hire directories at least every two days and report matches to state agencies within two days. All federal agencies also had to report information, including wages, on all employees (except those involved in security activities if they could potentially be compromised) to the FPLS for use in matching against state child support cases. State unemployment agencies had to report quarterly wage and unemployment compensation information to the FPLS. The HHS Secretary had to ensure that FPLS information was shared with the Social Security Administration, state CSE agencies, and other agencies authorized by law. However, the HHS Secretary also had to ensure both that fees were established for agencies that used FPLS information and that the information was used only for authorized purposes. The Secretaries of HHS and Labor were required to work together to develop a cost-effective means of accessing information in the various directories established by the law. All states were required to have procedures for recording the Social Security numbers of applicants on the application for professional licenses, commercial drivers' licenses, occupational licenses, and marriage licenses; states had to record Social Security numbers in the records of divorce decrees, child support orders, paternity orders, and death certificates. Streamlining and uniformity of procedures All states had to enact the Uniform Interstate Family Support Act (UIFSA), including all amendments adopted by the National Conference of Commissioners of Uniform State Laws before January 1, 1998. Provisions recommended by the commissioners on procedures in interstate cases were included in the law. States were not required to use UIFSA in all cases if they determined that using other interstate procedures would be more effective. The law also clarified the definition of a child's home state, made several revisions to ensure that full faith and credit laws could be applied consistently with UIFSA, and clarified the rules regarding which child support order states had to honor when there was more than one order. States were required to have laws that permitted them to send orders to and receive orders from other states. Within five days of receiving a case from another state, responding states had to match the case against its databases, take appropriate action if a match occurred, and send any collections to the initiating state. The HHS Secretary had to issue forms that states had to use for withholding income, imposing liens, and issuing administrative subpoenas in interstate cases. States had to adopt laws that provided the CSE agency with the authority to initiate a series of expedited procedures without the necessity of obtaining an order from any other administrative or judicial tribunal. These actions included ordering genetic testing; issuing subpoenas; requiring public and private employers and other entities to provide information on employment, compensation, and benefits or be subject to penalties; obtaining access to vital statistics, state and local tax records, real and personal property records, records of occupational and professional licenses, business records, employment security and public assistance records, motor vehicle records, corrections records, customer records of utilities and cable TV companies pursuant to an administrative subpoena, and records of financial institutions; directing the obligor to make payments to the CSE agency in public assistance or income withholding cases; ordering income withholding in CSE cases; securing assets to satisfy arrearages, including the seizure of lump sum payments, judgments, and settlements; and increasing the monthly support due to make payments on arrearages. Paternity establishment States were required to have laws that permitted paternity establishment until at least age 18 even in cases previously dismissed because a shorter statute of limitations was in effect. In contested paternity cases, except where barred by state laws or where there was good cause not to cooperate, all parties had to submit to genetic testing at state expense; states could recoup costs from the father if paternity was established. States had to take several actions to promote paternity establishment including creating a simple civil process for voluntary acknowledgment of paternity, maintaining a hospital-based paternity acknowledgment program as well as programs in other state agencies (including the birth record agency), and issuing an affidavit of voluntary paternity acknowledgment based on a form developed by the HHS Secretary. When the child's parents were unmarried, the father's name was not to appear on the birth certificate unless there was an acknowledgment or adjudication of paternity. Signed paternity acknowledgments had to be considered a legal finding of paternity unless rescinded within 60 days; thereafter, acknowledgments could be challenged only on the basis of fraud, duress, or material mistake of fact, with the burden of proof on the challenger. Results of genetic testing had to be admissible in court without foundation or other testimony unless objection was made in writing. State law had to establish either a rebuttable or conclusive presumption of paternity when genetic testing indicated a threshold probability of paternity. States had to require issuance of temporary support orders if paternity was indicated by genetic testing or other clear and convincing evidence. Bills for pregnancy, childbirth, and genetic testing had to be admissible in judicial proceedings without foundation testimony and were required to constitute prima facie evidence of costs incurred for such services. Fathers had to have a reasonable opportunity to initiate a paternity action. Voluntary acknowledgments of paternity and adjudications of paternity had to be filed with the state registry of birth records for matches with the State Case Registry of Child Support Orders and states had to publicize the availability and encourage the use of procedures for voluntary establishment of paternity and child support. Individuals who applied for public assistance had to provide specific identifying information about the noncustodial parent and had to appear at interviews, hearings, and other legal proceedings. States had to have good cause and other exceptions from these requirements that took into account the best interests of the child. Exceptions could be defined and applied by the state CSE, welfare, or Medicaid agencies. Families that refused to cooperate with these requirements had to have their grant reduced by at least 25%. Program administration and funding The HHS Secretary was required to develop a proposal for a new child support incentive system and report the details to Congress by March 1, 1997. States were given a new option for computing the paternity establishment rate; in addition to the procedure for calculating the rate relative to the CSE caseload, states could calculate the rate relative to all out-of-wedlock births in the state. The mandatory paternity establishment rate of prior law was increased from 75% to 90%. States were allowed several years to reach the 90% standard, but had to increase their establishment rate by 2% a year when the state rate was between 75% and 90%. States were required to annually review and report to the HHS Secretary information adequate to determine the state's compliance with federal requirements for expedited procedures, timely case processing, and improvement on the performance indicators. The Secretary had to establish, and states had to use, uniform definitions in complying with this requirement. The Secretary had to use this information to calculate incentive payments and penalties as well as to review compliance with federal requirements. To determine the quality of data reported by states for calculating performance indicators and to assess the adequacy of financial management of the state CSE program, the Secretary had to conduct an audit of every state at least once every three years, and more often if a state failed to meet federal requirements. States had to establish an automated data system that (1) maintained data necessary to meet federal reporting requirements, (2) calculated state performance for incentives and penalties, and (3) ensured the completeness, reliability, and accuracy of data. The automated data system also was required to have privacy safeguards. Data requirements enacted before or during 1988 had to be met by October 1, 1997; funding at the 90% federal matching rate was made available to meet these requirements (including retroactive funding for amounts spent since October 1, 1995). A total of $400 million, to be divided among the states in a manner determined by the HHS Secretary, was made available for meeting the data requirements imposed by this legislation; this money was made available to states at a federal match rate of 80%. The Secretary could use 1% of the federal share of child support collections on behalf of welfare families to provide technical assistance to the states; if needed, the Secretary could use up to 2% of the federal share to operate the FPLS. The HHS Secretary was required to provide several new pieces of information to Congress on an annual basis. This new information included the total amount of child support collected, the costs to the federal and state governments of furnishing child support services, and the total amount of support due and collected as well as due and unpaid. Establishment and modification of support orders The mandatory three-year review of child support orders was slightly modified to permit states some flexibility in determining which reviews of welfare cases should be pursued and in choosing methods of review; states had to review orders every three years (or more often at state option) if either parent or the state requested a review in welfare cases or if either parent requested a review in non-welfare CSE cases. Consumer credit agencies were required to release information on parents who owed child support to CSE agencies that followed several requirements, such as ensuring privacy. Financial institutions were provided immunity from prosecution for providing information to CSE agencies; however, individuals who knowingly made unauthorized disclosures of financial records were subject to civil actions and a maximum penalty of $1,000 for each unauthorized disclosure. Enforcement of support orders Child support enforcement for federal employees, including retirees and military personnel, was substantially revamped and strengthened. As under prior law, federal employees were subject to wage withholding and other actions taken against them by state CSE agencies. Every federal agency was responsible for responding to a state CSE as if the federal agency were a private business. The head of each federal agency had to designate an agent, whose name and address had to be published annually in the Federal Register , to be responsible for handling child support cases. The agent was required to respond to withholding notices and other matters brought to his or her attention by CSE officials. The definition of income for federal employees was broadened to conform to the general CSE definition and child support claims were given priority in the allocation of federal employee income. The Secretary of Defense had to establish a central personnel locator service, which had to be updated on a regular basis, that permitted location of every member of the Armed Services. The Secretary of each branch of the military service had to grant leave to facilitate attendance at child support hearings and other child support proceedings. The Secretary of each branch of the Armed Services also had to withhold child support from retirement pay and forward it to state disbursement units. States had to have laws that permitted the voiding of any transfers of income or property that were made to avoid paying child support. State law had to permit a court or administrative process to issue an order requiring individuals owing past-due support to pay the amount due, follow a plan for repayment, or participate in work activities. States had to periodically report to credit bureaus, after fulfilling due process requirements, the names of parents owing past-due child support. States also had to have procedures under which liens took effect by operation of law against property for the amount of overdue child support; states had to grant full faith and credit to the liens of other states. States also were required to have the authority to withhold, suspend, or restrict the use of drivers' licenses, professional and occupational licenses, and recreational licenses of individuals owing past-due child support. In addition, state CSE agencies had to enter into agreements with financial institutions to develop and operate a data match system in which the financial institution supplied, on a quarterly basis, the name, address, and Social Security number of parents identified by the state as owing past-due child support. In response to a lien or levy from the state, financial institutions were required to surrender or encumber assets of the parent owing delinquent child support. The Internal Revenue Code was amended so that no additional fees could be assessed for adjustments to previously certified amounts for the same obligor. In the case of individuals owing child support arrearages in excess of $5,000, the Secretary of HHS had to request that the U.S. State Department deny, revoke, restrict, or limit the individual's passport. The Secretary of State, working with the Secretary of HHS, was authorized to declare reciprocity with foreign countries for the purposes of establishing and enforcing support orders. U.S. residents had to be able to access services, free of cost, in nations with which the United States had reciprocal agreements; these services were expected to include establishing parentage, establishing and enforcing support, and disbursing payments. State plans for child support were mandated to include provision for treating requests for services from other nations the same as interstate cases. The U.S. Bankruptcy Code was amended to ensure that any child support debt that was owed to a state and that was enforceable under the child support section of the Social Security Act (Title IV–D) could not be discharged in bankruptcy proceedings. A state that has Indian country was allowed to enter into a cooperative agreement with an Indian tribe if the tribe demonstrated it had an established court system that could enter child support and paternity orders; the HHS Secretary was allowed to make direct payments to tribes that had approved CSE plans. Medical support The definition of ''medical child support order'' in the Employee Retirement Income Security Act (ERISA) was expanded to clarify that any judgment, decree, or order that was issued by a court or by an administrative process had the force and effect of law. All orders enforced by the state CSE agency had to include a provision for health care coverage. If the noncustodial parent changed jobs and the new employer provided health coverage, the state was required to send notice of coverage to the new employer; the notice in effect served to enroll the child in the health plan of the new employer. Enhancing responsibility and opportunity for nonresidential parents P.L. 104-193 guaranteed $10 million per year for funding grants to states for access and visitation programs including mediation, counseling, education, development of parenting plans, and supervised visitation. A formula for dividing the grant money among the states was included. States were required to monitor, evaluate, and report on their programs in accordance with regulations issued by the HHS Secretary. 1997 Balanced Budget Act of 1997 P.L. 105-33 , the Balanced Budget Act of 1997, made about 30 technical changes to the 1996 welfare reform law ( P.L. 104-193 ) that related to the CSE program (Title IV-D of the Social Security Act). It stipulated that in addition to TANF families, the following families were exempt from paying an application fee for CSE services: families receiving foster care under Title IV-E, families receiving Medicaid benefits (Title XIX), and certain food stamp recipients. It modified child support requirements affecting (1) distribution of state-collected support and state options for applicability of certain rules; (2) distribution of collections with respect to families receiving assistance and families under certain agreements; (3) civil penalties for failure to report required information to a State Directory of New Hires; (4) uses of the Federal Parent Locator Service, including access to its CSE case registry data for research purposes; (5) collection and use of Social Security numbers for child support enforcement purposes in state certificates and licenses for marriage, occupational, professional, and commercial activities; (6) availability of funds earmarked for the Federal Parent Locator Service; (7) authority to collect child support from federal employees; (8) direct federal grants to Indian tribes for child support enforcement; (9) state retention of child support amounts collected on behalf of a child for whom a public agency was making foster care maintenance payments to the extent necessary to reimburse it for such payments; (10) high-volume automated administrative enforcement in interstate cases; and (11) statutory procedures to ensure that persons with child support arrearages have a work or payment plan. It clarified that with respect to the suspension of certain licenses for failure to pay child support, recreational licenses included sporting licenses. It also stipulated that no information from the Federal Parent Locator Service was to be disclosed to any person if the state had notified the HHS Secretary that the state had evidence of domestic violence or child abuse, and that disclosure of such information could be harmful to the custodial parent or the child, and made many other technical changes. 1998 Deadbeat Parents Punishment Act of 1998 P.L. 105-187 , the Deadbeat Parents Punishment Act of 1998, established two new categories of felony offenses, subject to a two-year maximum prison term: (1) traveling in interstate or foreign commerce with the intent to evade a support obligation if the obligation had remained unpaid for more than one year or was greater than $5,000; and (2) willfully failing to pay a child support obligation regarding a child residing in another state if the obligation had remained unpaid for more than two years or was greater than $10,000. Child Support Performance and Incentive Act of 1998 P.L. 105-200 , the Child Support Performance and Incentive Act of 1998, established a revised incentive payment system that provided incentive payments to states based on a percentage of the state's CSE collections and incorporated five performance measures related to establishment of paternity and child support orders, collections of current and past-due support payments, and cost-effectiveness. The law set specific annual caps on total federal incentive payments and required states to reinvest incentive payments back into the CSE program. The exact amount of a state's incentive payment depended on its level of performance (or the rate of improvement over the previous year) when compared with other states. In addition, states were required to meet data quality standards. If states did not meet specified performance measures and data quality standards, they faced federal financial penalties. (The purpose of the CSE incentive payments is to encourage states to operate efficient and effective CSE programs.) P.L. 105-200 imposed less severe financial penalties on states that failed to meet the October 1997 deadline for implementing a statewide CSE automated data processing and information retrieval system. It also included provisions related to medical support and privacy protections, and made other minor changes. Noncitizen Benefit Clarification and Other Technical Amendments Act of 1998 P.L. 105-306 , the Noncitizen Benefit Clarification and Other Technical Amendments Act of 1998, included a correction to P.L. 105-200 that allowed a state that failed to comply with the 1996 child support data processing requirements to have its annual penalty reduced by 20% for each of the five performance measures under the child support incentive system for which it achieved a maximum score. In addition, the provision clarified the date by which states had to pass laws implementing medical child support provisions to allow time for state legislatures that met biennially to pass laws after final federal regulations were issued in 2000. 1999 Consolidated Appropriations Act, 2000 P.L. 106-113 , the Consolidated Appropriations Act, 2000, provided an alternative penalty for states that were not in compliance with the centralized State Disbursement Unit requirement but had submitted a corrective compliance plan by April l, 2000, that described how, by when, and at what cost the state would achieve compliance. The Secretary of HHS was required to reduce the amount the state would otherwise have received in federal child support payments by the penalty amount for the fiscal year. The penalty amount was 4% for the first fiscal year of noncompliance; 8% for the second year; 16% for the third year; 25% for the fourth year; and 30% for the fifth or any subsequent year. In addition, the law provided for coordination of the alternative disbursement unit penalty with the automated systems penalty so that states that failed to implement both the automated data processing requirement and the state disbursement unit requirement were subject to only one alternative penalty. P.L. 106-113 granted access to the National Directory of New Hires to the Department of Education. These provisions were designed to improve the ability of the Department of Education to collect on defaulted student loans and grant overpayments. Foster Care Independence Act of 1999 P.L. 106-169 , the Foster Care Independence Act of 1999, limited the hold harmless requirement of current law by stipulating that states would only be entitled to hold harmless funds if the state's share of child support collections were less than they were in FY1995 and the state had distributed and disregarded to welfare families at least 80% of child support collected on their behalf in the preceding fiscal year or the state had distributed to former welfare recipients the state share of child support payments collected via the federal income tax offset program. If these conditions were met, the state's share of child support collections would be increased by 50% of the difference between what the state would have received in FY1995 and its share of child support collections in the pertinent fiscal year. P.L. 106-169 repealed this hold harmless provision effective October 1, 2001. 2004 Consolidated Appropriations Act, 2004 P.L. 108-199 , the Consolidated Appropriations Act, 2004, granted access to the National Directory of New Hires to the Department of Housing and Urban Development. These provisions were designed to verify the employment and income of persons receiving federal housing assistance. SUTA Dumping Prevention Act of 2004 P.L. 108-295 , the SUTA Dumping Prevention Act of 2004, granted access to the National Directory of New Hires to the state workforce agencies responsible for administering state or federal Unemployment Compensation programs. These provisions were designed to determine whether persons receiving unemployment compensation are working. Consolidated Appropriations Act, 2005 P.L. 108-447 , the Consolidated Appropriations Act, 2005, granted access to the National Directory of New Hires to the Department of the Treasury. These provisions were designed to help the Department of the Treasury collect nontax debt (e.g., small business loans, Department of Veterans Affairs (VA) loans, agricultural loans) owed to the federal government. 2006 Deficit Reduction Act of 2005 P.L. 109-171 , the Deficit Reduction Act of 2005, made several changes to the CSE program. It reduced the federal matching rate for laboratory costs associated with paternity establishment from 90% to 66%, ended the federal matching of state expenditures of federal CSE incentive payments reinvested back into the program, and required states to assess a $25 annual user fee for child support services provided to families with no connection to the welfare system. It also simplified CSE distribution rules and extended the "families first" policy by providing incentives to states to encourage them to allow more child support to go to both former welfare families and families still on welfare. Namely, states that chose to pass through some of the collected child support to the TANF family did not have to pay the federal government its share of such collections if the amount passed through to the family and disregarded by the state did not exceed $100 per month ($200 per month to a family with two or more children) in child support collected on behalf of a TANF (or foster care) family. In addition, P.L. 109-171 included provisions that (1) lowered the threshold amount for denial of a passport to a noncustodial parent who owes past-due child support; (2) allowed states to use the federal income tax refund offset program to collect past-due child support for persons not on TANF who are no longer minors; (3) authorized the Secretary of HHS to compare information of noncustodial parents who owe past-due child support with information maintained by insurers concerning insurance payments and to furnish any information resulting from a match to CSE agencies so that they can pursue child support arrearages; (4) allowed an assisting state to establish a CSE interstate case based on another state's request for assistance (thereby enabling an assisting state to use the CSE statewide automated data processing and information retrieval system for interstate cases); (5) required states to review and, if appropriate, adjust child support orders of TANF families every three years; and (6) required that medical child support for a child be provided by either or both parents. Returned Americans Protection Act of 2006 P.L. 109-250 , the Returned Americans Protection Act of 2006, granted access to the National Directory of New Hires to the state agencies that administer the Food Stamp program. These provisions were designed to assist in the administration of the program. ( P.L. 110-246 , enacted in June 2008, changed the Food Stamp program references to the Supplemental Nutrition Assistance Program (SNAP).) 2007 Dr. James Allen Veteran Vision Equity Act of 2007 P.L. 110-157 , the Dr. James Allen Veteran Vision Equity Act of 2007, required the Secretary of Veterans Affairs to provide the HHS Secretary with information for comparison with the National Directory of New Hires for income verification purposes in order to determine eligibility for certain veteran benefits and services. 2008 Fostering Connections to Success and Increasing Adoptions Act of 2008 P.L. 110-351 , the Fostering Connections to Success and Increasing Adoptions Act of 2008, added the Title IV-B and Title IV-E (of the Social Security Act) programs to the list of programs that have access to the National Directory of New Hires and other FPLS databases. 2009 American Recovery and Reinvestment Act of 2009 P.L. 111-5 , the American Recovery and Reinvestment Act of 2009, temporarily reinstated federal matching of child support incentive payments for FY2009 and FY2010. 2014 Preventing Sex Trafficking and Strengthening Families Act P.L. 113-183 , the Preventing Sex Trafficking and Strengthening Families Act, included several CSE provisions. In order to standardize and streamline the enforcement of child support in international cases, it (1) required the Secretary of HHS to use the authorities provided by law to ensure the compliance of the United States with any multilateral child support convention/treaty to which the United States is a party; (2) amended federal law so that the federal income tax refund offset program is available for use by a state to handle CSE requests from foreign reciprocating countries and foreign treaty countries; (3) required states to adopt the 2008 amendments to the Uniform Interstate Family Support Act (UIFSA) verbatim to ensure uniformity of procedures, requirements, and reporting forms; and (4) clarified which state court has controlling jurisdiction in establishing, enforcing, and modifying child support orders. It provided Indian tribes or tribal organizations access to the Federal Parent Locator Service by designating them as "authorized persons." It also allowed Indian tribes or tribal organizations that operated a CSE program to be considered a state for purposes of authority to conduct an experimental pilot or demonstration project under the Section 1115 waiver authority to assist in promoting the objectives of the CSE program. P.L. 113-183 included a Sense of the Congress statement that specified that (1) establishing parenting time arrangements (also known as visitation) when obtaining child support orders was an important goal that should be accompanied by strong family violence safeguards; and (2) states should use existing funding sources to support the establishment of parenting time arrangements, including child support incentives, Access and Visitation Grants, and Healthy Marriage Promotion and Responsible Fatherhood Grants. It required data standardization within the CSE program to improve the ability of two or more systems or entities to exchange information and to correctly use the information that has been exchanged. Also, it required the HHS Secretary, in conjunction with developing the CSE strategic plan, to review and provide recommendations for cost-effective improvements to the CSE program. In addition, it required all states to use electronic processing of automated systems for the collection and disbursement of child support payments via the State Disbursement Unit by the transmission of child support orders and notices to employers for income withholding purposes using uniform formats prescribed by the HHS Secretary and, at the option of the employer, using the electronic transmission methods prescribed by the HHS Secretary.

The Child Support Enforcement (CSE) program was enacted in 1975 as a federal-state program (Title IV-D of the Social Security Act, P.L. 93-647). It is intended to help strengthen families by securing financial support for children from their noncustodial parent on a consistent and continuing basis and by helping some of these families to remain self-sufficient and off public assistance. Child support payments enable parents who do not live with their children to fulfill their financial responsibility to them by contributing to the payment of childrearing costs. When the program was first established its goals were to reimburse the states and the federal government for the welfare payments they provided families, in addition to helping families obtain consistent and ongoing child support payments from the noncustodial parent and helping some of these families remain self-sufficient and stay off welfare. The CSE program has evolved over time from a "welfare cost-recovery" program into a "family-first" program that seeks to enhance the well-being of families by making child support a more reliable source of income. The CSE program has the potential to impact more children and for longer periods of time than most other federal programs. In FY2014, it served 16.3 million children (nearly one in four children in the United States). Total CSE expenditures amounted to $5.7 billion and the program collected $28.2 billion in child support payments. The CSE program collected $5.25 for every $1 it spent in that year. According to Census Bureau data, 29% of custodial families have income below the federal poverty level. Child support represented 49% of family income for poor custodial families that received it. As noted, the CSE program began in part as a "welfare cost-recovery" program. For many years the program has been an integral part of helping families escape poverty. As part of its oversight duties, Congress periodically examines the effectiveness and efficiency of the CSE program. Since its enactment in 1975, almost 50 laws have made changes to the program. Although it generally garners bipartisan support, for most of its history changes to the program have been achieved in tandem with more controversial changes to other social programs. This report provides a legislative history of the CSE program. It includes a discussion of precursor legislation, describes the provisions that were part of the initial 1975 law, and summarizes the many subsequent provisions in other laws that made changes to the CSE program. It also includes a summary table of laws that pertain to the program. Moreover, the information related to individual CSE provisions generally provides enough detail to demonstrate how some of the main provisions of the CSE program have changed over time.

Introduction From the mid-1970s to the mid-1990s, economic and trade relations between the United States and Vietnam remained virtually frozen, in part a legacy of the Vietnam War. On May 2, 1975, after the Democratic Republic of Vietnam (North Vietnam) defeated U.S. ally the Republic of Vietnam (South Vietnam), President Gerald R. Ford extended President Richard M. Nixon's 1964 trade embargo on North Vietnam to cover the reunified nation. Under the Ford embargo, bilateral trade (including arms sales) and financial transactions were prohibited. Economic and trade relations between the two nations began to thaw during the Clinton Administration, building on joint efforts during the Reagan and George H. W. Bush Administrations to resolve a sensitive issue in the United States—recovering the remains of U.S. military personnel declared "missing in action" (MIA) during the Vietnam War. The shift in U.S. policy also was spurred by Vietnam's withdrawal from Cambodia. President Bill Clinton ordered an end to the U.S. trade embargo on Vietnam on February 3, 1994, and on July 11, 1995, the United States and Vietnam restored diplomatic relations. Two years later, President Bill Clinton appointed the first U.S. ambassador to Vietnam since the end of the Vietnam War. Bilateral relations also improved in part due to Vietnam's 1986 decision to shift from a Soviet-style central planned economy to a form of market socialism. The new economic policy, known as doi m oi ("change and newness"), ushered in a period of 30 years of rapid growth in Vietnam. Since 2000, Vietnam's real GDP growth has averaged over 6% per year. Much of that growth was generated by foreign investment in Vietnam's manufacturing sector, particularly its clothing industry. The United States and Vietnam signed a bilateral trade agreement (BTA) on July 13, 2000, which went into force on December 10, 2001. As part of the BTA, the United States extended to Vietnam conditional most favored nation (MFN) trade status, now known as normal trade relations (NTR). Economic and trade relations further improved when the United States granted Vietnam permanent normal trade relations (PNTR) status on December 29, 2006, as part of Vietnam's accession to the World Trade Organization (WTO). In June 2007, the United States and Vietnam signed a Trade and Investment Framework Agreement (TIFA), and set up a ministerial-level Trade and Investment Council to discuss issues related to the implementation of the TIFA and WTO agreements, as well as trade and investment policies in general. Since signing the TIFA, Vietnam has indicated a desire to foster closer trade relations. In 2008, Vietnam applied for acceptance into the U.S. Generalized System of Preferences (GSP) program and the two nations started negotiations of a bilateral investment treaty (BIT). Both those initiatives, however, receded in importance once Trans-Pacific Partnership (TPP) negotiations got underway in 2008. The United States also has expressed an interest in closer economic relations, but has told the Vietnamese government that it needs to make certain changes in the legal, regulatory, and operating environment of its economy to conclude the BIT agreement or to qualify for the GSP program. For the first few years following the end of the U.S. embargo in 1994, trade between the two nations grew slowly, principally because of Vietnam's lack of NTR (see Figure 1 ). However, following the granting of conditional NTR in December 2001, trade flows between the United States and Vietnam grew quickly. According to both nations' official trade statistics, merchandise trade nearly doubled between 2001 and 2002. Bilateral trade continued to climb after the United States granted PNTR status to Vietnam in 2006. U.S . imports from Vietnam slid 4.7% in 2009 because of the U.S. economic recession, but have rebounded sharply since 2010. According to U.S. trade statistics, U.S. exports to Vietnam declined by nearly $2 billion in 2017, but Vietnamese trade statistics show an increase in imports from the United States of almost $500 million. The growth in bilateral trade also has created sources of friction over specific goods. A rapid increase in Vietnam's clothing exports to the United States led to the implementation of a controversial monitoring program from 2007 to 2009. The growth in Vietnam's catfish exports (also known as basa , swai , and tra ) has also generated tensions between the two nations (see " Catfish " section below). The recent growth of new merchandise exports from Vietnam, such as electrical machinery, may become subject to future bilateral trade friction. A possible area for growth in U.S. exports to Vietnam is arms sales (see " Arms Sales " section below). In May 2016, President Obama announced that he would lift the remaining restrictions on arms sales to Vietnam. The Trump Administration has repeatedly signaled its interest in increasing arms sales to Vietnam, and has reportedly made such sales a priority for the Defense Department, the State Department, and the U.S. embassy in Hanoi. So far, such arms sales have been limited, despite the expressed interest displayed by both governments. Bilateral Trade Balance The Trump Administration has indicated that reducing U.S. bilateral trade deficits will be a priority in its trade policy. During a June 2017 meeting with South Korea's President Moon Jae-in, President Trump reportedly said, "The United States has trade deficits with many, many countries, and we cannot allow that to continue." The $32 billion bilateral merchandise trade deficit with Vietnam in 2016 was reportedly a major issue during President Trump's May 2017 meeting at the White House with Vietnam's Prime Minister Nguyen Xuan Phuc. The bilateral trade deficit also was discussed during President Trump's meeting with Vietnam's President Tran Dai Quang in Hanoi in November 2017. Since 2001, the U.S. merchandise trade deficit with Vietnam has risen significantly, resulting in its rise from 45 th largest in 2001 to the 5 th largest bilateral deficit in 2017 (see Table 1 ). The increase in the U.S. trade deficit with Vietnam has been largely driven by substantial and successive increases in the import of new types of goods from Vietnam, starting in the early 2000s with clothing, apparel and footwear, and then from 2012 to 2017 expanding into electronics and machinery. This growth largely reflects changes in Asia's regional supply chains, in which major manufacturers from China, Japan, South Korea, the United States, and other nations have relocated some of their production facilities to Vietnam, resulting in an increase in Vietnamese exports. The joint statement issued following Prime Minister Phuc's May 2017 meeting with President Trump identified a number of measures to be taken to "actively promote mutually beneficial and ever-growing economic ties to bring greater prosperity to both countries." The measures included: Both nations "creating favorable conditions for the businesses of both sides, particularly through the effective use of the Trade and Investment Framework Agreement to address issues in United States-Vietnam relations in a constructive manner"; Vietnam pursuing "a consistent policy of economic reform and international integration, creating favorable conditions for foreign companies, including those of the United States, to do business and invest in Vietnam"; Vietnam protecting and enforcing intellectual property; Vietnam "bringing its labor laws in line with Vietnam's international commitments"; and Both nations pledging "to continue to work together constructively to seek resolution of other priority issues of each country, including those related to intellectual property, advertising and financial services, information-security products, white offal, distiller's dried grains, siluriformes , shrimp, mangos, and other issues." Following their November 2017 meeting, President Quang and President Trump released a joint statement that stated: The two leaders pledged to deepen and expand the bilateral trade and investment relationship between the United States and Vietnam through formal mechanisms, including the Trade and Investment Framework Agreement (TIFA). … The leaders committed to seek resolution of remaining agricultural trade issues, including those regarding siluriformes , shrimp, and mangoes, and to promote free and fair trade and investment in priority areas, including electronic payment services, automobiles, and intellectual property rights enforcement. In addition, Vietnam's Minister of Trade and Investment Tran Tuan Anh met with U.S. Trade Representative Robert Lighthizer on May 30, 2017, and asked that the United States recognize Vietnam as a market economy, lift the new catfish inspection regulations, and accelerate the licensing of Vietnamese fruit exports to the United States. Trade and Investment Framework Agreement (TIFA) As both joint statements indicate, the United States and Vietnam have agreed to utilize the 2007 bilateral TIFA, and its Trade and Investment Council (the Council), as a major vehicle to discuss trade and investment issues. According to Article Two of the TIFA, the Council "shall endeavor to meet no less than once a year." The two nations held the first Council meeting since 2011on March 27-28, 2017, in Hanoi. During the meeting, Assistant U.S. Trade Representative Barbara Weisel urged Vietnam to address certain bilateral trade issues, such as agriculture and food safety, intellectual property, digital trade, financial services, customs, industrial goods, transparency and good governance, and illegal wildlife tracking. During a May 2017 meeting with U.S. Trade Representative Robert Lighthizer, Minister of Industry and Trade Tran Tuan Anh urged the United States to recognize Vietnam as a market economy, repeal the special catfish inspection procedures (see " Catfish " below), and reduce barriers to Vietnamese fruit imports. Catfish Catfish have been a source of trade friction between the United States and Vietnam since 2002. Vietnam is a major exporter of frozen fish fillets using certain varieties of fish—known as basa , swai , and tra in Vietnamese—that are commonly referred to as catfish in the global fish market. Since 1999, Vietnamese exports of basa , swai , and tra frozen fish fillets have secured a growing share of the U.S. market, despite the objections of the U.S. catfish industry and the actions of the U.S. government. In 2017, the United States imported almost $345 million in catfish from Vietnam. Over the last 16 years, the United States has taken several actions that have had an impact on the import of Vietnamese catfish (see Table 2 ). In 2002, Congress passed legislation that prohibited the labeling of basa , swai , and tra as "catfish" in the United States. In August 2003, the U.S. government imposed antidumping duties on "certain frozen fish fillets from Vietnam," including basa , swai , and tra . In June 2009, the ITC determined to keep the duties in place "for the foreseeable future." According to the Vietnam Association of Seafood Exporters and Producers (VASEP), the number of companies exporting catfish to the United States declined from 30 to 3 following the imposition of antidumping duties. Although U.S. imports of Vietnamese catfish declined in 2003 and 2005, possibly as a result of legislation and antidumping duties, after 2005, U.S. imports of basa , swai , and tra from Vietnam continued to rise. In the 2008 Farm Bill ( P.L. 110-246 ), Congress transferred catfish inspection (including basa , swai , and tra ) from the Food and Drug Administration (FDA) to the U.S. Department of Agriculture (USDA); Congress confirmed that transfer in the Agriculture Act of 2014 ( P.L. 113-79 ). The Secretary of Agriculture sent draft regulations to the Office of Management and Budget (OMB) in November 2009; the final regulations were published in December 2015. The new regulations took effect on March 1, 2016, but provided a transition period lasting until September 1, 2017, before full implementation would take place. The inspection program was implemented as scheduled. Vietnam's Response In the eyes of the Vietnamese government, the U.S. response to the growth of Vietnam's basa , swai , and tra exports constitutes a case of trade protectionism designed to shelter U.S. catfish producers from legitimate competition. Following the passage of the 2008 Farm Bill, then-Ambassador to the United States Le Cong Phung sent a letter to nearly 140 Members of Congress, suggesting that a reclassification of basa and tra as catfish would call into question the U.S. commitment to the WTO and endanger the jobs of more than 1 million Vietnamese farmers and workers. In addition, an opinion article in the Wall Street Journal referred to the possible reclassification of basa , swai , and tra as catfish as "protectionism at its worst." Vietnam also pointed to U.S. anti-dumping measures on Vietnamese shrimp and plastic bags as an indication of U.S. protectionism. Starting in 2010, Vietnam's Ministry of Agriculture and Rural Development (MOARD) tightened export hygiene standards for basa , swai , and tra , in anticipation of the new U.S. inspection regulations. Effective April 12, 2010, all basa and tra exported from Vietnam needed certificates for hygiene and food safety issued by the National Agro-Forestry-Fisheries Quality Assurance Department. In addition, MOARD and the Ministry of Industry and Trade contracted U.S.-based Mazzetta Company to train Vietnamese fish breeders on how to comply with U.S. standards. In 2011, then Prime Minister Dung reportedly approved a 10-year, $2 billion "master plan" for the development of Vietnam's fish farming industry that is designed to promote infrastructure and technological development, disease control, and environmental improvement. Following the publication of the new U.S. catfish regulations, a spokesperson for Vietnam's Ministry of Foreign Affairs reportedly expressed disappointment, stating the new regulations are unnecessary, could constitute a non-tariff trade barrier, reduce Vietnamese exports, and harm the lives of Vietnamese farmers. Vietnamese officials also reportedly indicated that the 18-month transition period to comply with the new U.S. standards was much shorter than the customary five years granted to developing nations, and suggested that the new regulations may violate the WTO sanitary and phytosanitary (SPS) Agreement. On February 22, 2018, Vietnam filed a WTO complaint that the U.S. inspection program for catfish imports violates the WTO SPS Agreement. In its complaint, Vietnam asserted that the United States had no scientific basis for subjecting imported catfish to a special inspection program. Under WTO procedures, Vietnam is requesting consultation with the United States to resolve the dispute. If, after 60 days, the two nations cannot resolve the dispute, Vietnam can request a formal WTO panel to review and adjudicate the complaint. The Antidumping Sunset Review on Catfish While the USDA prepared the new catfish regulations, the ITC issued, on June 15, 2009, a final determination in its five-year (sunset) review of the existing antidumping duties on "certain frozen fish fillets from Vietnam." In a unanimous decision, the six ITC commissioners voted to continue the antidumping duties "for the foreseeable future." In April 2014, the Department of Commerce lowered the antidumping duties on Vietnam's catfish exports to the United States. On January 12, 2018, Vietnam filed a request for consultations with the WTO's Dispute Settlement Body (DSB) regarding the imposition of anti-dumping duties and cash deposit requirements by the U.S. Department of Commerce on "Certain Frozen Fish Fillets" from Vietnam. On March 8, China submitted a request to be a party to the consultations, noting, "A substantial portion of China's Pangasius seafood product is exported to the United States' market." The United States has 60 days in which to respond to the request and resolve the matter. After 60 days, Vietnam may request adjudication by a WTO dispute panel. As of mid-April, Vietnam has not requested a formal review. Arms Sales In 1975, U.S. military sales to Vietnam were banned as part of the larger U.S. ban on bilateral trade. In 1984, the U.S. government included Vietnam on the International Traffic in Arms Regulations (ITAR) list of countries that were denied licenses to acquire defense articles and defense services. The ITAR restrictions on arms sales remained in effect after President Clinton lifted the general trade embargo in February 1994. In April 2007, the Department of State amended ITAR to permit "on a case-by-case basis licenses, other approvals, exports or imports of non-lethal defense articles and defense services destined for or originating in Vietnam." To the Vietnamese government, the continuing restrictions on trade in military equipment and arms were a barrier to the normalization of diplomatic relations and constrained closer bilateral ties. Vietnam was subsequently permitted to participate in the Foreign Military Financing (FMF) program, administered by the State Department, starting in fiscal year 2009 (see Table 3 ). Via FMF, Vietnam was able to purchase spare parts for Huey helicopters and M113 Armored Personnel Carriers captured during the Vietnam War. According to the Defense Security Cooperation Agency (DSCA), U.S. military sales agreements with Vietnam rose from $653,000 in fiscal year 2011 to $20 million in fiscal year 2016. In October 2014, as relations continued to deepen, the Obama Administration partially relaxed U.S. restrictions on the transfer of lethal weapons and articles to Vietnam to permit "future transfer of maritime security-related" defense articles, again on a case-by-case basis. The Department said that the move would help the United States "integrate Vietnam fully into maritime security initiatives" by helping Vietnam to "improve its maritime domain awareness and maritime security capabilities." While in Hanoi in May 2016, President Obama announced the removal of remaining U.S. restrictions on sales of lethal weapons and related services to Vietnam. At the time, U.S. officials and some observers argued that such an action would help improve Vietnam's capacity to respond to China in the South China Sea and solidify the growing strategic partnership between the United States and Vietnam. Others, however, called the move premature without improvements in human rights conditions in Vietnam. The Trump Administration has indicated that it sees increased U.S. arms sales to Vietnam as one means of reducing the bilateral merchandise trade deficit, as well as strengthening the security partnership with Vietnam. The State Department reportedly is encouraging Vietnam to diversify its source of arms away from its "historical suppliers" (such as Russia) and include more U.S. equipment. Overseas U.S. weapons sales also are an important part of the Trump Administration's "Buy American" proposal, which reportedly will require the Pentagon and U.S. diplomats to play a more active role in promoting arms trade, as well as possible easing of ITAR restrictions. The impact of removing the restrictions on arms sales to Vietnam is unclear. Following the 2014 partial easing of the arms export ban, few lethal defense articles were sold or transferred to Vietnam from the United States. A refurbished Hamilton-class cutter was transferred to Vietnam through the Excess Defense Article (EDA) program on May 25, 2017. Also in May 2017, the first tranche of six Metal-shark patrol boats were delivered, financed via the FMF program. The State Department anticipates that Vietnam will use future FMF funding to acquire additional U.S.-origin defense articles. Vietnam reportedly is interested in obtaining F-16 fighter aircraft, P-3C Orion maritime patrol aircraft, and maritime intelligence surveillance and reconnaissance (ISR) equipment. The potential sale of arms to Vietnam had been a source of some controversy for Congress. While some Members support the provision of lethal assistance, others object in part because of Vietnam's alleged human rights record. Congress will have oversight of some exports of military items to Vietnam, pursuant to Section 36(b) of the Arms Export Control Act (AECA; P.L. 90-629). That law requires the executive branch to notify the Speaker of the House, the Senate Foreign Relations Committee, and the House Foreign Affairs Committee before the Administration can take the final steps to conclude either a government-to-government or commercially licensed arms sale. For potential sales to Vietnam, the Administration is required to notify the congressional committees and leadership 30 calendar days before concluding sales of major defense equipment, defense articles, defense services, or design and construction services meeting certain value thresholds. Non-Market Economy Designation Vietnamese leaders would like the United States to change Vietnam's official designation under U.S. law from "nonmarket economy" to "market economy." The United States' designation of Vietnam as a non-market economy, which, according to the Vietnamese government, will expire in 2019 under the terms of its accession to the World Trade Organization (WTO), generally makes it more likely that antidumping and countervailing duty cases would result in the Commerce Department issuing adverse rulings against Vietnamese companies' exports to the United States. Under U.S. trade law (19 U.S.C. 1677), the term "nonmarket economy country" means "any foreign country that the administering authority determines does not operate on market principles of cost or pricing structures, so that sales of merchandise in such country do not reflect the fair value of the merchandise." "Nonmarket economy" status is particularly significant for antidumping (AD) and countervailing duty (CVD) cases heard by the U.S. International Trade Administration (ITA) and ITC. In making such a determination, the administrating authority of the executive branch (the Department of Commerce) is to consider such criteria as the extent of state ownership of the means of production, and government control of prices and wages. However, the General Agreement on Tariffs and Trade (GATT), the forerunner of the World Trade Organization (WTO), implicitly defines a "non-market economy" for purposes of trade as "a country which has a complete or substantially complete monopoly of its trade and where all domestic prices are fixed by the State." For over 20 years, Vietnam has been transitioning from a centrally planned economy to a market economy. Under its doi moi policy, Vietnam has allowed the development and growth of private enterprise and competitive market allocation of most goods and services. Although most prices have been deregulated, the Vietnamese government still retains some formal and informal mechanisms to direct or manage the economy. State-Owned Enterprises For the United States, one of the main concerns about Vietnam's economy is the continued importance of state-owned enterprises (SOEs) in the nation's industrial sector. In the early 1990s, the number of SOEs in Vietnam declined from more than 12,000 to fewer than 7,000. By 2001, the number of SOEs had reduced to fewer than 5,400, and between 2001 and 2005, more than 40% of the SOEs had been partially privatized. Between 2005 and 2013, the portion of Vietnam's GDP produced by SOEs declined from 37.6% to 28.7%. However, SOEs continue to dominate key sectors of Vietnam's economy, such as mining and energy. Many of Vietnam's SOEs have been converted into quasi-private corporations through a process known as "equitization," in which some shares are sold to the public on Vietnam's stock exchange, but most of the shares remain owned by the Vietnamese government. According to the Vietnam Economic Institute, 530 SOEs have been equitized over the last five years. Following the 12 th National Congress of the Communist Party of Vietnam (CPV) in January 2016 and the introduction of a new government led by Prime Minister Nguyen Xuan Phuc, Vietnam seemingly made plans for the equitization of more SOEs. In February 2017, the government promulgated a directive requesting the Ministry of Finance to enact regulations and procedures to facilitate equitization of SOEs. In May 2017, the government approved a blueprint for SOE restructuring in the 2016-2020 period, under which the government aims to equitize 137 more SOEs by 2020, including many of the larger SOEs. These include Agribank, Mobifone, PV Power, PV Oil, Saigon Jewelry Company (SJC), Saigon Trading Group (Satra), Saigon Tourist Vietnam Multimedia Corporation (VTC), Vietnam Posts and Telecommunications Group (VNPT), Vietnam Rubber Group (VRG), Vinacafe, Vinachem, Vinacomin, Vinafood 2, and Vinataba. The pace of equitization for the first half of 2017, however, was relatively slow, with 19 SOE equitization plans approved. To some analysts, however, the retention of a controlling interest in the shares of the companies provides the Vietnamese government with the means to continue to manage the operations of the equitized SOEs. According to one Vietnamese economist, although 96% of the remaining SOEs have been equitized, only 8% of the capital has been transferred to private investors, as the share of equity sold has been kept low. Price and Wage Controls The doi moi process has led to the gradual deregulation of most prices and wages in Vietnam. However, the Vietnamese government maintains controls over key prices, including certain major industrial products (such as cement, coal, electricity, oil, and steel) and basic consumer products (such as meat, rice, and vegetables). On wage control, Vietnamese government workers are paid according to a fixed pay scale, and all workers are subject to a national minimum wage law. Workers for private enterprises, foreign-owned ventures, and SOEs receive wages based largely on market conditions. The Vietnamese government asserts that most of the prices and wages in Vietnam are market-determined, especially the prices of goods exported to the United States. Vietnam's View The Vietnamese government maintains that its economy is as much a market economy as many other nations around the world, and actively has sought formal recognition as a market economy from its major trading partners. A number of trading partners—including the Association of Southeast Asian Nations (ASEAN), Australia, India, Japan, and New Zealand—have designated Vietnam a market economy for purposes of international trade. Under the terms of its WTO accession agreement with the United States, Vietnam is to remain a non-market economy for up to 12 years after its accession (i.e., 2019) or until it meets U.S. criteria for a "market economy" designation. Designation as a market economy has both symbolic and practical value for Vietnam. The Vietnamese government views market economy designation as part of the normalization of trade relations with the United States. In addition, Vietnam's designation as a nonmarket economy generally makes it more likely that AD and CVD cases will result in adverse rulings and higher imposed duties against Vietnamese companies. The 115 th Congress could consider legislation weighing in on the designation of Vietnam as a market or nonmarket economy by amending or superseding existing U.S. law. IPR Protection The U.S. government remains critical of Vietnam's record on intellectual property rights (IPR) protection. Vietnam was included in the "Watch List" in the U.S. Trade Representative's 201 7 Special 301 Report , an annual review of the global state of IPR protection and enforcement. Vietnam remained on the Watch List because of its continuing issues with online piracy and the sales of counterfeit goods. The report states: Enforcement continues to be a challenge for Vietnam. Piracy and sales of counterfeit goods online remain common. Unless Vietnam takes stronger enforcement action, online piracy and sales of counterfeit goods are likely to worsen as more Vietnamese people obtain broadband Internet access and smartphones. Counterfeit goods, including counterfeits of high-quality, remain widely available in physical markets, and, while still limited, domestic manufacturing of counterfeit goods is emerging as a concern. Bilateral Investment Treaty (BIT) Negotiations During their June 2008 meeting, President Bush and Prime Minister Dung announced the launch of talks to establish a bilateral investment treaty (BIT). BITs are designed to improve the climate for foreign investors by establishing dispute settlement procedures and protecting foreign investors from performance requirements, restrictions on transferring funds, and arbitrary expropriation. The United States currently is a party to 40 BITs; Vietnam has signed over 50. The first round of BIT negotiations was held in Washington, DC, on December 15-18, 2008. Since then, two more rounds of talks have been held—one on June 1-2, 2009, in Hanoi, and another on November 17-19, 2009, in Washington, DC. A proposed fourth round of talks that was to be held in early 2010 did not happen. According to the State Department, no BIT talks were held after the two nations joined the TPP negotiations, presumably because the TPP agreement would have encompassed those issues that would be addressed in the BIT. The existing 2001 Bilateral Trade Agreement (BTA) between the United States and Vietnam included provisions in Chapter 4 governing investment and the future negotiation of a BIT. Specifically, Article 2 commits both nations to providing national and MFN (NTR) treatment to investments. Article 4 provides for a dispute settlement system for bilateral investments. Article 5 requires both nations to ensure that the laws, regulations, and administrative procedures governing investments are promptly published and publicly available. Article 11 pertains to compliance with the provisions of the WTO Agreement on Trade-Related Investment Measures (TRIMs). Article 13 states that both nations "will endeavor to negotiate a bilateral investment treaty in good faith within a reasonable period of time." If the United States and Vietnam successfully complete the negotiations of a BIT during the 115 th Congress, the treaty would be subject to Senate ratification. As of mid-April 2018, BIT negotiations had not resumed. Action on the part of Congress as a whole may be required if the terms of the BIT require changes in U.S. law. Possible Regional Trade Agreements Although the United States has withdrawn from the TPP, the remaining 11 nations, including Vietnam, signed a proposed regional trade agreement, the Comprehensive and Progressive Agreement for Trans-Pacific Partnership (CPTPP), on March 8, 2018. In addition, Vietnam is among 16 nations negotiating another proposed RTA, the Regional Comprehensive Economic Partnership (RCEP). If either agreement is implemented, projections of the trade effects of both RTAs show a slight increase in Vietnamese exports to the United States, and a small decrease in U.S. exports to Vietnam, leading to an overall increase in the bilateral trade deficit. According to Vietnam's projections, the CPTTP will increase Vietnam's GDP by 1.32%, its exports by 4.0% and its imports by 3.8%. Key Trends in Bilateral Trade The preceding sections of the report have focused on current and past issues in U.S.-Vietnam trade relations. The final section of the report attempts to identify potential sources of future trade friction by examining trends in bilateral trade and investment statistics. The focus is on three aspects of recent trade relations—merchandise trade, trade in services, and foreign direct investment (FDI). Merchandise Trade Over two decades have passed since the opening of trade relations between the United States and Vietnam. As previously mentioned, the rapid growth in Vietnam's export of two types of products—clothing and catfish—quickly made them sources of trade tension between the two nations. However, other commodities that contribute more to U.S.-Vietnam trade flows could also become touch points for challenges in bilateral trade relations. According to U.S. trade statistics, the top U.S. imports from Vietnam in 2017, besides clothing, were: electrical machinery; footwear; and furniture and bedding (see Table 4 ). The top U.S. exports to Vietnam included aircraft; electrical machinery; cotton; machinery and mechanical appliances; edible fruit and nuts; and oil seeds. The juxtaposition of these two lists reveals product categories that may warrant watching for their emerging importance in bilateral trade, as well as a connection between some of the top trade commodities. Particularly noticeable in 2017 was the rise of electrical machinery as the leading import from Vietnam; in 2014, it was the third largest import after the two apparel categories. Similarly, footwear rose from being the fourth largest import in 2014 to the third largest import in 2017. Product Interplay There is also a discernable interplay between Vietnam's top exports to the United States and the top U.S. exports to Vietnam. Vietnam imports substantial amounts of cotton from the United States, which is then used to manufacture clothing to be exported to the United States. Similarly, Vietnam imports wood from the United States that may end up in the furniture that is imported by the United States from Vietnam. There is also a significant amount of cross-trade in electrical machinery as parts and components are shipped back and forth across the Pacific Ocean. The implication is that potential efforts to curtail the growth of certain top exports of Vietnam to the United States could result in a decline in U.S. exports to Vietnam. Electrical Machinery According to USITC, Vietnam's electrical machinery exports to the United States have grown significantly since 2001, from less than $1 million to just under $1 billion in 2011 and then increasing to more than $8.3 billion in 2015 and $11.0 billion in 2017. Electrical machinery constituted more than 23% of total U.S. imports from Vietnam in 2017. According to interviews with foreign investors in Vietnam, there is great potential for growth in this sector because of Vietnam's relatively inexpensive, skilled workers. Vietnamese economic officials have indicated that expanding the production of higher-valued consumer electronics and other electrical devices is a priority for the nation's transition to a middle-income economy. Footwear While most of the focus of bilateral trade discussions has been on the sizeable clothing imports from Vietnam, footwear constituted nearly 12% of total U.S. imports from Vietnam in 2017. Vietnam was the second-largest source of footwear imports for the United States in 2017 (after China), more than three times the size of imports from Indonesia (the next largest source). Furniture and Bedding Since 2004, Vietnam has risen from being the 62 nd -largest source for furniture and bedding imports for the United States to being the 4 th -largest source—surpassing past leaders such as Italy, Malaysia, and Taiwan. Furniture and bedding accounted for 10% of total U.S. imports from Vietnam in 2017. Trade in Services The United States has generally run a bilateral trade surplus in services with Vietnam, and perceives a trade advantage in several of the services sectors, especially financial services. According to the U.S. Bureau of Economic Analysis, the United States exported $2.2 billion in services to Vietnam in 2016, and imported $1.2 billion in services. In the U.S. National Trade Estimate (NTE), the Office of the U.S. Trade Representative indicated that as part of the implementation of the 2001 BTA, Vietnam has committed to greater liberalization of a broad array of its services sectors, including financial services, telecommunications, express delivery, distribution services, and certain professions. It is likely that the United States will press Vietnam for more access during any BIT negotiations. Foreign Direct Investment In 2016, Vietnam licensed 2,613 foreign direct investment (FDI) projects worth $26.9 billion. The leading source of FDI in 2016 was South Korea, with 849 projects worth $8.0 billion. The United States was the 13 th -largest source of FDI in 2016 with 65 projects worth $430 million. The accumulated value of FDI in Vietnam for the period 1989-2016 is $293.7 billion. South Korea was the leading investor during this period, followed by Japan and Singapore. The United States was the 9 th - largest investor, with 817 projects worth $10.1 billion. U.S. interest in investment opportunities in Vietnam could have an impact on possible BIT negotiations. In addition, as more U.S. companies invest in Vietnam, there is the possibility of more business-to-business disagreements between U.S. and Vietnamese companies, and more constituent pressure on Congress to address perceived shortcomings in Vietnam's treatment of foreign-owned enterprises. Looking Ahead Prospects for U.S-Vietnam trade relations for 2018 and beyond will depend on various factors, including the growth in bilateral merchandise trade and the potential resolution of Vietnam's challenge of U.S. catfish regulations. According to the USITC, U.S. imports from Vietnam were up 5.2% year-on-year for the first two months of 2018, while U.S. exports to Vietnam were down 2.4%, possibly indicating that the U.S. bilateral merchandise trade deficit with Vietnam will continue to grow. On April 29, 2017, President Trump issued Executive Order 13796, "Addressing Trade Agreement Violations and Abuses," which, among other things, requires the Secretary of Commerce, and the U.S. Trade Representative to "conduct comprehensive performance reviews" of "all trade relations with countries governed by the rules of the World Trade Organization with which the United States does not have free trade agreements but with which the United States runs significant trade deficits in goods." Vietnam is one such country. The Agriculture and Nutrition Act of 2018 ( H.R. 2 , so called "2018 Farm Bill") was introduced in the House on April 12, 2018, and includes no provisions with regards to the catfish inspection program. On March 19, 2018, Senator John McCain and Senator Jeanne Shaheen, in a letter to U.S. Trade Representative Robert Lighthizer, asked the Trump Administration to terminate the catfish inspection program before the WTO consultation ended. In the letter, the two Senators assert, "Since its implementation, the USDA Catfish Inspection Program has done nothing more than erect a damaging trade barrier against Asian catfish imports to protect a handful of domestic catfish farmers in Southern states." It remains uncertain if a Senate version of the 2018 Farm Bill will address this issue. Appendix. Bilateral Merchandise Trade Data The table below provides the official merchandise trade data for the United States and Vietnam.

President Trump's decision in January 2017 to withdraw the United States from the proposed Trans-Pacific Partnership (TPP) trade agreement removed a major focus of trade relations with the Socialist Republic of Vietnam (Vietnam) since 2008. As a result, trade relations are likely to refocus onto various bilateral trade issues such as the rising U.S. bilateral merchandise trade deficit with Vietnam, Vietnam's desire to be recognized as a market economy, and various elements of each nation's trade policies and regulations. Congress may play a role in each of these trade issues. Over the last 20 years, the U.S. merchandise trade balance with Vietnam has gone from a surplus of $110 million in 1997 to a deficit of more than $38 billion in 2017. The 2017 bilateral merchandise trade deficit with Vietnam was the 5th largest for the United States. U.S. exports declined in 2017 by nearly $2 billion compared to 2016, while U.S. imports from Vietnam increased by more than $4 billion. Given President Trump's focus on nations with which the United States has a bilateral merchandise trade deficit, Vietnam's trade policies and practices may face increased scrutiny from his Administration in the months ahead. One issue that was prominent during the TPP negotiations, and will likely remain an issue during the 115th Congress, were changes in U.S. laws regulating catfish imports that the Vietnamese government saw as protectionist, including the 2008 Farm Bill (P.L. 110-246) which shifted the inspection of catfish from the Food and Drug Administration (FDA) to the U.S. Department of Agriculture (USDA). Given the views expressed by some Senators, catfish import regulation may be addressed if the Senate considers the Agriculture and Nutrition Act of 2018 (H.R. 2). A new trade issue that may arise is U.S. arms sales to Vietnam. In May 2016, President Obama ended the remaining restrictions on lethal arms sales to Vietnam that had been in place since the end of the Vietnam War in 1975. President Trump has indicated that he sees U.S. arms sales to Vietnam as an important method of reducing the bilateral merchandise trade deficit. While Vietnam has made few purchases of U.S. military equipment and materials since the removal of the restrictions, Vietnamese officials indicate that more requests may be submitted. In certain circumstances, Congress can play a role in the approval or disapproval of such arms sales. Each nation has raised other concerns about the other's trade policy. Vietnam would like the United States officially to recognize it as a market economy and sign a bilateral investment treaty (BIT). The United States would like Vietnam to increase U.S. imports, reduce certain technical barriers to trade, and implement various labor reforms. The importance of Vietnam's trade relations with the United States may be influenced by two proposed regional trade agreements. Vietnam is a party to the 11-member Comprehensive and Progressive Agreement on Trans-Pacific Partnership (CPTPP), which was signed in March 2018, as well as the proposed Regional Comprehensive Economic Partnership (RCEP); the United States is not. The implementation of either trade agreement is likely to increase Vietnam's trade flows to the other nations in the trade agreements, and decrease its trade with the United States. The 115th Congress may play an important role in one or more of these issues, as have past Congresses. No legislation has been introduced regarding trade relations with Vietnam, but other legislation, such as H.R. 2, may contain relevant provisions.

Background Beginning with the Antiterrorism and Effective Death Penalty Act of 1996 (AEDPA) (1) and the Illegal ImmigrationReform and Immigrant Responsibility Act of 1996 (IIRIRA), (2) legislation and administrativeactions have focused on reducing immigration litigation by limiting and streamlining bothadministrative appeal and judicial review procedures and by rendering aliens in certain categoriesineligible for certain types of relief from removal. Even when an alien may be considered fordiscretionary relief, judicial review of denials is restricted, as is review of removal orders issued tocriminal aliens. Also, the REAL ID Act restricted habeas review and certain other non-direct judicialreview in response to U.S. Supreme Court holdings that such review was still available after the1996 acts. (3) Despite these efforts, other changes made by the 1996 Acts increased litigation by expandingthe scope of the grounds for inadmissibility and deportation and the definition of aggravated felony,which effectively further expanded the grounds for deportation. Increased enforcement effortscoupled with the increasing numbers of illegal aliens present in the country have also increasedlitigation as more aliens are placed in removal proceedings. In 2002, then-Attorney General Ashcroft implemented procedural reforms in the Board ofImmigration Appeals [BIA], the administrative body with jurisdiction to review decisions ofimmigration judges and, at times, other immigration officers. (4) These reforms were intendedto eliminate the existing BIA backlog of cases and to provide for current, efficient disposition ofcases. (5) Since the changes,there has been a shift of the backlog and the number of appeals to the federal appellate courts. Thefollowing charts indicate the increase in caseload in the U.S. Circuit Courts of Appeal and that theincrease of matters in immigration courts and in the BIA cannot account entirely for thecorresponding increase in the federal appellate courts. (6) The immigration appeals in the federal appellate courts accountfor 18% in 2005 vs. 2% in 1996, a nine-fold increase. By contrast, the immigration court caseloadhas only increased 40% and the BIA caseload 71% over the same period. Figure 1. BIA/INS Appeals to the U.S. Courts of Appeals, 1996-2005 Source: Administrative Office of the U.S. Courts, Judicial Busines s Figure 2. Total Administrative Matters/Appeals Received, 1996-2005 Source: U.S. Department of Justice, Executive Office of Immigration Review, Statistical Yearbooks. Other factors have also been perceived as contributing to increased litigation. The U.S. Courtof Appeals for the Ninth Circuit has made holdings perceived by some as contributing to increasedlitigation at the administrative and judicial levels. The REAL ID Act established new statutoryevidentiary standards for asylum claims to resolve inconsistent standards among the federal appellatecourts and the BIA with the intent of decreasing litigation but these were not fully applied towithholding of removal. Legislative Proposals Several current major immigration bills contain provisions concerning immigration litigationreform, including Title V of S. 2454 , the Securing America's Borders Act, introducedby Senate Majority Leader Frist on March 16, 2006; §§ 421-423 of S.Amdt. 3192 to S.2454 (Chairman's (Senator Specter) mark reported by the Senate Judiciary Committee),proposed March 30, 2006; and §§ 421-423, 701-707 of S. 2611 / S. 2612 ,the Comprehensive Immigration Reform Act of 2006 respectively introduced by Senator Specter andSenator Hagel on April 7, 2006 (generally known as the Hagel-Martinez compromise). H.R. 4437 , the Border Protection, Antiterrorism, and Illegal Immigration Control Actof 2005 passed by the House of Representatives, does not contain broad litigation reform provisions,although it does contain amendments to resolve certain narrower judicial review issues. Title V ofS. 2454 appears to incorporate some of the immigration litigation reduction provisionsfrom Title VII of the initial Chairman's mark text considered in the Senate Judiciary Committee[hereinafter Chairman's mark] and some similar to those in Title VIII of H.R. 4437. (7) Consolidation of Immigration Appeals Current Law. Judicial review of removal ordersis available in the federal appellate court for the judicial circuit in which the removal proceedingswere completed (Immigration and Nationality Act [INA] § 242(b)(2); 8 U.S.C. § 1252(b)(2)). (8) However, federal districtcourts do have a limited role. With regard to the treatment of U.S. nationality claims, if there is agenuine issue of material fact concerning whether the person appealing the removal order is a U.S.national, the federal appellate court transfers the proceeding to the federal district court in whosejurisdiction the appellant resides for a new hearing and a declaratory judgment on that issue as ifbrought under 28 U.S.C. § 2201 (INA § 242(b)(5)(B); 8 U.S.C. § 1252(b)(5)(B)). Judicial reviewof challenges to the validity of the system for expedited removal of certain inadmissible aliens underINA § 235(b)(1) (8 U.S.C. § 1225(b)(1)) lies in the District Court for the District of Columbia (INA§ 242(e)(3); 8 U.S.C. § 1252(e)(3)). An appeal from the decisions described above would lie in thefederal appellate court for the circuit in which the district court issuing the decision is located (28U.S.C. §§ 1294, 1295, 2106, 2107). Proposed Changes. Section 501 of S. 2454 would consolidate appeals regarding removal of aliens in the U.S. Court ofAppeals for the Federal Circuit. It would increase the authorized number of judges on the FederalCircuit from 12 to 15 and would authorize sums necessary to implement these changes and theincreased case load of the Federal Circuit for fiscal years 2007 to 2011. The effective date of thesechanges would be the date of enactment and they would apply to any final agency order or districtcourt decision entered on or after the date of enactment. This consolidation of appeals would remove pressure on the other federal appellate circuitsfrom the dramatic increase in their caseload, largely resulting from immigration appeals (9) ; it would basically add theequivalent of another 3-judge panel to the Federal Circuit. This provision would also eliminatefuture inconsistency among appellate circuits in interpretations of immigration law, which in the pastmay have increased litigation as different circuits considered an issue for the first time and as theU.S. Supreme Court may have had to resolve circuit differences. Differences among circuits alsomay have necessitated congressional action to clarify or establish statutory standards in response toinconsistent appellate circuit interpretations. (10) No similar provision is in H.R. 4437 , S.Amdt. 3192 , or S. 2611 / S. 2612 , although § 701 of the Chairman's mark was identical to§ 501 of S. 2454 . Several authorities were critical of the consolidation proposal, (11) leading Senator Specter,Chairman of the Senate Judiciary Committee, to exclude the entire litigation reduction Title VII fromthe Chairman's mark pending a hearing on judicial review of immigration matters on April 3, 2006,a week after the conclusion of the mark-up of the Chairman's Mark. It appears that upon furtherconsideration, Senator Specter has decided to drop the consolidation provision and certain otherjudicial review provisions from current legislative proposals; S. 2611, which heintroduced, does not contain these provisions, retaining only provision concerning reform of theBoard of Immigration Appeals and the Immigration Courts. At the hearing, Senator Specter expressed interest in a comprehensive, thorough examinationof the issue of immigration review before proceeding with broad reforms. (12) Accordingly, in lieu of thejudicial review provisions, § 707 of S. 2611 / S. 2612 provides for a GAOstudy on the appellate process for immigration appeals, including a consideration of theconsolidation of appeals into one U.S. Court of Appeals, whether in an existing circuit court or intoa new centralized circuit court; reallocation of immigration caseloads from one circuit to anotherwith a lower caseload; resources needed for such alternatives; case management techniques; impacton each circuit and on litigants; and the other reforms formerly in Title VII of the Chairman's mark,such as review of motions to reopen and reconsider and attorney fee awards. Additional Immigration Personnel Current Law. There is no specific directive incurrent authorizations or appropriations acts concerning litigation or adjudication personnel increasesor restrictions for immigration-related agencies. The Intelligence Reform and Terrorism PreventionAct of 2004 (13) and theEnhanced Border Security and Visa Entry Reform Act of 2002 (14) appear to have been themost recent legislation to specify certain personnel increases for immigration-related agencies, butnot for litigation or adjudication personnel. Proposed Changes. Section 502 of S. 2454 , § 701 of S. 2611 / S. 2612 , and § 702 of theChairman's mark would mandate, for each fiscal year from 2007 to 2011, increases in the numberof immigration-related litigation and adjudication personnel in the Department of Homeland Security(DHS), Department of Justice (DOJ), and the Administrative Office of the U.S. Courts to providethe personnel necessary to handle efficiently the increased caseload in administrative adjudicationand judicial review. Increases in personnel would be subject to the availability of appropriations. The legislation authorizes appropriations necessary to implement the personnel increases for fiscalyears 2007 to 2011 for the DHS and DOJ, but does not do so for the Administrative Office of theU.S. Courts, which would increase the number of attorneys in the Federal Defenders Program forcriminal immigration defendants in the federal courts. There is no similar provision in H.R. 4437 or S.Amdt. 3192 . (15) Board of Immigration Appeals Removal Order Authority Current Law. "Order of removal" is not currentlydefined in the INA. "Order of deportation" is defined as the order of the special inquiry officer, orother such administrative officer to whom the Attorney General has delegated the responsibility fordetermining whether an alien is deportable, concluding that the alien is deportable or orderingdeportation. The order becomes final upon the earlier of a determination by the Board ofImmigration Appeals (BIA) affirming such order or the expiration of the deadline for appeals (INA§ 101(a)(47)). The Illegal Immigration Reform and Immigrant Responsibility Act of 1996(IIRIRA) (16) substantially reformed enforcement adjudication procedures, replacing exclusion and deportationproceedings with removal proceedings. (17) The absence of a definition of "order of removal" appears tohave been a technical oversight. As a separate procedural matter, the U.S. Court of Appeals for the Ninth Circuit held that theBIA must remand a case to the immigration judge for entry of an order of removal where it reversedthe immigration judge's decision to not order removal. (18) In 2005, most BIA appeals were filed in the Ninth Circuit (53percent). (19) Proposed Changes. In response to the NinthCircuit case law, § 503 of S. 2454 and § 703 of the Chairman's mark would amend thedefinition of "order of deportation" and would add a similar definition of "order of removal" to theINA to clarify that the BIA may directly enter an order of removal upon reversal of an immigrationjudge's decision to the contrary. This section would include the BIA in the list of those designatedto enter removal/deportation orders, add the Secretary of Homeland Security as the delegatingauthority for removal orders, and expand the list of actions making the removal/deportation orderfinal to include entry by the BIA and other actions. Conforming amendments would be made. H.R. 4437 contains a similar provision, § 801. However, it would simplyreplace the definition of "order of deportation" with the new definition of "order of removal." Thisdefinition would apply to orders entered before, on, or after the date of enactment of the act. S.Amdt. 3192 and S. 2611 / S. 2612 do not contain such aprovision; this is one of the provisions dropped by Senator Specter, pending further study. Judicial Review of Visa Revocation Current Law. There is no judicial review(including review pursuant to 28 U.S.C. § 2241, or any other habeas corpus provision, and 28 U.S.C.§§ 1361 and 1651) of a visa revocation, except in the context of a removal proceeding if suchrevocation provides the sole ground for removal (INA § 221(i)). Proposed Changes. Section 504 of S. 2454 and § 704 of the Chairman's mark would amend the current statute concerningvisa revocation to clarify that, notwithstanding any other provision of law, no judicial review of suchrevocation is available in any context and that no court shall have jurisdiction to hear any claimarising from, or any challenge to, revocation, thereby facilitating efforts by the DHS to remove alienswhose incorrectly granted visas were revoked after they entered the United States. H.R. 4437 contains a similar provision, § 802; however, this amendment wouldapply to revocations effected before, on, or after the date of enactment of the act. (20) S.Amdt. 3192 and S. 2611 / S. 2612 do not contain such a provision; this is one of theprovisions dropped by Senator Specter, pending further study. Reinstatement of Removal Orders Current Law. If the Attorney General finds thatan alien has reentered the United States illegally after having been removed or having departedvoluntarily, under an order of removal, the prior order of removal is reinstated from its original dateand is not subject to being reopened or reviewed. Also, the alien is not eligible and may not applyfor any relief under the INA, and the alien shall be removed under the prior order at any time afterthe reentry (INA § 241(a)(5)). Current law does not contain provisions specifically limiting judicialreview of reinstatement of orders of removal, deportation, or exclusion (INA §242). The U.S. Court of Appeals for the Ninth Circuit held that reinstatement of a previous orderof removal against an alien who illegally reenters the United States necessitates a hearing before animmigration judge. (21) Proposed Changes. In response to the case lawin the Ninth Circuit, § 505 of S. 2454 and § 705 of the Chairman's mark would amendthe current statute to clarify that, if the Secretary of Homeland Security finds that an alien hasillegally reentered the United States after a prior removal or voluntary departure, then the order ofremoval, deportation, or exclusion may be reinstated without a hearing before an immigration judge. There would be no judicial review of the original removal order, but there could be limited reviewof certain factual determinations (that an alien had illegally reentered after prior removal) inindividual reinstatement cases. These amendments would take effect as if enacted on April 1, 1997(effective date of IIRIRA changes to the removal statute), and would apply to all orders reinstatedon or after that date regardless of the date of the original order. H.R. 4437 contains a similar provision, § 803; however, it would further providefor very limited judicial review under INA § 242 of the constitutionality and statutory consistencyof the reinstatement statute. (22) S.Amdt. 3192 and S. 2611 / S. 2612 do not contain such a provision; this is one of the provisions dropped bySenator Specter, pending further study. Withholding of Removal Current Law. The INA restricts the removal ofan alien to a country where the alien's life or freedom would be threatened and provides that the trierof fact shall determine whether the alien has sustained the alien's burden of proof, and shall makecredibility determinations, in the manner described in INA § 208(b)(1)(B)(ii & iii) (INA §241(b)(3)). Proposed Changes. Section 506 of S. 2454 and § 706 of the Chairman's mark would amend the current statute to clarifythat certain amendments made by the REAL ID Act with respect to evidentiary standards for asylumwould also apply to determinations of withholding of removal, in addition to the ones alreadyreferenced. The burden of proof would be on the alien to establish that the alien's life or freedomwould be threatened in the country for removal, and that race, religion, nationality, membership ina particular social group, or political opinion would be at least one central reason for such threat. The clarifying amendment would take effect as if enacted on May 11, 2005 (the effective date of theREAL ID Act amendments for withholding of removal). H.R. 4437 contains a similar provision, § 804. S.Amdt. 3192 and S. 2611 / S. 2612 do not contain such a provision; this is one of theprovisions dropped by Senator Specter, pending further study. Certificate of Reviewability Current Law. No pre-screening process existsin the current provision governing judicial review of removal orders (INA § 242). Proposed Changes. Section 507 of S. 2454 and § 707 of the Chairman's mark would amend the current statute to providefor a screening process under which an alien would submit a brief concerning a petition for judicialreview within 40 days after the date on which the administrative record is available or face dismissalof the appeal; after the alien's brief is filed, the appeal would be assigned to one judge on the U.S.Court of Appeals for the Federal Circuit, who would review a case within 60 days of assignment;and a petition for review would be denied absent the issuance of a certificate of reviewability by thefederal appellate judge or circuit justice. The certificate would only be granted if the petitionerestablishes a prima facie case that a petition should be granted; the denial of a certificate would notbe subject to further review. H.R. 4437 contains a similar provision, § 805, but the standard for issuance ofa certificate would be that the petitioner must make a substantial showing that the petition for reviewis likely to be granted. S.Amdt. 3192 and S. 2611 / S. 2612 donot contain such a provision; this is one of the provisions dropped by Senator Specter, pendingfurther study. Discretionary Decisions on Motions to Reopen or Reconsider Current Law. No similar provision is in thecurrent statute except for one reference to the discretion of the Attorney General to waive thedeadline for filing a motion to reopen (INA §240(c)). Proposed Changes. Section 508 of S. 2454 and § 708 of the Chairman's mark would amend current law to clarify thatmotions to reopen or reconsider are discretionary decisions of the Attorney General and wouldestablish a special rule for motions to reopen to provide safeguards from the removal of an alien toan alternate country not previously considered in removal proceedings. These amendments wouldapply to motions to reopen and reconsider that are filed on or after the date of enactment of this actin removal, deportation, or exclusion proceedings, regardless of whether a final administrative orderis entered before, on, or after such date. H.R. 4437 contains a similar provision, § 212. S.Amdt. 3192 and S. 2611 / S. 2612 do not contain such a provision; this is one of theprovisions dropped by Senator Specter, pending further study. Fee/Costs Awards Bar for Judicial Review of Removal Orders Current Law. Except as otherwise provided bystatute, a judgment for costs not including the fees and expenses of attorneys, may be awarded to theprevailing party in any action brought by or against the United States. Unless expressly prohibitedby statute, a court may award reasonable fees and expenses of attorneys to the prevailing party in anycivil action brought by or against the United States (28 U.S.C. §2412). Proposed Changes. Section 509 of S. 2454 and § 709 of the Chairman's mark would add a new subsection to current lawto provide that, notwithstanding any other provision of law, a court may not award fees and expensesto an alien based on the alien's status as the prevailing party in proceedings related to a removal orderunless the court of appeals finds that the determination of the Attorney General or Secretary ofHomeland Security that the alien was removable was not substantially justified. This amendmentwould apply to proceedings related to a removal order issued on or after the date of enactment of thisact, regardless of the date that such fees or expenses were incurred. H.R. 4437 contains a similar provision, § 808, but it would only refer todeterminations of the Attorney General, not the Secretary of Homeland Security, and would applyto fees or other expenses awarded on or after the date of enactment of this act. S.Amdt. 3192 and S. 2611 / S. 2612 do not contain such a provision; this is one ofthe provisions dropped by Senator Specter, pending further study. Waiver of Review in Nonimmigrant Visa Issuance Current Law. There is no such provision incurrent law. Visa waiver program admittees only need waive this as a condition of admission to theUnited States without a visa pursuant to the program under INA § 217. Proposed Changes. Section 806 of H.R. 4437 would make issuance of a nonimmigrant visa subject to a waiver by the alienof any right to review of an inadmissibility determination at a port of entry or to contest removalexcept for asylum claims. S. 2454 , S.Amdt. 3192 , and S. 2611 / S. 2612 do not contain similar provisions. Review of Discretionary Relief Denials Current Law. Current law at INA § 242(a)(2)(B)currently restricts judicial review for denials of discretionary relief "regardless of whether thejudgement, decision, or action is made in removal proceedings" and defining decision or action asbeing those taken by the Attorney General or Secretary of Homeland Security under authorityspecified under certain provisions of the INA. INA § 242(a)(2)(C) bars judicial review of removalorders against a alien removable on certain criminal grounds. Proposed Changes. Section 807 of H.R. 4437 would clarify that bars on judicial review for individual determinations ofdenials of discretionary relief apply regardless of whether such determinations were made in removalproceedings and were guided by standards. It would further clarify that limits on judicial review ofremoval orders for criminal aliens would apply regardless of whether relief or protection fromremoval had been denied specifically on the basis of the alien's commission of a crime. Executive Office of Immigration Review (EOIR) Current Law. Procedural guidelines for EOIR,including guidelines for the Board of Immigration Appeals (BIA) and the immigration courts, arecurrently not expressly set out in the INA; they are set out in the regulations at 8 C.F.R. part 1003,subparts A to C, and § 1103.3 (1-1-06 Edition). In 2002, then-Attorney General Ashcroftimplemented new BIA procedural reforms intended to eliminate the existing BIA backlog of casesand to provide for current efficient disposition of cases. (23) These included reducing the size of BIA, expandingsingle-member review of certain cases, and time limits for certain actions. Proposed Changes. Section 510 of S. 2454 , § 702 of S. 2611 / S. 2612 and § 712 of the Chairman'smark contain similar provisions that would establish in statute the jurisdiction, procedures, andstandards for the BIA. They would require that cases be heard by a 3-member panel, with certainexceptions permitting a single-member hearing, including summary dismissals of appeals in certaincircumstances, the grant of an unopposed motion, and adjudications of certain motions to remand. Consideration or reconsideration of a case by the full BIA sitting en banc is authorized by a majorityvote. The BIA may affirm cases without an opinion only in certain circumstances. Regulations shallbe promulgated by the Attorney General within 180 days after the date of enactment of the act (§ 706of S. 2611/S. 2612 and § 716 of the Chairman's mark provide that regulationsshall be promulgated for the subtitle regarding administrative appeals). S. 2611/S.2612 and the Chairman's mark each contain a subtitle that undertakes a morecomprehensive statutory establishment and structuring of the Executive Office of ImmigrationReview (EOIR) than the provisions of S. 2454. This includes establishment of thecomposition, qualifications, appointment procedures and duties of the BIA members and Chair. Section 703 of S. 2611 / S. 2612 and § 713 of the Chairman's markcontain similar provisions concerning the qualifications, appointment procedures, and duties ofimmigration judges; S. 2611 contains simpler appointment guidelines. Section 704 of S.2611/S. 2612 would provide that no immigration judge or BIA member may beremoved or otherwise subject to disciplinary or adverse action for their exercise of independentjudgment and discretion. Section 714 of the Chairman's mark would further provide that removalcould only be for good cause by the Director of EOIR in consultation with the Chair of the BIA orthe Chief Immigration Judge for the removal of a BIA member or immigration judge respectively. Section 705 of S. 2611 / S. 2612 and § 715 of the Chairman's markwould provide for the continuation of a legal orientation program for detainees and the expansionof the program to disseminate information regarding immigration court procedures nationwide. Section 702 H.R. 1502 (Berman) includes a similar statutory establishment andstructuring of EOIR, which it would rename the Immigration Review Commission. FormerRepresentative Bill McCollum introduced similar legislation in several Congresses since the 97thCongress, most recently H.R. 185 , the United States Immigration Court Act of 1999,in the 106th Congress. Various immigration authorities have advocated different proposals forrestructuring the immigration courts over the years. H.R. 4437 and S.Amdt. 3192 do not contain provisions regardingthe statutory establishment of the EOIR. Immigration Injunction Reform Current Law. There are no provisions restrictingjudicially ordered injunctive relief regarding immigration actions. Proposed Changes. The Fairness in ImmigrationLitigation Act of 2006, comprising §§ 421 to 423 of S. 2611 / S. 2612 and S.Amdt. 3192 , would establish conditions limiting the granting of injunctive reliefagainst the Federal Government in any civil action pertaining to the administration or enforcementof immigration laws.

Beginning with the Antiterrorism and Effective Death Penalty Act of 1996 (AEDPA) and theIllegal Immigration Reform and Immigrant Responsibility Act of 1996 (IIRIRA), legislation andadministrative actions have focused on reducing immigration litigation by limiting and streamliningboth administrative appeal and judicial review procedures and by rendering aliens in certaincategories ineligible for certain types of relief from removal. Despite these efforts, other changes made by the 1996 Acts increased litigation by expandingthe scope of the grounds for inadmissibility and deportation and the definition of aggravated felony,which effectively further expanded the grounds for deportation. Increased enforcement effortscoupled with the increasing numbers of illegal aliens present in the country have also increasedlitigation as more aliens are placed in removal proceedings. In 2002, then-Attorney General Ashcroft implemented procedural reforms in the Board ofImmigration Appeals [BIA] intended to eliminate the existing BIA backlog of cases and to providefor current efficient disposition of cases. These changes have resulted in a shift of the backlog andthe number of appeals to the federal appellate courts. Changes proposed by H.R. 4437 , S. 2454 , S.Amdt. 3192 , and S. 2611 / S. 2612 , among other bills, would continue the trendof streamlining procedures and limiting immigration litigation, appeals to the Board of ImmigrationAppeals and judicial review.

Reshuffling the Asian Deck The end of the Cold War and demise of communism triggered two revolutionary movements. The first was political—symbolized by the fall of the Berlin Wall and the breakup of the former Soviet Union. The second was economic—symbolized by the privatization of state-owned enterprises, the loosening of centralized control, and adoption of market principles not only in the former Soviet Union but in East Asian countries such as China and Vietnam. On the economic side, a global consensual philosophy is now evolving that the economic system that provides the highest growth rates, greatest consumer satisfaction, and best standard of living is market-based with private ownership, access to global markets, freedom of capital movement, and government intervention/regulation primarily in cases of market failure. Autocratic governments, moreover, have found that they can use the market system and the growth it generates to gain legitimacy, repress opposition, fund military expansion, and build nationalistic pride in their countries. Even with the uneven income distribution and potential for conflict between the "haves" and "have-nots" caused by rapid economic growth, governments increasingly are placing their policy bets on globalization, international trade, and industrialization to raise standards of living and garner popular political support. Eventually, moreover, experts see economic growth as creating a middle class and competing power centers wherever it occurs. This arguably leads to more democratic societies and less chance of military confrontation with the industrialized countries of the world. During the Cold War, trade patterns followed security relationships. The United States became a major (if not the main) trading partner of Japan, South Korea, Taiwan, and several countries of Southeast Asia. Communist countries likewise gravitated to China and the Soviet Union and were rewarded with special trade credits. Currently, however, those trade patterns have changed. Globalization knows no political philosophy. Businesses seek low cost, high quality production bases regardless of where they are located. China is rapidly becoming the preferred manufacturing platform for companies from Japan, South Korea, Taiwan, the United States, and other countries. Formal trading arrangements are following the newly developed trading patterns. The structure overlaying the individual market economies is rapidly becoming crisscrossed by bilateral and regional preferential trade agreements. During the Cold War, the security overlay for countries often coincided with the philosophy underlying the organization of government and their economies. Communist blocs arose among socialist countries, while the United States formed explicit and tacit alliances with the more market-oriented economies. On one side was a U.S.-led arrangement with the United States as a benign hegemon supported by bilateral security alliances with key non-Communist Asian countries. The United States maintained strategic and allied relationships with Japan, South Korea, Taiwan, the Philippines, Thailand, Australia, and New Zealand in a type of hub and spoke configuration. This U.S.-protected block dominated peripheral Asian and Pacific Ocean countries. On the other side was a communist China that shared a hostility toward the United States with the Soviet Union and dominated the interior of the Asian land mass. China and the Soviet Union supported countries with communist governments, such as North Korea and North Vietnam. The result was bifurcation of East Asia into U.S.-dominated and communist-dominated blocs with some countries attempting to follow more independent paths. The two sides intersected with a balance of power regionally that derived from the Cold War balance of terror globally. Some intra-Asian or world organizations existed, but none of them could effectively deal with overarching security, political, or economic issues in Asia. The political and security arrangements that were formed among East Asian nations, moreover, tended to be anti-China or anticommunist in nature. ASEAN or SEATO (South East Asia Treaty Organization ) are two cases in point. Currently, however, the economic and political arrangements are crossing philosophical lines, and China is emerging as a regional hegemon in Asia. These changes are manifest in intra-Asian organizations such as the East Asia Summit, ASEAN Economic Community, ASEAN + 3 (ASEAN plus China, Japan, and South Korea), the ASEAN Regional Forum, and the six-party talks, as well as track-two fora, such as the Shangri-La Dialogue or the Northeast Asia Cooperation Dialogue. Why Join Together? Countries join in bilateral agreements and multilateral arrangements in order to prevent or limit armed conflict, ease tensions, gain economic advantages, and, in cases, raise standards for human rights. On the security side, the uncomfortable fact faced by all nations is that the space above the level of countries is basically anarchy. Throughout history, nations have attempted to step into that anarchy to pursue narrow national interests. Until World War II, countries countered such behavior mainly by creating security alliances. No global institution with global sovereignty existed. Now, international laws and norms have been established, and institutions (e.g., the United Nations) exist, but these institutions wield sovereignty only to the extent that individual countries cede power to them. In many cases, a primary benefit of such institutions is to provide a mechanism to resolve international disputes, provide non-hegemonic peace-keeping forces, and to bring countries face to face in a diplomatic setting rather than on the battlefield. On the economic side, the space above national economies also is anarchic, but unlike many zero-sum security exchanges (such as conquering territory), international economic transactions are positive sum and usually provide gains for businesses and consumers on both sides. In cases, however, private trading gains may conflict with national policies (such as in illicit trade). The role of nations in legitimate economic activity is to provide the crucible for it to occur, to facilitate it, to regulate it, and in some cases, own it. In facilitating trade in the anarchic space among nations, for example, governments establish trading rules and cede preferential benefits to other nations through formal mechanisms. These include granting normal trade relations (most-favored nation) status, establishing the World Trade Organization (WTO), adopting free trade agreements, or organizing special financial institutions such as the World Bank or International Monetary Fund. Trade and security arrangements and institutions also provide a platform for countries to take leadership roles and to spread their influence. The end of the Cold War brought unipolarity with the United States sitting at the top. Asian nations recognize that the United States will continue to exercise major influence in the region, but Beijing, in particular, sees the formation of an exclusive Asian organization as an opportunity to help reclaim what it considers to be its historical position as the regional leader in Asia. China also would like to weaken the relationships between the United States, Japan and South Korea (India also) and see countries in Asia more acquiescent to its own desires. ASEAN, likewise, sees itself as a more neutral party in the big power rivalry as this plays out in Asia and a moving force for regionalism. Southeast Asians observe that it matters not whether the big elephants are courting or fighting, in the process the surrounding spectators can get trampled. East Asia also has a unique history that plays into the interaction among nations and the composition of any regional organization. Historically, there have been two major models that linked East Asian countries. The first occurred when China considered itself the "Central Kingdom" and sat atop a hierarchy as a "superior state" whose values and culture spread throughout the region. This Sino-centric order required surrounding countries to treat China somewhat like the head of a family and to pay respects and tribute to Peking. The second model came under the Japanese-controlled Greater East Asian Co-prosperity Sphere prior to and during World War II. Under this model, Japan forcibly subdued or received through war settlements territory that now includes the Korean peninsula, Taiwan, much of China, and much of Southeast Asia. Japan's occupation of many of these areas was often brutal, and resentment still lingers, particularly in South Korea and China. The wariness of some Asian nations to join in a grouping that would allow China or Japan to take the lead often harkens back to memories of either of these historical East Asian structures. Scholars have long observed the relationship between economic interaction and warfare. A "democratic peace" hypothesis states that democratic nations (particularly liberal democratic nations) almost never go to war with one another. Recent academic studies of the results of economic interdependence and security indicate the following: Among nations, the greater the interdependence (the greater the costs of exiting from an economic relationship), the greater the probability that the nations will not seek political demands that could lead to conflict. On the other hand, economic interdependence also can be used as leverage to extract political demands. The greater the extent that internationally oriented coalitions in a country (actors with interest in expanding foreign markets or in importing) have political clout, the more likely that outside, economic incentives or sanctions will be effective in influencing policy in the country in question. The more democratic and market-oriented a country is, the more likely this will occur. The expectation of future commercial gains between nations helps to dampen political tensions and deter the onset of hostilities. Such future gains are enhanced by preferential trading arrangements, such as FTAs. Membership in preferential trading arrangements tends to inhibit interstate conflict. Economic and security arrangements increase opportunities for communication, establishing personal ties between people, and cooperating in diplomatic endeavors. This reduces the chances for miscalculations and misperceptions and increases the chances for direct diplomacy and back-channel communications. On the other hand, economic arrangements may increase competition for domestic industries and invite blowback from trade liberalization. What Are Regional Trade Agreements? The motivation for trade and financial agreements is usually to gain benefits for exports, imports, or investments that are not available through global concessions agreed to multilaterally through the WTO. Under WTO rules, bilateral and regional trade agreements can lower barriers between signatory countries but cannot raise barriers to other economies. Trade agreements have both trade diversion and trade creation effects. They divert existing trade toward the signatory countries but also may create more trade overall. Free trade and other trade agreements also may lock in market access or other benefits provided by one government in a country that are under risk of being withdrawn by successive governments. They also may induce governments to take politically difficult actions, such as opening agricultural markets or providing labor rights or protection for the environment. Any change in the rules of trade, however, creates both winners and losers—those who can take advantage of the new trading regime and those who are hurt by it. There usually will be some economic actors (particularly declining or non-competitive industries or certain labor groups) that are protected from international competition under an existing trade regime that will be worse off if that protection is eliminated by a free-trade agreement. Environmental or other interests also may be threatened by more trade (e.g., logging of old growth forests). As with the European Union or the North American Free Trade Area, preferential trade arrangements usually follow trading patterns. FTAs do not spring into existence ex nihilo (out of nothing), although in cases FTAs are pursued for political more than economic reasons. FTAs typically proceed through evolutionary stages with respect to intensity (greater liberalization) and expansiveness (more members). As shown in Figure 1 , trading relationships begin with unorganized trade and investment flows based on comparative economic advantage. Trade then can come under broad international trading rules such as those stemming from normal trade relations (most-favored nation) status or from the WTO. Trade then can be placed under a preferential trading arrangement with special access privileges or reduced barriers but not necessarily free trade. As a precursor to a preferential trading arrangement, the United States uses Trade and Investment Framework Agreements (TIFA) to strengthen bilateral trade and support economic reform in the partner country through regular senior-level discussions on commercial and economic issues. Other countries use Framework Agreements that may provide for an "early harvest" of trade concessions and launch discussions on a future FTA. Japan and other countries often negotiate partial FTAs called Economic Partnership Agreements (EPA). These have established free trade in most manufactured goods, but they also may exclude sensitive sectors, such as agriculture. In some cases, they include only a few actual trade concessions. They also may map a path toward a full FTA. An FTA usually provides for eliminating tariffs on goods, liberalized access in services and investment flows, as well as other provisions. The most extensive trading arrangement is a common market which goes beyond an FTA. Its members have free trade among themselves plus common external barriers and allow for free movement of labor and capital among member states. As trade arrangements become more intense, they also can become more expansive by including other countries (such as is occurring with European Union enlargement). In East Asia, most trade agreements have been driven by the market. They also have been competitive. The benefits available under a preferential trade agreement usually induce other countries to seek the same trade advantages or risk losing business for their exporters or investors. In some cases, the arrangements (or lack thereof) are politically driven, particularly in the case of Taiwan as Beijing attempts to isolate it diplomatically while Taipei tries to counter the diplomatic snubs that belie existing underlying trading relations. In other cases, politics and disputes over history (especially between Japan and China and South Korea) have hindered the conclusion of free trade agreements. Regional Economic and Financial Arrangements Regional trade agreements (RTAs), including FTAs, have become a major vehicle to achieve trade and investment liberalization. They are being negotiated both as a supplement to and concurrently with multilateral trade negotiations under the WTO. While some see RTAs as stumbling blocks to global trade liberalization, others see them as building blocks to eventual global free trade. WTO agreements tend to result in "lowest common denominator" outcomes, whereas RTAs can go beyond WTO agreements with deeper concessions made by like-minded nations. The complex web of free trade agreements in the world, sometimes referred to as a "spaghetti bowl," is becoming denser each year. The WTO reports that as of December 2008, 421 regional trade agreements had been notified to the WTO, and 230 agreements were in force. Close to 400 RTAs are scheduled to be implemented by 2010. The major East Asian RTA relationships are summarized in Table 1 . Existing Preferential Trading Arrangements In East Asia, home to many of the most dynamic economies in the world, the competition is intensifying to join in regional trade agreements. In 1992, ASEAN created an ASEAN FTA (AFTA) among its member nations. Under this arrangement, ASEAN states have already made significant progress in lowering intra-regional tariffs. The ASEAN-6 (Brunei Darussalam, Indonesia, Malaysia, the Philippines, Singapore and Thailand) have reduced tariffs to 5% or less on 99% of the products agreed to under the Common Effective Preferential Tariff Scheme for AFTA. Cambodia, Laos, Burma/Myanmar and Vietnam have been given more time to lower their tariffs. This FTA covers all manufactured and agricultural products. However, 734 tariff lines in the General Exception List, representing about 1.09% of all tariff lines in ASEAN, are permanently excluded from the free trade area for reasons of national security; protection of health and human, animal or plant life; and for artistic, historic or archaeological reasons. In 2003, ASEAN also established the ASEAN Community. This has three pillars: the ASEAN Security Community, the ASEAN Economic Community, and the ASEAN Socio-Cultural Community. The ASEAN FTA forms the basis of the ASEAN Economic Community. While ASEAN has been fostering closer political, economic, and cultural relations among its member states, the organization also has concluded various agreements with other nations that provide some immediate trade liberalization and contain provisions for negotiations that are to lead to formal free trade agreements. ASEAN views itself as the core of a regional FTA in East Asia. Currently, there are various proposals for membership, such as ASEAN plus three (Japan, China, and South Korea) and ASEAN plus six (addition of Australia, New Zealand, and India). In order to build on such a regional arrangement, ASEAN is concluding bilateral agreements with the countries that are potential members of such a regional agreement. As shown in Table 1 , numerous FTAs have already been concluded or are being negotiated among East Asia countries. In November 2002, ASEAN and China signed a Framework Agreement on Comprehensive Economic Co-operation. This provided for an ASEAN-China Free Trade Area (ACFTA) that took effect on January 1, 2010, between China and the more industrialized ASEAN-6, and by 2015 for Cambodia, Laos, Myanmar, and Viet Nam. ASEAN also has concluded an FTA with Australia and New Zealand and envisages a regional FTA by 2015. In November 2007, Japan and ASEAN endorsed a free trade agreement under which tariffs would be eliminated on 90% of imports by both sides, but key items such as rice and beef would remain protected. ASEAN is negotiating a similar Agreement with India. With South Korea, ASEAN has signed an FTA pact that covers goods trade only. In December 2005, Thailand refused to sign the agreement because South Korea excluded rice from the 4,000 items that are to have import tariffs cut to below 20% and then to zero by 2009 (with an additional five years for the newer ASEAN member nations). In 2008, Thailand and South Korea concluded negotiations that brought Thailand into the ASEAN-Korea FTA and gave Thailand more flexibility than other ASEAN nations in cutting or waiving its tariffs or both. Services and investment have also been added to the original agreement. Since ASEAN is not a common market, it may negotiate an FTA agreement, but each individual member must sign it and implement it as if it were a bilateral agreement. ASEAN does not have common external tariff rates. Individual ASEAN countries also may pursue bilateral FTAs on their own. Singapore has been most aggressive in doing so. In addition to being a part of the ASEAN Economic Community, it has concluded free trade agreements with the United States, China, Japan, South Korea, Australia, New Zealand, India, Jordan, Panama, and the European Free Trade Association (EFTA). Singapore also is a member of the Trans-Pacific Strategic Economic Partnership Organization (an FTA among Singapore, New Zealand, Chile, and Brunei) that is seeking to expand membership to include the United States, Australia, Peru, and Vietnam. It has ongoing negotiations with Mexico, Canada, Pakistan, Costa Rica, Ukraine, and the European Union. Likewise, Thailand , Philippines , Indonesia , and Malaysia have been initiating talks and signing various types of trade agreements. Negotiations for a U.S.-Malaysia FTA began in June 2006. Cambodia, Vietnam , and Laos are far behind in the process. They barely have been able to sign trade agreements, let alone free trade or other types of preferential trade arrangements. Laos is not a member of the WTO, and Cambodia joined in 2004 while Vietnam joined in 2007. Vietnam and Japan are negotiating on a bilateral FTA. All ASEAN members are committed to trade liberalization within ASEAN and generally have attempted to negotiate bilateral FTAs parallel with ASEAN's FTA agreements with other countries and also to conclude preferential trading arrangements with a variety of other nations. For the United States, the creation of a trading bloc based on ASEAN poses little threat to U.S. commercial interests. U.S. companies are well established in ASEAN member economies, particularly in Singapore, the Philippines, and Indonesia, and lowered trade barriers within ASEAN tends to benefit both U.S. companies there and U.S. exporters to the region. However, the large imponderable in the development of the new trade architecture in East Asia is the People ' s Republic of China (PRC) . The PRC has taken an aggressive stance toward establishing FTAs with trading partners. In January 2010, China and the ASEAN-6 more industrialized countries reduced tariffs on 90% of products traded. The four remaining ASEAN members (Vietnam, Cambodia, Laos, and Burma) are to follow by the end of 2014. China also has an FTA with New Zealand and is negotiating or discussing FTAs with Japan, Taiwan, Pakistan, and India. FTAs follow trade, and the Chinese economy is beginning to dominate trade in Asia. As shown in Table 2 , China has become the top trading partner for Japan, South Korea, Taiwan, and Australia. It is the second largest trading partner for Singapore and Thailand, and the third largest for Indonesia and the Philippines. With the exception of the Philippines, a former U.S. colony, the United States ranks below China in the trade rankings for most of East Asia. While the United States still is a major trader there, increasingly it is being eclipsed by China. While the United States does not oppose the creation of regional trading arrangements, U.S. commercial interests in East Asia are huge. Therefore, it seems important for U.S. policy to ensure that any such trading blocs do not work to the disadvantage of U.S. exporters and American companies with a presence there, particularly when competing with China. The danger also exists that security considerations will follow trade and investments. Once China becomes the dominant regional economy, governments may turn to China first in seeking solutions to problems. China then may be able to spread its influence in political, security, and socio-cultural issues that may or may not be consonant with U.S. interests and values. Japan joined the FTA race relatively late. It is burdened by a highly protective agricultural sector and a trade agenda that usually has placed top priority on multilateral trade negotiations under the World Trade Organization. Japan began its quest for FTAs by signing an Economic Partnership Agreement (EPA) with Singapore in 2003. It then sought to counter the effects of the NAFTA by signing an EPA with Mexico in 2004. Japan signed an economic partnership agreement with the Philippines in 2006, also signed an EPA (eliminating tariffs on 97% of goods traded) with Malaysia that went into effect in July 2006. In 2005, Japan also agreed to an EPA with Thailand, in 2006 to one with Indonesia, and in 2007 signed EPAs with Chile and Brunei and a framework agreement with ASEAN as a whole that led to an FTA. The Japan-South Korean FTA talks have bogged down over disputes dealing with agricultural products, history, and competing claims to an island. In 2009, Prime Minister Yukio Hatoyama called for an East Asian Economic Community consisting of ASEAN, Japan, China, South Korea, India, Australia, and New Zealand. However, considering that Japan and South Korea cannot agree on even a limited FTA between themselves, it is hard to imagine their reaching an agreement on a regional FTA spanning Northeast and Southeast Asia as well as parts of the Pacific Ocean. South Korea also has joined the rush to conclude FTAs. After seeing a surge in its exports to Chile after its first free trade accord with that country came into effect in April 2004, South Korea announced in March 2005 that it intended to initiate trade talks with as many as 50 countries and push for FTAs with more than 15 of them. In addition to Chile, Seoul has signed FTA arrangements with ASEAN, EFTA, and India; and FTAs with the United States and the European Union are awaiting ratification. South Korea also has ongoing FTA talks with Japan, Canada, Mexico, China, Mercosur, Peru, Australia, and New Zealand. Given that the international status of Taiwan ( Chinese Taipei ) is in dispute and Beijing has waged a campaign to isolate it, Taiwan faces great difficulty in finding partner countries willing to negotiate free trade arrangements. Taiwan has FTAs with Panama, Guatemala, Nicaragua, El Salvador, and Honduras. It is pursuing a similar agreement with Paraguay. Pressure from China, however, apparently has led the South American trade bloc Mercosur to prohibit its members from signing unilateral trade agreements with other economies, particularly as Mercosur considers an FTA with China. Taiwan has indicated that the United States, New Zealand, and Singapore are its top priority for future FTA partners. Taiwan also has raised the topic with Thailand, Japan, and ASEAN. Taipei is particularly concerned about being excluded from the ASEAN+3 group and the East Asian Summit and the discussions about building an East Asian Community consisting of the Summit attendees. Taiwan also is wary that a U.S.-South Korean FTA, if approved by Congress, would divert trade away from Taiwan toward South Korea. East Asian Economic Community The ASEAN Plus Three (APT) consisting of the ASEAN ten plus China, Japan, and South Korea has spawned cooperation among these thirteen countries in politics, security, and economics. The group is working to form an East Asian Free Trade Area that parallels the East Asian Economic Caucus originally proposed in 1990 by former Prime Minister Mahathir Mohamad of Malaysia. At the time, the United States opposed such an East Asian grouping primarily out of concern that it would develop into an exclusive Asian trading bloc even though it was proposed as mainly a consultative mechanism. Now, however, the U.S. strategy is not necessarily to oppose regional trading and consultative arrangements but to ensure U.S. access through bilateral agreements, global institutions, or through close coordination with friendly member nations. The ASEAN Plus Three Unit helps coordinate the activities of the group and is located within the ASEAN Secretariat in Singapore. The APT group holds its annual summit immediately following the ASEAN summit. So far it has focused on its annual summits, trade facilitation, establishing institutional structures for financial and monetary cooperation, and discussing political and security matters. An East Asian Economic Community eventually could become a free trade area and powerful Asian trading bloc that could rival the free trade areas in North America and Europe. Economic and financial cooperation among the APT nations was given a fillip by reports by the East Asia Vision Group in 2001 and the East Asia Study Group in 2002. These reports laid out a vision for the group and proposed specific measures including holding the East Asian Summit, completing bilateral FTAs and eventually the East Asian FTA, greater financial cooperation including an Asian Bond Market, establishing a network among East Asian think tanks, forming an East Asian Business Council, and pursuing a more closely coordinated regional exchange rate regime. Since most of the more industrialized countries of ASEAN already have bilateral FTAs with China, Japan, and South Korea, the building blocks exist for the East Asian Economic Community. The APT had a report on the possibility of an East Asian FTA at the 12th ASEAN Plus Three Summit in October 2009 in Thailand. The East Asian Economic Community would require that the negotiations on the Japan-South Korea FTA be completed and that FTA agreements be concluded between China and Japan as well as between China and South Korea. China is a major force in the ASEAN + 3 process. This reportedly has become China's preferred regional forum in which both political/security and economic issues are addressed. In East Asia, China, Japan, ASEAN, and the United States all are vying for leadership of the region. Traditionally, Japan has led in economics and finance, ASEAN in coordinating regional institutions, and the United States and China in security issues. With China's rise and its increasing clout in political, economic, and security matters, Beijing apparently sees ASEAN +3 as an institution in which it can take the lead without competition from the United States or Europe or the dilution of East Asian interests by India or Australia. The APT nations have already established certain cooperative financial arrangements. These have resulted primarily from the adverse effects of the 1997-1998 Asian financial crisis. In particular, in May 2000, the ASEAN+3 Finance Ministers agreed to what is called the Chiang Mai Initiative (named after the city in Thailand where the meeting took place). The initiative aims to create a network of bilateral swap arrangements, by which short-term liquidity can be provided to support participating ASEAN+3 countries in need. The idea is that in times of currency crisis, China, Japan, and South Korea would swap their foreign exchange reserves for the currencies of ASEAN countries in crisis. This network of bilateral swap arrangements has been formalized among China, Indonesia, Japan, Korea, Malaysia, the Philippines, Singapore and Thailand—the major countries in ASEAN+3. In February 2009, the ASEAN + 3 nations agreed to increase the size of the Chiang Mai Initiative from $80 billion to $120 billion and to develop a more robust and effective surveillance mechanism to support its operation. The APT also has an Asian Bond Market Initiative. CJK FTA In February 2010, South Korean government announced that it would take the initiative in discussions on integrating the East Asian economies and push for a trilateral free trade agreement among China, Japan, and South Korea. In October 2009, the trade ministers of South Korea, China, and Japan agreed to launch the first joint study meeting of a CJK FTA in the first half of 2010. This is to involve business executives, government officials, and academics, and is intended to set a schedule leading to the FTA. Prime Minister Yukio Hatoyama of Japan proposed at the Beijing Trilateral meeting between China, Japan, and South Korea on October 10, 2009, that such an FTA be accelerated. Proposed Comprehensive Economic Partnership in East Asia or East Asia FTA Several have proposed that the countries that are members of the East Asia Summit join to form an Asian free trade area. This has been called an East Asia FTA, but Japan also has proposed a that it be called a Comprehensive Economic Partnership in East Asia or CEPEA. This would be a 16-nation East Asian Free Trade area to be coordinated by an organization similar to the Organization for Economic Cooperation and Development. The 16 nations would include the ten members of the Association of Southeast Asian Nations, Japan, China, South Korea, India, Australia, and New Zealand. China and South Korea, however, have not supported Japan in this idea. Both of these countries have indicated that their first priority would be the ASEAN + 3 FTA proposal. ASEAN and India have welcomed the concept. In 2006, former U.S. Ambassador to Japan Thomas Schieffer expressed some concern about the proposed East Asia FTA saying it could damage U.S. interests in the region. He said that the United States is uncomfortable "when people start talking about somehow trying to exclude the United States from Asia." The United States has tremendous interests there and wants to be a part of Asia, he remarked. At the 2009 East Asia Summit, the leaders noted the final Phase II Report of the Track Two Study Group on Comprehensive Economic Partnership in East Asia (CEPEA) and welcomed the decision to task their Senior Economic Officials to discuss and consider the recommendations in the report. They stated that CEPEA and East Asia Free Trade Area (EAFTA) could be examined and considered in parallel. Proposed FTA of the Asia Pacific and APEC At the 2006 Leader's Meeting of the Asia-Pacific Economic Cooperation forum the APEC members decided to study the possibility of a Free Trade Area of the Asia Pacific (FTAAP). This trans-Pacific FTA was promoted by the United States and would encompass the 21 APEC economies and would include the ASEAN-6 plus Vietnam, China, Chinese Taipei (Taiwan), Hong Kong, Japan, and South Korea in Asia; the United States, Canada, Mexico, Peru, and Chile in the Americas; Australia, New Zealand, and Papua New Guinea in the Pacific; and Russia. In 1994, APEC declared the so-called "Bogor Goal" of free and open trade and investment in the Asia-Pacific by 2010 for industrialized member economies and 2020 for the rest. The FTAAP would realize the Bogor Goal, but it raises the question of timing. Should the nations of the Asia Pacific seek a comprehensive trans-Pacific FTA first and skip the intermediate FTA configurations centered on ASEAN or should the immediate focus be on the "ASEAN plus" process with the ultimate aim of linking FTAs in Asia with those in North and South America after the Asian FTA architecture is complete? The question actually centers on China. Which is more likely to materialize: a China-Japan FTA in an ASEAN + 3 or ASEAN + 6 context or a U.S.-China-Japan FTA in an FTAAP context? The Asia-Pacific Economic Cooperation forum, or APEC, was established in 1989 to facilitate economic growth, cooperation, trade, and investment in the Asia-Pacific region. It operates on the basis of non-binding commitments with decisions made on the basis of open dialogue, equal weights for all participants, and consensus. For the United States, one important feature of APEC is that it includes Taiwan (Chinese Taipei). Other economic and political groupings generally include China but exclude Taiwan. Asia Pacific Community In building the trade architecture of Asia, Australia has tried to ensure that it would be included in whatever pan-Asian FTA develops as the Asian trade architecture evolves. Australia has joined the East Asia Summit and has been a major supporter of the Asia Pacific Economic Cooperation (APEC) forum. In June 2008 Prime Minister Kevin Rudd announced that Australia would seek to encourage development of an 'Asia Pacific Community' by 2020. This community would include at least the members of the East Asia Summit plus the United States and possibly Russia. He argued that no existing cooperation forum so far brings together the whole Asia Pacific region and it was therefore desirable to review the region's architecture. The APC could be a vehicle to to manage great power relationships, both economic and security, in the Asia Pacific. The Trans-Pacific Partnership The Trans-Pacific Strategic Economic Partnership (TPP) originally included Singapore, New Zealand, Chile, and Brunei. It is an FTA that spans the Pacific Ocean. On November 14, 2009, President Obama announced that the United States would engage with the Trans-Pacific Partnership: on December 14, 2009, the Office of the U.S. Trade Representative formally notified Congress of the Obama Administration's intent to enter into negotiations of the Trans-Pacific Partnership. The first TPP negotiating session took place on March 15, 2010, in Australia. Also entering into negotiations with the TPP are Australia, Peru, and Vietnam. The United States already has FTAs with Singapore and Chile and with potential TPP partners, Australia and Peru. Joining the TPP would require that the United States negotiate FTAs with New Zealand, Brunei, and possibly Vietnam. The possible inclusion of Vietnam may prove problematic for U.S. industries, such as textiles, apparel, and fisheries. The process of negotiation may span a considerable period of time, and congressional consideration of any agreement may still be farther into the future, but just the possibility of such an FTA may induce other countries, such as South Korea, to also join the negotiations. If so, the TPP could become the foundation of a Free Trade Area of the Asia Pacific (FTAAP) as envisaged by APEC. The G-20 East Asian Caucus After the onset of the Global Financial Crisis of 2008-2010, the Group of Twenty nations (G-20) took an expanded role in coordinating and providing support for policy to cope with the crisis and also to implement regulatory reforms. Some have proposed that rather than create a new institution, that the East Asian members of the G-20 (China, Japan, South Korea, Australia, India, and Indonesia) form an East Asian Caucus. The purpose of this caucus would be to ensure that the major powers of Asia meet and coordinate policies before the G-20 summits and report on the results of the summits to a broader Asian grouping (e.g. at an ASEAN plus Three [or Six] meeting or at the East Asia Summit). This proposal may gain traction since South Korea has assumed the G-20 Chair in 2010, and the G-20 Summit is scheduled for Seoul in November 2010. Regional Political and Security Arrangements Security arrangements, in most cases, are designed to reduce the risk of hostilities by co-opting the interests of the signatory nations and also by presenting a united front to potential adversaries. Such arrangements range from formal alliances and mutual defense institutions to merely creating a forum to discuss security issues in order to build confidence and resolve conflicts through diplomacy. Under the European model of security, intra-European wars, particularly among Germany, France, England, and Spain, have become a dimming memory as the countries have joined together under the European Union and, for most, the North Atlantic Treaty Organization. Trans-Atlantic institutions, such as the Organization for Security and Cooperation in Europe (Helsinki Commission) also exist that provide a regularized forum to discuss security and human rights issues. Such security arrangements underlie what is sometimes referred to as the new security paradigm: "disconnectedness defines danger." The threat of the Cold War has been replaced by terrorism, rogue nations with possible weapons of mass destruction, competition for energy and resources, and ethnic or religious conflict. Today, most dangers originate from areas of the world without collective security arrangements and disconnected from the process of globalization, network connectivity, financial transactions, and liberal media flows. Even in this new age, however, the potential for a big power confrontation (including one with a nuclear-armed China) still exists. Regional political and security arrangements in East Asia are still in the developmental stage compared with those in Europe, the North Atlantic, or Gulf States. The major efforts in Asia include the ASEAN Security Community, ASEAN Regional Forum, the East Asian Summit, the Shanghai Cooperation Organization, and the six-party talks. Figure 2 shows current and proposed regional trade, political, and security arrangements in East Asia. Currently, ASEAN is playing a key organizing role in several of the arrangements, but it is doing so partly at the strong support of China and with close cooperation from Beijing. The United States also is a major player and is acting from both inside and outside depending on the organization. The United States plays a central role in APEC and the six-party talks, and is a major participant in the ASEAN Regional Forum. The United States also would be a key member of the proposed Northeast Asia Regional Forum and now can join the East Asia Summit. The security related organizations in East Asia are discussed below. ASEAN and the ASEAN Security Community The Association of Southeast Asian Nations or ASEAN was established in 1967 with five original members: Indonesia, Malaysia, the Philippines, Singapore, and Thailand. Brunei joined in 1984, Vietnam in 1995, Laos and Burma (Myanmar) in 1997, and Cambodia in 1999. ASEAN was formed at the time of the Vietnam war purportedly to enhance economic, social, and cultural cooperation, but in reality, it was a product of the Cold War and part of the U.S. strategy to contain communism, particularly that being promulgated by China and Vietnam. After the 1975 U.S. withdrawal from Vietnam, ASEAN increasingly became a vehicle for the Southeast Asian nations to resolve territorial and other problems through consensual and informal community building efforts. ASEAN has attempted to coopt the interests of Cambodia, Burma/Myanmar, and Laos by bringing them into membership, but the results have been mixed, particularly with respect to the military junta in Burma/Myanmar. Currently, ASEAN is playing a leading role with strong support from China in moving the countries of the region toward organizing into cooperative arrangements. ASEAN often can take the lead in building multilateral institutions because it is viewed as more neutral and non-threatening than China or Japan. ASEAN has created the ASEAN Security Community to foster greater political and security cooperation and help ensure peace and harmony. ASEAN + 3 (China, Japan, and South Korea) ASEAN + 3 came about in 1997 as an unanticipated result of a Japanese proposal to create a regular summit process between ASEAN and Tokyo with an agenda that included security. Concerned with possible negative response from other Asian nations, ASEAN subsequently broadened the proposed summit to include China and South Korea. The ASEAN + 3 members meet regularly after each ASEAN summit to discuss finances, economics, and security. China reportedly favors this organization over the East Asian Summit because it does not include other big powers, such as India, although Beijing continues to support the East Asian Summit. ASEAN Regional Forum The ASEAN Regional Forum (ARF) was established in 1994 with the purpose of bringing non-ASEAN nations from the Asia-Pacific region together to discuss political and security matters and to build cooperative ties. The 25 participants in ARF include the ten members of ASEAN, the United States, China, Japan, European Union, Russia, Australia, Canada, New Zealand, South Korea, North Korea, India, Pakistan, Mongolia, Papua New Guinea, and East Timor. In a region with little history of security cooperation that crosses philosophical lines, the ASEAN Regional Forum is the principal institution for security dialogue in Asia. ARF claims that it complements the various bilateral alliances and dialogues which underpin the region's security architecture. ARF was created to provide the missing link between U.S. security guarantees that appeared to be weakening in the early 1990s and the uncertainties produced by the prospect of a new regional multipolarity developing with the resurgence of China. The ARF is characterized by minimal institutionalization and the "ASEAN way" of gradualism and consensualism. The ARF process begins with transparency (through the publication of military-spending and deployment information), dialogue, and confidence-building measures; then moves to preventive diplomacy (discussion and mutual pledges to resolve specific disputes solely through peaceful means); and, in the long term, hopes to develop a conflict resolution capability. The vision of ARF is to manage and prevent conflict rather than engage in it. Currently, most of the ARF measures have been at the level of dialogue and confidence building, particularly with respect to the region's counter terrorism effort and the North Korean missiles/nuclear program. Still the ARF provides a venue for foreign ministers (Secretary of State for the United States) from Asia/Pacific countries to meet and focus on specific current issues. In order to bring in defense ministers, ARF holds a separate ARF Defense Dialogue among defense and military officials who also attend the ARF. At the 16 th meeting in Thailand in July 2009, the representatives discussed several security related topics, such as North Korea's missile and nuclear tests, and they adopted the ARF Work Plan on Counter-Terrorism and Transnational Crime. They also noted the that the first ARF field exercise on disaster relief had been conducted. East Asia Summit The East Asia Summit (EAS) is a new organization that met for the first time on December 14, 2005, in Malaysia. It brought together the ten ASEAN nations, the "plus three" states of China, South Korea, and Japan, as well as Australia, New Zealand, and India. The United States was not invited to attend. This meeting was timed to follow the ASEAN Summit as well as bilateral meetings between ASEAN and Russia, Japan, South Korea, and India. Many see the EAS as a reformulation on the political and security side of the East Asian Economic Caucus (EAEC). At the time, the United States opposed such an exclusive East Asian grouping primarily out of concern that it would develop into an exclusive Asian trading bloc even though it was proposed as mainly a consultative mechanism. Now, however, the U.S. strategy is not to oppose regional trading and consultative arrangements but to ensure U.S. access through bilateral agreements, global institutions, or through close coordination with friendly member nations. China has played a strong role in promoting the EAS partly as an offsetting force to the ubiquitous U.S. presence in the Asian rim. Japan and Singapore, however, reportedly pushed to have Australia and India included, partly to offset the feared dominance of China in the summit. Since then, Beijing has been less enthusiastic about the EAS and more willing to retreat to the ASEAN + 3 concept in which it has a more central position. At the first EAS meeting, the delegates established the EAS as an integral part of the evolving regional architecture in Asia. The countries also declared that EAS efforts to promote community building in East Asia are to be consistent with and the realization of the ASEAN Community; that the EAS is to be an open, inclusive, transparent, and outward looking forum with ASEAN as the driving force; and that the EAS will focus on fostering strategic dialogue and promoting cooperation in political and security issues to ensure that the EAS countries can live at peace with one another and with the world at large in a just, democratic, and harmonious environment. For the initial meeting of the EAS, membership required that participants sign the Treaty of Amity and Cooperation in Southeast Asia (TAC), be a formal dialogue partner of ASEAN, and have substantive cooperative relations with ASEAN. Non-ASEAN signatories to the Treaty include China, Japan, India, South Korea, Russia, Pakistan, and Papua New Guinea, but not the United States. On July 22, 2009, Secretary of State Hillary Rodham Clinton signed the TAC on behalf of the United States. The 2007 East Asian Summit resulted in a declaration addressing climate change. The 2006 summit (initially cancelled but later held) focused on the future purposes and operation of the summit and a declaration on energy security. U.S. concerns with the EAS are that it could potentially work to diminish U.S. influence in Asia, could replace APEC as the main multilateral forum in Asia on trade and investment liberalization and economic integration, and could further marginalize Taiwan (who was not invited to the EAS but is a member of APEC). Still, the United States has not overtly opposed it and, at some point, may join it (this would require that the United States sign the ASEAN Treaty of Amity and Cooperation). Shanghai Cooperation Organization Although the Shanghai Cooperation Organization (SCO) is not an East Asian organization, per se , it was initiated by China and is of interest to the United States because it has adopted a somewhat anti-American stance. The SCO was organized in 2001 by six countries: China, Russia, Kazakhstan, Kyrgyzstan, Tajikistan, and Uzbekistan. Mongolia, Pakistan, Iran and India are observers. The SCO reportedly has not acted on Iran's request for membership. The SCO's secretariat is located in Beijing and its Regional Anti-Terrorist Structure (RATS) is in Tashkent, Uzbekistan. The main goals for the organization as stated in the 2001 Shanghai Pact are to fight terrorism, separatism, and extremism. China's initial motive for establishing the SCO seems to have been to prevent ethnic Kazakhs or Uighurs in China from using Central Asian states as a haven from which to plan separatist activities in China's Xinjiang Uighur Autonomous Region (formerly East Turkestan). As the SCO has developed, however, it appears now to be a vehicle for China and Russia to curb U.S. influence in Central Asia in order to establish a joint sphere of influence there. This includes access to energy resources by China as well as markets for exports and collaboration against Islamist movements. As China, Russia, and other SCO members have conducted war games under the auspices of the SCO, some observers have pointed out the potential for it to take on a military role not unlike that of the North Atlantic Treaty Organization, although it is not yet developed sufficiently to become a counterpoint to NATO. As the SCO has entered into its ninth year of existence, it seems to have become an effective vehicle for Beijing and Moscow to pursue geopolitical aims. It was the first regional bloc to oppose the bid by Japan, Brazil, Germany, and India to enlarge the United Nations Security Council's permanent membership. In 2005, the SCO called for a date certain for U.S. troops to be out of Central Asia, and at the 2006 summit, the Iranian President, while not mentioning the United States by name, spoke against "the threat of domineering powers and their aggressive interference in global affairs." In 2007, the SCO conducted extensive joint military exercises in Russia using the most modern weapons and equipment. Given that Beijing plays a primary role in giving direction to the SCO, the way that the SCO has developed might provide clues to the direction other regional organizations, such as ASEAN + 3, might take if China is able to assume a dominant position. Both China and Russia, however, insist that the SCO is not a bloc that is directed against any third forces or countries. In June 2007, the Chinese Defense Minister emphasized that the SCO is a geopolitical structure whose work is aimed at combating terrorism and safeguarding the region's safety and security. In 2008, the SCO members signed an Agreement on Cooperation among the Defense Ministries of the SCO Member States. In 2010, they agreed to a two-year plan that outlines main areas of cooperation among the defense ministries of the SCO member states, including further strengthening of dialogue and consultations in the field of defense and security, preparation of joint counterterrorism military drills, organization of workshops aimed to share experience in fighting against terrorism, conducting peace-keeping operations, army building and development, as well as staging of relevant activities marking the 10th anniversary of the founding of the SCO. It should be noted that after the 2008 invasion of the Republic of Georgia by the Russian Federation, Russian President Dmitry Medvedev sought support for its action from the SCO. China and other SCO members, however, would not have the SCO give its support for Moscow's action. The SCO refused to support the dismemberment of a sovereign Georgia and the ensuing independence of South Ossetia and Abkhazia. China, itself facing problems with territorial independence movements, indicated that it was wary of this request and merely stated that the situation should be resolved by dialogue. The Six-Party Talks The potential nuclear threat from the Democratic People's Republic of Korea (DPRK) induced five countries with the most direct interest in this issue to join in talks with Pyongyang. The participants include China, the United States, Japan, South Korea, Russia, and the DPRK. In early 2003, China hosted the first round of talks in Beijing, and they have continued sporadically since then. This is another venue in which China is able to cooperate with other nations and take the lead in dealing with an issue directly affecting its national interests and on its border. The talks resumed in September 2006, and in 2007 showed considerable progress. The talks are yet to succeed in curtailing/eliminating North Korea's nuclear weapons program, but they have brought together the major players in northeast Asia to seek a solution to the problem. The Proposed Northeast Asia Regional Forum Some have suggested that the five countries (excluding the DPRK) in the six-party talks formalize this ad hoc grouping into what might be called the Northeast Asia Regional Forum (NERF). As proposed by one group of authors, the purpose of NERF would be to organize multilateral diplomatic meetings at regular intervals to consider key security, energy, health, and economic issues in the region. The state representatives attending would have the same diplomatic level as those in the six-party talks. At the 13 th ASEAN Regional Forum meeting in July 2006, Secretary of State Condoleezza Rice expressed the need for a "robust dialogue on Northeast Asian Security" and for discussions on how to "move forward on issues of cooperation and security." At the ARF meeting, the five non-North Korean members plus Malaysia (the 2006 host of ARF), Australia, and Canada met for a discussion on the North Korean situation. This was held in lieu of a session of the six-party talks, since North Korea at the time was refusing to attend them. A major problem in East Asia is that differences among China, Japan, Russia, the United States, and South Korea are so vast that the only time the countries get together and work toward a common end is when they all face a single problem large enough that they are willing to put aside their strategic rivalries and cooperate to find a mutually satisfactory solution. The trouble with this approach is that ad hoc organizations, such as the six-party talks, come into existence only when the problems are large, transcend borders, and seem intractable—such as North Korea's nuclear weapons program. In tackling such mega-issues, the parties involved are expected to cooperate and find common ground even when there may be no history of cooperation between them or the parties involved may even be strategic competitors and hold antagonistic feelings toward each other. Many experts feel that there needs to be a way to get the major players in northeast Asia together more often, for them to pursue confidence building measures, and to have more discussions and joint policy actions. The countries could begin by addressing areas of overlapping interests where there already is some degree of consensus. Such issues in the region might include infectious diseases, terrorism, transportation security, or energy. This process could establish lines of communication and build confidence much as occurred in Europe with the Commission on Security and Cooperation in Europe (the Helsinki Commission). Track Two Dialogues In addition to official regional organizations, a number of track two dialogues also exist. These include the International Institute for Strategic Studies' Shangri-La Dialogue, the Council for Security Cooperation in the Asia Pacific, and the University of California's Northeast Asia Cooperation Dialogue (NEACD). These usually involve top-level officials and academics from countries of the region who meet to discuss issues of mutual importance. The 2009 NEACD meetings in San Diego, for example, included Ri Gun, North Korea's deputy chief envoy for nuclear negotiations, and U.S. chief negotiator Sung Kim as well as defense and diplomatic officials and academics. It came at a time when the Six Party Talks were stalled. The Pacific Command The U.S. Pacific Command (USPACOM) also works to advance cooperation in regional security primarily through two channels: the first is country-to-country with visits by the U.S. Commander, joint military exercises, military-to-military training, and relief operations, such as post-tsunami assistance. The second is through hosting fora for military officers and civilians from various countries to come to PACOM headquarters for education and training. PACOM's Asia Pacific Center for Security Studies, in particular, provides a venue, similar to track two dialogues, for military officers from across the Asia-Pacific region to meet in an unconstrained, off-the-record learning environment to discuss security issues. Policy Issues The development of new trade and security arrangements in East Asia raises several issues for U.S. policy makers that stem from essential U.S. interests. U.S. Interests Rising regionalism in East Asia enters into U.S. policy considerations because of its effect on three vital national interests: security, economic well being, and value projection. With respect to security, the United States has fought three wars in East Asia and still maintains significant military forces in Japan, South Korea, and the Pacific. More recently, terrorist attacks on U.S. businesses and on American citizens have occurred there (particularly in Indonesia and the Philippines). China is a recognized nuclear power while North Korea has tested two nuclear weapons. Potential flashpoints in East Asia include not only the confrontations between Taiwan and the PRC and between North and South Korea but also terrorist attacks on businesses, diplomatic assets, and citizens of the United States or other countries in the region. Disputes also are flaring up over islands or resources in various East Asian areas. In 2003, one author pointed out that every major al Qaeda plot since 1993 had some link to radical Muslim groups in the Philippines. By far, however, the major issue developing in Asia is the growing economic and security presence of China and what that means for the rest of the world. Following the global financial crisis of 2008-2009, China has been exhibiting increased self-confidence (some argue that it is more like hubris) in global affairs and in particular toward the United States. As the London Economist stated, "China ... is more assertive and less tolerant of being thwarted.... From its perceived position of growing economic strength, China has been throwing its weight around...." Given China's conclusion of free-trade agreements with its Southeast Asian neighbors and free-trade discussions with Japan and South Korea, it is possible that, in the future, the industrial world could be divided into three large quasi-blocs for trade: North America, Europe, and East Asia. If each trading bloc pursued its own interests over those of the world, a global consensus on trans-national issues would be more difficult to achieve. This could affect, for example, the ability to achieve future multinational trade agreements under the World Trade Organization or agreements dealing with climate change. It also could affect the ability to reach agreement on trans-regional standards for rapidly developing technology in areas such as information science, nanotechnology, genetically modified plants, or in intellectual property rights. Asia also plays an essential role in America's economic well being. Globalization and the growth of supply links that cross the Pacific Ocean have woven the U.S. and Asian economies into an intermeshed and interdependent tapestry whose threads are constantly being adjusted. The population of East Asia at 2.1 billion accounts for a third of the total 6.2 billion people on earth. If the Indian subcontinent is added, Asia accounts for more than half of the world's population. These countries both compete with and complement the U.S. economy. For the many exporting countries in East Asia, the United States is the market of last resort and the source of much of their capital, technology, and ideas for product design. The U.S. market, however, is rapidly being displaced by China and intra-regional trade among the Asian countries themselves. China's rapid growth also is generating huge demand for limited natural resources and pushing up their prices. Asia is a major competitor for global energy supplies and is a source of some new infectious diseases (avian flu and Severe Acute Respiratory Syndrome [SARS]) that can threaten the essential well being of Americans. Another challenge for the United States with respect to East Asia is that trans-Pacific economic and financial relationships are fundamentally unbalanced. China, Japan, South Korea, and Taiwan alone account for about 40% of the U.S. merchandise trade deficit. Those same countries have become major financiers of U.S. budget and saving deficits. Many U.S. jobs once thought secure also are being outsourced to Asia, and some Asian nations have lax enforcement of intellectual property rights and questionable labor or environmental policies. In the projection of U.S. values, a major goal of the United States is to help create a world of democratic, well-governed states that can meet the needs of their citizens and conduct themselves responsibly in the international system. In this respect, Asia is both a success story and cauldron of concern. While democracy in most of the countries is vibrant and representative, glaring exceptions remain in Burma, China, and North Korea. Likewise with human rights, these three countries along with Vietnam, Indonesia, Cambodia, and Laos are often cited for human rights abuses. U.S. goals in East Asia include preserving U.S. influence and alliance relations, fostering stability both with and within the region (particularly with China, across the Taiwan Strait, and on the Korean Peninsula), reducing the terrorist threat, working for equitable trade and investment relations, protecting Americans from new threats (such as a human avian flu pandemic), and developing sufficient supplies of energy and raw materials needed for economies to grow. The policy tools the United States can use include both hard and soft power: military threats and action, diplomacy, political and economic alliances, trade and investment measures, and the spread of ideas and ideals. The means to wield the tools include engagement (cooperating with but not joining), cooptation (joining with them or bringing them into an existing organization), containment (hindering progress), and rollback (seeking to turn back gains already made). The means also include wielding an array of military activities (including pre-emptive strikes) and an assortment of law-enforcement and diplomatic measures. For purposes of this report, the focus is on engagement and cooptation through formal international arrangements as a means to accomplish U.S. policy goals. The importance of considering these changes in East Asia was stated by Kurt Campbell, an expert on security affairs. In 2005, he said that while the most important issue facing the United States today is the war on terrorism, in 20 or 25 years, we may find that the dominant issue of today in retrospect was actually the rise of China and that Asian dynamics actually were more significant than those issues that are likely to be with us for some time in the Middle East. Ellen Frost of the Institute for International Economics and National Defense University, a scholar who long has followed Asian security and economic issues, stated, "If the United States continues to downplay Asian regional arrangements—demonstrating an attitude of 'benign neglect' and a preference for bilateral agreements only—it will gradually lose influence, especially relative to China." In short, the ultimate driver of U.S. concern over East Asian regional arrangements lies in U.S. strategic relations with the PRC. The core question for many analysts, therefore, is what to do about the growing influence of China in Asia. What is clear is that China sees itself as a regional economic and military power. It is aiming to establish its position as the leader of Asia, is already displacing Japan and the United States among Southeast Asian nations as the primary trading partner and source of economic assistance, and has pursued a "charm offensive" that appears to be winning the "hearts and minds" of people in many of the countries there. China has accomplished this through skillful diplomacy, use of aid resources, and by presenting a more friendly face, but it also has relied on formal trade and other agreements. Nevertheless, the United States still is the dominant military power in Asia. As one observer noted, the danger in this rise of China as a friendly economic giant, is that countries in the region could "subordinate their interests to China's and no longer reflexively look to the United States for regional solutions." In the six-party talks, for example, some have suggested that the United States is "outsourcing" its leadership role to China. In addressing the issue of growing regionalism in East Asia, there are first two basic questions: (1) what is the U.S. vision for Asia and Asian regionalism, and (2) does Asian regionalism threaten U.S. interests and goals, particularly with respect to China? Visions for East Asia Currently, several visions for East Asia are competing for traction as the spaghetti strands expand in the East Asian bowl of trade and security arrangements. The vision of the United States begins with a preeminent position for the country both as the keeper of the peace, a wellspring for economic prosperity, an advocate for open markets, and a role model for social, cultural, and political values. The United States shares leadership with other nations and institutions, but it seeks a seat at the table when decisions are made affecting its interests in East Asia. U.S. goals are to prevent any other single power from dominating Asia; to maintain peace and stability through a combination of military presence, alliances, diplomatic initiatives, and economic interdependence; and to increase access for U.S. exports and companies through the World Trade Organization, Asia Pacific Economic Cooperation forum, and free trade and other agreements. China 's vision for East Asia is to establish itself as the leading regional power and to attain a status in the world community of nations commensurate with its position as one of the five permanent members of the U.N. Security Council and a population comprising a sixth of global humanity. China sees a U.S. decline as the corollary to its rise and seeks to displace Japan as the economic leader of East Asia. China's strategy is to foster favorable conditions for continuing its modernization while also reducing the perception that its rise threatens the interests of others. China needs peace and stability in the region while it grows and resolves numerous internal economic, political, and social problems. Beijing recognizes that the United States is perhaps the only power that can thwart its plans to bring Taiwan under its sovereign control or can impose a system of economic sanctions that could cripple its economic—and military—rise. China prefers an exclusive East Asian regional organization that would enable it to take the lead and place the United States and Japan in secondary roles. Paramount in China's vision is a region in which countries respect what it considers to be its territorial integrity (including its claim to Taiwan), allow for flows of trade and investment necessary to sustain its high rates of growth, and not interfere with what it considers to be its internal affairs. Japan 's vision for East Asia is one in which the United States continues to provide a nuclear umbrella for the region and in which Tokyo relies on its economic power to exercise leadership. It seeks to be a "normal" nation without vestiges of its defeat in World War II, particularly the self-maintained constraints on its military. Japan would like to bury its World War II history and be viewed as a peaceful nation and a force for betterment in Asia through economic progress. Prior to the resurgence of China, Japan characterized the countries of East Asia as flying in a wild geese migrating pattern with Japan playing the role of the lead goose. Tokyo recognizes now that Beijing is rapidly assuming the leadership role in East Asia, and China is becoming the center of gravity for trade and investment activity. Japan, however, would like to maintain a position of leadership in Asia, accommodate China's rise without becoming subservient to it, and continue to be at the forefront in economic and financial affairs. Japan is attempting to establish itself as a normal advanced nation in its own right and not as a surrogate in East Asia for the United States. ASEAN 's vision for East Asia is to develop a counterweight to the European Union and NAFTA (and perhaps NATO) with ASEAN taking a prominent organizational role for regional institutions and providing venues for meetings. ASEAN also seeks a counterweight to China in the region and, in general, is more inclusive in terms of allowing countries, such as Australia and India, to participate in regional organizations. Indonesia traditionally has been the dominant leader in ASEAN, but now Thailand and Malaysia along with Singapore also vie for leadership. ASEAN relies on the European model of engagement to influence and engender change in countries such as Burma/Myanmar and Laos. ASEAN's basic goals are to achieve cooperative peace and shared prosperity, and it sees itself as the primary driving force in building a more predictable and constructive pattern of relationships among nations in the Asia-Pacific region. South Korea 's vision for East Asia is for the country to become a hub for economic activity and to gain greater security by engaging with North Korea and pursuing closer relationships with China and ASEAN countries. South Korea also depends heavily on the United States to maintain security both on the Korean peninsula and in the region. South Korea seeks to be an export power able to use North Korean and Chinese labor, generating its own high technology, and with national champion companies that are highly competitive in the global marketplace. Taiwan 's vision for East Asia is existential and revolves around whether it can maintain its de facto independence while finessing its relations with the PRC. It sees a major role for the United States in maintaining security in the region. Since China ensures that Taiwan is shut out of regional organizations (except for APEC), Taiwan pursues bilateral trade agreements and organizations with inclusive membership, such as the WTO and United Nations. Australia and New Zealand are pulled between their European heritage and Asian proximity. Since they trade heavily with East Asian countries and have deep security interests there, they envisage regional organizations inclusive of themselves and other nations. Australia was instrumental in ensuring that APEC encompassed the Asia Pacific and the United States. Australia envisages a strong role for the United States in Asia. It always is in danger of being excluded from Asian organizations because of its Anglo-Saxon and Celtic origins, although debates over an East Asian identity also categorize people by major religion rather than ethnic origin. Australia and New Zealand continue to engage China and recognize that they must cope with the challenges of maintaining their close relationships with the United States. Australia, in particular, has become a target of radical Muslim terrorism, has irritated its neighbor Indonesia through its participation in the Iraq war and support for independence for East Timor, and is viewed by China as a segment of a broader U.S.-Japan-South Korea-Australia axis that could potentially encircle China in the maritime region of East Asia. This brief overview of visions for East Asia indicates that the U.S. vision is roughly compatible with that of Japan, South Korea, most of ASEAN, and Australia/New Zealand. All recognize that multipolarity is developing in East Asia not only with the rise of China but a more normal Japan, a somewhat recidivist Russia, and a rapidly developing India. There is conflict between U.S. and Chinese visions with respect to which country will be the preeminent power in Asia. The rise of China as an economic juggernaut could be duplicated in the political and security realms as well. The U.S. vision also conflicts with that of China (and at one time Malaysia) on the principle of exclusivity: whether the United States is able to participate as a member or observer or whether U.S. participation is relegated to being through a surrogate. By definition, the ASEAN + 3 meetings exclude the United States. The United States could join the East Asia Summit. The United States (along with the European Union and Canada) participates in the ASEAN Regional Forum. The United States, along with Canada, Mexico, Peru, and Chile are members of APEC. The 16-nation East Asia FTA proposal announced by Japan would exclude the United States. In the case of the exclusionary East Asian Economic Caucus (EAEC) proposed by Malaysian Prime Minister Mahathir Mohamad in 1990, the U.S. strategy took two tracks. The first was to oppose its founding through diplomatic and other means. The second was to join with Australia in pushing for APEC, a more inclusive organization. With the momentum for regionalism now growing in East Asia and world wide, opposing the trend toward regionalism seems both unnecessary and futile. The important factor, some say, is to ensure that U.S. interests are protected and adequately represented and to connect the U.S. economy with Asian free trade arrangements through bilateral and other FTA agreements. Asian Regionalism and U.S. Interests Economic Interests As for U.S. interests in East Asia, the new regional trade agreements, in and of themselves, do not seem to threaten vital U.S. economic interests. As a State Department official put it, it is not necessary for the United States to "be in every room and every conversation that Asians have with one another." The United States does, however, want to "ensure the strongest possible continuing U.S. engagement in the region." The United States also holds that the strategic and economic geography through which Asia can best build on its successes so far is through trans-Pacific partnerships and institutions. In other words, the United States would like for Asian institutions to straddle the Pacific Ocean rather than stopping at the international date line in the Pacific. This appears to be a major rationale for the negotiations to join the Trans-Pacific Partnership. The United States also looks toward multilateral structures in the Asia-Pacific region that strengthen existing partnerships, particularly bilateral U.S. security alliances and free trade agreements with East Asian nations. The ASEAN FTA and the many bilateral FTAs may result in some diversion of trade and investment from the United States, but to the extent that they represent true liberalization of trade and investment flows, and as long as the United States continues to ink bilateral FTA agreements with Asian nations, they do not seem to be generating ill effects on U.S. exporters and business interests there. If the enlarged Asian markets and marketing opportunities divert some Asian exports toward the region instead of toward the United States, the FTAs may result in a reduction in U.S. bilateral trade deficits with Asian nations. There is some concern that the proliferation of bilateral and regional FTAs will detract from multilateral negotiations under the World Trade Organization. While that concern is real, given the problems with the Doha Round and its collapse in mid-2006, the opposite case also can be made. In this view, the FTAs represent real progress in liberalizing trade and can serve as a backup position if trade liberalization under the WTO fails. The spaghetti bowl problem of multiple agreements all intertwined but each with different provisions can actually hinder rather than facilitate trade by raising transaction costs for businesses. Calculating complicated rules of origin for products with parts from many countries each with different tariff rates and phase-in periods for lowering those tariffs can be costly and bothersome. The U.S. approach is to have a "gold standard" template that provides for similar elimination of all tariffs and addresses other barriers to economic interaction such as liberalizing investment flows, enforcing intellectual property rights, and increasing access for providers of services. Eventually, this "gold standard" template could provide the basis for regional FTAs that include the United States. U.S. adherence to this "gold standard," however, can create ill will as the United States is perceived to be excessively intrusive in requiring reforms in FTAs. The Asia Pacific Economic Cooperation forum, however, also is developing best practices and model measures for FTAs that are working to standardize agreements. A problem with any liberalization of trade and investment is that each economy will have winners and losers. The losing sectors typically are agriculture, textiles, and apparel. In nearly all Asia Pacific countries, including the United States, they are either protected to some extent or subsidized heavily (particularly agriculture). The proliferation of FTAs threatens the economic viability of these sectors, since the FTAs remove protection, although each FTA will have phase-in periods and exceptions. Security Interests The developing regional security arrangements in East Asia could have a mixed effect on U.S. security interests. To the extent that they encourage peaceful resolution of conflicts, they correlate well with U.S. goals of stability and the maintaining of alliance relationships in the region. They, however, could have some negative effects. They may lead to political and security arrangements in which Chinese influence is large and Beijing is able to work at cross purposes to the United States. They also may require further consideration of the role of U.S. forces based in Japan and South Korea. As Asian populations perceive that external threats to their countries have diminished because of cooperative regional security relations, they may question the need to continue to support so many U.S. troops stationed in their home countries. These sentiments often are reflected in what is called rising nationalism and may take the form of protests over actions of U.S. soldiers, resistance to military base operations, and parliamentary pressures to reduce the budgetary costs of host nation support for the U.S. military. China has taken a dual approach to East Asia of both working through ASEAN and signing agreements with individual member countries. The United States has placed emphasis on bilateral agreements. Five of the seven worldwide U.S. mutual defense treaties are with countries of the Asia Pacific. Membership in regional organizations could have a "European Union effect" in reducing tensions, moderating China, encouraging dialogue, and seeking peaceful solutions to security issues. The developing regional architecture may work to temper the excesses of the Chinese government and make it a more responsive stakeholder in regional affairs. For example, China has joined with the United States in opposing radical Muslim terrorism (albeit with its own domestic interests at stake), performed the function of host and "penholder" to draft the Joint Statement at the September 2005 six-party talks, and has stopped forcibly claiming disputed territory between it and Southeast Asian nations (such as Mischief Reef) in the South China Sea. China still has overt disputes with Japan, a nation with which it has refrained from establishing either preferential economic or bilateral security links. In some cases, moreover, Beijing has used regional meetings to exacerbate problems with Japan. At the 2005 APEC Leaders' Meeting, China refused to hold a bilateral summit with Japan and widened the gap between them. Yet at the July 2006 ASEAN Ministerial Meeting, the foreign ministers of China and Japan did meet and narrowed that gap somewhat. What can be said is that no one knows for certain whether China will be a military threat in the future and what effect various regional ties and interaction will have. It is clear, however, that Chinese military strategists define grand strategy in a broad sense. They pursue their grand strategy by using overall national strength to achieve political goals, especially those related to national security and development. Put another way, Chinese strategy, as they define it, is one of maintaining balance among competing priorities for national economic development and maintaining the type of security environment within which such development can occur. Beijing uses the concept of "comprehensive national power" to evaluate and measure the country's national standing in relation to other nations. This includes qualitative and quantitative measures of territory, natural resources, economic power, diplomatic influence, domestic government, military capability, and cultural influence. Regional trade and security arrangements in East Asia can assist China in developing its economic power, diplomatic influence, and cultural reach. Economic power also can lead to greater military capability and can generate support for the ruling Communist Party and its lock on domestic government. In this sense, the proliferating trade and security arrangements in East Asia can contribute to Chinese comprehensive national power, but whether the regional arrangements will also attenuate the aggressive use of that power cannot now be determined. Another long-term security related issue for the United States in Asia is the rising nationalism in Japan, South Korea, Malaysia, Thailand, Indonesia, the Philippines, and other nations of Asia. These countries appear to be growing weary of being dominated by outside powers, whether they be the United States, China, Russia or their sometimes hostile neighboring states. In Japan and South Korea, for example, although most recognize their dependence for security on their respective military alliances with the United States, many government elites and a growing segment of the public have recently been pushing for more independence of action and for government policies more in line with their, not America's, national interests. The value system of unfettered democracy, free trade, and human rights, buttressed by the ever present threat of intervention and preemption by the U.S. military also seems to be wearing thin in many Asian nations. There is not the hatred of the United States that is frequently found in the Middle East, but East Asian nations often chafe under the weight of U.S. hegemony and a perceived unipolar world and all that this implies for their independence of action and what they view as their traditional values. For example, in a June 2006 Pew survey of attitudes toward the United States, America's global image had again slipped. From 1999/2000 to 2006, America's image (those with favorable opinions of the United States) had declined significantly in Indonesia (from 75% to 36%) and in Japan (77% to 63%). The United States also is often blamed for the dislocations caused by globalization and the growing inequality of income both within and among countries. As one analyst explained it, Americans today are perceived as the world's market-dominant minority, wielding outrageously disproportionate economic power relative to their numbers. As such, they have become the object of the same kind of mass popular resentment that afflicts financial elites around the world (such as the overseas Chinese of Southeast Asia). It is not clear whether the developing regional architecture in East Asia will add to or ameliorate the anti-American and nationalistic sentiments growing in Asia, but those organizations that exclude direct U.S. participation provide avenues for Asian leadership and values to be showcased, particularly the process of consensus building. A stronger regional security organization in East Asia could play a role in quelling terrorism by violent extremists. Since terrorism is a transnational problem, the United States relies on international cooperation to counter it. Without close multilateral cooperation, there are simply too many nooks and crannies for violent extremists to exploit. Currently, most of that cooperation is bilateral or between the United States and its traditional allies. While the ASEAN Regional Forum and ASEAN + 3, for example, have addressed the issue of terrorism, neither has conducted joint counter-terrorism exercises as has the Shanghai Cooperation Organization. Neither organization as a group, moreover, has joined U.S. initiatives aimed at North Korean nuclear weapons (e.g., the Proliferation Security Initiative). Meanwhile, tensions continue across the Taiwan Strait, and disputes over territory and drilling rights have flared up between China and Japan and between Japan and South Korea. (For the United States, there is a growing possibility of nationalist territorial conflicts between two or more U.S. allies. ) The North Korean nuclear issue remains unresolved; North Korea has conducted tests of ballistic missiles and a nuclear weapon; and the oppressive military rule in Burma/Myanmar continues. Added to these concerns are several regional issues: diseases (such as avian flu, SARS, and AIDS), environmental degradation, disaster mitigation and prevention, high seas piracy, and weapons proliferation. Memories of the 1997-1999 Asian financial crisis still haunt policy makers in Asian countries. These are some of the major U.S. interests and issues as the United States proceeds with its policy toward a regional architecture in East Asia. Since this policy is aimed at the long-term structure of East Asian nations, it can be separated, somewhat, from current pressing problems. A metric by which any architecture can be evaluated, however, is how well it contributes to a resolution of problems as they now exist or will exist in the future. Policy Options For the United States, policy options include (1) disengage from institution building in Asia, (2) continue current Administration policy, and (3) establish a stronger presence in existing institutions, particularly in Southeast Asia, and push for a new regional organization for Northeast Asia. Disengage from Regional Institution Building in Asia One policy option is to disengage from direct participation in negotiating economic and security institutions in Asia and allow Asian nations to determine their own architecture. The United States already is a member of APEC and the ASEAN Regional Forum as well as the six-party talks on North Korea. The United States has relied upon a spoke and hub system of military alliances and forward deployed troops to look to U.S. security interests. Many feel that regional organizations tend toward being "talk shops" anyway. The United States could disengage from regional institution building without disengaging from economic and security ties with Asia. Currently no locus of opinion seems to be manifesting itself in the United States on this issue On the economic side, however, debate is intense over the effects and utility of free trade agreements. Opposition toward further FTAs has been building in Congress, although Congress did approve the U.S.-Oman FTA and a U.S.-Peru Trade Promotion Agreement. Under the Bush administration, the United States signed FTAs with Columbia, Panama, and South Korea, but these await legislative action and final approval. Concerns have been raised with respect to issues, such as the large U.S. trade deficit, outsourcing of jobs, protection of intellectual property rights, and labor and environmental conditions abroad. U.S. debate over future FTAs appears to be more between domestic interests opposed to or in favor of more liberalized trade than over the geopolitical and international implications of closer economic relations with other countries. The creation of an Asia Pacific FTA encompassing the 21 APEC nations (including the United States) seems distant. An East Asian Economic Community (ASEAN + 3 FTA) or East Asian FTA (ASEAN + 6) could divert trade away from the U.S. market, but the United States can continue to negotiate bilateral FTAs with countries belonging to any Asian regional trade arrangement. A system of bilateral FTAs and security alliances emanating from the United States as a hub should be able to poke spokes into the various Asian regional organizations existing and being proposed. Still the United States could use its influence to dampen enthusiasm for new Asian regional organizations, or Washington could let the Asians wrestle with each other to determine the size, shape, and reach of any new institution. A danger of disengagement from institution building on the security side is that Asian nations may see that as evidence that the United States is distracted by the Middle East and has lost interest in Asia. Disengagement also opens the way for China to assume a leadership role and possibly to move the organization in ways that are inimical to U.S. interests. Continue Current Engagement Another option is to continue current policy of engagement in institution building in Asia as pursued by the Obama Administration and Congress. This includes seeking membership in the Trans-Pacific Partnership; pursuing possible additional bilateral FTAs, such as a future FTA with ASEAN and a future Asia Pacific FTA; strengthening the ASEAN Regional Forum and the Asia Pacific Economic Cooperation forum; holding discussions on establishing a security forum for Northeast Asia; and maintaining current strategic alliances with certain countries in the region. The largest item on the agenda arguably is for Congress to address consideration of the Korea-U.S. Free Trade Agreement. The current negotiations for the United States to join the Trans-Pacific Partnership represents a concrete way for the United States to cement itself into the evolving architecture of international trade in the Asia Pacific. The FTA negotiations were originally among the four countries of Chile, New Zealand, Singapore, and Brunei; Australia, Peru, and Vietnam also have joined the talks. This is one trade arrangement that includes countries on both sides of the Pacific. Such an arrangement, along with the ASEAN FTA, could form the nucleus for an FTA of the Asia Pacific that would include those willing among the 21 members of the Asia Pacific Economic Cooperation forum. Current U.S. policy has evolved from historical conditions and through the tussle of political, military, and economic forces that drive decision making and provide opportunities for leaders to place their patina on the tenor of relations among nations. The strategy of the United States at the present with respect to East Asia appears to be based on two primary factors. The first is the reality that the Middle East and Afghanistan/Pakistan has taken priority over East and Southeast Asia. The amount of new resources and energy the United States can devote to issues in East Asia is constrained by commitments in Iraq and Afghanistan. The second factor seems to be that peace and prosperity in East Asia is possible in the short run only if the United States maintains a strong military and political presence in the region and in the long run only if nations have political and economic systems that allow human ambition to be channeled into constructive and peaceful endeavors. The U.S. military presence in East Asia is based on a series of treaty alliances. Some of these alliances have required a major adjustment recently, but they still form the bedrock of U.S. security in Asia. As for the rise of China, current U.S. strategy seems to be to engage China but also to place constraints on activities potentially inimical to U.S. security or economic interests. Both "idealism" and "realism" come into play. The Pentagon's military planning, of necessity, tends to be power- and threat-based and built on realism as a lens through which to view the world. It considers and prepares for several scenarios, including the "worst case" in order to provide for the security interests of the United States. These policies stress contingent military planning, export controls, strong alliance relations with Japan and South Korea, and rising levels of engagement. According to the 2008 National Defense Strategy , China is one ascendant state with the potential for competing with the United States. For the foreseeable future, the United States will need to hedge against China's growing military modernization and the impact of its strategic choices upon international security. It is likely that China will continue to expand its conventional military capabilities, emphasizing anti-access and area denial assets including developing a full range of long-range strike, space, and information warfare capabilities. U.S. interaction with China will be long-term and multi-dimensional and will involve peacetime engagement between defense establishments as much as fielded combat capabilities. The objective of this effort is to mitigate near term challenges while preserving and enhancing U.S. national advantages over time. Other U.S. policies toward China tend to be based on an idealistic view of the world. They are aimed at promoting U.S. ideals of democracy, a liberal market economy, and human rights. In the long run, matters of war and peace depend on actions of national governments or the lack thereof. In this view, conditions favorable for peace are generated most generally through political systems in nations with strong democratic institutions and economic systems that are vibrant and market-oriented with liberal trading and investment opportunities. Such economic systems support a knowledgeable middle class that, in turn, forms the foundation for democratic society. A democratic society is less likely than a dictator-dominated state to seek to achieve its goals through belligerent means. A country without a viable economy and functioning representative government also is vulnerable to becoming a failed state and home to terrorist organizations. This economic-democratic-peace hypothesis calls for opening borders to foreign trade, liberalizing domestic economies, developing representative governments, establishing the rule of law with a court system to back it, and reducing corruption. This is a major rationale for current U.S. policies of liberalizing trade, recognizing China's right to have a leadership role in international institutions, encouraging communications at all levels, and engaging Beijing on a multitude of fronts including through regional institutions. Increase Regional Efforts A third policy option overlaps with current policy somewhat and is more incremental than divergent. It would be to increase efforts to energize or join existing organizations, to push harder for a Northeast Asia Regional Forum, and to encourage Japan and South Korea to join the Trans-Pacific Partnership negotiations. The United States first could join the East Asia Summit. The Obama Administration has taken a necessary step toward this possibility by signing the ASEAN Treaty of Amity and Cooperation, an action required for membership. The United States could do more to reinvigorate APEC. At the 2006 APEC Leader's Meeting in Hanoi, the United States did push for an FTA of the Asia Pacific. This would realize the Bogor goal of achieving free and open trade and investment among the industrialized APEC members by 2010 and the remainder of the members by 2020. While the APEC working groups seem to be accomplishing considerable trade facilitation, the large goal of establishing a free trade area that spans the Pacific and includes the United States, Canada, Mexico, Japan, South Korea, China, Taiwan, Australia, Singapore, and other APEC members does not seem even remotely feasible within three years as stated in the Bogor Declaration. Rather than a specific goal, the Bogor goals seem to have become more of a long-term prospect. The next two years may be a critical period for APEC in either setting a concrete direction to achieve its Bogor Goals or to postpone them and treat them as a future target. The 2010 meetings are to be held in Yokohama, Japan—the target year for APEC's industrialized members to achieve the Bogor Goals. The United States will host the 2011 meetings. The Obama Administration has chosen Honolulu as the host city for the 2011 Leaders' Meeting but has not given a clear indication of APEC's role in U.S. trade policy. With the proposal for an East Asian Economic Community seeming to be gaining traction, the industrialized world appears to be coalescing into a three bloc world—three large geographical free trade areas: North America, Europe, and East Asia. How would a potential East Asian FTA affect the United States? Judging from U.S. relations with the European Union, the formation of the EU as a trade bloc meant that the balance of economic power across the Atlantic became more equal. Rather than the United States with its $14.8 trillion gross domestic product ($17.3 trillion for NAFTA) negotiating with the UK ($2.1 trillion GDP) or Germany ($3.3 trillion GDP), the United States now faces an equal in the EU with its combined GDP of $16.3 trillion. An East Asian FTA encompassing 16 nations not only would constitute half the world population but a combined GDP of $16.4 trillion that is growing faster than either North America or Europe. Realistically speaking, however, a 16-nation Asian FTA would be far into the future, if at all. China and South Korea are lukewarm to the idea, and Japan and South Korea currently cannot agree on an FTA between themselves, let alone one that includes China and 13 other nations. Recently, however, China, Japan, and South Korea seem to be warming to the possibility of an FTA among themselves. South Korea, in particular, is pursuing several FTAs. The FTAs now being implemented between ASEAN and the three major East Asian nations on a bilateral basis has for now become a structure for regional trade: the ASEAN +1 type of FTA with ASEAN as the center of a hub-and-spoke network of FTAs and with the spokes (ASEAN trade with Japan, China, South Korea, and India) having more weight than the hub. On the security side, the proposals for future direction go beyond the purview of this report. A direction of thinking by some, however, is that the United States needs to go beyond the threat-centric mode of bilateral security arrangements to one based more on multilateral security partnerships, or what is termed a "convergent security" approach. The reason is that the immediate danger to security appears to center more on terrorism and the threat of nuclear proliferation than on Cold War style attacks by nation states. A "convergent security" approach differs from the concepts of offshore balancing and independent Asian power centers in that it envisages the United States as working as an active partner with its bilateral allies to manage transitions in the region's security order that lead to multilateral stability rather than to geopolitical coalitions. The underlying assumption of this approach is that China has enough at stake in maintaining international stability that it will cooperate in financial and economic issues with the rest of the world and not engage in military action that would destabilize the system. A "convergent security" approach would, for example, call for greater engagement in new multilateral initiatives, such as the East Asia Summit and Asia Pacific Community. Another possible measure for U.S. policy could be to convene a conference to organize the Northeast Asia Regional Forum. Current proposals for membership are to invite countries with strong interest in Northeast Asia, such as the United States, Russia, China, Japan, South Korea, and North Korea. Other possible candidates for membership are Mongolia, Canada, and Taiwan (as an observer). Current proposals are for such a forum to be attended by foreign ministers. Attendance could be expanded to include defense ministers or heads of state (as with APEC). In order to generate interest and participation in such an organization, an expectation would have to be established that the organization would go beyond a "photo-op and talk shop." The organization could be aimed at resolving particular problems of common concern, those that are tractable, build confidence, invite a high level of participation by members, and maximize benefits of coordinated collective action. It could take up issues related to the North Korean nuclear program—currently the topic of the six-party talks—but also could address issues such as trade liberalization, combating terrorism and corruption, energy security, and containing the spread of infectious diseases. It also could work toward resolving disputes related to history, such as sponsoring the joint writing of textbooks on sensitive historical topics such as World War II or Japan's annexation of Korea.

The global financial crisis, the end of the Cold War, the rise of China, globalization, free trade agreements, the war on terror, and an institutional approach to keeping the peace are causing dramatic shifts in relationships among countries in East Asia. A new regional architecture in the form of trade, financial, and political arrangements among countries of East Asia is developing that has significant implications for U.S. interests and policy. This report examines this regional architecture with a focus on China, South Korea, Japan, and Southeast Asia. The types of arrangements include bilateral free trade agreements (FTAs), regional trade pacts, currency and monetary arrangements, and political and security arrangements. The East Asian regional architecture is supported by two distinct legs. The economic leg is strong and growing more intense. A web of bilateral and regional FTAs is developing. An East Asian Economic Community (with 13 nations), an East Asian FTA (with 16 nations), and an Asia Pacific FTA (with 21 nations) are being discussed. In contrast, the political and security leg remains relatively underdeveloped. The most progress has been made with the Association of South East Asian Nations playing the role of convener and has taken the form of the ASEAN Security Community (10 Southeast Asian nations) and ASEAN Regional Forum (25 nations, including the United States). In Northeast Asia, the six-party talks aimed at resolving the North Korean nuclear program are ongoing. As U.S. policy toward economic and security arrangements in East Asia evolves, it is turning on matters of intensity, inclusiveness, and final structure. Should the United States intensify its efforts to either hinder or support the architecture? Who should be included in the arrangements? Should the groupings be exclusively Asian? On the economic side, current U.S. policy appears to be to hedge by not trying to block attempts to create exclusive Asian FTAs but doing deals to keep from being cut out from their benefits. On the security side, U.S. interest in stability, counter-terrorism, and nonproliferation in East Asia is so great that the United States has sought a seat at the table when Asians meet to address security issues. Some also have called for the United States to join the East Asia Summit or to create a Northeast Asia Regional Forum that would include the United States, China, Russia, Japan, and South Korea. At the core of U.S. concern over the developing regional architecture in East Asia is the growing influence of China. A danger exists that if China comes to dominate regional institutions in East Asia, it could steer them down a path inimical to U.S. interests. Some Asian nations, however, are wary of excessive Chinese influence and are hedging and maneuvering against possible Chinese dominance. On March 15, 2010, the United States began negotiating to join a regional, Asia-Pacific trade agreement, known as the Trans-Pacific Partnership (TPP) Agreement. The United States, Australia, Peru, and Vietnam are seeking to join with the four existing members of the pact: Singapore, Chile, Brunei, and New Zealand. The TPP could become the basis for a Free Trade Area of the Asia-Pacific over the long term. The final question for the policy deliberations on trade and security arrangements in East Asia is what form the architecture will take. The industrialized world seems to be evolving into three distinct blocs, North America, Europe, and East Asia, but a trans-Pacific trade and security arrangement that includes countries both of Asia and the Americas also is possible. This report will be updated periodically.

The Unemployment Compensation Program Unemployment Compensation (UC) is a joint federal-state program financed by federal taxes under the Federal Unemployment Tax Act (FUTA) and by state payroll taxes under the State Unemployment Tax Acts (SUTA). The underlying framework of the UC system is contained in the Social Security Act (SSA). Title III of the SSA 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. Federal Unemployment Tax Act1 If a state UC program complies with all federal rules, the net FUTA tax rate for employers is 0.6% on the first $7,000 of each worker's earnings. The 0.6% FUTA tax funds both federal and state administrative costs as well as the federal share of the Extended Benefit (EB) program, loans to insolvent state UC accounts, and state employment services. Federal law defines which jobs a state UC program must cover for the state's employers to avoid paying the maximum FUTA tax rate (6.0%) on the first $7,000 of each employee's annual pay. Expired Provision: FUTA Surtax Congress first passed a temporary FUTA surtax in 1976, and since 1983 this surtax had been applied as 0.2% on the first $7,000 of employee wages until July 1, 2011. Since July 1, 2011, the effective FUTA tax on employers for each employee is 0.6% (a decrease from 0.8%) on the first $7,000 of wages. State Unemployment Tax Acts States levy their own payroll taxes on employers to fund regular UC benefits and the state share of the EB program. The SUTA tax rate of an employer is, in most states, based on the amount of UC benefits paid to former employees. Generally, the more UC benefits paid to its former employees, the higher the tax rate of the employer, up to a maximum established by state law. The Unemployment Trust Fund The UTF is designated, by law, as a trust fund in the U.S. Treasury. The designation as a trust fund is a federal accounting mechanism to directly link revenues and distributions connected to the UC programs. The UTF accounts include the Employment Security Administration Account (ESAA), the Extended Unemployment Compensation Account (EUCA), the Federal Unemployment Account (FUA), 53 state accounts, the Federal Employees Compensation Account (FECA), and two accounts related to the Railroad Retirement Board. Federal unemployment taxes are credited to the ESAA; each state's unemployment taxes are credited to the state's unemployment account. Federal taxes are dedicated to pay for UC administration grants to the states—including administration of the EB program—and the federal share of EB. State taxes are dedicated to pay for regular UC benefits and the state share of EB. Typically, the EB program is funded 50% by the federal government and 50% by the states, however, P.L. 111-5 , as amended, temporarily provided for 100% federal funding of EB from February 22, 2009, through December 31, 2013. Although the UTF contains 59 separate accounts (often referred to as book accounts ) to attribute and distribute the monies based on program purpose, the UTF is a single trust fund. The use of separate accounts solely means that revenues and distributions are directly linked to UC program purpose. The use of a single trust fund (the UTF) for all UC programs permits a balance to carry over surplus spending authority to subsequent years. The balance represents reserve spending authority available to these programs in addition to the spending authority provided by the automatic appropriation of current tax receipts. This reserve spending authority is used during recessions when UC outlays exceed UTF tax revenues, that is, when current spending exceeds current receipts. Like many of the UTF's other transactions, the balance is effectively a bookkeeping entry. The Unemployment Trust Fund and the Federal Budget All UC tax receipts and outlays for benefits and administration flow through the Treasury, and thus affect federal revenue, outlays, and the overall financial position (deficit or surplus) of the federal government. The UTF accounts for all UC and EB financial transactions. This accounting device (designation as a trust fund) is used to accumulate legal spending authority that is available automatically when needed. However, the UTF does not contain financial resources. The required cash the federal government needs to pay benefits or administrative costs must be drawn from current resources through either taxation or borrowing. The revenue and the expenditures of the UC system are counted in the federal budget. Federal unemployment taxes are deposited into the unemployment trust fund. Following federal law, the Treasury invests all receipts in federal securities that bear interest. This investment increases the federal debt. When these securities are redeemed to pay for administration of the program, to lend funds to the states, or to pay for extended benefits, this investment decreases the federal debt. State unemployment taxes are deposited into the unemployment trust fund. Following federal law, the Treasury invests all state unemployment tax receipts in federal securities that bear interest. This investment increases the federal debt. When states pay UC benefits to unemployed individuals, the Treasury redeems those securities held within that state's unemployment trust fund account. Thus, the payment of regular state UC benefits decreases the federal debt. If states do not have enough reserves in their UTF account, Title XII of the SSA allows the states to borrow funds from the FUA within the UTF. (States may borrow from other sources although some states are prohibited from doing so under state laws.) The issuing of loans to the state would require that the FUA redeem securities. This redemption would decrease the federal debt. If the FUA is insolvent and the other federal accounts within the unemployment trust fund do not have sufficient balances to lend the funds that states need (as occurred in FY2010 through FY2015), Title XII of the SSA allows the FUA to borrow funds from the Treasury. If the Treasury issues new securities in order to lend funds to the FUA, this will increase the federal debt. When a state pays back the state loan from the FUA, the FUA would then use those funds to repay its debt to the Treasury and the federal debt would be decreased. Unemployment Trust Fund Revenues and Distributions The UTF is credited with revenues from three primary sources: state unemployment taxes on employers, federal unemployment taxes on employers, and U.S. government agency transfers. Although UC benefits are taxable and are fully subject to the federal income tax, those revenues do not support the UC system and are not credited to the UTF. These three types of revenues are depicted at the top of Figure 1 . State Unemployment Tax Revenues Are Credited to the State Unemployment Accounts Within the Unemployment Trust Fund States are authorized to designate that these funds be used to pay UC benefits. State unemployment account funds that are attributable to state unemployment taxes may only be used for unemployment benefits and the state's portion of EB payments. Administrative costs are funded through distributions from the ESAA to the state unemployment accounts. At the end of FY2016, states were estimated to have collected $40.9 billion while expending $32.3 billion in regular UC benefits. Federal Unemployment Taxes Are Credited to the ESAA Each fiscal year, funds are appropriated through the federal budget process to make distributions from the ESAA for the states' costs of administering their unemployment compensation programs, and for the federal costs of administration. The Secretary of Labor determines (certifies) the amount of the administrative payments, and permits the Secretary of the Treasury to make the payments to the states. The Secretary of Labor in certifying a state for payment takes into account (1) that the state's UC programs contain specific provisions related to the payment of monies from the state unemployment system, (2) the state agency's specific responsibilities in administering the UC program and UC benefits, and (3) the rights and responsibilities of the UC benefit recipients. Each Month, the ESAA Distributes 20% of the Net Monthly Activity to the EUCA Net monthly activity is the sum of revenues credited to the ESAA less distributions for refunds of FUTA taxes and additional taxes attributable to a reduced credit for SUTA taxes. By the end of FY2016, the federal accounts had collected an estimated $4.8 billion; the ESAA had a net balance of $2.1 billion. Since the ceiling for the ESAA was $1.7 billion, $0.4 billion in excess funds were transferred to the EUCA. By the end of FY2016, the ESAA had distributed a total of $4.1 billion to the states for administrative costs. If states have an active EB program, EUCA distributions are made for the federal portion (50%). At the end of the fiscal year after any required distribution from the ESAA, the EUCA balance is calculated. The EUCA balance is limited to the maximum of $750 million or 0.5% of covered wages. If the EUCA balance exceeds the limitation, the excess is distributed to the FUA. At the end of FY2016, no funds were expended to pay for the federal share of EB benefits as no state met the economic criteria to provide an EB benefit in FY2016. The EUCA net balance was an estimated shortfall of (negative) $11.0 billion (a cash balance of $1.2 billion, $8.7 billion owed to the general fund of the Treasury and $3.5 billion owed to FUA/ESAA). The EUCA ceiling was $28.8 billion; thus, there was no fund transfer to the FUA. In addition to any EUCA distribution, the FUA is credited with the additional taxes paid by employers when a reduced credit against federal taxes exists because the state has an outstanding unpaid loan from FUA. FUA funds are distributed as loans to states, through the state unemployment accounts. (See the discussion below on " Loans to Insolvent Accounts " for a more detailed explanation of these loans.) The FUA balance is limited to the maximum of $550 million or 0.5% of covered wages. At the end of FY2016, the estimated net FUA balance was an estimated $8.2 billion ($4.5 billion borrowed by the states, and $3.5 billion owed from ESAA/EUCA, and an end of year cash balance of $0.14 billion). The balance was lower than the $28.8 billion ceiling and so no Reed Act distribution occurred. (See below for details of the Reed Act distributions.) In addition, distributions are made to the state unemployment accounts from the FECA to reimburse the states for employment compensation paid to former federal employees. Each federal agency reimburses the UTF for its share of federal workers' UC benefits. Other Unemployment Trust Fund Expenditures (Reed Act Distributions) At the end of the fiscal year, there is a limitation on the balance in the ESAA—the account balance cannot exceed 40% of the prior fiscal year's appropriation by Congress. If the balance in the ESAA exceeds this limitation, the excess is distributed to EUCA. After the distribution, if the balance in the EUCA exceeds the limitation, the excess is distributed to the FUA. If after the distribution from the EUCA, the FUA balance exceeds the limitation, the excess is distributed, as a Reed Act distribution, to the states. At the end of FY2016 there was no Reed Act distribution. Loans to Insolvent Accounts The Treasury can write checks for a state unemployment account, provided that legal spending authority exists for such spending if the state unemployment account has a positive balance. During the most recent recession, current taxes and reserve balances were insufficient to cover expenditures for UC benefits. Many state unemployment accounts required and/or continue to require "loans" to pay for state UC benefits. The state unemployment accounts can borrow from the FUA. If states do not increase their SUTA taxes to repay the loan, federal law requires that the principal of the loan is repaid by reducing federal tax credits for SUTA taxes and crediting those increased revenues to the FUA. The state cannot pay the interest on such loans using the state unemployment account but must pay the interest through state general revenues or other measures. Federal law also authorizes appropriations if balances in the federal accounts are insufficient to cover their expenditures. For example, if the states' borrowing needs exceed the available FUA balance, Congress is authorized to appropriate additional spending authority to cover the amount needed. Such appropriations require discretionary action by Congress and the President. From FY2009 through FY2015, the FUA had to borrow funds from the Treasury in order to loan funds to the state accounts.

This report provides a summary of how Unemployment Compensation (UC) benefits are funded through the Unemployment Trust Fund (UTF). The UTF in the U.S. Treasury is designated as a trust fund for federal accounting purposes. Although the UTF is a single trust fund, it has 59 accounts: the Employment Security Administration Account (ESAA), the Extended Unemployment Compensation Account (EUCA), the Federal Unemployment Account (FUA), 53 state accounts (including District of Columbia, Puerto Rico, and the Virgin Islands), the Federal Employees Compensation Account (FECA), and two accounts related to the Railroad Retirement Board. Federal unemployment taxes are credited to the ESAA; each state's unemployment taxes are credited to the state's unemployment account. Federal taxes pay for administration grants to the states. State unemployment taxes are dedicated to pay for regular UC benefits. The extended benefits (EB) program is funded 50% by the federal government and 50% by the states.

Introduction This report presents a side-by-side comparison of H.R. 2576 , the TSCA Modernization Act of 2015, as passed by the House on June 23, 2015, and S.Amdt. 2932 , the Frank R. Lautenberg Chemical Safety for the 21 st Century Act, as passed by the Senate on December 17, 2015, as a substitute amendment to H.R. 2576 . (Hereafter in this report, the House-passed bill H.R. 2576 will be referred to as the "House bill," while the Senate amendment to H.R. 2576 will be referred to as the "Senate amendment.") Both the House bill and the Senate amendment would amend Title I of the Toxic Substances Control Act (TSCA). The Senate amendment, but not the House bill, would also amend the Mercury Export Ban Act of 2008 and add a provision to the Public Health Service Act regarding potential cancer clusters. The first section of this report provides a brief background on Title I of TSCA. For a summary of TSCA provisions and history, see CRS Report RL31905, The Toxic Substances Control Act (TSCA): A Summary of the Act and Its Major Requirements , by [author name scrubbed]. The second section describes differences between the House bill and the Senate amendment and also presents background on selected issues that the legislation addresses. The final section includes Table 1 , which presents a side-by-side comparison of the provisions of existing law, the House bill, and the Senate amendment. Title I of the Toxic Substances Control Act (TSCA) In 1976, President Ford signed into law the Toxic Substances Control Act, which authorizes the U.S. Environmental Protection Agency (EPA) to identify and regulate chemicals in U.S. commerce that present an "unreasonable risk of injury to health or the environment." Since 1976, Congress has added five other titles to TSCA and has amended the original law, referred to as Title I, to address specific chemical concerns. None of these additions and amendments has altered the core program under Title I of TSCA. Neither the House bill nor the Senate amendment would amend the other titles (i.e., Titles II through VI) of TSCA. Among other things, Title I of TSCA requires EPA to compile and maintain a list of chemical substances manufactured or processed in the United States. This list is referred to as the TSCA Chemical Substance Inventory (or TSCA Inventory). EPA's initial compilation of the TSCA Inventory included over 62,000 chemical substances. TSCA distinguishes between chemical substances that are on the inventory and those that are not. Any chemical substance listed on the inventory is considered by the agency as an "existing" chemical substance. The statute defines any chemical substance not on the inventory as a "new chemical substance." Since EPA's publication of the initial TSCA inventory, the agency has added over 23,000 new chemical substances to the inventory. Once a chemical substance is added to the TSCA inventory, it becomes an existing chemical substance for purposes of the statute. In order to determine which chemicals warrant regulation under TSCA, EPA is authorized to evaluate risks that may arise from the entire commercial life-cycle of chemicals, including their manufacture, processing, distribution, use, and disposal. Pursuant to TSCA Section 6, EPA has authority to pursue a range of regulatory options to address unreasonable risks from chemicals. These options vary in severity from a complete ban to a requirement that manufacturers notify distributors of unreasonable risks. Since the enactment of TSCA, EPA has regulated few chemicals under TSCA Section 6, including: chlorofluorocarbons used in aerosol propellants; nitrosamines used in metalworking fluids (40 C.F.R. Part 747); hexavalent chromium used for certain water cooling towers (40 C.F.R. Part 749); new uses of asbestos (40 C.F.R. Part 763, Subpart I); dioxin-contaminated wastes; and polychlorinated biphenyls (40 C.F.R. Part 761). The agency has taken actions pursuant to other authorities in the statute. For example, EPA has: collected information on the risks, uses, and volumes in commerce of various chemicals to inform its evaluation of chemical risks (pursuant to TSCA Sections 4, 5, and 8); evaluated various chemicals for risks (pursuant to TSCA Section 6); and promulgated rules to require notification for significant new uses of certain chemical substances (pursuant to TSCA Section 5). Since 2005, Members of Congress have introduced bills to revise the chemical evaluation process for determining whether regulatory actions are warranted and to address other related purposes. Although the bills were not enacted, they generated debate on whether and how to amend the evaluation process, regulatory criteria, and other elements of the law. H.R. 2576 and the Senate Substitute Amendment The House bill would amend several provisions in TSCA, including: the authority for EPA to require testing of chemicals under TSCA Section 4; the process by which EPA would evaluate risks of chemicals and regulate those found to present unreasonable risks under TSCA Section 6; the procedures and standards under TSCA Section 14 for confidential treatment of certain information submitted to EPA under TSCA; TSCA's relationship to state laws regulating chemicals under TSCA Section 18; and the authority for EPA to collect fees under TSCA Section 26. The Senate amendment would amend the same provisions of TSCA listed above, albeit with differences. Additionally, the Senate amendment would amend: the process by which EPA reviews new chemical substances or significant new uses of chemicals under TSCA Section 5; the recordkeeping and reporting requirements under TSCA Section 8; and various other provisions. The following sections provide a brief discussion of seven issues that have received attention in the debate to amend Title I of TSCA. The discussions include comparisons between how the House bill and Senate amendment would address each issue. These issues include: prioritization of existing chemical substances for the evaluation of risks; regulatory threshold criteria under which EPA would be authorized to restrict a chemical; regulatory options available to EPA in restricting a chemical found to warrant regulation; EPA's authority to require the development of new information regarding a chemical; preemption of state laws concerning the regulation of chemicals; disclosure and protection from disclosure of information submitted to EPA; and resources that may be available for EPA to administer the act. Prioritization of Chemicals for Evaluation of Risks Determining which chemicals EPA may select before others to evaluate risks has been a long-standing issue given that the agency has finite resources to evaluate over 85,000 chemical substances listed on the TSCA inventory and continues to become aware of new chemical substances. EPA's evaluation of a chemical is intended to generate information that informs the agency's determination as to whether the regulatory threshold is met to restrict that chemical. Under TSCA, EPA has discretion over which chemicals on the TSCA inventory to evaluate for risks. In 2012, EPA identified, as part of the agency's TSCA Work Plan, more than 1,200 substances that possibly warranted an evaluation based on certain prioritization criteria. These substances were further screened based on hazard, exposure, and bioaccumulation potential, which led EPA to prioritize 90 substances for an evaluation of risks to human health or the environment. Of the 90 prioritized chemical substances, EPA has assessed five, three of which were determined to present risks. EPA continues to evaluate the other 85 substances. For new chemical substances, TSCA Section 5 requires manufacturers to submit a premanufacture notice (PMN) to EPA 90 days prior to manufacturing the chemical substance, subject to certain exemptions. During this time period, EPA has the opportunity to evaluate risks of the new chemical substance and determine whether regulation may be warranted based on the PMN and any existing data concerning the environmental and health effects of the substance. According to EPA, from July 1979 through September 2015, the agency has received more than 39,000 PMNs and more than 15,000 PMN exemption applications. EPA states that it has taken regulatory action on approximately 10% of the PMNs submitted. Both the House bill and the Senate amendment would establish a process and criteria for EPA to prioritize existing chemical substances for evaluation, albeit with differences. The Senate amendment, and not the House bill, would amend TSCA Section 5 with regard to the evaluation of new chemical substances, although, in part, it would codify certain existing practices. For a comparison among existing law, the House bill, and the Senate amendment on this topic, see pages CRS-28 and CRS-36 in Table 1 . Regulatory Threshold for Restricting a Chemical In order for EPA to restrict a chemical under TSCA, the agency must first determine that the chemical presents or will present "an unreasonable risk of injury to [human] health or the environment." This phrase is used in multiple provisions of TSCA as the basis for whether certain actions may be warranted. Some stakeholders have argued that the existing regulatory threshold for restricting a chemical in TSCA—that the chemical presents or will present risks that are unreasonable—is difficult for EPA to demonstrate. A recurring issue of concern in the TSCA debate has been whether or how to amend the regulatory threshold to clarify the criteria and factors to be considered for determining whether certain chemicals warrant regulatory control. TSCA does not define the "unreasonable risk" standard. However, the "unreasonable risk" standard of TSCA has been interpreted at the circuit court level as, essentially, a multi-factor balancing test. In its 1991 decision, Corrosion Proof Fittings v. EPA , which struck down large parts of an asbestos ban under TSCA, the Fifth Circuit stated that "[i]n evaluating what is 'unreasonable,' the EPA is required to consider the costs of any proposed actions and to 'carry out this chapter in a reasonable and prudent manner [after considering] the environmental, economic, and social impact of any action.'" The court also quoted a Supreme Court case regarding "unreasonable risk" language in general, saying that "'unreasonable risk' statutes require 'a generalized balancing of costs and benefits.'" The Fifth Circuit ruled that in its asbestos ban, EPA had "basically ignored the cost side of the TSCA equation" and that potentially "spending $200-$300 million to save approximately seven lives (approximately $30-$40 million per life) over thirteen years" was not reasonable under the "unreasonable risk" standard. Thus, under TSCA's "unreasonable risk" standard, whether regulation of a chemical is warranted depends on not only the hazards of the chemical and the extent or likelihood of exposure to the chemical but also the costs of risk management and the benefits of various uses of the chemical. Since 1991, EPA has not promulgated a rule to restrict a chemical under TSCA Section 6. Both the House bill and the Senate amendment would amend the regulatory threshold for restricting a chemical by modifying what constitutes "unreasonable risk." As an example, both the House bill and the Senate amendment would prohibit the consideration of cost and other non-risk factors when determining whether there are unreasonable risks associated with a chemical. However, whether more chemicals could be regulated under TSCA by amending the regulatory threshold would ultimately depend on implementation. For a comparison among existing law, the House bill, and the Senate amendment on this topic, see page CRS-31 in Table 1 . Regulatory Options for Restricting a Chemical If EPA were to determine that a chemical presents or will present "an unreasonable risk of injury to health or the environment," TSCA Section 6 directs the agency to promulgate a requirement to protect adequately against such risks using the "least burdensome requirement" while considering certain other factors. These include, among other factors, the approximate costs of the proposed regulation and the availability of alternatives to the chemical subject to regulatory control. EPA may select the least burdensome requirement from options listed in the statute that vary in severity from a complete ban to a requirement that manufacturers or processors notify distributors, other people in possession of a chemical, and the general public of unreasonable risks. This provision implements the concept of balancing costs and benefits when determining what requirement to impose on a chemical determined to meet the regulatory threshold. Some stakeholders have argued that the limit on EPA to choose the least burdensome regulatory requirement that still adequately protects against unreasonable risk requires the agency to do lengthy analyses and may result in the promulgation of a regulation that is inadequately protective because of considerations of cost. In Corrosion Proof Fittings v. EPA , the Fifth Circuit stated that EPA had not shown substantial evidence that its total ban on most uses of asbestos was the least burdensome adequate alternative for all circumstances and product categories. Thus, in practice, the "least burdensome" requirement imposes an additional standard on EPA beyond that imposed by the requirement that the agency conduct a cost-benefit analysis of the chosen alternative, because a rule cannot be upheld based only on its benefits outweighing its costs. In order to reject a less burdensome requirement in favor of a more burdensome one, the Fifth Circuit required EPA to show that each less burdensome requirement would not adequately protect against the unreasonable risk. Some environment and public health groups have argued that it is unlikely another chemical could be regulated under TSCA if EPA was not able to regulate asbestos under the statute. Both the House bill and the Senate amendment would remove from TSCA the requirement that EPA promulgate the "least burdensome requirement" in order to restrict a chemical demonstrated by the agency to present unreasonable risks. In addition, the House bill and the Senate amendment would amend the process that EPA would undertake to select a regulatory option that would restrict a chemical determined to warrant regulation. For a comparison among existing law, the House bill, and the Senate amendment on this topic, see page CRS-31 in Table 1 . Requirement for the Development of Test Information EPA relies on scientific and technical information regarding chemical substances and mixtures to evaluate risks and determine if any risks are unreasonable. In order to obtain such information, TSCA Section 8 authorizes EPA to require reporting and recordkeeping of existing information on chemical substances and mixtures by manufacturers, processors, and distributors of chemical substances. If the risks are insufficiently known from existing information and testing is necessary to develop new information about the risks, TSCA Section 4 mandates that EPA promulgate a rule to require manufacturers and processors to conduct testing if the agency finds (1) that the chemical substance may present unreasonable risks, or (2) that "substantial quantities" are or will be produced either in a way that enters or may reasonably be anticipated to enter the environment, or in a way that "there is or may be significant or substantial human exposures." To date, EPA has required additional testing for over 200 chemical substances. Some stakeholders have argued that limits on EPA's authority under TSCA to require the development of new information regarding the health and environmental effects of chemicals have hindered EPA's ability to assess the risks of chemicals. EPA has argued that finding a chemical substance "may present an unreasonable risk of injury to health or the environment" in order to require the development of new information to determine whether a chemical substance presents an unreasonable risk is a "possible analytical catch-22." Likely for this reason, EPA has generally required further testing based on the production volume of a chemical and the likelihood of exposure. Some stakeholders contend that the development of new information may take a lengthy amount of time and be costly to those required to develop the information. Both the House bill and the Senate amendment would expand EPA's authority to require the development of test data, albeit with differences in the extent of that authority. As an example, the House bill would authorize EPA to require testing if the agency finds that testing of the chemical is necessary to evaluate risks to determine whether regulation is warranted under TSCA. Compared to existing TSCA, this finding would be an additional finding that EPA could make to require testing. As another example, the Senate amendment would give EPA discretion to require testing that the agency determines is necessary for specific purposes related to evaluating risks of chemicals. For a comparison among existing law, the House bill, and the Senate amendment on this topic, see page CRS-18 in Table 1 . Preemption of State Requirements46 With an increasing number and diversity of state chemical regulations providing a backdrop for TSCA amendment discussions at the federal level, the scope of TSCA preemption has been a long-standing issue. Under the Supremacy Clause of the U.S. Constitution, conflicting state law and policy must yield to the exercise of Congress's enumerated powers. When it acts, Congress can preempt state action within a field entirely, allow states to take different actions, or permit state action to any degree in between. Current TSCA preemption is not at either end of the spectrum; it gives EPA a primary role in management of chemicals but leaves states some ability to set their own chemical requirements under certain circumstances. Specifically, TSCA Section 18 provides that states are generally preempted from taking action to manage risk from a chemical if EPA has taken action on a similar risk presented by that chemical, although states may apply for waivers. For state requirements other than duplicative testing requirements, a number of exceptions to preemption apply. State requirements that are identical to federal requirements are not preempted, allowing states to co-enforce the federal requirements by adopting them as their own law. States are also authorized to regulate disposal, establish or continue in effect any chemical requirement adopted under the authority of any other federal law, and prohibit use of a chemical within the state (except for its upstream use in manufacture or processing of other chemicals). In the TSCA amendment context, advocates for broader federal preemption claim that a uniform national regulatory framework with regard to chemicals can provide sufficient protection from chemical risks. They assert that absent preemption, states may implement varying and even conflicting regulations, leading to increased compliance costs, reduced economies of scale, and economic repercussions across industry supply chains and throughout interstate commerce. On the other hand, opponents of preemption argue that the federal regulation should set a minimum standard but that states should be able to experiment with different policies and implement more stringent requirements than those EPA sets in order to protect the safety and welfare of their citizens. Both the House bill and the Senate amendment would retain the general structure of TSCA preemption, in which certain EPA actions regarding a specific chemical will preempt state chemical regulations for that same chemical, subject to exceptions and waivers. Both would add some exceptions to preemption and would align the preempting EPA actions with the amended regulatory framework but with some differences between their approaches. For a comparison among existing law, the House bill, and the Senate amendment on this topic, see pages CRS-42 through CRS-46 in Table 1 . Confidentiality and Disclosures of Information TSCA requires chemical manufacturers, processors, and distributors to submit certain information to EPA regarding their chemicals. This information can include detailed chemical structures, production volumes, and health and safety data. Thus, another issue of concern in amending TSCA is how to balance the goals of, on the one hand, public access to chemical information and, on the other, protection of information that if disclosed could compromise the submitter's competitiveness. TSCA Section 14 prohibits disclosure of information reported to or obtained by EPA that is exempt from disclosure under the Freedom of Information Act (FOIA) as "trade secrets and commercial or financial information obtained from a person and privileged or confidential," with certain exceptions. Under the terms of TSCA, wrongful disclosure by EPA employees or contractors is a criminal act. Confidential business information (CBI) protection under TSCA does not prohibit disclosure of any health and safety study, but any data within any such study that would disclose manufacturing processes or proprietary mixture compositions would remain protected. Many items of information—including chemical identities—have been protected by EPA as CBI on the TSCA Inventory, in health and safety studies, and in other situations. TSCA Section 14 contains several exceptions requiring disclosure of CBI, including if EPA determines that disclosure is "necessary to protect health or the environment against an unreasonable risk of injury." If EPA makes this determination, or if EPA finds that information that has been designated as CBI does not meet the standard for protection, EPA must provide notice to the information submitter prior to disclosing the information. Procedurally, to obtain CBI protection for information that the submitter believes is entitled to confidential treatment, the submitter is required only to designate the information as CBI. Neither substantiation nor EPA review of confidentiality claims is expressly required under current TSCA. CBI protection also continues indefinitely, unless EPA determines that the information no longer qualifies for protection under the FOIA exemption and gives the submitter the required prior notice. Since 2010, EPA has increased its review of confidentiality claims, particularly relating to chemical identities in health and safety studies. The agency has also issued a "CBI Declassification Challenge" asking industry to withdraw CBI claims voluntarily and has engaged in other initiatives to increase public access to non-confidential information. Both the House bill and the Senate amendment would expand the requirements for substantiation of confidentiality claims and add certain circumstances (such as emergencies) when confidential information may be disclosed, with some differences. The House bill and the Senate amendment also take somewhat differing approaches to protecting chemical identities in health and safety studies. For a comparison among existing law, the House bill, and the Senate amendment on this topic, see pages CRS-20 through CRS-27 in Table 1 . Resources to Administer TSCA The level of resources and staffing available to EPA is one key factor that affects the pace and thoroughness for evaluating chemicals under TSCA. An issue for Congress is whether to continue funding EPA's activities under TSCA through discretionary appropriations or to establish dedicated sources of funding that are supplemental to and not subject to discretionary appropriations. Under TSCA Section 29, appropriations for Title I were authorized through FY1983. Congress has continued to fund EPA's implementation of TSCA through annual appropriations pursuant to the program or "organic" authorities of TSCA that do not have a sunset date and do not expire unless otherwise amended. Additionally, TSCA Section 26(b) authorizes EPA to assess fees on chemical manufacturers (including importers) or processors. The authorization for EPA to assess these fees does not have a sunset date. EPA's authority to collect fees is statutorily limited to a maximum of $2,500 for the following actions required under TSCA Section 5: Each PMN that a manufacturer of a new chemical substance is required to submit to EPA, and Each notice that a manufacturer or processor is required to submit to EPA for a significant new use of a chemical substance. TSCA Section 26(b) currently provides an exception for small businesses under which these fees are limited to a maximum of $100. Furthermore, TSCA Section 26(b) authorizes EPA to assess fees within these statutory caps for the costs of evaluating testing data that a manufacturer or processor of a chemical substance may be required to submit to the agency under TSCA Section 4. Under TSCA, there is no dedicated account for fees collected under Section 26(b). As such, these fees are treated as miscellaneous receipts and deposited into the General Fund of the U.S. Treasury as required by the Miscellaneous Receipts Act. The availability of fees collected under TSCA for obligation by EPA is subject to annual appropriations. Both the House bill and the Senate amendment would amend TSCA Section 26(b) with regard to the authority to collect fees. The House bill and the Senate amendment differ in terms of what activities EPA would be authorized to collect a fee from manufacturers or processors and certain other limitations to overall fee collection authority. For either the House bill or the Senate amendment, collected fees would only be made available to EPA subject to the discretionary appropriations process. For a comparison among existing law, the House bill, and the Senate amendment on this topic, see pages CRS-47 through CRS-48 in Table 1 . Side-by-Side Comparison of Provisions by Topic Table 1 of this report presents a side-by-side comparison of existing law, the House bill, and the Senate amendment. The table includes a discussion of each provision of the House bill and the Senate amendment, although it does not provide comprehensive analysis of the potential effects of particular provisions in the House bill or the Senate amendment. Existing law in the table is presented to the extent that such law would be amended by either the House bill or the Senate amendment. The table organizes the provisions of the House bill and the Senate amendment under 10 subheadings selected by CRS that reflect the following elements of TSCA: 1. Short title, intent, and definitions (page CRS- 12 ); 2. Policies, procedures, and guidance; and advisory committee (page CRS-13); 3. Recordkeeping, reporting, chemical inventory, and development of new information (page CRS-15); 4. Confidential treatment and public disclosure of information (page CRS-20); 5. Addressing risks of existing chemical substances and mixtures (page CRS-28); 6. Addressing risks of new chemical substances and significant new uses of chemical substances (page CRS-36); 7. Judicial review and enforcement (page CRS-39); 8. Relationship to state law (page CRS-42); 9. Resources to implement TSCA (page CRS-47); and 10. Other provisions (page CRS-49).

This report compares H.R. 2576, the TSCA Modernization Act of 2015, as passed by the House on June 23, 2015, and the Senate's substitute amendment (S.Amdt. 2932) to H.R. 2576, the Frank R. Lautenberg Chemical Safety for the 21st Century Act, as passed by the Senate on December 17, 2015. The Senate amendment is based, in part, on S. 697, as reported by the Senate Committee on Environment and Public Works on April 28, 2015. The House bill and the Senate amendment would amend Title I of the Toxic Substances Control Act (TSCA). Enacted in 1976, TSCA is the primary federal law that authorizes the regulation of commercial chemicals throughout their lifecycle from manufacture to disposal. TSCA authorizes the Environmental Protection Agency (EPA) to determine whether regulation of a chemical is necessary to provide protection against "unreasonable risk of injury to health or the environment." The Senate amendment, but not the House bill, would also amend the Mercury Export Ban Act of 2008 and add a provision to the Public Health Service Act regarding potential cancer clusters. Over the 39-year history of TSCA, EPA, regulated entities, environmental and public health groups and others have observed significant challenges in implementing the statute. For example, concerns have been raised on whether the threshold to regulate a chemical under TSCA is too difficult for EPA to demonstrate and whether the agency is unnecessarily constrained by the requirement that it impose the "least burdensome requirement" to restrict a chemical. In addition, EPA has argued that limits in requesting test information have constrained its ability to assess risks of certain chemicals. Many have argued that these concerns have diminished public confidence in the "safety" of chemicals in commerce. Additionally, regulated entities and right-to-know advocates have raised concerns about the appropriate balance between disclosures of chemical information and confidentiality of business information submitted to EPA under TSCA. Regulated entities have also raised concerns that state and local governments are adopting different requirements with respect to particular chemicals and compliance may be difficult with this growing "patchwork" of requirements. They argue that there should be uniform regulation under TSCA nationally. However, certain states and others have expressed concerns regarding the role of preemption in limiting states' ability to regulate chemicals. Since 2005, these concerns and others led to the introduction of legislation that would amend TSCA in each Congress. The first section of the report provides a brief background on TSCA. The second section provides a brief comparison between the House bill and the Senate amendment and also provides a background discussion of seven issues: Prioritization of chemicals for the evaluation of risks; Regulatory threshold for restricting a chemical; Regulatory options for restricting a chemical; Requirements for the development of test information; Preemption of state requirements; Confidentiality and disclosures of information; and Resources to administer TSCA. Finally, Table 1 presents a side-by-side comparison of the provisions of existing law, the House bill, and the Senate amendment. This report does not provide a comprehensive analysis of the potential effect of particular provisions. Ultimately, the outcome, if either the House bill or the Senate amendment were enacted, depends on implementation.

The Air Cargo Industry The air cargo industry consists of a complex distribution network linking manufacturers and shippers to freight forwarders, off-airport freight consolidators, and airport sorting and cargo handling facilities where shipments are loaded and unloaded from aircraft. Cargo placed on aircraft travels both domestically and internationally and is widely regarded as a vital component of U.S. trade and commerce. While only a small fraction of cargo shipments travels by air, items shipped on aircraft generally consist of time-sensitive and high-value commodities. By weight, air freight comprised only 0.4% of all commercial freight activity in the United States, but accounted for 25.1% of the value of commodities shipped as freight in 2007. Common examples of air cargo include high-value machine parts and manufacturing equipment, electronic components for manufactured goods, consumer electronics, jewelry, and perishable items such as flowers, fruits, and fresh fish. Specialized freight that requires specific handling—such as unique scientific instruments, highly specialized tools and equipment, and even thoroughbred horses—is also transported as air cargo. Most outbound air cargo packages are consolidated at off-airport facilities and arrive at airports on bulk pallets or in special containers known as unit load devices. It is estimated that about 75% of all air cargo travels on bulk pallets. Typically, shippers have no foreknowledge of the particular route or aircraft by which a package will be transported. Freight forwarders and airlines make such determinations, using logistics software, databases, and computerized flight schedules to optimize the flow of air cargo. Both domestic and international air cargo movements generally rely on a hub-and-spoke network of airports to link origins and destinations. Most international air cargo that enters the United States transits through large hub facilities in Europe and Asia. Business and consumer demand for the fast and efficient shipment of goods has fueled rapid growth in the air cargo industry over the past 30 years. Although sluggish economic growth has had the effect of reducing air cargo shipments considerably over the past two years, the Federal Aviation Administration (FAA) forecasts a return to annual growth rates in air cargo movements of about 1.3% domestically and 4.7% on international routes over the next 10 years. According to Boeing Commercial Airplanes, worldwide air cargo traffic has rebounded in 2010 and is forecast to triple over the next 20 years, with 5.9% annual growth anticipated. Slightly more than 19 billion pounds of cargo were shipped on domestic flights in 2009. Of this, FedEx transported more than 10 billion pounds, while rival UPS carried more than 5.5 billion pounds. Collectively, these two carriers transported about 83% of all domestic air cargo in 2009, and were by far the largest two operators in the U.S. air cargo industry. Additionally, in 2009, approximately 15.7 billion pounds of international air cargo were transported to and from the United States. While FedEx and UPS were the largest carriers by volume, combined they transported only about 15% of international air cargo to and from the United States. Their comparatively smaller role in the international sector reflects a greater number and diversity of air carriers that transport cargo that originates overseas. Passenger aircraft play a much greater role in transporting air cargo internationally than within the United States. On international routes, roughly one-third of air cargo by weight is transported on passenger aircraft, compared to only 7% in domestic markets. This characteristic is of particular interest with respect to potential security vulnerabilities, as cargo shipments could provide a means of placing explosive devices aboard international passenger flights destined for the United States. Security Threats to Air Cargo Despite concern over the potential use of air cargo to introduce an explosive device aboard a passenger aircraft, no such attack has ever occurred. The concern is largely predicated on the belief that more stringent measures to screen passengers and baggage may cause terrorists to consider that explosive devices in air cargo are less likely to be detected. In 1994, after a plot to place bombs in passenger cabins aboard multiple trans-Pacific flights—the so-called "Bojinka plot"—unraveled following a fire at a terrorist bomb-making site in the Philippines, Ramzi Yousef and Khalid Sheikh Mohammed allegedly pursued a plot to bomb U.S.-bound cargo planes. In February 2005, Yousef was arrested in Pakistan before the plot was carried out. The air cargo system is not particularly suitable for terrorists seeking to bomb a specific flight or even to generate attention by bombing a passenger flight, as shippers typically lack control or foreknowledge of how or when a shipment will travel. Reflecting this thinking, TSA's air cargo security strategy focuses on two primary security threats: (1) the introduction of an explosive device on a passenger aircraft, and (2) the hijacking of an all-cargo aircraft in order to use it as a weapon of mass destruction. The potential use of a hijacked all-cargo aircraft as a weapon of mass destruction was illustrated in a dramatic incident that occurred on April 7, 1994, several years prior to the 9/11 attacks. In that incident, an off-duty Federal Express flight engineer attempted to hijack a FedEx DC-10 aircraft and crash it into the company's Memphis, TN, headquarters. The hijacker boarded the airplane in Memphis under the guise of seeking free transportation (a practice known in the industry as deadheading) to San Jose, CA. His only luggage was a guitar case that concealed hammers, mallets, a knife, and a spear gun. At the time, there was no federal requirement or company procedure to screen personnel or personal baggage carried aboard cargo aircraft. The three flight crew members thwarted the hijacker's attempt to take over the airplane and made a successful emergency landing in Memphis despite sustaining serious injuries. While TSA strategies for all-cargo operations have focused most intensely on the hijacking threat, recent events suggest that terrorists may again be seeking to target U.S.-bound air cargo shipments by exploiting weaknesses in air cargo security overseas. On October 29, 2010, intelligence and law enforcement agencies in Dubai, United Arab Emirates, and in the United Kingdom discovered explosive devices concealed in packages shipped as air cargo bound for the United States. According to media reports, the explosives were not detected by initial screening, but were discovered upon reexamination after authorities received a tipoff from a member of the Al Qaeda terrorist organization who had turned himself over to officials in Saudi Arabia prior to the incident. One of the devices had traveled on two passenger flights, from Yemen to Qatar and then from Qatar to Dubai, before being prepared for loading on a U.S-bound all-cargo aircraft. Authorities in the United Kingdom surmised that the explosives, concealed in printer cartridges, were probably intended to detonate in flight and were capable of bringing down the aircraft. The devices originated in Yemen and are believed to be the work of Al Qaeda in the Arabian Peninsula, a terrorist group that is also believed to have been responsible for the attempted bombing of a Detroit-bound passenger airliner on December 25, 2009. The group has also claimed responsibility for the crash of a UPS cargo airplane near Dubai on September 3, 2010, although the initial investigation of that crash did not uncover any evidence of a bomb. The devices found in the October incidents and used in the December 2009 attempt contained pentaerythiritol tetranitrate (PETN), a powerful explosive, in quantities considered sufficient by explosives experts to cause catastrophic damage to a large airliner if detonated during flight. Following the discovery of these explosive devices shipped as air cargo, the United States temporarily suspended air cargo shipments from Yemen, and has indicated that it will work closely with Yemeni authorities to improve their cargo screening procedures and security measures. Some European countries have taken additional steps to prohibit cargo shipments from Somalia as well as the carriage of large printer cartridges in the cabins of passenger aircraft. Also, Germany took further action suspending all inbound passenger flights from Yemen soon after the incident. A week after the incident, the United States prohibited cargo shipments from Somalia as well. TSA also banned the shipment of printer cartridges weighing more than one pound in cargo or checked baggage, and implemented additional screening requirements for cargo deemed to be high risk. Following an unrelated incident in early November 2010 involving three packages containing explosives that were addressed to European heads of state, Greece temporarily suspended all outbound international parcel shipments by air and airmail. The discovery of the explosives shipped from Yemen apparently intended to detonate in flight aboard all-cargo aircraft may require a rethinking of the generally accepted belief that bombing an all-cargo aircraft is less attractive to terrorists than bombing a passenger plane. Much remains unknown about the motives and objectives behind these incidents. The possibility that the terrorists intended to bring about more restrictive regulations and thus cause widespread economic damage to the air cargo industry cannot be excluded. Regardless of motive, the policy response to these incidents has raised anew the debate between advocates of a risk-based strategy that relies heavily on characteristics of a shipment to identify packages for increased scrutiny and supporters of approaches in which all or most shipments are subject to some form of physical inspection. Proponents of comprehensive physical screening argue that it is the only way to ensure adequate security, while advocates of risk-based approaches argue that comprehensive screening is too costly, too time consuming, and given the current state of technology, potentially no better than well designed targeting strategies. At present, the United States requires more extensive physical screening for shipments placed on passenger aircraft than for shipments aboard cargo planes, in accordance with a statutory mandate for 100% screening of all such cargo. However, TSA has stated it may not reach fully compliance with the mandate to screen all cargo aboard inbound international passenger flights until August 2013. Current Legislative Issues Following the October 2010 discovery of explosives in cargo originating in Yemen, there has been renewed interest in requiring that all air cargo, not just that placed on passenger aircraft, be subject to physical screening. On November 16, 2010, Representative Markey introduced the Air Cargo Security Act ( H.R. 6410 , 111 th Congress), to require screening of all cargo transported on all-cargo aircraft, including U.S.-bound international shipments, in a manner commensurate with the screening requirements for passenger checked baggage. The legislation also includes provisions requiring inspections of foreign air cargo shipping facilities that handle U.S.-bound flights and formal security training programs for cargo handlers. On November 17, 2010, Senator Casey introduced a similar measure ( S. 3954 , 111 th Congress) in the Senate. Potential Challenges for All-Cargo Screening TSA lacks the direct authority to define screening requirements at foreign airports for U.S.-bound cargo. TSA could impose regulations on foreign carriers, as well as U.S. carriers, stipulating minimum air cargo security standards and requirements, including 100% screening using certain approved methods. However, enforcement overseas would be up to authorities in other countries. If they do not concur with the U.S. approach, disagreement over security standards could complicate U.S. foreign relations and could potentially impact foreign trade. The impact of 100% screening on the air cargo industry could be considerable as associated costs may be difficult to fully pass on to shipping costumers. The Congressional Budget Office estimated a cost of $250 million in the first year and $650 million per year for the following five years, for a total of $3.5 billion over six years, to implement the mandate for 100% baggage screening on passenger aircraft. Previous CRS estimates concluded that the cost may be somewhat lower, totaling about $3.75 billion over the first 10 years of implementation. However, more recent estimates suggest that industry-wide compliance with the 100% screening mandate may cost more than $700 million in the first year. Given that these estimates cover only shipments placed on passenger aircraft, which make up about 10% of all cargo shipped to and within the United States by air, the projected cost of physically screening all air cargo could conceivably total several billion dollars annually. The logistical challenges of screening all air cargo may also be significant, as demonstrated by the complexities of meeting the 100% screening mandate for cargo aboard domestic passenger flights and the continuing difficulties in screening all inbound international cargo placed on passenger flights. In addition, there is potential for full physical screening of all air cargo to lead to shipping delays and other inefficiencies. With respect to the federal budget, air cargo may become an issue of increasing focus following the October 2010 explosives incidents. The President's request for FY2011 sought a slight decrease in funding for air cargo security measures, seeking $118 million compared to $123 million appropriated in FY2010. The Senate-reported FY2011 appropriations bill ( S. 3607 , 111 th Congress) specified $122 million, with the additional funds above the requested level to accelerate hiring of additional inspectors and expanding canine cooperative programs with state and local law enforcement in order to support current cargo screening mandates. This funding increase has not been enacted. International Cooperation With regard to all-cargo operations, there is no statutory or regulatory requirement for screening, and according to industry estimates, the overall percentage of international shipments screened prior to transit to the United States may be as low as 50%. TSA concedes that screening international cargo poses unique challenges and constraints due to shippers' limited control over their foreign supply chains, the scale and diversity of worldwide supply chains, and diplomatic considerations. To address theses challenges, TSA's International Air Cargo Workgroup has developed a risk-based rating system and scheduling tool to prioritize air cargo facility inspections overseas. In 2008, the TSA entered into a bilateral agreement with the European Union as well as a quadrilateral agreement on air cargo security with the European Union, Canada, and Australia. More broadly, it is working closely with the International Civil Aviation Organization (ICAO) to draft worldwide standards for all-cargo security, which will probably entail a lengthy period of implementation. TSA has 10 international cargo transportation security inspectors deployed to field offices in Los Angeles, Dallas-Fort Worth, Miami, and Frankfurt, Germany. The role of these inspectors is to examine cargo operations at the last points of departure to the United States and assess compliance with screening and security requirements. Additionally, TSA has eight international industrial representatives who work with about 240 foreign passenger and all-cargo air carriers that operate flights to the United States. These individuals have responsibility for ensuring foreign air carrier compliance with TSA regulations, including those pertaining to the screening and security of air cargo. Given the volume of international air cargo, the potential threat posed by international shipments, and the extensive reliance on passenger aircraft to haul cargo from overseas, the size of the TSA's international inspector and industrial representative workforce may be an area of particular interest to Congress. Risk-Based Evaluations of Shipments Under the current air cargo security system, a number of risk-based strategies are being employed to evaluate the security risk of air cargo shipments. The Known Shipper Program The principal means for pre-screening or profiling cargo has been through the use of air carrier and freight forwarder "known shipper" programs. In May 2006, TSA issued a final rule establishing an industry-wide known shipper database (KSDB) for vetting all shipments placed on passenger aircraft. According to TSA, the database lists millions of known shippers that are approved to ship cargo on passenger aircraft. Shipments from parties that do not appear in the database may not be placed aboard passenger aircraft, even if they are screened or inspected physically. This applies to inbound international flights as well as domestic flights. Before the industry-wide KSDB was created, some air carriers and freight forwarders had voluntarily participated in a system using a central database of known shippers to vet cargo destined for passenger aircraft as required under the Aviation and Transportation Security Act of 2001 (ATSA, P.L. 107-71 ). Other air carriers and freight forwarders relied on internal databases and security protocols approved by TSA for determining whether shipments bound for a passenger airplane originated from known sources applying approved security measures to protect the integrity of those shipments. The development of known shipper programs in the mid-1990s was prompted by industry experts and Congress. Key concerns included the need for increased compliance with guidelines for the shipment of hazardous materials and the need to deter terrorists from using cargo as a means to place explosives or incendiary devices on aircraft. In addition, congressional hearings regarding the 1996 Valujet crash in Miami that resulted from a cargo hold fire concluded that air cargo safety could be achieved only through a comprehensive inspection program encompassing all components of the air cargo network. In December 1996, FAA's Aviation Security Advisory Committee Security Baseline Working Group issued a series of recommendations that formed the basis for FAA's effort to strengthen air cargo safety and security. The White House Commission on Aviation Safety and Security, formed after the 1996 crash of TWA Flight 800 and commonly referred to as the Gore Commission, urged adoption of the recommendations of the Baseline Working Group regarding the profiling of "known" and "unknown" shippers. FAA subsequently established a known shipper program, outlining procedures for freight forwarders and air carriers to review the security practices of known frequent customers and establish a cargo security plan for handling cargo from known and unknown shippers. With the passage of ATSA in 2001, oversight of cargo security measures was transferred from FAA to TSA. TSA has continued to rely on known shipper programs as a principal means for pre-screening air cargo. A central issue regarding the post-9/11 implementation of known shipper programs was the creation of a consolidated database. TSA initially instituted a voluntary industry-wide database. This initiative poised TSA to address congressional interest in establishing a mandatory industry-wide known shipper database, as urged by the Senate during the 108 th Congress (see S. 165 , S. 2845 as passed by the Senate). The administration's subsequent regulatory action to require an industry-wide known shipper database led Congress to ultimately drop a Senate-passed statutory requirement from the Intelligence Reform Act of 2004 ( P.L. 108-458 ). Congress instead settled on language directing TSA to issue final rules on air cargo security, including an industry-wide known shipper database, by September 2005. The final rules were announced in May 2006. Vulnerability Assessments and Risk-Based Targeting Reflecting concerns over the logistics and costs associated with mandatory cargo screening, air cargo industry stakeholders have voiced considerable opposition to requiring 100% screening of passenger air cargo, urging Congress instead to "focus on realistic solutions based on a framework that identifies and prioritizes risks, works methodically to apply effective and practical security programs, and makes optimal use of federal and industry resources." The industry has continually advocated for a risk-based screening system that incorporates threat assessment and targeting capabilities, provides incentives for shippers to strengthen supply chain measures, and focuses increased inspections on cargo determined to be of elevated risk through risk assessment and targeting capabilities. These arguments roughly parallel TSA's former strategic plan for air cargo security, which, prior to congressional mandates for 100% screening of cargo placed on passenger aircraft, focused on risk-based targeted screening of cargo. The industry specifically recommended increased use of canine explosives detection teams; enhanced supply chain security; enhanced targeting of shipments based on CBP experience with the Automated Targeting System (ATS); expanded use of explosive trace detection technology for targeted screening; and accelerated research and development of technologies that can more efficiently inspect elevated-risk cargo. While all domestic air cargo placed on passenger airplanes now undergoes physical screening, TSA employs random and risk-based assessments of inbound international shipments or domestic shipments carried on all-cargo aircraft. In these cases, it uses a combination of risk-based targeting strategies and vulnerability assessments of airports and operators to focus screening efforts on suspicious "high risk" cargo. TSA is continuing to work with international partners to apply risk-based strategies until 100% screening of cargo placed on inbound international passenger flights can be achieved. Additionally, TSA and CBP have jointly developed a risk assessment process using CBP's ATS and TSA's vulnerability assessment methodology. Under CBP's "advance manifest rule," carriers operating inbound international flights must forward cargo manifest information to CBP four hours prior to arrival in the United States. The four-hour requirement is relevant in carrying out CBP's mission of screening items as they enter the United States, but may be inadequate for use in targeting shipments from an aviation security standpoint. In many cases, aircraft may have departed for the United States before CBP receives the manifest information and analyzes it using ATS to identify high risk cargo. This concern does not apply to flights originating in Canada, Mexico, and the Caribbean, for which CBP requires the manifest information before wheels up. Whereas CBP's mission is focused on detecting threats to the United States arriving at points of entry, including U.S. airports, TSA's aviation security mission considers threats to airborne aircraft before they enter U.S. airspace. A considerable policy question arising from the October 2010 incidents is the adequacy of current manifest screening requirements and targeting procedures for detecting potential threats to U.S.-bound flights. Congress may want to gain a better understanding of whether earlier transmittal of manifest information could improve targeting capabilities aimed at identifying high risk cargo and, if so, what potential impacts such requirements may have on international air cargo shipments. Prior to the October 2010 incidents in which explosives were discovered in U.S.-bound air cargo shipments, efforts to expand risk-based targeting of shipments in the all-cargo sector had reportedly languished over concerns regarding potential operational impacts. For example, the Wall Street Journal reported that efforts to develop more sophisticated risk profiles for vetting overnight packages had apparently stalled over concerns that thresholds for inspections may be set too low, causing potential delays in the delivery of time-sensitive shipments. Following the October 2010 incidents, TSA applied additional screening measures to inbound international air cargo assessed to be high risk. While the specific details of how TSA assesses risk are regarded as sensitive security information, factors may include country of origin and possibly risk scores based on data regarding the sender, the recipient, and other characteristics of the shipment. For example, cash payment of shipping costs may be considered an indicator of risk in certain markets, although this characteristic, by itself, may not raise suspicion in all cases. Cargo Screening Procedures Whereas the air cargo industry has favored risk-based approaches for both cargo planes and cargo aboard passenger aircraft, some policymakers have argued that more comprehensive screening of cargo is needed to make cargo security comparable to that of passengers and baggage. Congress responded to these arguments in a series of enactments since the 9/11 terrorist attacks. The first of these laws, ATSA, established a requirement for screening and inspection of all individuals, goods, property, vehicles, and other equipment entering a secured area of a passenger airport. The law mandated that other areas of airports have the same level of protection as passenger terminals, but did not require the use of any specific screening technologies or techniques. ATSA required TSA to provide for the screening of cargo placed on passenger aircraft, but did not specify how such screening was to be carried out. ATSA also directed that a system to screen, inspect, or otherwise ensure the security of all-cargo aircraft be established as soon as practicable, but set no specific deadlines. Additionally, aircraft operators were required to establish controls over cargo shipments to prevent the carriage of unauthorized explosive or incendiary devices aboard passenger aircraft and access by unauthorized individuals. The Homeland Security Appropriations Act of 2005 ( P.L. 108-334 ) called for tripling the proportion of cargo on passenger airplanes that is screened or inspected. FY2006 appropriations language ( P.L. 109-90 ) directed TSA to take all possible measures—including the certification, procurement, and deployment of screening systems—to inspect and screen air cargo on passenger aircraft and increase the percentage of cargo inspected beyond the level mandated in the FY2005 appropriations measure. A year later, FY2007 appropriations language ( P.L. 109-295 ) directed TSA to work with industry stakeholders to develop standards and protocols to increase the use of explosives detection equipment for screening air cargo. Similarly, the FY2008 Omnibus Appropriations Act ( P.L. 110-161 ) directed the parent agency of both TSA and CBP, the Department of Homeland Security (DHS), to research, develop, and procure new technologies to screen air cargo, and, in the interim, to utilize checked baggage explosives detection equipment to the maximum extent practicable to screen air cargo placed on passenger aircraft. The Implementing the 9/11 Commission Recommendations Act of 2007 ( P.L. 110-53 ), enacted in August 2007, required 100% physical screening and inspection of all cargo placed on passenger aircraft by August 2010, with an interim requirement to screen 50% of such cargo by February 2009. The act specified screening methods acceptable in meeting this requirement, including X-ray systems, explosives detection systems, explosives trace detection, TSA-certified explosives detection canine teams, and physical searches conducted in conjunction with manifest verifications. Additional methods may be approved by TSA. However, the act specifies that cargo documents and known shipper verification, by themselves, are not acceptable screening methods. The act, however, did not specify who is to conduct the screening. TSA has interpreted the language to allow airlines, freight forwarders, or, in some cases, shippers, manufacturers, and third party screening facilities to conduct screening at off-airport locations, so long as they can assure the security of a shipment until it is loaded onto an aircraft. TSA maintains that this is the only viable means for meeting the mandate for 100% physical screening, as it lacks the resources to screen the volume of cargo placed on passenger aircraft using TSA employees. TSA's approach, implemented through its voluntary Certified Cargo Screening Program (CCSP), has pushed much of the operational cost associated with cargo screening and inspection on to the airlines, freight forwarders, and shippers. The extent to which air carriers and freight forwarders have been able to pass along these costs to shippers and consumers may be an issue of particular interest to Congress. Mandatory screening requirements for cargo on passenger flights may place passenger airlines at a competitive disadvantage against all-cargo airlines, so long as all-cargo carriers face less stringent requirements. In addition, if security screening requirements discourage shipments on passenger flights, some routes may no longer be profitable for airlines. Given that most large passenger airlines have failed to achieve consistent profitability in recent years, the direct and indirect costs associated with a mandate to screen all cargo may present particular financial challenges to the airlines. While estimated cargo revenues of about $4.7 billion annually make up only about 5% of total industry-wide operating revenues among U.S. passenger air carriers, these additional revenues can make the difference between profit or loss for passenger airlines. Beyond the economic impact, the prospect of screening 100% of air cargo placed on passenger aircraft has raised a number of challenges due to a lack of suitable bulk screening technologies. TSA and industry experts concluded that the only viable means of meeting the August 2010 deadline was to conduct screening at the piece level at various points in the supply chain and then to impose a variety of measures to secure cargo after screening it at off-airport locations. In order to address these complexities, TSA established the voluntary CCSP, allowing shippers, manufacturers, warehouses, and off-airport cargo consolidation facilities to screen cargo destined for passenger aircraft. The Certified Cargo Screening Program (CCSP) Screening pallets and containers can be complex, potentially requiring that the shipments be broken down so that individual items can be examined. CCSP is intended to minimize these logistical complexities by allowing screening to occur at factories, warehouses, third party logistics providers, and off-airport cargo consolidation facilities, so long as the operator of the facility tenders cargo to either an air carrier or a freight forwarder. TSA must approve the screening procedures as well as supply chain security measures to prevent tampering with shipments once they have been screened, and it audits participants' performance. The CCSP program is voluntary, but widespread industry participation reflects considerable perceived benefits. To participate in CCSP, employers must allow TSA to conduct security threat assessments to check the names of workers with access to air cargo against government terrorist watchlists. The cost of doing so, currently a one-time fee of $19 per worker, is fully recovered from fees charged to CCSP participants. In FY2011, TSA anticipates collecting $5.2 million in fees to vet almost 275,000 cargo handlers and other supply-chain employees covered under CCSP. This is in addition to about 200,000 employees at CCSP facilities that completed security threat assessments in FY2010. By late August 2010, just after the 100% screening mandate went into effect, over 1,000 facilities—including more than 500 indirect air carrier facilities, almost 100 independent cargo screening facilities, and almost 400 shippers—had been certified under the CCSP program. As these totals represent only a fraction of the domestic air cargo industry, considerable expansion of the program is anticipated during FY2011. Cargo Screening Technologies TSA reported in August 2010 that 100% of cargo placed on domestic passenger flights undergoes approved physical screening in compliance with statutory requirements set forth in the Implementing Recommendations of the 9/11 Commission Act of 2007 ( P.L. 110-53 ). However, TSA recently indicated that 100% screening of all inbound international air cargo transported on passenger aircraft may not be achieved until August 2013. TSA has approved a number of x-ray, bulk explosives detection systems and explosives trace detection machines for screening air cargo to meet the requirements of the screening mandate. Essentially, these are adaptations of technologies used extensively for screening checked baggage and carry-on items. However, none of these devices is approved for the screening of palletized or containerized cargo. Procedures stipulate that screening must instead be done on individual cargo items since available technologies, especially explosives detection systems, impose considerable limits on the size of the object that can be screened. Currently available systems can only accommodate objects slightly more than 3 feet wide and about 8 feet long, far too small for large cargo items, much less cargo containers and pallets. The limitations of explosives detection systems in the air cargo environment have led to extensive reliance on explosives trace detection, particularly at airport screening locations, coupled with canine teams. TSA has trained over 500 law enforcement canine teams at 78 airports. Under cooperative agreements, TSA pays for the training, certification, and maintenance of the dogs and partially reimburses law enforcement agencies for handler salaries and other costs. These teams devote about 25% of their time to air cargo screening. In addition, TSA has about 150 of its own canine teams that screen cargo at the 20 busiest airports in terms of cargo shipments aboard passenger planes. These teams focus on screening large bulk cargo configurations that cannot be efficiently screened using currently available technologies. In FY2010, TSA carried out a pilot program at 18 locations to evaluate the effectiveness of selected screening technologies and chain-of-custody procedures. Participating facilities were reimbursed up to $375,000 each for acquisition of a mix of security screening technologies. In exchange, these sites were required to provide TSA with detailed reports of cargo volumes and the effectiveness and efficiency of screening technologies used. The study concluded in August 2010. TSA is now assessing the performance of the various screening technologies and methods employed. To date, however, the only approved technologies for cargo screening require examination of individual items. It is estimated that palletized cargo makes up 75% of all cargo carried on passenger planes. The lack of an approved technology for screening pallets leaves the industry dependent on work-around solutions, largely involving the off-airport screening of cargo coupled with approved supply-chain security measures to prevent tampering after the item is screened under CCSP procedures. Imaging systems are employed at seaports and border crossings to scrutinize entire trucks and multimodal containers. These systems, which use a variety of gamma-ray, x-ray, x-ray backscatter, and millimeter wave imaging technologies, are generally not considered suitable in the air cargo domain because they require intensive human observation to detect potential threats. They generally do not offer adequate image resolution or automated or assisted threat detection capabilities for identifying relatively small explosive devices capable of destroying an airliner. Neutron beam technologies offer a potential solution, allowing automated explosives detection capabilities of containerized and palletized cargo. Under a pilot program, a pulsed fast neutron analysis scanner was installed at Houston's George Bush Intercontinental Airport in 2005, at a cost of $8 million. The unit was touted as a potential means to automatically screen large containers and bulk cargo shipments for explosives as well as for hazardous chemicals, radiological and nuclear materials, and other potential threats based on sub-atomic properties. In 2007, the pilot program was suspended, reportedly for financial reasons, despite high detection rates and low false alarm rates across a wide range of threat types and container sizes. The technology is being used to screen cargo and baggage in Singapore and Hong Kong, and to screen truck containers at a border checkpoint in El Paso, TX. However, the high cost and large footprint of the machines have been significant deterrents to their use in the air cargo industry. Absent a suitable technology for screening palletized and containerized cargo at airport facilities, the reliance on off-airport cargo screening under CCSP and the logistic demands of the air cargo industry pose unique challenges for maintaining security throughout the supply chain. Supply Chain Security Measures A variety of supply chain security measures provides options for preventing and detecting tampering and maintaining the integrity of cargo shipments. These measures include tamper-evident and tamper-resistant packaging, cargo tracking technologies, and identifiers to designate screened cargo. Tamper-Evident and Tamper-Resistant Packaging Various technologies exist for sealing cargo shipments and cargo containers to prevent tampering. Relatively low cost solutions such as tamper-evident tapes that provide visual indications of tampering are readily available and could easily be implemented during packaging. Such technology could be used in combination with "known shipper" protocols to insure that known shippers provide sufficient security in their packaging facilities and to deter tampering and theft during shipping and handling. Tamper-evident tape may also be an effective tool to deter cargo theft and the introduction of contraband, counterfeit, and pirated goods during shipment. At cargo handling facilities, tamper-evident seals and locks can be utilized on cargo containers to prevent theft and the introduction of contraband or threat objects. Electronic seals may serve as an additional deterrent by providing more immediate detection of tampering. Electronic seals have alarms, some triggered by fiber optic cable loops, that transmit a signal when tampered with. Electronic seals cost about $2,500 per unit, but are reusable. However, currently available seals have a limited transmission range, which may make it difficult to detect tampering. In addition, there is concern that the signals may interfere with aircraft electronic systems. Tracking Technologies The air cargo industry, particularly the express package sector, relies on tracking technologies such as global positioning systems and radio-frequency identification to process, sort, and track shipments. The technology also has potential security applications. Tracking technologies could identify suspicious origins or unexplained delays or detours in transit. Screened Cargo Identifiers TSA relies primarily on a system of identifiers to designate that a piece of cargo has been properly screened and is eligible for shipment on passenger aircraft. TSA approves a variety of stickers, stamps, and tags to be used as screened cargo identifiers. The security and integrity of these identifiers is a key element of CCSP, as stolen or counterfeit identifiers could be used to pass off unscreened cargo as screened. Measures to account for all identifiers appear to be vital components of supply chain security. However, given the highly diverse and geographically distributed nature of the supply chain, it may be difficult to detect falsified or counterfeit stamps beyond the point of screening. The effectiveness of CCSP in maintaining package integrity beyond the point of screening may be an issue of particular interest to Congress. Security of Air Cargo Facilities and Operations Air cargo operators and freight forwarders in the United States and at overseas locations that handle U.S.-bound shipments must apply TSA-approved security programs. TSA has not publicly released the specific requirements of these programs. Broadly, these programs include access control measures, site surveillance and physical security, mandatory background checks and security threat assessments of air cargo workers, and employee security training and awareness. Major passenger airlines must implement TSA's Aircraft Operator Standard Security Program, including detailed security measures for transported cargo. All-cargo operators that operate any aircraft weighing roughly 100,000 pounds (45,000 kg) or more, such as FedEx, UPS, and operators of large freight aircraft, are covered under the Full All-Cargo Aircraft Operator Standard Security Program. Cargo operators and charter operators that also consign cargo shipments aboard aircraft that are larger than 12,500 pounds but less than roughly 100,000 pounds must implement a TSA-approved Twelve-Five Standard Security Program. Domestic freight forwarders must implement an Indirect Air Carrier Standard Security Program (IACSSP). Other components of the air cargo network, such as shippers, third party logistics companies, and independent air cargo consolidation and screening facilities, may voluntarily participate in the CCSP. In-Flight Security Measures In-flight air cargo security options address the primary perceived vulnerabilities of a potential hijacking of an all-cargo flight or the bombing of a passenger aircraft using an explosive device carried in a cargo shipment. Protecting access to the cockpit and arming all-cargo pilots have been viewed as the primary in-flight options to reduce the vulnerability of all-cargo aircraft to potential hijackings. Blast-resistant cargo containers are being considered as an option to protect passenger airliners from explosives. Hardened Cockpit Doors and Protective Barriers While ATSA required the installation of hardened cockpit doors, FAA regulations exempted all-cargo aircraft from the requirement after the FY2003 appropriations act (see P.L. 108-7 ) limited federal funding to doors on passenger aircraft. While some cargo aircraft have hardened cockpit doors to thwart potential stowaway hijackers, many do not. The use of protective barriers, such as metal gates and thick cable fences that are less costly than hardened cockpit doors, has been considered as a means to secure the cockpits of all-cargo aircraft. In 2007, Representative Israel introduced legislation ( H.R. 3925 , 110 th Congress) to require installation of such barriers on all air carrier aircraft, including all-cargo aircraft. For all-cargo aircraft, the proposal left the use of the protective barrier to the pilot's discretion. The legislation won the praise of the Air Line Pilots Association (ALPA), which has advocated the installation of protective barriers on both passenger and all-cargo aircraft, but it was not adopted. In 2004, United Airlines took the initiative of installing protective barriers in addition to the required hardened cockpit doors on some of its passenger aircraft. Other airlines have not followed suit and the issue has received little attention among policymakers. A renewed focus on cargo security may revive discussion of the possible use of these barriers on all-cargo aircraft. Arming All-Cargo Pilots Since the 9/11 attacks the issue of arming pilots to deter hijacking and protect the cockpit in the event of hijacking attempts has been controversial, opposed by airlines and several industry experts but broadly supported by Congress. Provisions allowing pilots of passenger airliners to receive firearms training and fly armed were included in the Homeland Security Act of 2002 ( P.L. 107-296 ). The act, however, did not allow for all-cargo pilots to participate in the program, despite concern about the risk of hijackings by stowaways. During the 108 th Congress, proponents of arming all-cargo pilots urged Congress to allow all-cargo pilots to join the ranks of passenger airline pilots who can volunteer for selection and training in the Federal Flight Deck Officers (FFDO) program. This program, established by the Homeland Security Act of 2002 ( P.L. 107-296 ), trains and deputizes qualified pilots to carry firearms and use deadly force to protect the flight deck against terrorist attacks (see CRS Report RL31674, Arming Pilots Against Terrorism: Implementation Issues for the Federal Flight Deck Officer Program , by [author name scrubbed]). While the plan was originally limited to pilots of passenger airliners, Vision 100 ( P.L. 108-176 ) expanded the program to allow all-cargo pilots and flight engineers to participate. Air carriers, in general, have been hesitant about the program because of liability concerns, even though the Homeland Security Act extended specific liability protections to the airlines and pilot participants. Cargo airlines had opposed allowing their pilots to join the FFDO program. In any event, the program is largely limited to domestic operations due to a lack of international agreements regarding the carriage of firearms by pilots. The FFDO program, along with other flight crew security training initiatives, has received annual appropriations of about $25 million since it was fully implemented in FY2004. Few, if any, changes to the program are expected in the near term. Nonetheless, Congress may at some point address lingering concerns such as the convenience of training and requalification sites, the carriage of firearms outside the cockpit (which is presently highly restricted), and program liability surrounding the role of the federal flight deck officer as both an airline pilot and a deputized federal officer. While the TSA has recently opened additional retraining and requalification sites in Texas and New Jersey, other aspects of the program remain unchanged. Blast-Resistant Cargo Containers The use of blast-resistant cargo containers has long been considered a possible option for mitigating the consequences of an in-flight explosion. The 9/11 Commission recommended the deployment of at least one hardened container on every passenger aircraft that carries cargo. Stemming from this recommendation, the National Intelligence Reform Act of 2004 ( P.L. 108-458 ) required the TSA to establish a pilot program to explore the feasibility of this concept and authorized the use of incentives to airlines to offset added fuel, maintenance, and other operational costs associated with using hardened cargo containers in an effort to encourage voluntary participation. The act authorized $2 million for the pilot program. The Implementing the 9/11 Commission Recommendations Act of 2007 ( P.L. 110-53 ) directed the TSA to evaluate the pilot program and, based on its findings, to implement a program to pay for, provide, and maintain blast-resistant cargo containers for use by air carriers on a risk-managed basis. However, no such program has been initiated. The airline industry and aviation experts have been skeptical of the approach because of both its direct and indirect costs, with indirect costs mostly related to additional fuel consumption and decreased payload capacity because of the additional weight of the hardened containers. The 9/11 Commission recommended that any suspicious packages going aboard a passenger aircraft be placed in the hardened cargo container. This recommendation implies that a cargo pre-screening or risk evaluation process would be used to determine what cargo should be loaded into the hardened container. A means for identifying elevated risk cargo through pre-screening would likely be needed to assess risk and determine what cargo should be placed in a hardened container. A key policy question is whether suspicious cargo should be allowed to travel on passenger aircraft even if it is secured in hardened containers. Congress may wish to debate the risks and benefits of shipping suspicious cargo in hardened containers aboard passenger airplanes compared to the alternative of offloading such shipments to all-cargo aircraft. If only one hardened cargo container is deployed per aircraft, a relatively small fraction of available cargo space will be reinforced. For example, a Boeing 747-400 passenger jet is capable of holding up to 13 full-width, or 26 half-width containers. Since one hardened container could house only a small fraction of transported air cargo, careful consideration must be given in deciding what cargo is placed inside these hardened cargo containers. TSA Inspection and Oversight of Air Cargo Operations TSA is responsible for conducting regulatory compliance inspections of air carriers and freight forwarders. Additionally, manufacturers, freight consolidators, and other entities that voluntarily participate in the CCSP allow TSA to inspect and audit their security practices to ensure they meet TSA minimum standards. TSA has regulatory oversight with regard to air cargo security matters of about 4,400 freight forwarders and about 300 air carriers. Additionally, more than 1,000 facilities are participating in the CCSP. TSA has about 500 transportation security inspectors overseeing the air cargo sector. While this is more than double the cargo inspector workforce in FY2006, it may still be strained by the size and complexity of the air cargo industry and the number of regulated entities. Moreover, the TSA has noted that cargo inspectors have, on occasion, participated in Visible Intermodal Prevention and Response (VIPR) teams to assist with response to elevated threat conditions. These additional duties that pull inspectors away from air cargo responsibilities could detract from TSA's ability to conduct adequate oversight of cargo security. TSA reports that it conducts almost 3,000 random security inspections each month. Teams of TSA air cargo inspectors have also completed cargo vulnerability assessments at major cargo airports as well as assessments of other selected airports. While these accomplishments are considerable, the scope and depth of random site inspections and audits of air cargo security may be an issue of particular interest to Congress as it assesses the degree to which deficiencies in regulatory compliance are being identified and corrected.

The October 2010 discovery of two explosive devices being prepared for loading on U.S.-bound all-cargo aircraft overseas has heightened concerns over the potential use of air cargo shipments to bomb passenger and all-cargo aircraft. The incidents have renewed policy debate over air cargo security measures and have prompted some policymakers to call for comprehensive screening of all air cargo, including shipments that travel on all-cargo aircraft. U.S. policies and strategies for protecting air cargo have focused on two main perceived threats: the bombing of a passenger airliner carrying cargo and the hijacking of a large all-cargo aircraft for use as a weapon to attack a ground target such as a major population center, critical infrastructure, or a critical national security asset. With respect to protecting passenger airliners from explosives placed in cargo, policy debate has focused on whether risk-based targeting strategies and methods should be used to identify those shipments requiring additional scrutiny or whether all or most shipments should be subject to more intensive physical screening. While the air cargo industry and the Transportation Security Administration (TSA) have argued for the implementation of risk-based approaches, Congress mandated 100% screening of all cargo placed on passenger aircraft using approved methods by August 2010 (see P.L. 110-53). While 100% of domestic air cargo now undergoes physical screening in compliance with this mandate, not all inbound international cargo shipments carried on passenger airplanes are scrutinized in this manner. TSA is working with international air cargo operators to increase the share of cargo placed on passenger flights that is screened, but 100% screening may not be achieved until August 2013. In the interim, TSA, along with Customs and Border Protection (CBP) and international partners, is relying on risk-based targeting to increase screening of air cargo, particularly shipments deemed to be high risk. Amid renewed congressional interest on air cargo security, a number of policy issues may arise regarding the desirability of risk-based strategies as alternatives to 100% cargo screening and inspection; the adequacy of off-airport screening under the Certified Cargo Screening Program (CCSP) in conjunction with various supply chain and air cargo facility security measures; the costs and benefits of requiring blast resistant cargo containers to protect aircraft from in-flight explosions in cargo holds; the desirability of having air cargo screened by employees of private firms rather than TSA and CBP employees; and cooperative efforts with international partners and stakeholders to improve the security of international air cargo operations.

How Is the Social Security COLA Calculated? An automatic annual Social Security benefit increase is intended to reflect the rise in the cost of living over a one-year period. The Consumer Price Index for Urban Wage Earners and Clerical Workers (CPI-W), updated monthly by the Bureau of Labor Statistics (BLS), is the measure that can trigger a benefit increase. The Social Security cost-of-living adjustment (COLA) is based on the growth in the index from the highest third calendar quarter average CPI-W recorded (most often, from the previous year) to the average CPI-W for the third calendar quarter of the current year. If the CPI-W triggers a COLA, the COLA becomes effective in December of the current year and is payable in January of the following year. (Social Security payments always reflect the benefits due for the preceding month.) A COLA trigger mechanism was first adopted in P.L. 92-603, the Social Security Amendments of 1972, and triggered COLAs were first payable in 1975. Prior to 1975, Congress sporadically approved COLAs through the adoption of legislation. What Is the COLA to Be Paid in January 2019? On October 11, 2018, the Social Security Administration (SSA) announced that a 2.8% Social Security COLA would be paid in January 2019. The BLS release of the September 2018 CPI-W on that day made possible the comparison of the two July-September sets of CPI-W data needed to compute the COLA (one for 2017 and another for 2016). Table 1 shows how the determination for a January 2019 COLA is computed under procedures set forth in Section 215(i) of the Social Security Act. Scenario in Which No COLA Is Payable Since automatic Social Security benefit COLAs began in 1975, there have been three years in which no COLA was payable: 2010, 2011, and 2016. The Social Security Act specifies that a COLA is payable automatically if the average CPI-W for the third quarter of the current year is higher than the highest average CPI-W for the third quarter of past years, which is called the "cost-of-living computation quarter." From 1975, when this provision became effective, to 2008, a new cost-of-living computation quarter was established in each subsequent year, which triggered the payment of a COLA each year. If the average CPI-W for the third quarter of the current year is equal to or less than the average CPI-W for the cost-of-living computation quarter, no COLA is payable. For example, the average CPI-W for the third quarter of 2009 was less than the average CPI-W for the third quarter of 2008 (211.001 and 215.495, respectively). As a result, an automatic COLA in January 2010 was not triggered and the third quarter of 2008 remained the cost-of-living computation quarter (i.e., the benchmark) used to determine if a COLA would be payable in January 2011. Though the average CPI-W for the third quarter of 2010 (214.136) was greater than the average CPI-W for the third quarter of 2009, it did not exceed the average CPI-W for the third quarter of 2008. The third quarter of 2008 remained the cost-of-living computation quarter for at least one more year and a COLA was not payable in January 2011. When the average CPI-W for the third quarter of 2011 (223.233) exceeded that for 2008, a 2012 COLA was triggered and the third quarter of 2011 became the cost-of-living computation quarter. New cost-of-living computation quarters were subsequently established in each year from 2012 to 2014, when the average CPI-W for the third quarter of 2012, 2013, and 2014 exceeded that for the third quarter of each preceding year. Similarly, since the average CPI-W for the third quarter of 2015 (233.278) did not exceed that of 2014 (234.242), no COLA was paid in January 2016. Thus, for the COLA payable beginning in January 2017, the cost-of-living computation benchmark quarter remained the third quarter of 2014 where it was compared with the average CPI-W for the third quarter of 2016. See Table 2 for a recent history of average CPI-W performance for the third calendar quarter, and how that has affected changes to the cost-of-living computation quarter and the triggering of COLAs in some years. Social Security benefit amounts cannot be reduced if the CPI-W decreases between the measuring periods. If the performance of the CPI-W does not trigger a COLA, benefits remain the same (prior to deductions for Medicare Part B and Part D premiums). Medicare Premiums and a Very Small or No COLA The absence of a COLA increase (or a very small increase) may impact certain Medicare Part B enrollees. For Medicare Part B enrollees who have their Part B premiums withheld from their monthly Social Security benefits, a hold-harmless provision in the Social Security Act (§1839[f]) ensures that their net benefits will not decrease as a result of an increase in the Part B premium. In most years, the hold-harmless provision has little impact; however, in a year in which there is a small or no increase in the Social Security COLA and a Part B premium increase, the hold-harmless provision may apply to a much larger number of people. For example, as a result of a 0% Social Security COLA in 2016 and a 0.3% COLA in 2017, an estimated 70% of Medicare beneficiaries were protected by this provision in those years and their premiums were reduced so that their Social Security benefits, net of the Medicare premium, would not decline. As a result of the relatively higher 2.0% Social Security COLA in 2018, the hold-harmless provision was not as broadly applicable in that year, and the percentage of Medicare Part B enrollees held harmless in 2018 declined to 28%. The Medicare trustees project that 2019 Medicare Part B premiums will increase by about $1.50 per month—from $134.00 per month in 2018 to about $135.50 in 2019. Under this scenario, the 2019 2.8% Social Security COLA would likely result in a further reduction in the number of Medicare Part B enrollees held harmless. In most cases, the dollar amount of the increase in enrollees' Social Security benefits, for both those who were and were not held harmless in 2018, would be more than sufficient to cover their 2019 Part B premium increases. Thus, it is likely that many of those held harmless in 2018 will not be held harmless in 2019 and will return to paying the normal standard premium amount. The actual 2019 Medicare premiums will likely be announced later in 2018 and could be higher or lower than projected. Regardless of the size (or absence) of a COLA, beneficiaries may see a net reduction in Social Security benefits as a result of increases in their Medicare Part D premiums or changes in their Medicare Part D plan selections. What Is Affected Besides Social Security Benefits? Other Programs Social Security COLAs trigger increases in other programs. Supplemental Security Income (SSI) benefits and railroad retirement "tier 1" benefits (equivalent to a Social Security benefit) are increased by the same percentage as the Social Security COLA or are held constant when a COLA is not paid to Social Security beneficiaries. Railroad retirement "tier 2" benefits (equivalent to a private pension) are increased by an amount equivalent to 32.5% of the Social Security COLA. (If no COLA is paid to Social Security beneficiaries, then the railroad retirement tier 2 benefits are not increased.) Veterans' pension benefits often are increased in the same amount as Social Security, but legislation must be passed annually for this purpose. Although COLAs under the Civil Service Retirement System (CSRS) and the federal military retirement system are not triggered by the Social Security COLA, these programs use the same measuring period and formula for determining their COLAs. The COLA for recipients of Federal Employees' Retirement System (FERS) benefits equals the Social Security COLA if inflation is 2% or less, but is lower than the Social Security COLA otherwise. Program Elements Some Social Security program elements, like the taxable earnings base , the retirement earnings test (RET) exempt amounts , and the substantial gainful activity (SGA) earnings level for the blind (which applies to Social Security disability beneficiaries), are indexed to wages, as opposed to prices, but increase only when a COLA is payable. Although changes to those three elements are based on growth in national average wages (rather than changes in prices ), these elements can be increased only when a COLA is payable. If a COLA is payable, then these amounts increase by the percentage that the national average wage index has increased. The taxable earnings base, the RET exempt amounts, and the SGA for the blind were unchanged in 2010, 2011, and 2016 when no COLA was payable. For example, had there been a COLA trigger in 2015, the taxable earnings base would have increased from $118,500 in 2015 to $122,700 in 2016. Because there was no COLA trigger in 2015, the base instead remained unchanged. With the 0.3% COLA announced in 2016, the taxable earnings base increased in 2017 as well. Similar to how the COLA's reference period is calculated, the increase in the taxable earnings base is calculated on the increase in the average wage index from 2013 to 2015 (about 7.2%). Table 3 shows the history of Social Security COLAs since the automatic COLAs began in 1975. Table 4 provides a comprehensive summary of all ad-hoc legislative cost-of-living adjustments to Social Security benefits before automatic adjustments began in July 1975. The first increase occurred in October 1950, 10 years after Social Security benefits were first issued in 1940. At that time, Social Security benefits were increased by 77%. After 1950, smaller increases were granted by separate legislation at irregular intervals. Table 4 shows the percentage increases and the dates from which these increases were paid. As noted, in 1974 the increase occurred in two steps: an increase of 7% was paid from April 1974 until June 1974; and an increase of 11% was paid from July 1974 onward. Both increases used February 1974 as the base level. Authorization for the automatic benefit increase beginning in 1975 appears as part of P.L. 92-336.

To compensate for the effects of inflation, Social Security recipients usually receive an annual cost-of-living adjustment (COLA). According to parameters outlined in the Social Security Act (42 U.S.C. 415(i)), a 2.8% COLA is payable in January 2019. For a retired worker receiving the average monthly benefit amount of $1,422, the COLA will result in a $39 increase in Social Security benefits (after final rounding down to the nearest dollar for a total of $1,461). Social Security COLAs are based on changes in the Consumer Price Index for Urban Wage Earners and Clerical Workers (CPI-W), updated monthly by the Department of Labor's Bureau of Labor Statistics (BLS). The COLA equals the growth, if any, in the index from the highest third calendar quarter average CPI-W recorded (most often, from the previous year) to the average CPI-W for the third calendar quarter of the current year. The COLA becomes effective in December of the current year and is payable in January of the following year. (Social Security payments always reflect the benefits due for the preceding month.) If there is no percentage increase in the CPI-W between the measuring periods, no COLA is payable. No COLA was payable in January 2010, January 2011, or in January 2016. The January 2019 COLA will also be applied to Supplemental Security Income (SSI) and railroad retirement "tier 1" benefits, among other changes in the Social Security program. Although COLAs under the federal Civil Service Retirement System (CSRS) and the federal military retirement program are not triggered directly by the Social Security COLA, these programs use the same measuring period and formula for computing their COLAs. As a result, their recipients will receive a similar COLA payable in 2019.

Introduction to Transportation, HUD, and Related Agencies (THUD) Appropriations The Transportation, Housing and Urban Development, and Related Agencies (THUD) Appropriations Subcommittees are charged with drafting bills to provide annual appropriations for the Department of Transportation (DOT), the Department of Housing and Urban Development (HUD), and six small related agencies. Title I of the annual THUD appropriations bill funds DOT. The department is primarily a grant-making and regulatory organization. Its programs are organized roughly by mode of transportation, providing grants to state and local government agencies to support the construction of highways, transit, and intercity passenger rail infrastructure, while overseeing safety in the rail, public transportation, commercial trucking and intercity bus, and maritime industries. The Federal Aviation Administration (FAA) is exceptional among DOT's large sub-agencies in that the largest portion of its budget is not for grants but for operating the U.S. air traffic control system. In support of that task, it employs over 80% of DOT's total workforce, roughly 46,000 of DOT's approximately 56,000 employees. Title II of the annual THUD appropriations bill funds HUD. The department's programs are primarily designed to address housing problems faced by households with very low incomes or other special housing needs. These include several programs of rental assistance for persons who are poor, elderly, and/or have disabilities. Three rental assistance programs—Public Housing, Section 8 Housing Choice Vouchers, and Section 8 project-based rental assistance—account for the majority of the department's funding. Two flexible block grant programs—the HOME Investment Partnership Program and Community Development Block Grants (CDBG)—help communities finance a variety of housing and community development activities designed to serve low-income families. Other, more specialized grant programs help communities meet the needs of homeless persons, including those with AIDS. HUD's Federal Housing Administration (FHA) insures mortgages made by lenders to home buyers with low down payments and to developers of multifamily rental buildings containing relatively affordable units. Title III of the THUD appropriations bill funds a collection of agencies involved in transportation or housing and community development. They include the Access Board, the Federal Maritime Commission, the National Transportation Safety Board, the Amtrak Office of Inspector General (IG), the Neighborhood Reinvestment Corporation (often referred to as NeighborWorks), the U.S. Interagency Council on Homelessness, and the costs associated with the government conservatorship and regulation of the housing-related government-sponsored enterprises, Fannie Mae and Freddie Mac. The Surface Transportation Board, formerly an agency of DOT, was made independent of DOT in 2015 legislation, and now appears in Title III of the THUD bill. Budget Concepts Relevant to THUD Appropriations Most of the programs and activities in the THUD bill are funded through regular annual appropriations , also referred to as discretionary appropriations. This is the amount of new funding allocated each year by the appropriations committees. Appropriations are drawn from the general fund of the Treasury. For some accounts, the appropriations committees provide advance appropriations , or regular appropriations that are not available until the next fiscal year. In some years, Congress will also provide emergency appropriations , usually in response to disasters. These funds are sometimes provided outside of the regular appropriations acts—often in emergency supplemental spending bills. Although emergency appropriations typically come from the general fund, they may not be included in the discretionary appropriation total reported for an agency. Most of DOT's budget is in the form of contract authority . Contract authority is a form of mandatory budget authority based on federal trust fund resources, in contrast to discretionary budget authority, which is based on resources in the general fund. Contract authority controls spending from the Highway Trust Fund and the Airport and Airway Trust Fund. Total annual discretionary budget authority for THUD is typically around half of the total funding provided in the bill, with the remainder made up of DOT's mandatory contract authority. Congressional appropriators are generally subject to limits on the amount of new nonemergency discretionary funding they can provide in a year. One way to stay within these limits is to appropriate no more than the allocated amount of discretionary funding in the regular annual appropriations act. Another way is to find ways to offset a higher level of discretionary funding. A portion of the cost of regular annual appropriations for the THUD bill is generally offset in two ways. The first is through rescissions , or cancellations of unobligated or recaptured balances from previous years' funding. The second is through offsetting receipts and collections , generally derived from fees collected by federal agencies. THUD Funding Trends Table 1 shows funding trends for DOT and HUD over the period FY2010-FY2016, omitting emergency funding and other supplemental funding. The purpose of Table 1 is to indicate trends in the funding for these agencies; thus emergency supplemental appropriations are not included in the figures. Status of the FY2017 THUD Appropriations Bill Table 2 provides a timeline of legislative action on the FY2017 THUD appropriations bill. FY2017 THUD Discretionary Funding Allocation 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 have not yet adopted 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 included $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 adopted "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 . Table 3 shows the discretionary funding provided for THUD in FY2016, the Obama Administration request for FY2017, and the amount allocated by the House and Senate Appropriations Committees to the THUD subcommittees. Table 4 lists the total funding provided for each of the titles in the bill for FY2016 and the amount requested for that title for FY2017. As discussed earlier, much of the funding for this bill is in the form of contract authority, a type of mandatory budget authority. Thus the discretionary funding provided in the bill is only about half of the total funding provided in this bill. FY2017 THUD Funding As shown in Table 4 , the Obama Administration's FY2017 budget requested $134.5 billion for the programs in the THUD bill, $20.5 billion more than the $114.0 provided in FY2016. Most of the requested increase was for additional highway, transit, and rail funding; the request for DOT was $22 billion over FY2016. The request for HUD was $1.3 billion more than provided in FY2016. According to press reports, the Trump Administration has requested a reduction of $2.7 billion from FY2016 funding levels, zeroing out the Essential Air Services program and the TIGER (National Infrastructure Improvements) grant program and cutting funding for the New Starts program in DOT, and reducing funding for the Community Development Block Grants program in HUD. The Senate-reported S. 2844 recommended $114.2 billion for THUD; after accounting for the differences in rescissions and offsetting receipts in FY2016, this represents an increase of less than 1% over FY2016 funding. This situation is explored further in the next section of this report and in Table 5 . Currently, FY2017 funding is being provided through April 28, 2017, through a Continuing Appropriations Resolution ( P.L. 114-254 ) at roughly the same level as in FY2016. How Lower Budget Authority Becomes Greater Funding—The Impact of Offsets In the case of the THUD bill, net discretionary budget authority (which is the level of funding measured against the 302(b) allocation) is not the same as the amount of new discretionary budget authority made available to THUD agencies, due to budgetary savings available from rescissions and offsets. Each dollar available to the subcommittees in rescissions and offsets enables the subcommittee to provide funding that does not count against the 302(b) level. As shown in Table 5 , in FY2016, due to rescissions and offsets, the THUD subcommittees were able to provide $8.7 billion in discretionary appropriations to THUD agencies above the net discretionary budget authority level. The amount of these "budget savings" can vary from year to year, meaning that the "cost" in terms of 302(b) allocation of providing the appropriation may vary as well. With $2.15 billion more in rescissions and $579 million more in offsetting receipts and collections in FY2017 compared to FY2016, the Senate Committee on Appropriations was able to recommend $1.9 billion more discretionary funding for THUD for FY2017, even though the committee had given THUD a discretionary allocation that was $1.1 billion less than in FY2016. Detailed Tables and Selected Key Issues Title I: Department of Transportation Table 6 presents FY2017 appropriations totals and selected accounts for DOT, compared to FY2016 enacted levels. A brief summary of key highlights follows the table. For an expanded discussion, see CRS Report R44499, Department of Transportation (DOT): FY2017 Appropriations , by David Randall Peterman. DOT in Brief Trump Administration Budget According to press reports, the Trump Administration has requested a $1 billion reduction in DOT from FY2016 levels: zeroing out the Essential Air Services program (-$150 million) and the TIGER (National Infrastructure Investments) grant program (-$500 million), and reducing funding for the transit New Starts program by $400 million. Senate Action For DOT, the Senate bill included the following: $76.9 billion in new budgetary resources, $1.8 billion (2%) above the comparable FY2016 figure and $20 billion below the Administration request (for budget scoring purposes, a rescission of $2.2 billion reduces the net total to $74.7 billion). On an inflation-adjusted basis, this would be the largest DOT appropriation since FY2011. Increases in funding for the federal-aid highway program ($905 million) and the federal public transportation program ($575 million). $85 million for new intercity rail grant programs, in addition to $1.42 billion for Amtrak, $30 million (2%) more than Amtrak received in FY2016. House Action The House Committee on Appropriations recommended the following: The same amount of new budgetary resources as the Senate bill (unlike the Senate bill, there is no rescission of contract authority in the House-recommended bill, so the net total is larger than in the Senate bill). Increases in funding for the federal-aid highway program ($905 million) and the federal public transportation program ($743 million). $50 million for new intercity rail grant programs, in addition to $1.42 billion for Amtrak, $30 million (2%) more than Amtrak received in FY2016. Obama Administration Budget The Obama Administration's budget proposal for DOT included the following: A request for $96.9 billion in budgetary resources, an increase of 29% over the amount provided for FY2016 (for budget scoring purposes, a rescission of $2.4 billion reduces the net total requested to $94.5 billion). $1.25 billion for National Infrastructure Investment (TIGER grants), a 150% increase in funding over FY2016. $51.5 billion for federal-aid highways, a 20% increase in funding over FY2016. $19.8 billion for public transportation, a 68% increase in funding over FY2016. $1.9 billion for Amtrak, a 37% increase in funding over FY2016, plus $4.1 billion for other programs to develop intercity passenger rail service. Title II: Department of Housing and Urban Development (HUD) Table 7 presents account-level funding information for HUD, comparing FY2016 with the FY2017 Obama Administration budget request and congressional action. It is followed by a brief summary of key highlights. For an expanded discussion, see CRS Report R44495, Department of Housing and Urban Development (HUD): FY2017 Appropriations , coordinated by Maggie McCarty. HUD in Brief Trump Administration Budget According to press reports, the Trump Administration has recommended a $1.5 billion reduction in funding from the FY2016 level for the Community Development Block Grant (CDBG) program. House Action H.R. 5394 , as reported by the House Appropriations Committee, would provide the following for HUD: $47.95 billion in gross appropriations, which is approximately $1 billion more in appropriations than was provided in FY2016 but about $1 billion less than was requested by the Obama Administration. $38.7 billion in net budget authority, reflecting savings from offsets and other sources, which is about $84 million more than FY2016. Level funding for Community Development Block Grants (CDBG) relative to FY2016, which is a $200 million increase over the Obama Administration's requested funding level. Funding increases, to cover the cost of renewing subsidies in the Section 8 tenant-based (Housing Choice Voucher) and project-based rental assistance accounts (+$560 million and +$281 million relative to FY2016). No funding for new incremental vouchers. Senate Action For HUD the Senate bill (the substitute amendment to H.R. 2577 , as passed by the Senate) would provide the following: $48.4 billion in gross appropriations, which is approximately $1.5 billion more in appropriations than was provided in FY2016 but about $500 million less than was requested by the Obama Administration. $39.2 billion in net budget authority, reflecting savings from offsets and other sources, which is $890 million more than FY2016 ($1.5 billion more in appropriations and $610 million more in savings from offsets, excluding disaster funding). Level funding for Community Development Block Grants (CDBG) relative to FY2016, which is a $200 million increase over the Obama Administration's requested funding level. Funding increases, largely to cover the cost of renewing subsidies in the Section 8 tenant-based (Housing Choice Voucher) and project-based rental assistance accounts (+$800 million and +$281 million relative to FY2016). Proposes funding for new incremental vouchers for youth aging out of foster care and homeless veterans. Obama Administration's Budget The Obama Administration's FY2017 budget request for HUD included the following: $48.9 billion in gross appropriations, which is $1.9 billion more in gross appropriations than was provided in FY2016, excluding disaster funding. $39.7 billion in net budget authority, reflecting savings from offsets and other sources, which is $1.3 billion more than FY2016 ($1.9 billion more in appropriations and $600 million more in savings available from offsets). Increases in funding for most HUD programs, including funding for new incremental Section 8 Housing Choice vouchers. A 7% funding cut for CDBG, with a proposal to revisit the way funding is distributed to communities. Title III: Related Agencies Table 8 shows appropriations levels for the various related agencies funded within the Transportation, HUD, and Related Agencies appropriations bill. The Surface Transportation Board was transferred from the DOT title to the Related Agencies title starting with FY2017. Related Agencies, In Brief U.S. Interagency Council on Homelessness (USICH ) . The House Appropriations Committee-passed bill would reduce funding for the USICH by $1.5 million, from $3.5 million in FY2016 to $2 million in FY2017. The law establishing the USICH provides that it will sunset on October 1, 2017. The committee report ( H.Rept. 114-606 ) notes that funding is reduced in anticipation of the sunset date, states that funding could be better used to serve individuals experiencing homelessness directly, and encourages member agencies to establish working relationships that will extend beyond the USICH's sunset. The Obama Administration's budget requested that the sunset date be extended until October 1, 2020. The Senate Appropriations Committee-passed bill would extend the sunset date to October 1, 2018. NeighborWorks America. Neither the House Committee-passed bill nor the Senate-passed bill would provide funding for foreclosure mitigation counseling administered by the Neighborhood Reinvestment Corporation, commonly known as NeighborWorks America. Funding for foreclosure mitigation counseling has been provided to NeighborWorks America in each year since FY2008; this funding was intended to be temporary, and both the House and Senate committee reports note that home foreclosure rates have been declining in recent years. The Obama Administration's budget also did not request funding for foreclosure mitigation counseling for NeighborWorks America for FY2017. Both the House Committee-passed bill and the Senate-passed bill (and the Obama Administration's budget request) would continue to provide funding to NeighborWorks America for broader community reinvestment activities, and would continue to provide other funding for housing counseling activities to HUD.

The House and Senate Transportation, Housing and Urban Development, and Related Agencies (THUD) Appropriations Subcommittees are charged with providing annual appropriations for the Department of Transportation (DOT), Department of Housing and Urban Development (HUD), and related agencies. THUD programs receive both discretionary and mandatory budget authority; HUD's budget generally accounts for the largest share of discretionary appropriations in the THUD bill, but when mandatory funding is taken into account, DOT's budget is larger than HUD's budget. Mandatory funding typically accounts for around half of the THUD appropriation. The Obama Administration requested net budget authority of $134.5 billion (after scorekeeping adjustments) for FY2017, $20.6 billion (18%) over the FY2016 level. Most of this increase was for highway, transit, and passenger rail programs. On May 19, 2016, the Senate approved $114.2 billion in net budget authority ($121.2 billion in new budget authority before scorekeeping adjustments), an increase of $244 million (less than 1%) over FY2016, for THUD for FY2017 as part of a substitute amendment to H.R. 2577 that incorporated both the Senate-reported THUD bill (S. 2844) and the Senate-reported Military Construction, Veterans Affairs, and Related Agencies bill. On May 24, 2016, the House Committee on Appropriations ordered to be reported H.R. 5394, an FY2017 THUD bill recommending $115.9 billion in net budget authority ($120.8 billion in new budget authority before scorekeeping adjustments). Congress passed two continuing appropriations resolutions to fund THUD and other federal agencies in FY2017; the current funding bill runs through April 28, 2017. The House and Senate THUD bills expired with the end of the 114th Congress. DOT: The Obama Administration requested a $96.9 billion budget for DOT for FY2017. That was about $22 billion more than FY2016, with significant increases requested for highway, transit, and rail programs. Both the Senate and House bills largely rejected the proposed increases and recommended $76.9 billion in new budget authority for DOT, $1.8 billion more than the comparable figure in FY2016. Both bills would increase funding for federal highway and transit programs and would fund new grant programs for intercity passenger rail. HUD: The Obama Administration requested $39.6 billion in net new budget authority for HUD for FY2017, $1.3 billion more than FY2016. The Senate bill recommended $39.2 billion in net new budget authority, representing $1.5 billion more than FY2016 and $600 million more in savings from offsets. Most of the increase is to maintain current services in HUD's primary rental assistance programs, the project-based Section 8 rental assistance program and Housing Choice Voucher program. The House committee bill also proposed increases relative to FY2016, but less than proposed by the Senate. Related Agencies: The Obama Administration requested $350 million for the agencies in Title III (the Related Agencies). This was about $33 million less than the comparable figure for FY2016, as the request included funding for an agency that was not in the Related Agencies title in FY2016, the Surface Transportation Board. The major change in funding from FY2016 levels in the request was a cut of $35 million (20%) for the Neighborhood Reinvestment Corporation (NRC). The Senate bill recommended $339 million, cutting another $5 million from the NRC; the House committee bill recommended $343 million, funding NRC at the requested level. FY2017 funding is being provided through April 28, 2017, at roughly FY2016 levels through a continuing resolution. According to press reports, the Trump Administration has recommended cuts for FY2017 of $2.7 billion from FY2016 levels for THUD, including eliminating the Essential Air Services and TIGER grant programs and reducing funding for New Starts in DOT, and reducing funding for Community Development Block Grants (CDBG) in HUD.

Introduction [author name scrubbed], [phone number scrubbed] (Last updated April 22, 2003) Daily Developments For a day-by-day summary of Iraq-related developments through the end of the combat phase of the war, see Iraq-U.S. Confrontation: Daily Developments http://www.crs.gov/products/browse/iraqdocs/iraqdaily.shtml . Purpose of This Report This report was created to provide information and analysis on the buildup to the 2003 war with Iraq and on the war itself. Since the combat phase of this conflict has ended, the report will not befurther updated. For current CRS products related to Iraq, see the CRS home page at http://www.crs.gov . The Background section of this report outlines the evolution of the conflictwith Iraq after September 11, 2001. This section is followed by a more detailed description andanalysis of U.S. policy and a survey of congressional actions on Iraq. The report then reviews arange of issues that the Iraq situation has raised for Congress. These issue discussions have beenwritten by CRS experts, and contact information is provided for congressional readers seekingadditional information. In this section and elsewhere, text boxes list CRS products that providein-depth information on the topics under discussion or on related topics. The final section links thereader to additional sources of information on the Iraq crisis. Background Bush Administration concerns about Iraq's alleged weapons of mass destruction programs intensified after the September 11, 2001 terrorist attacks. President Bush named Iraq, Iran, and NorthKorea as the "axis of evil" nations in his January 2002 State of the Union address. Vice PresidentCheney, in two August 2002 speeches, accused Iraqi leader Saddam Hussein of seeking weaponsof mass destruction to dominate the Middle East and threaten U.S. oil supplies. (1) These speechesfueled speculation that the United States might soon act unilaterally against Iraq. However, in aSeptember 12, 2002 speech to the United Nations General Assembly, President Bush pledged towork with the U.N. Security Council to meet the "common challenge" posed by Iraq. (2) H.J.Res. 114 , which became law ( P.L. 107-243 ) on October 16, authorized the use offorce against Iraq, and endorsed the President's efforts to obtain prompt Security Council action toensure Iraqi compliance with U.N. resolutions. On November 8, 2002, the Security Council, actingat U.S. urging, adopted Resolution 1441, giving Iraq a "final opportunity" to comply with thedisarmament obligations imposed under previous resolutions, or face "serious consequences." Prelude to War. During January-March 2003, theU.S. military buildup in the Persian Gulf intensified, as analysts speculated that mid- to late Marchseemed a likely time for an attack to be launched. Officials maintained that it would be possible toattack later, even in the extreme heat of summer, but military experts observed that conditions forfighting a war would be far better in the cooler months before May. Statements by President Bush,Secretary of State Colin Powell, and other top officials during January, February, and Marchexpressed a high degree of dissatisfaction over Iraq's compliance with Security Council disarmamentdemands. The President said on January 14, that "time is running out" for Iraq to disarm, adding thathe was "sick and tired" of its "games and deceptions." (3) On January 26, 2003, Secretary of StatePowell told the World Economic Forum, meeting in Davos, Switzerland, that "multilateralismcannot be an excuse for inaction" and that the United States "continues to reserve our sovereign rightto take military action against Iraq alone or in a coalition of the willing." President Bush presented a sweeping condemnation of Iraq in his State of the Union Address on January 28, 2003. "With nuclear arms or a full arsenal of chemical and biological weapons," thePresident warned, "Saddam Hussein could resume his ambitions of conquest in the Middle East andcreate deadly havoc in the region." The President told members of the armed forces that "somecrucial hours may lie ahead." Alleging that Iraq "aids and protects" the Al Qaeda terroristorganization, the President also condemned what he said was Iraq's "utter contempt" for the UnitedNations and the world. On February 5, 2003, Secretary of State Powell detailed to the UnitedNations Security Council what he described as Iraq's "web of lies" in denying that it has weaponsof mass destruction programs. On February 26, President Bush gave a major address on Iraq. Hesaid that the end of Hussein's regime would "deprive terrorist networks of a wealthy patron .... Andother regimes will be given a clear warning that support for terror will not be tolerated." ThePresident returned to an earlier Administration theme in declaring that post-Hussein Iraq would beturned into a democracy, which would inspire reform in other Middle Eastern states. (For analysisof the issues raised by the President, see below, The Administration ; Weapons of MassDestruction Issues ; Post-War Governance Issues ; and Implications for theMiddle East .) Final Diplomatic Efforts. Despite the resolve of U.S. officials, international support for an early armed confrontation remained limited. PresidentJacques Chirac of France was a leading critic of the U.S. approach while the Iraq issue remainedbefore the U.N. Security Council, maintaining that he was not convinced by the evidence presentedby Secretary of State Powell. On February 10, at a press conference in Paris with President Putinof Russia, Chirac said "nothing today justifies war." Speaking of weapons of mass destruction,Chirac added "I have no evidence that these weapons exist in Iraq." (4) France, Germany, and Russiaadvocated a strengthened inspections regime rather than an early armed conflict with Iraq, and Chinatook a similar position. On February 24, 2003, the United States, the United Kingdom, and Spain introduced what was called a "second resolution" at the U.N. Security Council, stating that Iraq had failed "to take thefinal opportunity afforded to it by Resolution 1441" to disarm. The proposed resolution wasregarded as authorizing the immediate use of force to disarm Iraq. On March 10, President Chiracsaid that his government would veto the resolution, and Russian officials said that their governmentwould likely follow the same course. Chirac's stance, and the Administration's lack of success in garnering other support for the "second resolution," seemed to convince U.S. officials that further diplomatic efforts at the UnitedNations would prove fruitless. President Bush flew to the Azores for a hastily-arranged meeting withthe prime ministers of Britain and Spain on Sunday, March 16, 2003. The meeting resulted in apledge by the three leaders to establish a unified, free, and prosperous Iraq under a representativegovernment. At a press conference after the meeting, President Bush stated that "Tomorrow is theday that we will determine whether or not democracy can work." On March 17, the threegovernments announced that they were withdrawing the proposed Security Council resolution, andPresident Bush went on television at 8:00 p.m. (EST) that evening to declare that unless SaddamHussein fled Iraq within 48 hours, the result would be "military conflict, commenced at the time ofour own choosing." The war began on the night of March 19, 2003, with an aerial attack against a location where Saddam Hussein was suspected to be meeting with top Iraqi officials. U.S. and British troopsentered Iraq on March 20, and while the invasion encountered resistance, particularly in its earlystages, U.S. forces had largely gained control of Baghdad, the capital, by April 9. The northern citiesof Kirkuk and Mosul fell shortly afterward, and on April 14, U.S. troops entered Tikrit, Saddam'sbirthplace and the last major population center outside coalition control. On April 15, PresidentBush declared that "the regime of Saddam Hussein is no more." (5) (For information and analysisrelated to the war itself, see below, Military Issues .) Public Reactions. In mid-January 2003, pollsshowed that a majority of Americans wanted the support of allies before the United States launcheda war against Iraq. The polls shifted on this point after the State of the Union message, with amajority coming to favor a war even without explicit U.N. approval. (6) Polls shifted further in theAdministration's direction following Secretary Powell's February 5 presentation to the SecurityCouncil. (7) Although subsequent polls showed someslippage in support for a war, President Bush'sspeech on the evening of March 17 rallied public support once again. A Washington Post-ABC News poll taken just afterward, showed that 71% supported war with Iraq and that 66% supported thePresident's decision not to seek a U.N. Security Council vote. (8) With the fighting underway, pollsshowed that more than seven in ten Americans continued to support the war, (9) and WashingtonPost-ABC News polling found that 69% felt that the right decision had been made even if noweapons of mass destruction were found in Iraq. (10) Nonetheless, many Americans opposed the war,and large anti-war demonstrations took place in several cities on the weekend of March 15-16,followed by sharp protests in San Francisco and a large demonstration in New York after the fightingbegan. Major anti-war demonstrations had also occurred on the weekends of January 19-20 andFebruary 15-16, and there were demonstrations in support of Administration policy as well. Many reports have noted that U.S. policy on Iraq has led to a rise in anti-Americanism overseas, particularly in western Europe, where polls showed strong opposition to the war, (11) and in the MiddleEast. Demonstrations against the war in European cities on February 15-16 were widely describedas "massive," and, as in the United States, large demonstrations also took place on March 15-16. Large demonstrations were reported in many cities worldwide after the fighting began, and effortsto launch boycotts of U.S. products were launched in some countries. Some observers dismiss foreign protests as of little lasting significance, but others argue that rising anti-Americanism couldcomplicate U.S. diplomacy in the years ahead. (12) Secretary of State Powell has said in an interviewthat the United States will seek to change foreign perceptions of U.S. policy by supporting asignificant role for the United Nations in post-war Iraq, "aggressively" restarting the Arab-Israelipeace process, (13) and reaching out to "friends withwhom we may have been having somedifficulty." (14) (For further discussion, see below, Diplomatic Issues ). Some reports suggest thatEuropean opposition to the war is moderating in light of the successful overthrow of the Iraqidictator, and the welcome given to coalition troops in some places. (15) At the same time, manyEuropeans are concerned by images of disorder in Iraq, and large anti-war demonstrations occurredagain on April 12. U.S. Policy The Administration [author name scrubbed], [phone number scrubbed] (Last updated April 21, 2003) On March 17, 2003, as noted above in Background , President Bush addressed the American people and announced that Iraq would face conflict with the United States if Saddam Hussein andhis sons, Uday and Qusay, did not leave Iraq within 48 hours. On March 19, 2003, after theexpiration of the 48-hour ultimatum, President Bush told the American people that militaryoperations against Iraq had been authorized, and the effort began that evening. On April 11, 2003,two days after Iraq's regime had fallen from power in Baghdad, President Bush said he woulddeclare a U.S. victory when U.S. military commanders tell him that all U.S. war objectives had beenachieved. As of April 22, combat had wound down and the main focus of U.S. forces had becomerestoring security and fostering the conditions for economic and political reconstruction, searchingfor members of Iraq's former regime, and hunting for banned WMD programs. In making its case for confronting Iraq, the Bush Administration characterized the regime of Saddam Hussein in Iraq as a grave potential threat to the United States and to peace and security inthe Middle East region. The Administration maintained that the Iraqi regime harbored activeweapons of mass destruction (WMD) programs that could be used to attain Saddam Hussein'slong-term goal of dominating the Middle East. These weapons, according to the Administration,could be used directly against the United States, or they could be transferred to terrorist groups suchas Al Qaeda. The Administration said that the United States could not wait until Iraq made furtherprogress on WMD to confront Iraq, since Iraq could then be stronger and the United States mighthave fewer military and diplomatic options. In January 2003, the Administration revived assertions it had made periodically since the September 11, 2001 attacks that the Baghdad regime supported and had ties to the Al Qaedaorganization and other terrorist groups. According to the Administration, Iraq provided technicalassistance in the past to Al Qaeda to help it construct chemical weapons. A faction based in northernIraq and believed linked to Al Qaeda, called the Ansar al-Islam, had been in contact with the Iraqiregime, according to the Administration. The Ansar base near Khurmal was captured by coalitionforces during Operation Iraqi Freedom. Other experts are said to believe that there might have beensome cooperation when Osama bin Laden was based in Sudan in the early 1990s but that any Iraq-AlQaeda cooperation trailed off after bin Laden was expelled from Sudan in 1996 and went toAfghanistan. Bin Laden issued a statement of solidarity with the Iraqi people on February 12,exhorting them to resist any U.S. attack, while also criticizing Saddam Hussein's Baath Party regimeas "socialist" and "infidel." In attempting to win international support for its policy, the Administration asserted that Iraq was in material breach of 17 U.N. Security Council resolutions - including Resolution 1441 ofNovember 8, 2002 - mandating that Iraq fully declare and eliminate its WMD programs. A numberof U.S. allies and Security Council members, including France, Germany, Russia, and China agreedthat Iraq did not fully comply with Resolution 1441, but opposed military action, maintaining insteadthat U.N. inspections were working to disarm Iraq and should have been continued. Diplomaticnegotiations to avert war ended after the United States and Britain could not muster sufficientsupport for a proposed U.N. Security Council resolution that would have authorized force if Iraq didnot meet a final deadline for Iraq to fully comply with WMD disarmament mandates. The Bush Administration's September 2002 decision to seek a U.N. umbrella for the confrontation with Iraq led officials to mute their prior declarations that the goal of U.S. policy wasto change Iraq's regime. The purpose of downplaying this goal may have been to blunt criticismfrom U.S. allies and other countries that argued that regime change is not required by any U.N.resolution. The United States drew little separation between regime change and disarmament: theAdministration believed that a friendly or pliable government in Baghdad was required to ensurecomplete elimination of Iraq's WMD. As the U.N. option drew to a close, the Administration againstressed regime change as a specific goal of a U.S.-led war, and some argue that the President'sultimatum that Saddam and his sons leave Iraq was an indication that the regime change goal wasalways paramount, and WMD concerns secondary. Since the war began, senior officials havestressed the goal of liberating the Iraqi people and downplayed the hunt for alleged WMD stockpiles. Policy Debate. Several press accounts indicate that there were divisions within the Administration on whether to launch war against Iraq, and someof these divisions re-emerged on post-war issues such as the degree to which the United Nationsshould be involved in political and economic reconstruction. Secretary of State Powell had been saidto typify those in the Administration who believed that a long-term program of unfettered weaponsinspections could have succeeded in containing the WMD threat from Iraq. (16) He reportedly was keyin convincing President Bush to work through the United Nations to give Iraq a final opportunity todisarm voluntarily. However, after January 2003, Secretary Powell insisted that Iraq's failure tocooperate fully with the latest weapons inspections indicated that inspections would not succeed indisarming Iraq and that war would be required, with or without U.N. authorization. Press reports suggest that Vice President Cheney and Secretary of Defense Rumsfeld, among others, were consistently skeptical that inspections could significantly reduce the long-term threatfrom Iraq and reportedly have long been in favor of U.S. military action against Iraq. These andother U.S. officials reportedly believed that the overthrow of Saddam Hussein would pave the wayfor democracy not only in Iraq but in the broader Middle East, and reduce support for terrorism. Ina speech before the American Enterprise Institute on February 26, 2003, President Bush said that theoverthrow of Saddam Hussein by the United States could lead to the spread of democracy in theMiddle East and a settlement of the Israeli-Palestinian dispute. Congressional Action [author name scrubbed], [phone number scrubbed] (Last updated April 21, 2003) Overview. Congress was overwhelminglysupportive of Operation Iraqi Freedom, and Members expressed their strong backing for U.S.military forces in the region and for their families at home. On March 20, 2003, the House ofRepresentatives, by a vote of 392 in favor to 11 opposed, passed H.Con.Res. 104 , aresolution that expressed the support and appreciation of the nation for the President and themembers of the armed forces who participated in Operation Iraqi Freedom. That same day, theSenate passed a similar resolution, S.Res. 95 by a vote of 99-0. Congress also backedthe war effort by approving the largest supplemental appropriations bill in U.S. history. On April 3,2003, both the House and the Senate approved a supplemental funding measure, H.R. 1559 ( P.L. 108-11 ), to provide financing for military operations in Iraq, economic aid for foreigngovernments, and support for homeland security. (For more information, see below, Cost Issues. ) Background. After the Iraqi invasion of Kuwait in 1990, Congress played an active role in supporting U.S. foreign policy objectives to contain theregime of Saddam Hussein and force it into compliance with U.N. Security Council resolutions.Congress restricted aid and trade in goods to some countries found to be in violation of internationalsanctions against Iraq. Congress also called for the removal of Saddam Hussein's regime from powerand the establishment of a democratic Iraqi state in its place. In 1991, Congress authorized thePresident to use force against Iraq to expel Iraqi forces from Kuwait in accordance with UnitedNations Security Council Resolution 678 ( P.L. 102-1 ). On October 16, 2002, the President signed H.J.Res. 114 into law as P.L. 107-243 , the "Authorization for Use of Military Force Against Iraq Resolution of 2002." The resolutionauthorized the President to use the armed forces to defend the national security of the United Statesagainst the threat posed by Iraq and to enforce all relevant U.N. resolutions regarding Iraq. Theresolution conferred broad authority on the President to use force and required the President to makeperiodic reports to Congress "on matters relevant to this joint resolution." The resolution expressedcongressional "support" for the efforts of the President to obtain "prompt and decisive action by theSecurity Council" to enforce Iraq's compliance with all relevant Security Council resolutions. In the months after the passage of H.J.Res. 114 , Congress continued to play a role in formulating U.S. policy in Iraq. Many Members who voted in favor of the resolution offeredstrong support for President Bush's attempts to force Iraq into compliance with U.N. resolutions.Other lawmakers, including some who supported the resolution, commended the Administration forapplying pressure on Saddam Hussein's regime but called on the Administration to be moreforthcoming with plans for the future of Iraq and to be more committed to achieving the broadestpossible international coalition of allied countries. Still others, including some Members who votedin favor of H.J.Res. 114 , questioned the urgency of dealing with Iraq, particularly inlight of developments in North Korea and Iran. Finally, many Members who voted against H.J.Res. 114 ( P.L. 107-243 ) continued to look for ways to forestall the use of forceagainst Iraq, in part by proposing alternative resolutions that called for a more comprehensiveinspections process. In one instance, several Members initiated a lawsuit to curtail the President'sability to authorize the use of force. (See below, International and Domestic Legal Issues Relatingto the Use of Force .) Legislation. During the diplomatic phase of the confrontation with Iraq, a period that covered the beginning of the 108th Congress until mid-March2003, bills introduced ranged from measures that would forestall military action to calls for punitiveaction against European nations that did not support the use of military force against Iraq. Manyanalysts suggested that these proposals were mostly symbolic gestures and had insufficient supportfor passage. The Senate did pass S. 205 , (17) which would have granted visas and theadmission of residency to Iraqi scientists who would be willing to provide the United States withvital information on Iraqi weapons of mass destruction programs. The Senate also passed S.Con.Res. 4 , a concurrent resolution welcoming the expression of support of 18European nations for the enforcement of United Nations Security Council Resolution 1441. Neither S. 205 nor S.Con.Res. 4 received floor action in the House. After the start of the war, the House of Representatives passed H.Con.Res. 118 , a resolution condemning Iraq's failure to observe international rules on the treatment of prisonersof war. The House also passed H.Res. 153 , a resolution that recognized the "need forpublic prayer and fasting in order to secure the blessings and protection of Providence for the peopleof the United States and our Armed Forces during the conflict in Iraq and under the threat ofterrorism at home." In addition, the Senate passed S.Con.Res. 30 , a resolution ofgratitude to nations that are partners of the United States in its action against Iraq and S. 718 , the Troops Phone Home Act of 2003, a bill that would provide a monthly allotment of freetelephone time to U.S. troops serving in Iraq or Afghanistan. Indirectly related to the war in Iraq,both houses of Congress passed the Armed Forces Tax Fairness Act ( H.R. 1307 ), a billthat authorizes tax relief to members of the armed services and their families. A number of other proposed resolutions on the Iraq war may or may not see floor action during the post-war phase of Operation Iraqi Freedom. H.Res. 198 urges France, Germany, andRussia to help create a governmentally administered debt forgiveness program to assist Iraq in itsreconstruction. S. 876 would require public disclosure of noncompetitive contractingfor the reconstruction of the infrastructure of Iraq. H.R. 1828 calls on Syria to "halt itssupport for terrorism, end its occupation of Lebanon, stop its development of weapons of massdestruction, and cease its illegal importation of Iraqi oil and illegal shipments of weapons and othermilitary items to Iraq." Finally, S.Con.Res. 34 , H.Con.Res. 143 , and H.Res. 203 call for the persecution of Iraq's former leaders for war crimes. Congress and Post-War Iraq. With the transition of Operation Iraqi Freedom from a military to a reconstruction phase, Congress started to becomemore vocal in requesting specific information from the Bush Administration on plans for thepost-war future of Iraq. The Senate Foreign Relations Committee was particularly active in tryingto obtain credible reconstruction costs from Bush Administration officials. On April 20, 2003,Chairman Richard Lugar commented on the NBC News program "Meet the Press" that it could takeat least five years to create a functioning democracy in Iraq. In addition, many analysts believe thatthe costs of rebuilding Iraq will require Congress to appropriate additional funds in the future. Intestimony before Congress, Andrew S. Natsios, Administrator of the United States Agency forInternational Development, remarked that supplemental funding for Iraq's reconstruction will notcarry very far into fiscal year 2004. (18) Manybelieve that international organizations and foreigngovernments should make considerable contributions to the post-war rebuilding effort. At theinternational level, several Members submitted a letter to President Bush, expressing their supportfor widening the role of the international community in helping to rebuild Iraq. The letter noted thatby engaging the United Nations in the immediate aftermath of the war, the United States could helpbridge rifts in our international relationships while "strengthening ties with our allies as we continuein the war against international terrorism." (19) Overall, Congress recognized that, following thedownfall of Saddam Hussein's regime, significant portions of Iraq will be dependent onhumanitarian aid from the United States and the international community, as well as significantnumbers of police and military forces to maintain civil order. However, lawmakers have questionedhow long Iraq will require U.S. assistance, and how much assistance will need to be provided. Issues for Congress Military Issues [author name scrubbed], [phone number scrubbed] (Last updated April 22, 2003) All organized Iraqi military resistance has ceased, and coalition forces are in control of all major cities and oilfields. The operations of the U.S. Central Command (CENTCOM), which has overseenthe war in Iraq, are now focused on establishing public order, restoring basic services in urban areas,tracking down former regime leadership members, and locating chemical, biological, and nuclearweapons. CENTCOM has created three command regions, roughly centered on Mosul (north),Baghdad (central), and Basra (south). Retired Army Major General Jay Garner, head of DOD'sOffice of Reconstruction and Humanitarian Assistance, has arrived in Iraq and begun his initial toursof the region. Until Baghdad is more stabilized, Garner and his upporting personnel will be basedin the south of Iraq. In the Iraq campaign, CENTCOM pursued a strategy of rapid advance, by-passing urban centerswhen possible, pausing only when encountering Iraqi resistance. CENTCOM spokesmen generally characterized Iraqi resistance as sporadic and uncohesive. Oilfields and port facilities have beensecured, as have air bases in northern and western Iraq. Though a few oil wells were set afire, allfires were quelled, and there has been no widespread environmental sabotage. Allied forces did notencounter the mass surrenders characteristic of the 1991 campaign; however DOD reports that over 6,500 Iraqis have been taken prisoner, and believes that many more simply deserted their positions.Iraqi paramilitary forces, particularly the Saddam Fedayeen, engaged in guerrilla-style attacks fromurban centers in the rear areas, but did not inflict significant damage. Nevertheless, greater attentionthan anticipated had to be paid to protecting extended supply lines and securing urban centers,particularly around an-Nasiriyah and Najaf, and in the British sector around Umm Qasr and Basra.The anticipated support for the invasion from the Shiia population in southern Iraq was slow indeveloping, but now some cooperation is forthcoming throughout Iraq, despite some outbreaks offactional fighting and some popular opposition to the U.S. presence. Without permission to use Turkish territory, CENTCOM was unable to carry out an early ground offensive in Northern Iraq. However, Special Operations forces, the 173rd Airborne Brigade,and air-lifted U.S. armor, operating with Kurdish irregulars seized Mosul and Kirkuk. Cooperationwith Kurdish militias in the north has been excellent. Even a mistaken airstrike against a Kurdishvehicle convoy, killing or wounding senior Kurdish leaders, did not adversely affect this cooperation. The situation in the north could potentially be complicated by the Turkish desire to possibly augmentthe 8,000+ troops it has had stationed in Kurdish-held territory in order to block possible Kurdishrefugees and influence the accommodations made to the Kurds in a post-conflict Iraq. Turkishmiliary spokesmen have indicated that no additional Turkish forces will move into Iraq at this time. The United States has assured Turkey that the Kurdish forces involved in seizing Mosul and Kirkukwill be withdrawn and replaced with U.S. troops. With the onset of widespread looting and some breakdown of public services (electricity, water) in the cities, coalition forces are confronted with the challenges of restoring public order andinfrastructure. Though U.S. forces have come under some criticism for not having done more toprevent looting, the transition from combat to police roles is a difficult one, particularly when animportant objective is winning popular support. Harsh reactions risk alienation of the population,yet inaction reduces confidence in the ability of coalition forces to maintain order. The situation isfurther complicated by continuing small-scale attacks on coalition troops in relatively secure areas. Increased patrols, the return of many Iraqi policemen to duty, and the emergence of civilian "watchgroups" are assisting what appears to be a natural abatement of looting. Coalition forces will alsohave to ensure that factional violence and retribution against former government supporters do notderail stabilization efforts. The United States continues to introduce new ground force units in the Persian Gulf region, while withdrawing some air and naval units. The Department of Defense has released limitedofficial information on these deployments; but press leaks have been extensive, allowing a fairlygood picture of the troop movements underway. The statistics provided below, unless otherwisenoted, are not confirmed by DOD and should be considered approximate. The number of U.S.personnel deployed to the Persian Gulf region (both ashore and afloat) reportedly exceeds 340,000. Additional units that have been alerted for deployment, and elements of which have begun to transit, include the 1st Armored Division, and 1st Mechanized Division. The 4th MechanizedInfantry Division, originally intended to attack through Turkey, has arrived in Iraq and deployednorth of Baghdad. The 101st Airborne (Air Assault) Division has also deployed to positions withinIraq. Some airborne elements ( 173rd Airborne Brigade) have moved into positions in northern Iraq,and the 2nd Armored Cavalry Regiment has started deployment from the United States. The U.S. haswithdrawn two carrier battle groups, leaving three in the region, and has ceased Operation NorthernWatch that enforced the no-fly zone in northern Iraq. Air Force units throughout the theater are alsobeginning to re-deploy to home bases. In addition to U.S. deployments, British forces include an armor Battle Group, a naval Task Force (including Royal Marines), and Royal Air Force units, totaling reportedly about 47,000personnel. (20) Australia has deployedapproximately 2,000 personnel, primarily special operationsforces operating in western Iraq. Poland has approximately 200 special operations troopsaugmenting British forces in the Basra region. DOD has announced that, as of April 16, 2003, morethan 223,000 National Guard and Reservists from all services are now called to active duty. (21) DODhas not indicated which of these personnel are being deployed to the Persian Gulf region and howmany will be "backfilling" positions of active duty personnel in the United States, Europe, andelsewhere. (See below, Burden Sharing .) The United States has personnel and materiel deployed in the Persian Gulf states of Kuwait,Qatar, Bahrain, Saudi Arabia, and the United Arab Emirates. Though there had been speculationabout what level of cooperation/participation could be expected from these nations if the UnitedNations Security Council did not pass another resolution specifically authorizing the use of forceagainst Iraq, throughout the conflict they continued to support U.S. military operations. Because of significant popular opposition to this support in some countries, governments have sought tominimize public acknowledgment of their backing. U.S. and Australian forces, both ground and air,deployed from Jordan and secured Iraqi military facilities in the western part of the country. Only the United Kingdom, Australia, and Poland offered combat force contributions. Germany, Slovakia, the Czech Republic, and Ukraine have military nuclear-chemical-biological (NBC) defenseteams in Kuwait, but these will not enter Iraq. The United States is actively seeking military forcesfrom other countries to assist in the post-conflict stabilization effort. To date, the followingadditional countries have indicated a willingness to participate: Albania, Bulgaria, the CzechRepublic, Denmark, Italy, Poland, Romania, and Turkey. As military operations shift from combat to stabilization, the issues that move to center stage are how many ground forces will be required to maintain order while the reconstruction of the Iraqistate is undertaken and how long this process will take. There has been no consensus on either ofthese issues. Estimates of troop requirements have ranged from 75,000 to over 200,000, andestimates for the length of the operation have ranged from several months to a decade. The keyelement, and currently the most unpredictable, is the willingness of the Iraqi population to cooperatenot only with coalition forces but also among themselves. Diplomatic Issues [author name scrubbed], [phone number scrubbed] (Last updated April 22, 2003) The March 17, 2003 announcement by the United States, Britain, and Spain that they were withdrawing their proposed "second resolution" at the United Nations Security Council (see above, Background ), was followed that evening by President Bush's nationwide address giving SaddamHussein an ultimatum to flee or risk military conflict. These events marked the end of a major U.S.diplomatic effort to win the support of a Security Council majority for action against Iraq. Relations with European Allies. The end of the diplomatic phase of the confrontation left a bitter aftermath among many U.S. officials and theEuropean opponents of the U.S. and British intervention. After the war was launched on March 19,Russia's Prime Minister Vladimir Putin charged that "This military action cannot be justified in anyway." (22) German Chancellor Gerhard Schroedersaid "A bad decision was taken: the choice of thelogic of war has won over the chances for peace." (23) French President Jacques Chirac, as expected,was also highly critical. As the war went forward, however, European rhetoric moderated as leaderssought to avoid deepening the rift with the United States. Chancellor Schroeder and French PrimeMinister Jean-Pierre Raffarin both said that they were hoping for a U.S. victory and the earlyinstallation of a democratic regime in Iraq, while President Putin affirmed that Russia wanted tocontinue to work with the United States to resolve world problems. (24) President Chirac telephonedPresident Bush on April 15, reportedly saying he was pleased with Saddam's overthrow and that thewar had been short and offering to be pragmatic about arrangements for postwar reconstruction. (25) U.S. leaders also took steps to ease tensions with the Europeans. President Bush telephoned Putinon April 5, and the two leaders agreed on continued dialog with respect to Iraq. (26) Earlier, Secretaryof State Powell attended a meeting of European foreign ministers in Brussels, where the atmospherewas described as "relatively harmonious." (27) Role of the United Nations. The wounds of the Iraq debate remain nonetheless, and further diplomatic complications seem possible, particularly withrespect to the United Nations role in post-war Iraq. These complications could extend even toU.S.-British relations, since Prime Minister Blair is a leading advocate of a major U.N. role, whereasU.S. officials seem to favor confining the U.N. to humanitarian relief operations. The Britishgovernment reportedly had favored the appointment of a U.N. special coordinator for Iraq, whowould oversee the creation of an interim authority consisting of Iraqis, the drafting of a newconstitution, and an eventual handover to an Iraqi government. (28) However, statements by U.S.officials, including Secretary Powell, National Security Advisor Condoleezza Rice, and DeputyDefense Secretary Paul Wolfowitz indicate that they foresee the United States orchestrating theseevents. (29) President Bush and Prime Minister Blairdiscussed the issue during their summit on Belfaston April 7-8, and the President affirmed that the United Nations had a "vital role" to play in post-warIraq. Wolfowitz, however, testified on April 10, that the U.N. "can't be the managing partner. Itcan't be in charge." (30) The European critics of the U.S. and British intervention, by contrast, advocate a "central role" for the United Nations in administering Iraq and in overseeing a transition to a democratic regime. (31) On April 11, 2003, after a meeting in St. Petersburg, Schroeder, Putin, and Chirac affirmed that theywere glad the Saddam dictatorship had been overthrown, but insisted that Iraq should be rebuiltthrough a broad-based effort under U.N. control. (32) On April 17, the European Union also called fora "central role" for the U.N. during a summit meeting in Athens attended by both supporters andcritics of the war. According to the statement, the U.N. should be involved in the process leadingto self government in Iraq. (33) Many in Europe seea U.N. administration as essential to legitimizingwhatever government emerges in Iraq, and many also want to assure that their governments and theEuropean private sector participate through the United Nations in the recovery and reconstructionof Iraq. A similar debate could also occur over the extension of the Oil-for Food Program, whichunder U.N. Security Council Resolution 1472 remains under U.N. administration until May 12,2003. France, Russia, and Germany want this arrangement to continue, but some in the BushAdministration favor U.S. management of Iraq's oil exports. (34) (For more information, see below, Post-war Governance Issues and Humanitarian Issues .) President Bush, speaking in St. Louis on April 16, called for all U.N. sanctions against Iraq to be lifted, and some observers are expecting this appeal to lead to further diplomatic complications. Ending the sanctions would likely mean ending the Oil-for-Food Program and remove any rationalefor U.N. weapons inspectors to return to Iraq to verify the destruction of weapons of massdestruction. Both the Oil-for-Food Program and the weapons inspections gave the Europeans a voicein the Iraq situation through the United Nations, and European firms benefitted from contracts madeunder the Oil-for-Food Program. Consequently, European governments may oppose the early liftingof sanctions, but this is not yet certain. Debate on Improving Relations. How heavily the United States should invest in achieving compromise with European allies on these and other issuesis an issue in debate. Some see little value in mending relations with European critics of the war ongrounds that the capabilities of their countries for contributing to global threat reduction arelimited. (35) In this view, Atlantic cooperation andmultilateral approaches to world problems may haveplayed a useful role during the Cold War, but today may restrict the ability of the United States torespond to the threats it faces. There is concern that President Chirac in particular may see it as therole of France and the European Union (EU) to "balance" and constrain U.S. power, so that any U.S.move to compromise with European critics could play into this objective and damage U.S.interests. (36) The counter-view is that thecontroversy over Iraq has placed great strains on the UnitedNations, NATO, and the European Union - international institutions that many see as importantcomponents of global stability in the years ahead. From this perspective, healing relations withEuropean critics of the United States can reduce tensions within these organizations and help themto recover. (37) Moreover, some maintain that theUnited States will have an easier time of achievingits objectives in world affairs generally if it is regarded as a friendly and cooperative country byEuropeans and others. Specifically, some note that a major EU financial contribution to therecovery of Iraq or to the resolution of other world problems is more likely if U.S. relations withGermany and France improve. These two countries are central EU financial backers. Those whofavor greater understanding of European positions point out that many European countries havesignificant Muslim populations and see developments in the nearby Middle East as directly affectingtheir security interests. Use of Diplomatic Instruments in Support of the War. With the onset of war, the United States asked countries having diplomaticrelations with Iraq to close Iraqi embassies, freeze their assets, and expel Iraqi diplomats. U.S.officials argued that the regime in Iraq would soon change and that the new government would beappointing new ambassadors. Press reports suggest that the U.S. request met with a mixed response. Australia did expel Iraqi diplomats and close the embassy, while a number of other countriesexpelled individual diplomats suspected of espionage and left embassies open. Some countriesexplicitly refused the U.S. request. (38) On March20, 2003, President Bush issued an executive orderconfiscating Iraqi assets, frozen since Iraq's invasion of Kuwait in 1990, for use for humanitarianpurposes. The United States asked other countries holding Iraqi assets to do the same, but thisrequest too seems to have met with a mixed response to date. (39) U.S. policymakers are concerned that Turkey might send a large number of troops into northern Iraq, but have been successful in using diplomatic means to prevent this from happening. Turkeyfears that any drive by Iraqi Kurds toward independence would encourage Kurdish separatists inTurkey, but fighting between Turks and Kurds in northern Iraq would greatly complicate U.S. effortsto stabilize the country. Turks also worry that Turkmen in northern Iraq, regarded as ethnic kin, willbe persecuted by Kurds. President Bush warned Turkey not to come into northern Iraq on March24. (40) Secretary of State Powell visited Turkeyon April 2, 2003, and an agreement was reachedpermitting Turkey to send a small monitoring team into northern Iraq to assure that conditions didnot develop that might compel Turkey to intervene. Turkey also agreed that nonlethal supplies forU.S. troops in Iraq would be permitted to transit Turkey. (41) To date, Turkey seems to be acceptingassurances that Kurdish guerrillas who entered the cities of Kirkuk and Mosul will not remain. Finally, U.S. officials applied firm diplomatic pressure to end any foreign support for the Iraqi war effort. The U.S. government delivered a protest to the government of Russia for failing toprevent Russian firms from selling military equipment to Iraq in violation of United Nationssanctions. The sales reportedly included electronic jamming equipment and night vision goggles. On March 28, Defense Secretary Rumsfeld accused the Syrian government of "hostile acts"for thedelivery of military goods, including night vision goggles, across the Syrian border to Iraq, and saidthat the passage of armed Iraqi opposition elements from Iran into Iraq was a threat to U.S. forces. These opposition forces, known as the Badr Brigade, oppose Saddam Hussein, but U.S. officials fearthey could sow disunity in post-war Iraq. The warnings against Syria intensified on April 13, whenPresident Bush accused Syria of harboring leaders of the Saddam regime and of possessing chemicalweapons, while Defense Secretary Rumsfeld charged that Syria was allowing busloads ofmercenaries to cross into Iraq to attack American troops. (42) On April 14, Secretary Powell threateneddiplomatic, economic, or other economic sanctions against Syria. However, tensions with Syriaeased considerably on April 20, when President Bush said that he was confident the Syriangovernment had heard U.S. warnings and wanted to cooperate. (43) Use of Diplomatic Means to Promote Iraq's Recovery. Secretary of the Treasury John Snow is heading an effort to persuadethe international financial community, including the World Bank and the International MonetaryFund, to support the rebuilding of Iraq. On April 12, Snow reported that representatives of the G-7industrialized nations had reached a preliminary agreement on multilateral effort to help Iraq aftera meeting in Washington - if the U.N. Security Council grants authorization. Efforts to persuadegovernments to forgive debt owed by Iraq are facing difficulties, however. Russia, which is oweda reported $8 billion by Iraq and is heavily in debt itself, seems particularly resistant. (44) Weapons of Mass Destruction Issues [author name scrubbed], [phone number scrubbed] ( Last updated April 22, 2003 ) Iraq's chemical, biological, and nuclear weapons programs, along with its long-range missile development and alleged support for terrorism, were the justifications put forward for forciblydisarming Iraq. However, weapons of mass destruction (WMD) were not used by Iraqi forces andU.S. forces did not discover any WMD during the war. General Amir Saadi, Sadaam Hussein's topscientific advisor, reiterated on April 12, as he gave himself up, that Iraq did not possess WMD; butfew observers find his assertions credible. However, it is not clear whether there are any remainingWMD for post-war inspections to find, given at least one report by an Iraqi scientist that Husseinordered the destruction of WMD prior to the war. Many observers believe it critical for the UnitedStates to find evidence of WMD to justify invading Iraq, but some have suggested public supportat home and abroad does not depend on discoveries of WMD. (45) If WMD are found, many analystsbelieve that international verification will be necessary. (46) Iraq's Deployable Weapons of Mass Destruction? U.S. intelligence reports suggested that Hussein had chemical and biological weapons dispersed,armed, and ready to be fired, with established command and control. (47) Some observers suggestedthat U.S. forces toppled Iraq's military command structure and with it, the authorization to use suchweapons. Others suggested that Iraq had few incentives to use such weapons, for several reasons:they would have had limited military utility against U.S. forces, which moved fast; Iraq had fewdelivery options, given U.S. and allied command of the air; and the use of such weapons would haveturned world opinion against Iraq. (48) Manybelieved the threat of WMD use would increase the closerU.S. forces got to Baghdad, and then decrease once they were in the city (presumably because ofcollateral effects). The Search for WMD. Many observers believed U.S. forces would quickly find Iraq's weapons of mass destruction. Despite misleading reports ofchemical weapons discoveries, U.S. forces, at this writing, have not located WMD or WMD-relatedsites. Although it appeared that U.S. forces at an Iraqi military compound at Albu Muhawish wereexposed to nerve agents, later tests indicated that they were exposed to chemical pesticides. A reportabout medium-range missiles potentially containing sarin and mustard gas was not verified by thePentagon or CENTCOM. As in the U.N. inspections, a key to unlocking Iraq's WMD past may be interviews with 3000 former weapons experts. Secretary of Defense Rumsfeld stated that "The U.N. inspectors didn't findanything and I doubt that we will. What we will do is find the people who will tell us." (49) On April12, as noted above, General Saadi, a key figure in Iraq's chemical weapons program, surrenderedto U.S. forces; Dr. Jaffar Jaffar, head of the nuclear program, was located a few days later in anundisclosed country. On April 16, U.S. forces reportedly raided the home of Iraq's head biologicalweapons scientist, Dr. Rihab Taha. On April 17, a scientist involved in the chemical weaponsprogram, told U.S. forces that Iraq destroyed chemical weapons and biowarfare equipment daysbefore the war began. (50) Interviewing these andother scientists and examining documents forevidence will likely take time before conclusions can be drawn. If they fear being prosecuted for warcrimes, scientists may be less forthcoming. The Army's 75th Exploitation Task Force has been leading teams of weapons experts to hunt on the ground for WMD. These teams include former United Nations inspectors and U.S. civilianand military personnel. According to one report, the teams will be focusing on 36 priority sites ofa potential 1000 sites. (51) The task force reportedlywill come under the command of a much largerIraq Survey Group, which will be comprised of about 1000 civilian scientists, technicians,intelligence analysts and other experts led by a U.S. general. (52) The Defense Threat Reduction Agency (DTRA) has been negotiating contracts with private companies to destroy WMD stocks that are found. This approach contrasts sharply with the 1991Gulf War experience. In that war, first U.S. air strikes and then ground forces destroyed significantportions of Iraq's WMD and WMD capabilities. Air strikes were able to target well-known chemicalweapon and missile capabilities, in contrast to lesser known biological or nuclear capabilities. (53) Inadvertent destruction of WMD could pose environmental and safety issues, should it occur. During the 1991 Gulf War, U.S. and coalition forces destroyed warehouses that contained chemicalwarheads, including at the Khamisiyah site, and a Department of Defense investigation concludedthat as many as 100,000 U.S. personnel could have been affected by environmental releases. (54) According to one report, the United States' nuclear, biological and chemical (NBC) units "havemade major advancements since the Persian Gulf War of 1991," when Czech NBC units detectedsarin and mustard gas, but American detection units could not verify the results. (55) The impact ofpotential inadvertent destruction would depend on what kind of WMD is present (e.g., biologicalweapons pose fewer problems in destruction than chemical weapons, because dispersal is less likelyand they do not require such high temperatures for destruction); how the material or weapons arestored; and geographic, geological, and temporal circumstances. Role for U.N. Inspectors? From November 2002 to March 2003, the United Nations Monitoring, Verification, and Inspection Commission(UNMOVIC) and the International Atomic Energy Agency (IAEA) conducted approximately 750inspections at 550 sites. Those inspections uncovered relatively little: empty chemical weaponsshells not previously declared; two R-400 aerial bombs at a site where Iraq unilaterally destroyedBW-filled aerial bombs; 2,000 pages of undeclared documents on uranium enrichment; undeclaredremotely piloted vehicles; and cluster bombs that could be used with chemical or biological agents. As a result of the inspections, however, Iraq destroyed 70 (of a potential 100-120) Al-Samoud-2missiles. On the eve of war, about 200 U.N. staff left Iraq. UNMOVIC's Executive Chairman Dr.Hans Blix expressed disappointment at the unfinished job of the inspectors. Thus far, the U.N. hasnot been asked to help verify whatever WMD U.S. forces might uncover. Reportedly, the White House is considering international verification of what it finds in Iraq, but this may not include U.N. inspectors. Blix, who has stated he will retire in June 2003 at the endof his contract, has said UNMOVIC would not accept "being led, as a dog" to sites that allied forceschoose to display. (56) U.N. officials hope to revivea role for U.N. inspectors; U.N. Secretary GeneralKofi Annan, has stated that inspectors will return after the war. At a minimum, the IAEA willconduct inspections per Iraq's nuclear safeguards agreement under the Nuclear Non-ProliferationTreaty. A post-Hussein Iraq might consent to sign and ratify the Chemical Weapons Convention,but there are no equivalent international inspection regimes for biological weapons or missiles atpresent. (57) Some have suggested that the UnitedStates, if it took possession of Iraq's chemicalweapons, would be bound, as a party to the Chemical Weapons Convention, to allow internationalinspections of destruction. (58) The worldcommunity's confidence in Iraq's disarmament, and hence,the necessity for an ongoing monitoring regime, may depend on the level of verifiable disarmamentduring and after the war, and on the assurances of the future leaders of Iraq. Post-War Governance Issues [author name scrubbed], [phone number scrubbed] (Last updated April 21, 2003) The same U.S. concerns about fragmentation and instability in a post-Saddam Iraq that surfaced in prior administrations were present in the Bush Administration debates over post-war policy inIraq. One of the concerns cited by the George H.W. Bush Administration for ending the 1991 Gulfwar before ousting Saddam was that a post-Saddam Iraq could dissolve into chaos. It was feared thatthe ruling Sunni Muslims, the majority but under-represented Shiites, and the Kurds would fighteach other, and open Iraq to influence from neighboring Iran, Turkey, and Syria. Because of thecomplexities of various post-war risks to stability in Iraq and the region, some observers believedthat post-war Iraq might most effectively be governed by a military or Baath Party figure who is notnecessarily committed to full democracy but would comply with applicable U.N. resolutions. However, no such figure stepped forward to offer to play a leadership role. Administration Policy on Governance. Although the Administration wanted to keep much of the civilian bureaucracy of the former regime intact, theAdministration has long insisted that it will do what is necessary to bring about a stable anddemocratic successor regime that complies with all applicable U.N. resolutions. In press interviewson April 6, 2003, Deputy Secretary of Defense Paul Wolfowitz indicated that the Administrationhoped to turn post-war governance over to an Iraqi interim administration within six months. Experts note that all projections, including the duration of the U.S. military occupation and thenumbers of occupation troops, could be determined by the amount of Iraqi resistance, if any, thenumber of U.S. casualties taken, and the speed with which a successor regime is chosen. The Chiefof Staff of the Army, General Eric Shinseki, told the Senate Armed Services Committee on February24, 2003, that as many as 200,000 U.S. troops might be needed for a postwar occupation, althoughother Administration officials, including Wolfowitz, disputed the Shinseki assessment. Under plans formulated before hostilities began, Lt. Gen. Jay Garner (ret.) is directing civilian reconstruction, working through a staff of U.S. diplomats and other U.S. government personnel whowill serve as advisers and administrators in Iraq's various ministries. He heads the Office ofReconstruction and Humanitarian Assistance, within the Department of Defense, created by aJanuary 20, 2003 executive order. After spending the combat phase of the war in neighboringKuwait, Garner and some of his staff of about 200 deployed to Baghdad on April 21, 2003, to beginwork. During the interim period, the United States goals are to eliminate remaining WMD andterrorist cells in Iraq, begin economic reconstruction, and purge Baath Party leaders. Iraq's oilindustry is to be rebuilt and upgraded. The exact nature of post-war governance might depend on the outcome of discussions between the United States and its European allies over a U.N. role in post-war Iraq, which was the focus ofPresident Bush's meeting in Belfast with British Prime Minister Blair on April 7 and 8, 2003. Britain and most European countries believe that the Iraqi people would more easily accommodateto a U.N.- administered post-war Iraq. Senior U.S. officials, with the reported exception of Secretaryof State Powell, want to keep the U.N. role limited to humanitarian relief and economicreconstruction, reserving most decisions about a post-war Iraqi power structure to the United Statesand Britain. U.S. officials want a new U.N. Security Council resolution that would endorse a newgovernment, and, with U.S. support, Secretary-General Annan said on April 7 that he was appointinga U.N. coordinator, Pakistani diplomat Rafeuddin Ahmed, to run U.N. operations in Iraq. However,U.S. officials note that some of the countries that opposed the war might object to adopting aresolution that they believe might legitimize a U.S.-British occupation. (For further discussion, seeabove, Diplomatic Issues .) Establishing an Interim Administration. Those Iraqi groups who were opposed to the regime of Saddam Hussein, including those groups mostclosely associated with the United States, generally oppose a direct role for U.S. officials in runninga post-war Iraqi government. The opposition groups, including the U.S.-backed Iraqi NationalCongress, fear that the Administration might yield substantial power to former Baath Party members. The opposition met in northern Iraq in late February 2003 to plan its involvement in a post-Saddamregime. At that meeting, against U.S. urging, the opposition named a six-man council to prepare fora transition government: Iraqi National Congress director Ahmad Chalabi; Patriotic Union ofKurdistan leader Jalal Talabani; Kurdistan Democratic Party leader Masud Barzani; Shiite Muslimleader Mohammad Baqr Al Hakim, who heads the Iran-backed Supreme Council for the IslamicRevolution in Iraq (SCIRI); Iraq National Accord leader Iyad Alawi; and former Iraqi foreignminister Adnan Pachachi. After the fall of the regime, these leaders appeared to be competing forpower in post-war Iraq rather than cooperating. The Bush Administration asserted that it wants Iraqis who stayed in Iraq and were not part of the exiled opposition to participate in an interim government, and that it would not play a major rolein choosing who leads Iraq next. However, the U.S. military airlifted about 700 opposition fighters(Free Iraqi Forces), led by INC leader Ahmad Chalabi, into the Nasiriyah area on April 6, 2003,appearing to give him and the INC an endorsement for key roles in an interim government. Chalabiand some of the Free Iraqi Forces subsequently went to Baghdad to help U.S. forces restore civilorder after the regime fell. The Administration organized an April 15 meeting, in Nasiriyah, to begina process of selecting an interim administration. However, SCIRI, along with several Shiite clericsthat have appropriated authority throughout much of southern Iraq since the fall of the regime,boycotted the meeting and called for an Islamic state and the withdrawal of U.S. forces. At the sametime, some recent violence in the Shiite-dominated areas of Iraq, including the early April killing ofprominent cleric Abd al-Majid Khoi, could be connected with a jockeying for power within theShiite community, and between it and other contenders. Reconstruction and Oil Industry Issues. It is widely assumed that Iraq's vast oil reserves, believed second only to those of Saudi Arabia, will beused to fund reconstruction. Presidential spokesman Ari Fleischer said on February 18, 2003,referring to Iraq's oil reserves, that Iraq has "a variety of means ... to shoulder much of the burdenfor [its] own reconstruction." U.S.-led forces have secured all of Iraq's oil fields, and, contrary towhat was feared, only about nine oil wells were set on fire by the retreating regime. All fires havebeen extinguished. The remaining problems for the United States and Britain are to get Iraqi oilworkers to return to work and to establish a successor government with legal authority to contractfor sales of Iraq's oil to international buyers. Press reports on April 14, 2003 said the United Statesis considering former senior Iraqi oil professional Fadhil Othman to be an interim oil minister,reportedly with some oversight by a U.S. oil administrative official. A related issue is long-term development of Iraq's oil industry, and which foreign energy firms, if any, might receive preference for contracts to explore Iraq's vast reserves. Russia, China, andothers are said to fear that the United States will seek to develop Iraq's oil industry with minimalparticipation of firms from other countries. Some press reports suggest the Administration isplanning to exert such control, (59) although someobservers speculate that the Administration hadinitially sought to create such an impression in order to persuade Russia to support use of forceagainst Iraq. Continuation of the Oil-for-Food Program/U.N. Sanctions. Before the war, about 60% of Iraqis received all their foodstuffs fromthe U.N.-supervised Oil-for-Food Program. The program, which is an exception to thecomprehensive U.N. embargo on Iraq put in place after the 1991 Persian Gulf war, began operationsin December 1996. It was suspended just before hostilities began, when U.N. staff in Iraq that runthe various aspects of the program departed Iraq. At the time the war started, about $9 billion worthof humanitarian goods were in the process of being delivered or in production. On March 28, 2003,the U.N. Security Council unanimously adopted Resolution 1472 that restarted the program'soperations and empowered the United Nations, for a 45-day period, to take direct control of allaspects of the program. Under the resolution, the United Nations set priorities for and directed thedelivery of already-contracted supplies. On April 17, 2003, President Bush called for the lifting ofU.N. sanctions against Iraq that, if implemented by the United Nations, would presumably lead toa phasing out of the oil-for-food program in favor of normal international commerce with Iraq. Inan FY2003 supplemental appropriation ( P.L. 107-11 ), Congress has given the President the authorityto suspend most U.S. sanctions in place against Iraq. Burden Sharing [author name scrubbed] ([phone number scrubbed]) (Last updated April 22, 2003) In November 2002, the U.S. government reportedly contacted the governments of 50 countries with specific requests for assistance in a war with Iraq. On March 18, 2003, the Administrationreleased a list of 30 countries that had publicly stated their support for U.S. efforts to disarm Iraq,and Secretary of State Powell said that 15 other countries were giving private backing; according tothe White House, the number of countries publicly providing a range of types of support has sincerisen to 49. Nevertheless, only three countries supplied ground combat troops in significantnumbers- in contrast to the 1991 Gulf war when more than 30 countries provided military supportor to the 2002 campaign in Afghanistan, when 21 sent armed forces. (60) Political and Military Factors. On the international political front, analysts contend that it was important for the United States to enlistallies in order to demonstrate that it was not acting unilaterally-that its use of force to disarm Iraqhad been endorsed by a broad global coalition. Although the political leaders of some Islamiccountries were reportedly sympathetic to the Bush Administration's aims, they had to considerhostility to U.S. actions among their populations. Analysts have suggested that some countries sidedwith the United States out of mixed motives; former U.S. ambassador to the North Atlantic TreatyOrganization (NATO) Robert Hunter characterized the nations backing U.S. policy as "a coalitionof the convinced, the concerned, and the co-opted." (61) Some governments that provided supportasked that the Bush Administration remove their names from the coalition list. (62) From a strictly military standpoint, active allied participation was not critical. NATO invoked Article 5 (mutual defense) shortly after the September 11, 2001 attacks against the United States, butduring the subsequent war in Afghanistan, the United States initially relied mainly on its ownmilitary resources, accepting only small contingents of special forces from a handful of othercountries. Allied combat and peacekeeping forces arrived in larger numbers only after the Talibanhad been defeated. Analysts speculate that the Administration chose to "go it alone" because theunique nature of U.S. strategy, which entailed special forces ground units locating and then callingin immediate air strikes against enemy targets, necessitated the utmost speed in command andcommunications. (63) An opposing view is that the United States lost an opportunity in Afghanistan to lay the political groundwork for an allied coalition in the conflict against terrorism. However, during OperationAllied Force in Kosovo in 1999, some U.S. policy-makers complained that the requirement for alliedconsensus hampered the military campaign with a time-consuming bombing target approval process. Another military rationale for having primarily U.S. forces conduct operations against Iraq was thatfew other countries possess the military capabilities (e.g., airborne refueling, air lift, precision guidedmunitions, and night vision equipment) necessary for a high-tech campaign designed to achievevictory with minimum Iraqi civilian and U.S. casualties. Direct and Indirect Contributions. Britain, the only other country that had warplanes patrolling the no-fly zones in Iraq, sent or committed 45,000ground troops, as well as air and naval forces, and Australia committed 2,000 special forces troops,naval vessels, and fighter aircraft. Poland authorized 200 troops, including both special forces andnon-combat personnel. In a non-combat capacity, Denmark sent two warships and a medical unit,South Korea approved the deployment of 700 engineers and medics, and Spain dispatched threenaval vessels. Bulgaria, the Czech Republic, Germany, Romania, Slovakia, and Ukraine pledgedcontingents of anti-chemical and -biological weapons specialists. (64) Romania dispatched non-combattroops (engineers, medics, and military police), and about 1,000 U.S. personnel were stationed inConstana, which acted as an "air bridge" to the Persian Gulf. Japan, constitutionally barred fromsending ground troops, was reportedly prepared to help in the disposal of chemical and biologicalweapons, and also reinforced its naval fleet patrolling the Indian Ocean. (65) Other forms of support were also valuable. For example, countries granted overflight rights or back-filled for U.S. forces that might redeploy to Iraq from Central Asia or the Balkans: Canada isplanning on sending up to 3,000 troops to Afghanistan, freeing up U.S. soldiers for Iraq. In addition,gaining permission to launch air strikes from countries close to Iraq reduced the need for mid-airrefueling, allowed aircraft to re-arm sooner, and enabled planes to respond more quickly to groundforce calls for air strikes; several countries, including Djibouti, Ethiopia, Kuwait, Spain, Italy,Portugal, Romania, and Bulgaria allowed the use of their airbases and seaports. At the BushAdministration's request, Hungary approved the use of its Taszar airbase for the training of Iraqidissidents as non-combatant interpreters and administrators; the initial plan was to train up to 3,000Iraqi expatriates, but on April 1 it was announced that the program had been suspended after 100-150had been trained. (66) On January 15, the United States formally requested several measures of assistance from the NATO allies, such as airborne warning and control systems aircraft (AWACS), refueling, andoverflight privileges; the request was deferred. On February 10, France, Germany and Belgiumvetoed U.S. and Turkish requests to bolster Turkish defenses on the grounds that assent wouldimplicitly endorse an attack on Iraq; German Chancellor Schroeder sought to sharpen the distinctionby announcing that his government would provide defensive missiles and AWACS crews to helpprotect Turkey on a bilateral basis. The impasse was broken by an agreement over languageindicating that such assistance "relates only to the defense of Turkey" and would not imply NATOsupport for a military operation against Iraq. (67) Despite the compromise, many observers believe thetemporary rift may have lasting consequences for NATO. On April 16, NATO announced that, sinceTurkey no longer believed itself to be threatened, the defensive missiles and surveillance aircraftwould be returned to their home bases. The Bush Administration asked permission of the Turkish government to use Turkish bases and ports and to move American troops through southeast Turkey to establish a northern front againstIraq. The talks over troop access proceeded in tandem with negotiations over a U.S. aid package. (68) An initial agreement was struck, permitting 62,000 U.S. troops in Turkey; in return, the UnitedStates would provide $6 billion in assistance. On March 1, however, the Turkish parliamentrejected the deal by a three-vote margin. Prime Minister Erdogan urged Washington to wait, but byMarch 18, the U.S. military cargo vessels that had been standing anchored off the Turkish coast weresteaming to the Gulf. On March 20, the Turkish parliament authorized overflight rights but alsoagreed to send Turkish troops into Iraq, a move opposed by the United States and other countries. After an early April visit by Secretary Powell, it was announced that Turkey would permit thetransshipment of nonlethal military supplies and equipment to U.S. forces in Iraq. (See above, Diplomatic Issues ). Some Members of Congress criticized Turkey, claiming it sought to leverageU.S. strategic needs to squeeze aid out of Washington. However, Turkish officials argued that morethan 90% of their country's population opposed war and that Turkey suffered severe economic lossesfrom the 1991 Gulf War. Ankara also was concerned that the Iraq conflict might re-kindle effortsof Kurdish separatists to carve out a Kurdish state; such a move would likely prompt Turkishintervention. Finally, Turkey has sought assurances that Iraq's 2-3 million ethnic Turkmen wouldbe able to play a post-war role in Iraq. (69) In late February 2003, Jordan's prime minister acknowledged the presence of several hundred U.S. military personnel on Jordanian soil; the troops were reportedly there to operate Patriot missiledefense systems and to conduct search-and-rescue missions; the deployment marked a reversal fromJordan's neutral stance during the 1991 Gulf war. (70) Egypt is permitting the U.S. military to use itsairspace and the Suez Canal. Although the Persian Gulf states generally opposed an attack on Iraqin public statements, more than 225,000 U.S. military personnel were ashore or afloat in the regionin late March, and Saudi Arabia and Qatar host large U.S. military command centers; according torecent reports, the Saudi government sanctioned limited use of the Prince Sultan airbase commandcenter and permitted search-and-rescue operations to be conducted along the Saudi-Iraqi border. TheSaudis also pledged to step up their oil output to compensate for any drop in Iraqi production. Kuwait served as the launch pad for the U.S.-led ground attack against Iraq. In addition, five U.S.aircraft carriers were in the region. Post-Conflict Assistance. After the 1991 Gulf War, several nations - notably Japan, Saudi Arabia and Germany - provided monetary contributionsto offset the costs of the conflict; it is not yet known if such will be the case for the Iraq war. However, U.S. policymakers hope that many countries will contribute to caring for refugees and tothe post-war reconstruction of Iraq by providing humanitarian assistance funding, programs fordemocratization, as well as peacekeeping forces. Before hostilities, several countries, includingFrance, Japan, Sweden, Russia, Estonia, Lithuania, and Romania indicated that they might play arole. In late April, it was announced that U.S. diplomats had approached 65 governments requestingassistance in reconstruction efforts, and that 58 countries had responded favorably. Deputy DefenseSecretary Wolfowitz stated that the Bush Administration would "pressure all our friends and alliesto contribute as much as they can." (71) Varioustypes of commitments already are being announced;for example, the Japanese and Canadian governments have pledged $100 million and $65 millionin assistance, respectively, and Rome has said that it would dispatch up to 3,000 troops to help inhumanitarian activities. In addition, Denmark has proposed the creation of an ad hoc peacekeepingforce. (72) Implications for the Middle East [author name scrubbed], [phone number scrubbed] ( Last updated April 22, 2003 ) The U.S.-led military campaign to disarm Iraq and end the regime of Iraqi President Saddam Hussein could have widespread effects on the broader Middle East. The opportunity to craft a newgovernment and new institutions in Iraq is likely to increase U.S. influence over the course of eventsin the Middle East. Conversely, U.S. military intervention could create a significant backlash againstthe United States, particularly at the popular level, and regional governments may feel even moreconstrained in accommodating future U.S. policy goals. Middle East governments that providedsupport to the U.S. effort against Iraq did so with minimal publicity and expect to be rewarded withfinancial assistance, political support, or both, in the war's aftermath. Allegations by senior U.S. officials, including President Bush, that Syria facilitated the movement of military equipment into Iraq and offered safe haven to Iraqi leaders have fedspeculation that Syria and possibly other Middle East countries may follow Iraq as future targets ofU.S. military action. Such warnings could encourage more cooperation on the part of other MiddleEastern countries with U.S. policy goals in an effort to forestall possible U.S. reprisals against them. On the other hand, the U.S. warnings could have the opposite effect by inducing resentment withinthe region over what many may regard as unwarranted U.S. interference in Middle East affairs. Democracy and Governance. Some commentators, including officials in the Bush Administration, believe that the war with Iraq and theoverthrow of Saddam Hussein will lead to a democratic revolution in large parts of the Middle East.Some link democracy in the Middle East with a broader effort to pursue development in a region thathas lagged behind much of the world in economic and social spheres, as well as in individualfreedom and political empowerment. In a speech at the Heritage Foundation on December 12, 2002,Secretary of State Colin Powell announced a three-pronged "Partnership for Peace" initiativedesigned to enhance economic development, improve education, and build institutions of civilsociety in the Middle East. Separately, Crown Prince Abdullah of Saudi Arabia has reportedlyproposed an "Arab Charter" that would encourage wider political participation, economicintegration, and mutual security measures. In his ultimatum to Saddam Hussein on March 17, 2003,President Bush commented that after Saddam's departure from the scene, the Iraqi people "can setan example to all the Middle East of a vital and peaceful and self-governing nation." Skeptics, however, charge that U.S. Middle Eastern policy has traditionally been tolerant of autocratic or corrupt regimes as long as they provide support for U.S. strategic or economicobjectives in the region. Other critics argue that the minimal amount of assistance contained in thePowell initiative ($29 million during the first year) reflects only a token effort to supportdemocratization and development, although the Administration is requesting significantly morefunding for this initiative-$145 million-in FY2004. Still others fear that more open political systemscould lead to a takeover by Islamic fundamentalist groups, who often constitute the most viableopposition in Middle East countries, or by other groups whose goals might be inimical to U.S.interests. Some commentators are concerned that lack of prior experience with democracy mayinhibit the growth of democratic institutions in the Middle East. Finally, a U.S.-installed governmentin Iraq may find it difficult to gain acceptance within the Arab world (73) and may thus have onlylimited appeal in the region as a role model. Arab-Israeli Peacemaking. Administration officials and other commentators argue that resolving the crisis with Iraq may have created a morefavorable climate for future initiatives to resume currently stalled Arab-Israeli peace negotiations. Proponents of this view cite the experience of the first Bush Administration, which brought Arabsand Israelis together in a landmark peace conference at Madrid in 1991, after first disposing of theIraqi occupation of Kuwait. Officials of the present Bush Administration have continued to speakof their vision of pursuing an Arab-Israeli peace settlement after eliminating threats from Iraq. In astatement to the press on March 14, 2003, President Bush affirmed that "America is committed, andI am personally committed, to implementing our road map toward peace" between Arabs andIsraelis. Others believe, however, that resentment within the region over the U.S. campaign againstIraq may have reduced the willingness of Arabs and Muslims to cooperate with the United States ina peacemaking endeavor. Security Arrangements in the Gulf Region. Large-scale deployment of U.S. troops to the Middle East to wage war against Iraq and the likelihoodof a continued major U.S. military presence in the region will exert added pressures on Middle Eastgovernments to accommodate U.S. policies in the near term. However, some fear that long-lastingmajor U.S. military commitments in the region could heighten resentment against the United Statesfrom Islamic fundamentalists, nationalists, and other groups opposed to a U.S. role in the MiddleEast; such resentment could manifest itself in sporadic long-term terrorism directed against U.S.interests in the region. Even friendly Middle East countries may eventually seek a reduction in U.S.military presence. According to a Washington Post report on February 9, 2003, Saudi Arabia'sCrown Prince Abdullah plans to request the withdrawal of U.S. armed forces from Saudi territoryafter Iraq has been disarmed. U.S. and Saudi officials declined to comment on this report, which anunnamed White House official described as "hypothetical." In the altered environment after thecollapse of Saddam Hussein's regime, however, senior U.S. Defense officials reportedly arecontemplating a significant reduction in U.S. military presence in the Middle East at some point inthe future. (74) Humanitarian Issues [author name scrubbed], [phone number scrubbed] (Last updated April 22, 2003) Funding for Humanitarian Assistance. Large-scale humanitarian and reconstruction assistance programs are expected to be undertaken by the United States during and following the war in Iraq. Initial U.S. assistance expenditures wereaimed at preparations for the delivery of humanitarian aid, focusing mostly on contingency planningand prepositioning of commodities. The United States has pledged to release 610,000 tons of food. To date, $560.7 million in FY2003 funds has been allocated, of which only $43 million is forreconstruction activities. However, with the main fighting now finished in Iraq, attention is alsoquickly turning to plans for reconstruction. (75) FY2003 Supplemental. The FY2003 Supplemental Appropriations ( P.L. 108-11 ) provides $2.48 billion for a special Iraq Relief andReconstruction Fund to be directed at aid efforts in a wide range of sectors, including water andsanitation, food, electricity, education, and rule of law. It gives the President control over the Fundand does not prohibit funds from going to DOD. The President, however, must consult with theAppropriations Committees prior to allocation of funds, and all obligations must be notified to theCommittees five days in advance. Funds transferred to agencies other than the State Department andUSAID are also subject to notification procedures. Reportedly, there are still tensions between theState Department and DOD over policy matters in the reconstruction of Iraq; however, USAID haspointed out that the same coordinated delivery system applied to other conflicts is being used in Iraq. Oil-for-Food Program (OFFP). The OFFP was suspended between March 18 and March 28, 2003. Prior to its suspension, approximately $10billion worth earmarked for humanitarian supplies were in the process of being delivered orproduced, of which one quarter covered food needs. On March 28, the U.N. Security Councilunanimously approved Resolution 1472, which gives Secretary General Annan authority to prioritizeand coordinate the immediate humanitarian needs of Iraqi civilians for an initial 45-day period, oruntil May 12, under an expanded OFFP. The OFFP is dependent upon Iraq's future cooperation withthe OFFP (and use of its distribution network) and the security of the personnel working for theUnited Nations once inside Iraq. (76) Furthermore,a number of agencies have indicated they plan touse the OFFP system, but how the provision of aid is to be coordinated among multiple donorsremains to be worked out. On April 21, the OFFP Director, Benon Sevan, said that politicalobstacles involving the Oversight Committee and contracting arrangements under the OFFP madeit very unlikely that even 10% of the funds could be released, even if the emergency authorizationwere extended to June 3, a proposal Sevan is putting before the Security Council on April 22. Thedebate over the reactivation of the OFFP has also been highlighted by the larger question of whatrole the U.N. will play in reconstruction. The ability of the United States to use oil resources for more long-term reconstruction purposes would require a Security Council resolution providing legitimacy to any interim Iraqi authority thatmight be the recipient of oil profits. On April 16, President Bush urged the U.N. to lift the sanctionson Iraq that prevent it from selling oil. U.S. officials reportedly believe that the U.N. will take stepsto lift the sanctions during the week of April 21. (77) Some argue this request has called into questionthe future of the OFFP in that it was created to ease the burden of sanctions, and once those sanctionsare lifted, the OFFP will also end. (78) In addition, the United States has initiated an effort to obtain support from creditors for Iraq debt relief. On March 20, President Bush issued an executive order confiscating non-diplomaticIraqi assets held in the United States. Of the total assets seized, an estimated $1.74 billion areexpected to be available for reconstruction purposes and as much as $600 million more may beseized in other countries. In addition, the United States, seeking to locate formerly unknown assetscontrolled by Saddam Hussein, has identified roughly $1.2 billion that might be used for relief andreconstruction purposes. (79) Other Donors. On March 28, 2003, U.N. agencies issued a $2.2 billion "flash appeal" for humanitarian aid and postwar relief to Iraq to coverexpenditures for a six-month period. Of that total, $1.3 billion would be for food aid. As of April5, $1.2 billion in pledges had been received. U.S. diplomats have reportedly asked more than 65 nations for assistance in the relief, reconstruction, and peacekeeping effort in Iraq. (80) Although the European Union (EU) has agreed tounite to provide humanitarian aid to Iraq, its plans are unclear with respect to reconstruction andlong-term aid. The EU has designated 100 million euros for humanitarian relief agencies. Japan haspledged $100 million in humanitarian aid. International contributions have been pledged or receivedfrom a number of other donors in funds for Iraq, for humanitarian relief in neighboring countries,and for in-kind emergency supplies. U.S. Aid Policy Structure in Iraq. To prepare forthe use of aid, a post-war planning office was established on January 20, 2003, by a presidentialdirective. The Office of Reconstruction and Humanitarian Assistance (ORHA), although locatedin the Defense Department, is staffed by officials from agencies throughout the government. Whileimmediate overall responsibility for the war and management of U.S. activity in post-war Iraqbelongs to General Tommy Franks, Commander of U.S. Central Command, the ORHA is chargedwith producing plans for his use in carrying out that role. In addition, it is responsible forimplementing U.S. assistance efforts in Iraq. The Office, headed by retired Army Lt. Gen. Jay M.Garner, has three civilian coordinators - for reconstruction, civil administration, and humanitarianrelief. (81) Plans formulated before the war startedcall for three regional coordinators - for north,south, and central Iraq - to serve under the functional coordinators. (82) Regional coordinator officeswould reportedly be mostly staffed by so-called "free Iraqis," those who have been living outsideIraq in democratic countries, who would act as advisors. Indigenous Iraqi groups are expected tobe formed in each province to propose assistance activities to be implemented in their area. (83) Whilemost of the staff awaits deployment from Kuwait, General Garner has sent advance teams to Iraq toestablish offices in the three regions and to begin to assess relief and reconstruction needs. He touredBaghdad and other parts of Iraq on April 21. According to planners, U.S. armed forces will initially take the lead in relief and reconstruction, later turning to existing Iraqi ministries, nongovernmental organizations (NGOs), and internationalorganizations to assume some of the burden. (84) The U.S. Agency for International Development(USAID) has put together Disaster Assistance Response Teams (DARTs) that are slowly beingdeployed around the country. Reportedly, some U.S. humanitarian groups are objecting to the U.S.military taking charge of all relief efforts. They are concerned that operating under DOD jurisdictioncomplicates their ability to help the Iraqis, jeopardizes their neutrality, and increases the risk to aidworkers because they will be perceived as being closely allied with the U.S. campaign. Many NGOsview the U.N. leadership as important because it could add legitimacy and encourage wider NGOparticipation. Humanitarian Assistance: Relief Operations. Background. Until it was suspended on the eve of war, U.N. and other humanitarian agencies were providing aid to Iraq through the OFFP, which usedrevenue from Iraqi oil sales to buy food and medicines for the civilian population. (85) Sixty percentof Iraq's estimated population of 24 to 27 million were receiving monthly food distributions underthe OFFP. Prior to the war, sources said the average Iraqi had food supplies lasting a few months,but food security remains uncertain, just as the amount of food stored in OFFP warehouses is alsounclear. (86) WFP officials argue that while foodmay not be an issue at the moment, supplies needto be entering the country now in order to prevent a crisis in a few weeks. (87) Contingency Preparations. In the weeks leading up to the war, aid organizations planned for humanitarian needs amid great uncertainty about conditionsin the aftermath of conflict. (88) They report thatemergency supplies such as water, food, medicine,shelter materials, and hygiene kits are in place in countries bordering Iraq. While some arguedinitially that there was still a huge shortfall of resources and funding available for humanitarianassistance, the fact that the borders have remained quiet has allowed more time for furtherpreparation. Although population movements now appear less likely, there were concerns about theabsorptive capacity of neighboring countries, whether they could provide adequately for thesepopulations, and the impact of refugee flows on stability in the region. Iran, Turkey, Jordan, Syria,Saudi Arabia, and Kuwait have all publicly stated that they will prevent refugees from entering theircountries, although each has continued to make preparations for assistance either within Iraq'sborders or at transit areas at border crossing points. The U.N. Humanitarian Coordinator in Iraq,Ramiro Lopez da Silva, has set up an interim logistics hub in Cyprus. Although NGOs have alsobeen putting together plans, the absence of international organizations and NGOs with experienceoperating in and around Iraq means there are few networks in place and some concern over theimplementation of relief operations. Current Operating Environment. The war is destroying critical infrastructure, disrupting delivery of basic services and food supplies, andaffecting the humanitarian situation inside Iraq. So far it has not reached the crisis levels predictedbefore the start of hostilities. Widespread hunger and massive population movements have notmaterialized. Still, lack of electricity, water shortages, inadequate sanitation, and greatly reducedmedical care are creating hardship for many. The humanitarian situation continues to evolve as thewar progresses. The amount of assistance that is ultimately needed will obviously depend on thenature and duration of the conflict. The United Nations reportedly expects that nearly 40% of theIraqi population could require food assistance within weeks. (89) Relief and Security. In the short term, security of humanitarian aid delivery and distribution is a top priority. During the height of the militarycampaign, when small amounts of aid got through, logistical problems and unruly mobs madedistribution very difficult. Since then, looting and lawlessness, particularly in places where heavyfighting took place, have been widespread and even included hospitals and water supplyinstallations, which is having an increased impact on health care. Most aid agencies remain on Iraq'sborder unwilling to enter for security reasons. Some U.N. staff are said to be returning to certainparts of Iraq, security permitting. (90) Despite theprecarious situation on the ground, a small numberof private humanitarian groups are operating in southern Iraq, working independently from themilitary and in advance of the full return of U.N. staff. In Baghdad, roughly 18 NGOs have formedthe NGO Coordination Committee in Iraq (NCCI) to more effectively provide assistance. Deliveriesof water, food, and medical supplies are slowly getting through, even though at times the chaos andviolence hampers the efforts of those trying to provide the most minimal vital assistance. In general,the overall situation still has not not resulted in consistent, comprehensive provision of aid. Regularnon-military flights into Baghdad are pending approval by the military. The U.N. has appealed to coalition forces to act quickly to avoid the complete breakdown of aid efforts, calling for them to protect essential infrastructure such as hospitals and water supplysystems and to enable full-scale efforts to get food, water, and medical aid in to Iraq. Althoughpockets of resistance continue throughout the country, coalition troops are now also patrolling citiesand appear to be controlling much of the looting. In addition, they are beginning to assist with therestoration of basic public services. Despite the obvious destruction from bombing and looting, insome places, such as Baghdad, there are signs of a return to normal life in the form of traffic jams,lines at gas stations, and food stalls with produce. Post-War Relief Priorities. The United States has not yet declared victory in Iraq, but a new phase, to bring about law and order and humanitarian relief, appears to be underway. (91) Under the Fourth Geneva Convention theoccupying forces are obligated to provide for these basic needs. Throughout the country, logisticalproblems continue to complicate the security of supply routes. Once security is established,questions remain about delivery of aid (whether roads used by the military will be usable or whetherseparate supply routes will need to be put in place); availability of cargo and water trucks (currentlyin short supply); and distribution (particularly in cities where the military is may not have gained fullcontrol over population centers.) Aid agencies plan to establish bases within Iraq to support relief operations. However, they fear that receiving protection from coalition-led forces could mean an increase in security risks for theirstaff. The EU is also concerned about the "independence and integrity of delivering humanitarianaid." (92) Continuing instability has preventedattempts to assess the needs of local people and providehumanitarian assistance. The apparent bitterness towards the coalition forces also remains an issue. Water and Sanitation. An insufficient water supply is proving to be one of the biggest humanitarian challenges. Deliveries by tanker to some towns,building an extension to the pipeline from Kuwait to Umm Qasr, and mobile teams working to repairand maintain generators are mechanisms underway to address the problem. (93) UNICEF is alsoplanning its first shipment of water to southern Iraq. (94) Lack of electricity is a huge issue for manyIraqis. Shortages of fuel have also been reported. Many sewer treatment plants are not functioning,allowing sewage to drain into water systems. Health. The International Committee of the Red Cross (ICRC) has been operating in Iraq since the war began. They have now been joined by ahandful of NGOs. ICRC teams report that hospitals have varying levels of capacity and security. Some have been overwhelmed by casualties and are in need of additional medical supplies and staff. It is impossible to get accurate statistics on casualties and treatment provided. Dedicated staff havecontinued to work under difficult conditions, even protecting records and equipment from looting. An ICRC convoy was fired on in Baghdad on April 8 and one of its aid workers was killed. Civiliancasualties have been reported as a result of hostilities and also from unexploded ordinance and landmines. Summer heat, poor sanitation, and lack of electricity have some concerned about the highrisks of epidemic disease. There are reports of dramatic increases in diarrheal cases, especiallyamong children. The WHO is making plans to conduct a full assessment of hospital situations. (95) South of Baghdad a large U.S. Army hospital is treating both wounded and sick Iraqis. Food Security. At present, food supplies appear to be adequate, in part because extra rations were distributed prior to the war. The WFP has increasedits delivery of food from Turkey into northern Iraq and has made plans to open another humanitariancorridor in Iran and to dispatch food through Syria and Jordan. On April 17, the WFP sent its firstfood aid convoy from Jordan to Baghdad. (96) Security concerns result in many delays and slowtransportation. The WFP predicts that the food program in Iraq will be the largest in history,providing four times the amount supplied to Afghanistan after the Taliban was ousted. The WFPwants to reach a target of having enough food for 27 million people by early May but has a long wayto go to meet this objective, partly because it needs to secure warehouses and make mills and silosoperational. It will also need to reactivate the OFFP distribution system, which relies on 44,000outlets throughout Iraq, by reestablishing contact with recent or active suppliers to begin providingfood and other humanitarian assistance. (97) Population Movements. Limited or no access by the United Nations and aid agencies makes it difficult to confirm reports of population displacement.According to the United Nations, there is a reported increase in the number of people leavingBaghdad for the countryside and small towns. (98) There have been some increased populationmovements within Iraq, which appeared to be occurring mainly in the north. Many have eitherreturned home or were able to find local accommodation with friends and relatives. Emergencysupplies have been provided to aid agencies assisting Internally Displaced Persons (IDPs). Innorthern Iraq, the ICRC has continued to monitor the condition of the IDPs and provided emergencyand non-aid items to displaced families. There are reports of Arab families under pressure to leavebecause they are being displaced by Kurds. Few refugees have been moving out of Iraq. However, for several weeks some people were gathering close to the Iraq/Iran border in the south. Since the fall of Baghdad, up to 30,000 displacedIraqi have reportedly gathered at the Iraqi border near western Iran. (99) UNHCR, the United Nationsrefugee agency, is responding with assistance and reports that these IDPs do not intend to cross intoIran. And more recently, approximately 1,000 people have fled to a no-man's land on Jordan'sborder. Jordanian authorities are requiring those admitted to sign waivers agreeing to return to Iraq. In response to U.S. demands not to grant asylum to members of the former Iraqi regime, Syriaapparently sealed its border to all but those carrying visas. UNHCR reports that several dozen Iraqirefugees were removed from a Syrian refugee camp and taken back into Iraq. Third CountryNationals (TCNs) represented the main bulk of individuals leaving Iraq. Asylum seekers have beenreported at several border areas, but there are no confirmed arrivals. Transition Initiatives. The now coalition-controlled port of Umm Qasr, Iraq's main outlet to the Persian Gulf, is a crucial gateway for humanitariansupplies. British and Australian forces continue to sweep it for mines, but massive dredging andrebuilding is required to prepare the port for large cargo ships. Two Australian cargo ships carryingfood aid have been delayed entry into the port because they are unable to dock due to their size. (100) Once the port is operational, some sources fear that offloading will be slow and inefficient, leadingto risks of delay in the delivery and distribution of relief materials. The Royal Fleet Auxiliary shipSir Galahad, containing humanitarian supplies, arrived at the port on March 28. The food will bestored in a warehouse until the OFFP can be revived. The WFP met with national staff in Umm Qasrto discuss resuming a distribution role under the OFFP. (101) A team of port management specialistsand engineers are reported to be assessing the damage to the port and determining what needs to bedone to make it operational for the distribution of humanitarian aid. (102) It is quite possible that the situation in Iraq may move more quickly than anticipated through the humanitarian phase to reconstruction. Already transition initiatives are underway. Accordingto UNICEF, some schools in southern Iraq have reopened. And plans are being developed forlong-term reconstruction: reestablishing the educational system and health sector, restarting theeconomy, rebuilding the infrastructure (such as airports, water, and electric systems, road, railroads,and ports), and promoting democratic governance. International and Domestic Legal Issues Relating to the Use of Force Richard Grimmett [phone number scrubbed]; David Ackerman [phone number scrubbed] (Last Updated April 14, 2003) The use of United States military force against Iraq raised a number of domestic and international legal issues - (1) its legality under Article I, � 8, of the Constitution and the WarPowers Resolution; (2) its legality under international law if seen as a preemptive use of force; and(3) the effect of United Nations Security Council resolutions on the matter. The followingsubsections give brief overviews of these issues and provide links to reports that discuss thesematters in greater detail. The Constitution and the War Powers Resolution. Domestic legal issues raised by the use of military force against Iraq concerned both the Constitutionand the War Powers Resolution. Article I, Section 8, of the Constitution confers on Congress thepower to "declare War"; and historically Congress has employed this authority to enact bothdeclarations of war and authorizations for the use of force. Article II of the Constitution, in turn,vests the "executive Power" of the government in the President and designates him the "Commanderin Chief of the Army and Navy of the United States ...." Because of these separate powers, andbecause of claims about the inherent authority that accrues to the President by virtue of the existenceof the United States as a sovereign nation, controversy has often arisen about the extent to which thePresident may use military force without congressional authorization. While all commentators agreethat the President has the constitutional authority to defend the United States from sudden attackwithout congressional authorization, dispute still arises concerning whether, and the extent to which,the use of offensive force in a given situation, as in Iraq, must be authorized by Congress in orderto be constitutional. The War Powers Resolution (WPR) ( P.L. 93-148 ), in turn, imposes specific procedural mandates on the President's use of military force. The WPR requires, inter alia , that the President,in the absence of a declaration of war, file a report with Congress within 48 hours of introducingU.S. armed forces "into hostilities or situations where imminent involvement in hostilities is clearlyindicated by the circumstances." Section 5(b) of the WPR then requires that the President terminatethe use of the armed forces within 60 days (90 days in certain circumstances) unless Congress, in theinterim, has declared war or adopted a specific authorization for the continued use of force. TheWPR also requires the President to "consult" with Congress regarding uses of force. With respect to Iraq, these legal requirements were met. As noted earlier in this report, P.L. 107-243 , signed into law on October 16, 2002, authorized the President "to use the Armed Forcesof the United States as he determines to be necessary and appropriate in order to (1) defend thenational security of the United States against the continuing threat posed by Iraq; and (2) enforce allrelevant United Nations Security Council resolutions regarding Iraq." As predicates for the use offorce, the statute required the President to communicate to Congress his determination that the useof diplomatic and other peaceful means would not "adequately protect the United States ... or ... leadto enforcement of all relevant United Nations Security Council resolutions" and that the use of forcewould be "consistent" with the battle against terrorism. On March 18, 2003, President Bush sent aletter to Congress making these determinations. P.L. 107-243 also specifically stated that it was "intended to constitute specific statutory authorization within the meaning of section 5(b) of the War Powers Resolution." Thus, it waivedthe time limitations that would otherwise have been applicable under the WPR. The statute alsorequired the President to make periodic reports to Congress "on matters relevant to this jointresolution." P.L. 107-243 expressed congressional "support" for the efforts of the President to obtain"prompt and decisive action by the Security Council" to enforce Iraq's compliance with all relevantSecurity Council resolutions, but it did not condition the use of force on prior Security Councilauthorization. The authorization did not contain any time limitation. Subsequent to enactment of the authorization but prior to the initiation of military action, twelve members of the House of Representatives, along with a number of U.S. soldiers and the families ofsoldiers, filed suit against President Bush seeking to enjoin military action against Iraq on thegrounds it would exceed the authority granted by the October resolution or, alternatively, that theOctober resolution unconstitutionally delegated Congress' power to declare war to the President. On February 24, 2003, the trial court dismissed the suit on the grounds it raised a nonjusticiablepolitical question; and on March 13, 2003, the U.S. Court of Appeals for the First Circuit affirmed,albeit on different grounds. The appellate court stated that, although the mobilization of U.S. forcesclearly imposed hardships on the plaintiffs soldiers and family members, the situation was too fluidto determine whether there was an irreconcilable conflict between the political branches on thematter of using force; and, thus, the separation of powers issues raised by the suit were not ripe forjudicial review. On the delegation issue, the appellate court ruled that the Constitution allowsCongress to confer substantial discretionary authority on the President, particularly with respect toforeign affairs, and that in this instance there was no "clear evidence of congressional abandonmentof the authority to declare war to the President." "[T]he appropriate recourse for those who opposewar with Iraq," the First Circuit concluded, "lies with the political branches." See Doe v. Bush, 240F.Supp.2d 95 (D. Mass. Feb. 24, 2003), aff'd , 322 F.3d 109 (1st Cir. March 13, 2003), rehearingdenied , 2003 U.S. App. LEXIS 4830 (1st Cir. March 18, 2003). International Law and the Preemptive Use of Force. Given that the United States had not itself been attacked by Iraq, onequestion that arose with respect to the use of force against Iraq concerned its legitimacy underinternational law, if considered apart from Security Council resolutions. International lawtraditionally has recognized the right of States to use force in self-defense, and that right continuesto be recognized in Article 51 of the U.N. Charter. Self-defense has also traditionally included theright to use force preemptively. But to be recognized as legitimate under international law,preemption has had to meet at least two tests: (1) the perceived threat of attack has had to beimminent, and (2) the means used have had to be proportionate to the threat. In the past the imminence of a threat has usually been readily apparent due to the movement of enemy armed forces. But some contend that the advent of terrorism, coupled with the potentialavailability of weapons of mass destruction, has altered that equation. The Bush Administration, inparticular, argued in a national security strategy document released in 2002 that "we must adapt theconcept of imminent threat to the capabilities and objectives of today's ... rogue states and terrorists"by expanding the parameters of preemptive self-defense to include war against potential threats, i.e. ,preventive war. (103) Subsequently, with respectto the legality under international law of its use offorce against Iraq, the Administration relied primarily on prior resolutions of the United NationsSecurity Council. (104) But it also claimed thatits use of force was justified on the basis of our"inherent right of self defense, recognized in Article 51 of the UN Charter." (105) There is considerable doubt that Iraq posed a threat of attack on the U.S. sufficiently imminent to fall within the traditional justification for preemption. Arguably, therefore, the use of forceagainst Iraq can be seen as an exercise not of the traditional right of self-defense but of theAdministration's expanded doctrine of preemption that incorporates preventive war. To the extentthat is the case, critics argue that the military action against Iraq has loosened the legal constraintsthe international community has attempted to impose on the use of force since World War II andpresages similar justifications for the use of force against other states deemed to be potential, but notimminent, threats. India, in particular, it is noted, has been drawing parallels between Iraq andPakistani actions regarding Kashmir; and, it is argued, other states may do so as well. Thus, the useof force against Iraq has provided a singular opportunity to examine whether the international legalstandards governing preemption have been violated and, if so, whether the traditional standardsought to be reformulated. Security Council Authorization. Prior to widespread adoption of the Charter of the United Nations (U.N.), international law recognized anation's use of force against another nation as a matter of sovereign right. But the Charter wasintended to change this legal situation. The Charter states one of its purposes to be "to savesucceeding generations from the scourge of war." To that end it mandates that its Member states"refrain in their international relations from the threat or use of force against the territorial integrityor political independence of any State, or in any other manner inconsistent with the Purposes of theUnited Nations" and that they "settle their disputes by peaceful means ...." It also creates a systemof collective security under Chapter VII to maintain and, if necessary, restore international peace andsecurity, effectuated through the Security Council. While that system was often frustrated by theCold War, the Security Council has directed its Member states to impose economic sanctions in anumber of situations and to use military force in such situations as Korea, Iraq's invasion of Kuwait,and the Balkans. In addition, the Charter in Article 51, as noted above, continues to recognize the"inherent right" of States to use force in self-defense. On March 17, 2003, the United States, Great Britain, and Spain abandoned efforts in the Security Council to obtain a new explicit authorization for the use of force against Iraq. Nonetheless,the U.S. and Great Britain both contended that earlier resolutions of the Security Council adoptedin the wake of Iraq's invasion of Kuwait in 1990 provided sufficient and continuing authority for theuse of force. They noted that after a number of resolutions in 1990 calling on Iraq to withdraw hadgone unheeded, the Council in Resolution 678, adopted on November 29, 1990, authorized Memberstates "to use all necessary means to uphold and implement Resolution 660 (1990) and allsubsequent relevant resolutions and to restore international peace and security in the area." Theyfurther noted that following Gulf War I, the Council on April 3, 1991, adopted Resolution 687,which set forth numerous obligations that Iraq had to meet as conditions of securing a cease fire,including total disarmament and unconditional agreement not to develop or acquire chemical,biological or nuclear weapons or facilities or components related to them, and that Iraq acceptedthose obligations. Resolution 687, they also observed, specifically reaffirmed previous U.N. resolutions on Iraq, including Resolution 678. Noting that the Council had on numerous occasions - most recently inResolution 1441 in the fall of 2002 - found Iraq to be in material breach of its disarmamentobligations and contending that it was in material breach of that resolution as well, the U.S. andGreat Britain argued that the use of force continued to be authorized to remedy those breaches andto restore the conditions of the cease fire. Thus, the Attorney General of Great Britain in a legalopinion released on March 17, 2003, and the White House in a report to Congress released on March19, 2003, asserted that "a material breach of resolution 687 revives the authority to use force underresolution 678." Nonetheless, that was not the view of a number of Members of the Security Council, including some of the permanent Members, or of many international legal specialists. They contended that thequestion of whether past Security Council resolutions continue to authorize the use of force is forthe Security Council to decide and not individual Member states. In particular, they noted that Iraq'sagreement to the conditions of the cease fire, embodied in Resolution 687, was with the SecurityCouncil and not with the Member states that had forced its withdrawal from Kuwait. They furtherstressed that Resolution 1441, while deeming Iraq to be in "material breach" of its obligations underearlier resolutions, imposed "an enhanced inspections regime" in order to give Iraq "a finalopportunity to comply with its disarmament obligations," and stated that Iraq would face "seriousconsequences" if it continued to fail to meet its obligations. They also emphasized that Resolution1441 did not itself authorize Member states to use force but mandated that the Council "conveneimmediately" in the event Iraq interfered with the inspections regime or otherwise failed to meet itsdisarmament obligations. Thus, they concluded, Resolution 1441 contemplated that the use of forceagainst Iraq would be legitimate only upon the adoption of another resolution. In the absence of a judicial forum that might provide a final resolution of this legal debate, what may be most significant is that both supporters and opponents of the military action against Iraq found it necessary, or at least advantageous, to argue the legality of the action within the frameworkof the U.N. Charter. Pronouncements about the demise of that legal framework, in other words, mayhave been premature. Cost Issues [author name scrubbed], [phone number scrubbed]; [author name scrubbed], [phone number scrubbed] (Last updated April 21, 2003) On April 12, 2003, the House and Senate passed the conference version of the FY2003 supplemental appropriations ( H.R. 1559 ) providing funding for the war with Iraq,foreign assistance, homeland security, and aviation assistance ( P.L. 108-11 / H.Rept. 108-76 ). (106) FinalCongressional action was completed less than three weeks after the Administration's request wassubmitted shortly after the beginning of the war. For a more detailed discussion of the FY2003supplemental, see CRS Report RL31829 , Supplemental Appropriations FY2003: Iraq Conflict,Afghanistan, Global War on Terrorism, and Homeland Security . With the conclusion of hostilities and passage of the supplemental, debate about costs is likely to shift from the cost of the war itself to the scope and sharing of post-war costs by the Departmentof Defense, other government agencies, and the international community. For DOD, the adequacyof the $62.6 billion provided in the FY2003 supplemental may hinge on the number of troops whowill remain deployed in Iraq in FY2003. The size of troop deployments needed to ensure securityand stability has been debated both in Congress and among think tanks (see below). (107) Because DOD has not publicly identified the planned troop deployments assumed within the funding levels in the supplemental, it is difficult to assess whether the supplemental is likely to beadequate. DOD Comptroller Dov Zakheim recently suggested that the supplemental funding levellooks to be about right in light of current estimates (see below), but others have voiced concern thatDOD may be assuming too rapid a draw down. Since DOD's occupation costs in FY2004 are notincluded in its FY2004 appropriation request, a supplemental next year is likely. The other major cost issue that may arise is DOD's role in Iraqi relief and reconstruction efforts. The enacted version of the FY2003 supplemental appropriates $2.4 billion for those tasks to bedistributed to agencies by the President. In a National Security Presidential Directive issued in lateJanuary, DOD was given responsibility for the rebuilding of Iraq, suggesting that DOD may play amajor role in managing those funds. (108) Thelong-term costs of both occupation and reconstructionmay also be debated in Congress. Final Congressional Action on the FY2003 Supplemental. The conference version of H.R. 1559 provides the$62.6 billion requested for the Department of Defense for the war in Iraq, the continued U.S.presence in Afghanistan, enhanced security at U.S. military bases, postwar occupation costs in Iraq,and repair of equipment and replacement of munitions and equipment lost in the war. Of the $62.6billion total, DOD requested $59.9 billion in the Defense Emergency Response Fund (DERF), atransfer account where DOD can exercise discretion about where the monies would be spent andthen move the funds to the appropriate account, and $2.6 billion for specified activities. That proposal aroused considerable concern among many Members of Congress. (109) AlthoughDOD provided Congress with estimates of where the funds would be spent, these proposedallocations would not be binding. In response to that concern, the conference version of the billdistributes all but $15.7 billion of the funds for DOD to regular appropriations accounts. To givethe additional flexibility requested, Congress appropriated $15.7 billion to a new Iraq Freedom Fundthat can be spent by DOD as desired as long as it stays within certain ceilings and floors set withinthe bill and gives five days advance notification of transfers to the defense committees. Thisapproach blends the two different approaches for allocating the funds that were devised by Houseand Senate appropriators. Since these funds can be used in either FY2003 or FY2004, DOD couldfinance next year's occupation costs if funds proved to be greater than needed in FY2003 (seesection below, Recent Estimates of Cost of War ). DOD Request and Congressional Action. According to DOD's justification materials, the request assumed a "short but extremely intense" warand covered deployment and return of forces and equipment, repair and replenishment of equipmentand munitions damaged or used during the war, mobilization of reserve forces, special pays foractive-duty forces, and a "lower-intensity" operations phase after the war is over. The request alsoincluded funds for the cost of the U.S. presence in Afghanistan and enhanced security in the UnitedStates for the remainder of the fiscal year. (110) The request included several controversial proposals that broadened DOD's role in military assistance including $1.4 billion for aid to Pakistan, Jordan, and other nations for logistical andmilitary-related support; $150 million that DOD could use to pay irregular or "indigenous" foreignmilitary forces; and $50 million for foreign military regular forces of unspecified countries whocooperate with the U.S. in the "global war on terrorism." Although the Secretary of Defense wouldneed the concurrence of the Secretary of State for the aid to regular or irregular foreign militaryforces, congressional oversight would be limited because reporting of expenditures would be afterthe fact. (111) The conference version requires15-day advance notifications for the $1.4 billion inlogistical and military support, eliminates the Administration's request for $150 million for irregularforces, and reduces the $50 million for regular foreign military forces and limits that funding tocounter terrorism training. In addition to funds for DOD, the Administration requested $2.4 billion for an Iraqi Relief and Reconstruction Fund, with the Administration retaining flexibility both as to how to spend the fundsand which agency would manage those funds. The prospect that much of these funds would bemanaged by DOD, rather than by USAID and the State Department as is the norm for foreignassistance programs, created controversy within the Administration, among American internationalnon-governmental organizations (NGOs), and internationally. Critics argue that military control ofcivilian operations would be inappropriate. The conference version places the new Relief andReconstruction Fund under the control of the president, and permits funds to be transferred to DOD,reversing earlier action by the House and Senate appropriators. The conference version requiresconsultation prior to transfers and 5-day advance notification to the appropriations committees beforeobligation of funds. (112) Based on press reportsand the President's decision to give DOD majorresponsibility for reconstruction, DOD may play a major role in managing these funds. The FY2003 supplemental also included specified requests for aid to 22 countries that have assisted the U.S. in some fashion in Iraq or the global war on terrorism and that face economic andpolitical risks because of the Iraqi war. This request totaled $4.7 billion. Major recipients wouldinclude Jordan ($700 million), Israel ($1 billion plus $9 billion in guaranteed loans), Turkey ($1billion which could be applied to $8.5 billion in loans), $325 million for Afghanistan, $300 millionfor Egypt for grants or loan guarantees, and $200 million for Pakistan. The conference versiongenerally provides the funds requested by Administration but reduces the request for Afghanistanto $167 million. (113) The FY2003 supplemental only addresses costs for the war itself, initial occupation, and replenishment of equipment and supplies for the remainder of the fiscal year. The Administration'srequest does not specify its assumptions about how many or how long troops would remain deployedin Iraq as an occupation force after the war is over, a controversial issue. Some current and retiredArmy leaders suggest that large numbers would be needed and that the Army's readiness could beaffected (see Occupation, below). To address the issue of long-term costs, the FY2004 budget resolution as passed by the Senate included an amendment that created a $100 billion reserve fund for the next 10 years to cover thecost of the war in Iraq, to be financed by reducing the size of the tax cut by $10 billion annuallybetween 2003 and 2013. The conference version of H.Con.Res. 95 eliminated thisprovision. (114) DOD Believes FY2003 Supplemental Will be Adequate. In a recent press conference, DOD Comptroller Dov Zakheim suggestedthat DOD's estimates of costs in its FY2003 supplemental request appear to be about right based oncosts experienced thus far. Based on its cost reports, it appears that DOD's costs in FY2003 for Iraqand Afghanistan and the global war on terrorism could range from $55.4 billion to $65.0 billion. The midpoint of the two estimates is $61.1 billion or close to the $62.6 billion provided by Congressin the supplemental. (see Table 1 below). (115) Table 1. DOD Estimate of Adequacy of FY2003 Supplemental for Cost of War in Iraq and Afghanistan (in billions of dollars) Source: CRS calculations based on DOD Press Transcript, Dov Zakheim,OSD/Comptroller , April16, 2003; see the related Department of Defense web site page at http://www.defenselink.mil/transcripts/2003/tr20030416-0111.html . a Covers personnel and personnel support costs for second half of FY2003; first half iscovered incategory, "Spent Thus Far." b Provides military and logistical support to Pakistan, Jordan and other "key cooperating"nations inthe global war on terrorism. c DOD estimates cost of Afghanistan and global war on terrorism runs about $1.1 billionto $1.2billion per month; CRS assumes the last seven months of costs are covered in the FY2003supplemental with the previous months funded in the $6 billion received by DOD in theFY2003 Consolidated Appropriations Resolution ( P.L. 108-7 ) d DOD's and Senator Steven's estimates of effect of congressional action to increaseimminentdanger pay and family separation allowances for deployed troops for FY2003 in P.L. 108-7 . e Congress set a floor of $1.1 billion for fuel costs due to higher prices compared to the $430millionassumed by DOD in its request. f Based on discussions with the services, Congress allocated $1.7 billion more for militarypersonnelthat DOD included in its request; however, if DOD's estimates are correct and the funding isnot needed, DOD can transfer the funds elsewhere (see H.Rept. 108-56 , p. 10). g May not add to total due to rounding. Estimates of the Total War and Postwar Costs. Because of uncertainties about both the course of the war itself and post-war needs, estimates of thetotal cost of war and war-related costs by observers outside the Administration ranged widely (see Table 2 below). Some observers emphasized that the cost for the United States could besubstantially higher than in the first Persian Gulf war because U.S. allies were unlikely to contributeto either the cost of the war itself or to postwar occupation. (116) The Administration is hopeful,however, that other countries will contribute to postwar reconstruction of Iraq. (117) The role of allies in postwar occupation is a particular concern of Army officials who worry that if a large postwar occupation force is required for one or two years, the readiness of U.S. forcescould be taxed. (118) Estimates of the numberof occupation forces needed have ranged from50,000-75,000, an estimate reportedly under consideration by the Joint Chiefs of Staff, to over200,000, an estimate proposed by both General Eric K. Shinseki, Chief of Staff of the Army, andretired military and other experts with recent experience in the Balkans or the 1991 Gulf war. (119) TheAdministration's estimate appears to include funding for a relatively small occupation force for sixmonths. Members of Congress voiced concerns about the effect of war costs on the deficit. It now appears unlikely that total war costs in FY2003 will reach $100 billion in the first year, which wouldhave increased the FY2003 deficit by one-third from about $300 billion to $400 billion, setting a newrecord in real terms (i.e. when adjusted for inflation) though still a smaller percent of the GDP thanin 1983. (120) The effect of war costs on thedeficit was part of the ongoing debate on the FY2004budget resolution. War and related costs could rise if DOD's assumption about the size of theoccupation force needed proves to be optimistic, and continuation of those costs could increasefuture deficit levels. The full costs of a war with Iraq could include not only the cost of the war itself but also the cost of aid to allies to secure basing facilities and to compensate for economic losses (e.g. Pakistan,Israel, Egypt, and Jordan), post-war occupation costs, reconstruction costs, humanitarian assistance,and paying Iraqi government officials. Post-war costs could prove to be higher than the cost of thewar itself according to the estimates below. Those estimates suggest that direct war costs could range between $33 billion and $60 billion, while the costs of aid to allies, occupation, reconstruction, and humanitarian assistance could rangebetween $35 billion and $69 billion in the first year depending on the size of the occupation force,the amount for aid to allies, the scope of humanitarian assistance, and the sharing of reconstructionaid. Estimates of total costs in the first year ranged from about $68 billion to $129 billion. (see Table 2 below). (The FY2003 supplemental covers costs for Iraq that begin with initialdeploymentof forces in December 2002 and January 2003.) The Defense Department has not provided anyofficial estimates of the potential costs of the war with Iraq beyond FY2003. Earlier, Secretary of Defense Rumsfeld had stated that $50 billion would be "on the high side for the cost of the war." (121) The Office ofManagement and Budget had reportedly estimated costsof $50-60 billion, but it did not issue the estimate publicly or explain the assumptions underlying itsprojections. An earlier estimate by former chief White House economist Larry Lindsey of $100billion to $200 billion was dismissed by the Administration. Table 2. Earlier Estimates of First Year Cost of a War with Iraq (in billions of dollars ) Notes and Sources: a Lower end reflects CBO revised estimate of cost of one-month war reflecting currentdeployments,a 10 month occupation of 100,000 troops, the U.S. paying half of the U.N.'s estimate of $30billion for reconstruction over three years, humanitarian aid for 10 % of the population, and $10billion in aid to allies based on State Department sources cited in Los Angeles Times , "Iraq WarCost Could Soar, Pentagon Says," February 26, 2003. b Higher end estimate reflects House Budget Committee estimate of cost of a 250,000 force,a10-month occupation of 200,000 troops, the U.S. paying the full cost of reconstruction,humanitarian aid for 20% of the population and $18 billion in aid to allies based on StateDepartment sources cited in Los Angeles Times , "Iraq War Cost Could Soar, Pentagon Says,"February 26, 2003. Previous Estimates of War Costs. In March 2003, on the basis of then current deployments, the Congressional Budget Office (CBO) revised itsestimates of the costs of a war. Using its assumptions, a one-month war would cost $33 billion anda two-month war would cost $41 billion. (122) Adding $19 billion cost of an occupation force of100,000 to the cost of a one-month war, CBO's estimate would be about $51 billion, fairly closeto the Administration's request taking into account that the request included about $10 billion innon-Iraq costs. (123) Using a methodology based on the costs of the Persian Gulf War of 1991, the Democratic staff of the House Budget Committee estimated that a two-month war that deployed 250,000 troops wouldcost $53 billion to $60 billion, an estimate closer to that used by Secretary Rumsfeld. (124) An estimateby the Center for Strategic and Budgetary Assessments (CSBA) that blends the two approaches,suggested that the direct costs of a two-month war would be about $35 billion. A six-month war,with the same force size, could cost substantially more, ranging from $50 billion using CBO'sfigures to $85 billion using CSBA's approach. (125) Related Aid to Allies. The long-term cost of assistance to allies that could be affected by the war is uncertain. The supplemental includesassistance requests for the next 12 months totals $4.5 billion including both grants and loans but doesnot address any longer term cost issues. (126) Occupation. The cost of a post-war occupation would vary depending on the number of forces and the duration of their stay. The FY2003supplemental includes $12 billion for "stabilization" costs for the remainder of FY2003, but it is notclear what the Administration is assuming about troop levels. (127) Using factors based on the recentexperience for peacekeepers, CBO estimated that monthly occupation costs would range from $1.4billion for 75,000 personnel to $3.8 billion for 200,000 personnel, a force size that was consideredby the U.S. Central Command. (128) A year-long occupation force of 100,000 troops would cost $22.8 billion and a force of 200,000 troops would cost $45.6 billion using these factors. That estimate was recently buttressed bytestimony from the Army Chief of Staff, General Eric Shinseki, stating his view that several hundredthousand troops could be needed initially. (129) Deputy Secretary of Defense Wolfowitz disavowed thisestimate, suggesting that a smaller U.S. force was likely and that Allies would contribute as well. An estimate by the Center for Strategic and Budgetary Assessments has pegged the post-war occupation cost at between $25 billion and $105 billion over 5 years depending on the size of theoccupation force that could range from a higher estimate of an initial peacekeeping forces of 150,000troops declining to 65,000 troops by the third year to a smaller occupation force of 50,000 decliningto 10,000 by the third year. (130) If thepeacekeeping role were shared with the U.N. or other nations,the costs to the United States would be lower. Press reports suggested that the Administration isconsidering an occupation of about 2 years but the Administration has not addressed the issue oflonger-term occupation costs though press reports cite discussion of $20 billion in annual costs. (131) Reconstruction. According to United Nations agencies, the cost of rebuilding Iraq after a war could run at least $30 billion in the first 3 years. (132) Nobel prize-winning economist William D. Nordhaus has indicated that reconstruction in Iraq couldcost between $30 billion over 3 to 4 years, based on World Bank factors used in estimatingrebuilding costs elsewhere, to $75 billion over 6 years using the costs of the Marshall Plan as aproxy. (133) If Iraqi oil fields are not substantially damaged, observers have suggested that oil revenues could pay for occupation or reconstruction. To help ensure that those revenues would be available,the FY2003 supplemental included a DOD request for $489 million for a Natural ResourceRemediation Fund to cover DOD costs for emergency firefighting and repair of Iraqi oil wells towhich other nations could also contribute; this request was enacted. (134) Most of Iraq's oil revenues,however, have been used for imports under the U.N. Oil-for-Food-Program or for domesticconsumption. Although expansion of Iraqi oil production may be possible over time, additionalrevenues might not be available for some time. Humanitarian Assistance. Costs of post-war humanitarian assistance for emergency food and medical supplies have been estimated at about $2.5billion the first year, and $10 billion over 4 years, assuming that about 20% of Iraq's population of24 million needed help. (135) If the numberneeding help were lower or other nations or the U.N.contributed, the cost to the United States would be lower. Economic Repercussions. Some observers suggested before the war that a conflict with Iraq could lead to a spike in the cost of oil generatedby a disruption in the supplies that could, in turn, tip the economy into recession, imposing majoradditional costs on the U.S. economy. (136) During the war itself, oil prices have fluctuated widely. For an analysis, see below, Oil Supply Issues . Oil Supply Issues Larry Kumins, [phone number scrubbed] (Last updated April 14, 2003) The armed conflict in Iraq raised concerns over the supply and price of crude oil in world markets. The International Petroleum Encyclopedia 2001 reports that Iraq held 112.5 billion barrelsof proven crude oil reserves - 11% of the world's currently known reserves - second only to SaudiArabia's 259 billion barrels. Despite holding such large reserves, Iraq's pre-war rate of oilproduction is much below its ultimate potential. With investment in facilities, technology, and betteroperating methods, Iraq could rank as a top producer, a development that could change world oilmarket dynamics. Under the now-suspended Oil-for-Food Program (OFFP), Iraq's oil exports varied greatly. In some weeks virtually no oil was exported, in others as much as 3.0 million barrels per day (mbd)entered world markets. On March 17, 2003, the U.N. withdrew its staff from Iraq, leaving theprogram in limbo. Fighting in the southern part of Iraq - source of roughly half the oil exportedunder the program - caused the halt of exports from the Persian Gulf port at Umm Qasr. Theremainder of Iraq's exports, mainly produced in and around the Kirkuk field in the north, had beenshipped via twin pipelines across Turkey to the Mediterranean port of Ceyhan. Tanker loadings therereportedly halted shortly after the fighting began because of vessels' unwillingness to call. Storagefacilities at Ceyhan are virtually full, and the pipeline has likely stopped shipping. Conditions in thenorthern oil fields near Kirkuk, where this oil is produced, are not clear at this update, although itdoes appear that damage to wells and infrastructure is minimal. On average, prior to the onset of fighting, the U.N. Office of the Iraq Program reported that exports averaged 1.7 mbd under the OFFP. In addition, Iraq likely supplied another 400,000 barrelsto adjacent countries outside the U.N.-run program as well as producing for internal consumption.Despite the off-and-on nature of Iraq's international oil flow, the oil market relied on Iraqi supply,and it played a role in the determination of crude oil prices and other supplier-consumerarrangements. Iraq accounted for about 10% of average oil production by the Organization ofPetroleum Exporting Countries (OPEC). Iraq is an OPEC member but does not participate in thecartel's quota program (as do the 10 other members) because Iraqi exports have been controlled bythe U.N. The U.N. has expressed an interest in restarting the Oil-for-Food Program as soon as ispractical, and Security Council Resolution 1472 of March 28, 2003, authorized the program underU.N. administration through May 12. (For further information, see above, Post-War GovernanceIssues and Humanitarian Issues .) It is too early to predict, however, when Iraqi exportsmightresume, under whose auspices, and in what quantity they may flow. Crude prices recently touched $40 per barrel, equaling levels reached during 1990-1991. The price spike resulted from supply difficulties due to an oil workers' strike in Venezuela, as well asoverriding concerns about Persian Gulf oil supply. The Venezuelan strike, which began on December2, 2002, seems at least partially resolved; oil exports appear to be slowly approaching pre-strikeamounts, although it is not clear if and when old levels might be re-attained. But tribal violence inNigeria, another important world market supplier, has resulted in output cuts as much as 800,000barrels per day. These intermittent difficulties present add variables to the international oil supplyshortfall situation, where Iraq is the largest component. War jitters about crude supply appear to ebb and flow. But the cessation of exports from Iraq, and Venezuelan and Nigerian supply concerns have combined to create volatile market conditions.Prices, which have fallen from March highs, now range in the mid-to-upper $20s. Were the supplyshortfalls from Venezuela and Nigeria to continue through spring, and Iraq's crude oil supply remainshut-in, OPEC members-who upped output by nearly 2 million barrels per day to offset the impactof Iraq-would be hard pressed to make up further crude supply losses. Were events in the PersianGulf, Nigeria or Venezuela to adversely effect the availability of petroleum for the world market, agenuine oil shortfall of significant proportion would result, with dramatic impact on supply andprice. At this update, as noted, prices are well off recent highs, but oil markets are extremely volatileand prices can fluctuate markedly depending on events and their interpretation. For the longer outlook, under a future Iraqi government, the country could have the resources to become a much larger oil producer, increasing world supply and changing the oil price paradigmthat has prevailed since the Iranian political upheaval of 1978-1979. This eventuality could unleasha new set of political and economic forces in the region; it could also change the complexion of theworld oil market by enhancing future crude oil availability. Information Resources This section provides links to additional sources of information related to a possible war withIraq. CRS Experts A list of CRS experts on Iraq-related issues may be found at http://www.crs.gov/experts/iraqconflict.shtml . Those listed include experts on U.S. policy towards Iraq, Iraqi threats, U.N. sanctions and U.S. enforcement actions, policy options and implications, war powers and the use of force,nation-building and exit strategies, and international views and roles. Information research expertsare also listed. CRS Products For a list of CRS products related to the Iraq situation, see http://www.congress.gov/erp/legissues/html/isfar12.html . The reports listed deal with threats, responses, and consequences; international and regional issues and perspectives; and authorities and precedents for the use of force. Military Deployments For information on U.S. armed forces deployed in connection with the Iraq crisis, see CRS Report RL31763, Iraq: Summary of U.S. Forces . Humanitarian Aid Organizations and Iraq CRS Report RL31766 , Iraq, United Nations and Humanitarian Aid Organizations. Iraq Facts For background information on Iraq, including geography, population, ethnic divisions, government structure, and economic information, see the World Factbook, 2002 published by theU.S. Central Intelligence Agency. http://www.cia.gov/cia/publications/factbook/geos/iz.html Maps For basic maps related to the Iraq situation, see CRS Report RS21396 , Iraq: Map Sources . The html version of the report includes hot links to a wide range of map resources. Reports, Studies, and Electronic Products The following CRS page focuses on official sources, including sources in both the legislative and executive branches of the U.S. government, foreign government sources, and sources ofinformation at international organizations. http://www.crs.gov/products/browse/iraqdocs.shtml . United Nations Resolutions On November 8, 2002, the United Nations Security Council unanimously adopted Resolution 1441, holding Iraq in "material breach" of its disarmament obligations. For background and text,see http://www.un.org/News/Press/docs/2002/SC7564.doc.htm For a compendium of resolutions since 1992, see CRS Report RL31611(pdf) , Iraq-Kuwait: United Nations Security Council Texts, 1992-2002.

The Iraq war was launched on March 19, 2003, with a strike against a location where Iraqi President Saddam Hussein and top lieutenants were believed to be meeting. On March 17, PresidentBush had given Saddam an ultimatum to leave the country or face military conflict. Although someresistance was encountered after U.S. troops entered Iraq, all major Iraqi population centers had beenbrought under U.S. control by April 14. In November 2002, the United Nations Security Councilhad adopted Resolution 1441, giving Iraq a final opportunity to "comply with its the disarmamentobligations" or "face serious consequences." During January and February 2003, a U.S. militarybuildup in the Persian Gulf intensified and President Bush, other top U.S. officials, and BritishPrime Minister Tony Blair repeatedly indicated that Iraq had little time left to offer full cooperationwith U.N. weapons inspectors. However, leaders of France, Germany, Russia, and China urged thatthe inspections process be allowed more time. The Administration and its supporters assert that Iraq was in defiance of 17 Security Council resolutions requiring that it fully declare and eliminate its weapons of mass destruction (WMD). Further delay in taking action against Iraq, they argued, would have endangered national security andundermined U.S. credibility. Skeptics, including many foreign critics, maintained that theAdministration was exaggerating the Iraq threat and argued that the U.N. inspections process shouldhave been extended. In October 2002, Congress authorized the President to use the armed forcesof the United States to defend U.S. national security against the threat posed by Iraq and to enforceall relevant U.N. resolutions regarding Iraq ( P.L. 107-243 ). Analysts and officials are concerned about the risk of instability and ethnic fragmentation in Iraq after the war. U.S. plans for post-war governance of Iraq are just starting to be implemented,and the role of the United Nations in administering Iraq, if any, is still under debate. Whether theoverthrow of Iraq President Saddam Hussein will lead to democratization in Iraq and the widerMiddle East, or promote instability and an intensification of anti-U.S. attitudes, is also an issue indebate. The Iraq war has created concerns over the humanitarian situation, particularly in Baghdadand other cities affected by the war, but large-scale refugee flows have not occurred. Constitutional issues concerning a possible war with Iraq were largely resolved by the enactment of P.L. 107-243 , the October authorization. International legal issues remain, however,with respect to launching a pre-emptive war against Iraq and the prospective occupation. Estimatesof the cost of a war in Iraq vary widely. If war or its aftermath leads to a spike in the price of oil,economic growth could slow, but oil prices have fluctuated widely during the conflict to date. Conceivably, global oil production could increase significantly after the war. This CRS report provides information and analysis with respect to the 2003 war with Iraq, reviews a number of war-related issues, and provides links to additional sources of information. Itwill not be further updated. For current CRS products related to Iraq, see the CRS home page at http://www.crs.gov .

Agriculture as a Target of Terrorism Overview of Agroterrorism The potential for terrorist attacks against agricultural targets (agroterrorism) is increasingly recognized as a national security threat, especially after the events of September 11, 2001. In this context, agroterrorism is defined as the deliberate introduction of an animal or plant disease with the goal of generating fear over the safety of food, causing economic losses, and/or undermining social stability. The response to the threat of agroterrorism has come to be called "food defense." An agroterrorist event would usually involve bioterrorism, since likely vectors include pathogens such as a viruses, bacteria, or fungi. People more generally associate bioterrorism with outbreaks of human illness (e.g., anthrax or smallpox), rather than diseases affecting animals or plants. The goal of agroterrorism is not killing cows or plants. These are the means to the end of causing economic crises in the agricultural and food industries, social unrest, and loss of confidence in government. Human health could be at risk through contaminated food or if an animal pathogen is transmissible to humans (zoonotic). While agriculture may not be a terrorist's first choice because it lacks the "shock factor" of more traditional terrorist targets, an increasing number of terrorism analysts consider it a viable secondary target. Agroterrorism could be a low-cost but highly effective means toward an al-Qaeda goal of destroying the United States' economy. Evidence that agriculture and food are potential al Qaeda targets came in 2002 when terrorist hideouts in Afghanistan were found containing agricultural documents and manuals describing ways to make animal and plant poisons. Agriculture has several characteristics that pose unique problems: Farms are geographically disbursed in unsecured environments (e.g., open fields and pastures throughout the countryside). While some livestock are housed in facilities that can be secured, agriculture generally requires large expanses of land that are difficult to secure. Livestock frequently are concentrated in confined locations (e.g., feedlots with thousands of cattle in open-air pens, farms with tens of thousands of pigs, or barns with hundreds of thousands of poultry) allowing diseases to infect more animals quickly. Concentration in slaughter, processing also makes large scale contamination possible. The number of lethal and contagious biological agents is greater for plants and animals than for humans. Most of these diseases are environmentally resilient, endemic in foreign countries, and not harmful to humans—making it easier for terrorists to acquire, handle, and deploy the pathogens. Live animals, grain, and processed food products are routinely transported and commingled in the production and processing system. These factors circumvent natural barriers that could slow pathogenic dissemination. International trade in livestock, grains, and food products is often tied to disease-free status. The presence (or rumor ) of certain pests or diseases in a country can quickly stop exports of a commodity, cause domestic consumption to drop, disrupt commodities markets, and can take months or years to recover. The past success of keeping many diseases out of the U.S. means that many veterinarians and scientists lack direct experience with foreign diseases. This may delay recognition of symptoms in case of an outbreak, and the ability to respond to an outbreak. Thus, the general susceptibility of the agriculture and food industry to bioterrorism is difficult to address in a systematic way due to the geographically dispersed, yet industrially concentrated nature of the industry, and the inherent biology of growing plants and raising animals. In an attack, the agricultural sector would suffer economically from plant and animal health losses, and the supply of food and fiber may be reduced. The demand for foods targeted in an attack may decline (e.g., dairy, beef, pork, poultry, grains, fruit, or vegetables), while demand for substitute foods may rise. Economic losses would accrue to individuals, businesses, and governments through costs to contain and eradicate the disease, and to dispose of contaminated products. More losses would accumulate as the supply chain is disrupted from farm-to-fork. Domestic markets for food may drop, and trade restrictions could be imposed on U.S. exports. The economic impact would range from farmers to input suppliers, food processors, transportation, retailers, and food service providers. Significant threats to the currently-held notion of food security could affect our social order. Fear of food shortages moved further from American psyche as the United States from an agrarian society to the industrial and information age. Nevertheless, food remains an important element of everyone's daily routine and is necessary for survival. Scope of This Report This report addresses the use of biological weapons against agriculture, rather than terrorists using agricultural inputs or equipment in attacks against non-agricultural targets. For example, the Department of Transportation issued regulations for developing security plans to protect dangerous agricultural materials such as fuels, chemicals, and fertilizers against theft. Legislation proposed in 2005-2006 ( H.R. 3197 , H.R. 1389 , and S. 1141 , 109 th Congress) would have restricted the handling of ammonium nitrate, an agricultural fertilizer that can be converted into an explosive. Another example is the concern over misuse of small aircraft, particularly crop-dusters, to spread biological weapons. This report focuses primarily on biological weapons (rather than chemical weapons) because biological weapons generally are considered the more potent agroterrorism threat. This report also focuses more on agricultural production than food processing and distribution, although the later is discussed. For more on chemical and biological weapons, see CRS Report RL32391, Small-scale Terrorist Attacks Using Chemical and Biological Agents: An Assessment Framework and Preliminary Comparisons , by [author name scrubbed] and [author name scrubbed] (pdf); and CRS Report RL31669, Terrorism: Background on Chemical, Biological, and Toxin Weapons and Options for Lessening Their Impact , by [author name scrubbed]. Federal Recognition of Agroterrorism Even before September 11, 2001, and the focus on terrorist threats that ensued, references to agroterrorism and/or agricultural bioweapons can be found in the government, academia, and the press. For example, the Gilmore Commission (on terrorism), in its first report to Congress in 1999, noted that "... a biological attack against an agricultural target offers terrorists a virtually risk-free form of assault, which has a high probability of success and which also has the prospect of obtaining political objectives, such as undermining confidence in the ability of government or giving the terrorists an improved bargaining position." Senator Roberts from Kansas also raised the awareness of agroterrorism with a hearing of the Senate Committee on Armed Services in 1999. However, as the 20 th century ended, agriculture and food production received less attention, or sometimes was overlooked, in federal counterterrorism and homeland security activities. A Presidential directive in 1998 on protecting critical infrastructure did not include agriculture and food. Agriculture was added to this list only in December 2003. Thus, after what many observers claim to be a slow start after September 11, 2001, agriculture now is garnering more attention in the expanding field of terrorism studies and policies. Agroterrorism received heightened national attention in December 2004 when then-Secretary of Health and Human Services Tommy Thompson said in his resignation speech, "For the life of me, I cannot understand why the terrorists have not attacked our food supply because it is so easy to do." Congress has held hearings on agroterrorism and, while addressing terrorism more broadly, has implemented laws and appropriations with provisions important to agriculture. The Government Accountability Office (GAO) has studied aspects of food safety, border inspections, interagency coordination, and physical security with respect to agroterrorism. The executive branch has responded by implementing the new laws, issuing several presidential directives, creating terrorism and agroterrorism task forces, and publishing protection and response plans. The law enforcement community has recognized agroterrorism as a threat, highlighted by FBI and JTTF (Joint Terrorism Task Force) sponsorship of an annual conference on agroterrorism. The 9/11 Commission (National Commission on Terrorist Attacks Upon the United States) does not make any direct references to agroterrorism or terrorism on the food supply in its 2004 report. However, agriculture obviously would be affected, along with other sectors of the economy, by some of the commission's recommendations regarding coordination of intelligence, information sharing, and first responders. An evaluation of those separate issues, however, is outside the scope of this report. Importance of Agriculture in the United States Agriculture and the food industry are very important to the social, economic, and arguably, the political stability of the United States. Although farming employs less than 2% of the of the country's workforce, 16% of the workforce is involved in the food and fiber sector, ranging from farmers and input suppliers, to processors, shippers, grocers, and restaurateurs. In 2002, the food and fiber sector contributed $1.2 trillion, or 11% to the gross domestic product (GDP), even though the farm sector itself contributed less than 1%. Gross farm sales exceeded $200 billion, and are relatively concentrated throughout the Midwest, parts of the East Coast, and California ( Figure 1 ). Production is split nearly evenly between crops and livestock. In 2002, livestock inventories included 95 million cattle, and 60 million hogs. Farm sales of broilers and other meat-type chickens exceeded 8.5 billion birds. Agriculture in the U.S. is technologically advanced and efficient. This productivity allows Americans to spend only about 10% of their disposable income on food (both at home and away from home). Productivity increases over time have allowed the share of disposable income spent on food in the U.S. to fall from 23% in 1929 to 10% in 2003. The United States has the lowest spending on food prepared at home (6.5%) compared to the rest of the world, which ranges from 10%-15% for most developed countries and 30% or higher for some developing countries. The U.S. produces and exports a large share the world's grain. In 2003, the U.S. share of world production was 42% for corn, 35% for soybeans, and 12% for wheat. Of global exports, the U.S. accounted for 65% for corn, 40% for soybeans, and 32% for wheat. If export markets were to decline following an agroterrorism event, U.S. markets could be severely disrupted since 21% of U.S. agricultural production is exported (10.5% of livestock, and 22% of crops). The U.S. exported nearly $60 billion of agricultural products (8% of all U.S. exports), and imported $47 billion of agricultural products (4% of all U.S. imports), making agriculture a positive contributor to the country's balance of trade. The price of land is directly correlated to the productivity and marketability of agricultural products, and the level of federal farm income support payments. In 2003, farm assets exceeded $1.3 trillion, with $1.1 trillion in equity. Land and other real estate accounts for 80% of those assets. Of the 938 million acres of farm land in the U.S., 46% are in crop land, 42% are pasture and range land, and 8% are wood land. Agricultural production in the U.S. is concentrated geographically and on a subset of large farms. Although the number of farms in the 2002 Census of Agriculture totaled 2.1 million, 75% of the value of production occurs on just 6.7%, or 143,500, of these farms. This subset of farms has average sales of $1 million annually, and averages 2,000 acres in size. Livestock and poultry production are concentrated in different regions of the country, and in large numbers. Cattle are the least concentrated of the major types of livestock, given the prevalence of small cow-calf herds throughout the country and pockets of dairy on the West Coast, upper Midwest, and Northeast. However, beef cattle feedlots are particularly concentrated in a swath from northern Texas through Kansas, Nebraska, eastern Colorado, and western Iowa. The top five cattle-producing states (Texas, California, Missouri, Oklahoma, and Nebraska) produce 35% of U.S. cattle ( Figure 2 ). Hog inventories are concentrated in the Midwest, especially Iowa and southern Minnesota, and in North Carolina. The top three hog-producing states (Iowa, North Carolina, and Minnesota) produce 53% of U.S. hogs ( Figure 3 ). The production of broilers for poultry meat is concentrated throughout the Southeast, ranging from the Oklahoma-Arkansas border up to the Delmarva peninsula (Delaware-Maryland-Virginia). The top three chicken-producing states (Georgia, Arkansas, and Alabama) produce 41% of U.S. chickens ( Figure 4 ). Grain production is concentrated in the Midwest, although other states may contribute significant shares for particular commodities. The top four corn-producing states (Iowa, Illinois, Nebraska, and Minnesota) produce 54% of the crop ( Figure 5 ). Potential Economic Consequences Economic losses from an agroterrorist incident could be large and widespread. First, losses would include the value of lost production, the cost of destroying diseased or potentially diseased products, and the cost of containment (drugs, diagnostics, pesticides, and veterinary services). Second, export markets could be lost if importing countries place restrictions on U.S. products to prevent possibilities of the disease spreading. Sanitary and phytosanitary rules in international trade agreements would be important for maintaining export markets. Third, multiplier effects could ripple through the economy due to decreased sales by agriculturally dependent businesses (farm input suppliers, food manufacturing, transportation, retail grocery, and food service). Tourism can be affected of access to certain destinations within the country is limited or perceptions of food or personal safety falter. Fourth, federal and state governments could bear significant costs, including eradication and containment costs, and compensation to producers for destroyed animals. Depending on the erosion of consumer confidence and export sales, market prices of the affected commodities may drop. This would affect producers whose herds or crops were not directly infected, making the event national in scale even if the disease itself were contained to a small region. For food types or product lines that are not contaminated, however, demand may become stronger, and market prices could rise for those products. Such goods may include substitutes for the food that was the target of the attack (e.g., chicken instead of beef), or product that can be certified to originate from outside a contaminated area (e.g., beef from another region of the country, or imported beef). For example, when Canada announced the discovery of mad cow disease (BSE, or bovine spongiform encephalopathy) in May 2003, farm-level prices of beef in Canada dropped by nearly half, while beef prices in the United States remained very strong at record or near record levels. When a cow with BSE was discovered in the United States in December 2003, U.S. beef prices fell, but less dramatically than in Canada. Consumer confidence in government may also be tested depending on the scale of the eradication effort and means of destroying animals or crops. The need to slaughter perhaps hundreds of thousands of cattle (or tens of millions of poultry) could generate public criticism if depopulation methods are considered inhumane or the destruction of carcasses is questioned environmentally. For example, during the United Kingdom's foot-and-mouth (FMD) outbreak in 2001, euthanizing thousands of cattle and incinerating the carcasses in huge open air pyres provided poignant television images and difficult public relations situations for the agriculture ministry. Dealing with these concerns can add to the cost for both government and industry. Depending on the disease and means of transmission, the potential for economic damage depends on a number of factors such as the disease agent, location of the attack, rate of transmission, geographical dispersion, how long it remains undetected, availability of countermeasures or quarantines, and incident response plans. Potential costs are difficult to estimate and can vary widely based on compounding assumptions. Drawing on the FMD outbreak in the United Kingdom in 2001, Price Waterhouse Coopers estimated that the economic impact was $1,389 to $4,477 for each of the 2.6 million head of livestock (cattle, sheep, and hogs) on which indemnities were paid in the U.K. These impacts exceed the value of the animals because of the number of industries affected by the outbreak, ranging from feed suppliers to tourism. Applying the loss ratios from the U.K. incident to the larger U.S. livestock industry, Price Waterhouse Coopers estimates that 7.5 million animals (5.3 million cattle, 1.4 million hogs, and 800,000 sheep) might be destroyed in a similar scale outbreak in the United States. The resulting economic impact could range from $10.4 billion to $33.6 billion, using the range of impacts estimated from the U.K. A 2002 National Defense University study estimates that a limited outbreak of FMD on just 10 farms could have a $2 billion financial impact. A study by the USDA Economic Research Service (ERS) outlines the wide-ranging implications of a FMD outbreak in the U.S., assigning probabilities for animal losses but not estimating a dollar loss. A 1994 study by the United States Department of Agriculture (USDA) on African swine fever suggested that if the disease were to become entrenched in the U.S., the 10-year impact would be at least $5.4 billion. The impact in today's dollars could be much higher. However, not all assessments agree that the economic consequences of an agroterrorist attack would be large and widespread. A December 2004 report by the Congressional Budget Office (CBO) concludes that the nation's economic loss from an agroterrorist attack "would probably be small, primarily because the food and agriculture industry is well adapted to the prospect of disruptions from weather, pests, and occasional health incidents." The CBO report also suggests that the food industry's experience recalling contaminated lots and the existence of commodity support programs "to sustain the incomes of some agricultural producers" might keep economic losses "within the realm of industry experience and current public plans for detection and response." Such a conclusion likely overstates the capacity of traditional farm commodity programs to respond to the scale devastation possible in agroterrorism. The purpose of farm commodity programs is to support farm income when prices and production vary within normal year-to-year cycles. They were never envisioned to compensate for losses due to agroterrorism or even widespread pest and disease outbreaks. The federal farm commodity support programs subsidize about 25 agricultural commodities (such as corn, wheat, soybeans, rice, and cotton). These supported commodities represent about one-third of gross farm sales. The list of commodities that normally do not receive direct support includes meats, poultry, fruits, vegetables, nuts, hay, and nursery products. These non-supported commodities account for about two-thirds of gross farm sales and are possibly more likely to be the targets of an agroterrorist attack. Thus, the food products more vulnerable to attack (meats, fruits, and vegetables) do not have existing federal farm income support programs. Food processors or retailers beyond the farm gate do not receive any commodity support payments. Any federal assistance to producers or processors stemming from an agroterrorist attack would likely come from the emergency transfer authority available to the Secretary of Agriculture (for producers) and through supplemental emergency appropriations enacted by Congress (for producers, and possibly processors). Making disaster payments to individuals who do not normally receive commodity payments is technically more difficult than supplementing regular program payments. In the end, despite the CBO suggestion that the economic effects of agroterrorism might fall within the realm of normal experience, numerous federal agencies, state agencies, and private corporations continue to prepare for agroterrorism based on the assumption that an attack could exceed the typical experience with naturally or accidentally occurring outbreaks. A Brief History of Agricultural Bioweapons Attacks against agricultural production are not new, and have been conducted both by nation-states and by substate organizations throughout history. At least nine countries had documented agricultural bioweapons programs during some part of the 20 th century (Canada, France, Germany, Iraq, Japan, South Africa, United Kingdom, United States, and the former USSR). Four other countries are believed to have or have had agricultural bioweapons programs (Egypt, North Korea, Rhodesia, and Syria). Despite extensive research on the issue, however, biological weapons have been used rarely against crops or livestock, especially by state actors. Examples of state actors using biological weapons against agriculture include Germany's use of glanders against Allied horses and mules in World War I, the alleged use of anthrax and rinderpest by Japan in World War II, and the alleged use of glanders by Soviet forces in Afghanistan in the 1980s. Thus, in recent decades, using biological weapons against agricultural targets has remained mostly a theoretical consideration. With the ratification of the Biological and Toxin Weapons Convention in 1972, many countries, including the United States, stopped military development of biological weapons and destroyed their stockpiles. Although individuals or substate groups have used bioweapons against agricultural or food targets, only a few can be considered terrorist in nature. In 1952, the Mau Mau (an insurgent organization in Kenya) killed 33 head of cattle at a mission station using African milk bush (a local plant toxin). In 1984, the Rajneeshee cult spread salmonella in salad bars at Oregon restaurants to influence a local election. Chemical weapons have been used somewhat more commonly against agricultural targets. During the Vietnam War, the U.S. used agent orange to destroy foliage, affecting some crops. Among possible terrorist events, chemical attacks against agricultural targets include a 1997 attack by Israeli settlers who sprayed pesticides on grapevines in two Palestinian villages, destroying up to 17,000 metric tons of grapes. In 1978, the Arab Revolutionary Council poisoned Israeli oranges with mercury, injuring at least 12 people and reducing orange exports by 40%. Congressional Responses Hearings on Agroterrorism From 1999 to 2006, Congress has held five hearings entirely devoted to agroterrorism or agricultural biosecurity, four in the Senate and one in the House, each by a different committee or subcommittee. The first Congressional hearing on agroterrorism was in October 1999, called by Senator Pat Roberts of the Subcommittee on Emerging Threats in the Senate Committee on Armed Services. The hearing was titled, "The Agricultural Biological Weapons Threat to the United States," and had both closed and open sessions with different witnesses. Four years later, on November 19, 2003, the Senate Committee on Governmental Affairs held an open hearing titled, "Agroterrorism: The Threat to America's Breadbasket," including witnesses from the Administration, state governments, and a private think tank. During the four years between these two hearings when the specter of terrorism was raised after September 11, 2001, a few individual panelists at more general hearings on food safety, homeland security, or terrorism discussed agroterrorism. In May 2005, a subcommittee of the House Homeland Security Committee held a hearing titled, "Evaluating the Threat of Agro-Terrorism." Both an open session and a closed session were held with the same two witnesses. Two months later, in July 2005, the Senate Agriculture Committee held a hearing titled, "Bio-security and Agro-Terrorism." Eight panelists from government, law enforcement, academia, and industry discussed vulnerabilities and preparedness efforts. In January 2006, the Senate Agriculture Committee's Subcommittee on Research, Nutrition, and General Legislation held a field hearing in Pennsylvania titled "BioSecurity Coordination." Ten panelists from government, academia, and industry discussed preparedness and coordination issues. Bioterrorism Preparedness Act (P.L. 107-188) The Public Health Security and Bioterrorism Preparedness and Response Act ( P.L. 107-188 , June 12, 2002) was enacted in response to vulnerabilities identified following September 11, 2001. Among many provisions affecting public health and general preparedness, the act contained several provisions important to agriculture. These provisions accomplish the following: Expand Food and Drug Administration (FDA) authority over food manufacturing and imports (particularly in sections 303-307). Tighten control of biological agents and toxins ("select agents" in sections 211-213, the "Agricultural Bioterrorism Protection Act of 2002") under rules by the Animal and Plant Health Inspection Service (APHIS) and Centers for Disease Control and Prevention. Authorize expanded agricultural security activities and security upgrades at USDA facilities (sections 331-335). Address criminal penalties for terrorism against animal enterprises (section 336) and violation of the select agent rules (section 231). Expanded FDA Authority over Food The Bioterrorism Preparedness Act responded to long-standing concerns about whether the Food and Drug Administration (FDA) in the Department of Health and Human Services (HHS) had the authority to assure food safety. FDA was instructed to implement new rules for (1) registration of food processors, (2) prior notice of food imports, (3) administrative detention of imports, and (4) record-keeping. Proposed rules began being issued in early 2003; the final set of rules was published in December 2004. Registration of Food Processors The act required FDA to establish a one-time registration system for any domestic or foreign facility that manufactures, processes, packs, and handles food. All food facilities supplying food for the United States were required to register with the FDA by December 12, 2003 (21 CFR 1.225 to 1.243). Registering involved providing information about the food products (brand names and general food categories), facility addresses, and contact information. Restaurants, certain retail stores, farms, non-profit food and feeding establishments, fishing vessels, and trucks and other motor carriers were exempt from registration requirements. However, many farms had a difficult time determining whether they needed to register based on the amount of handling or processing they performed. Registration documents are protected from public disclosure under the Freedom of Information Act (FOIA). The registry provides, for the first time, a complete list of companies subject to FDA authority, and will enhance the agency's capability to trace contaminated food. Critics argued that registration created a record keeping burden without proof that facilities will be able to respond in an emergency. Prior Notice of Imports As of December 12, 2003, importers are required to give advance notice to FDA prior to importing food (21 CFR 1.276 to 1.285). Electronic notice must be provided by the importer within a specified period prior to arrival at the border (within two hours by road, four hours by air or rail, and eight hours by water). With prior notice, FDA can assess whether a shipment meets criteria that can trigger an inspection. If notice is not given, the food will be refused entry and held at the port or in secure storage. Some critics are concerned that the administrative cost of compliance may raise the price of food. Others have argued that perishable imports are subject to increased spoilage if delays arise, or that certain perishables (especially from Mexico) are not harvested or loaded onto trucks before the two-hour notification period. However, implementation of the new system generally has not caused delays and most shippers have been accommodated. To facilitate compliance, FDA and the Department of Homeland Security (DHS) Bureau of Customs and Border Protection (CBP) integrated their information systems to allow food importers to provide the required information using CBP's existing system for imports. In December 2003, the two agencies agreed to allow CBP officers to inspect imported foods on FDA's behalf, particularly at ports where FDA has no inspectors. Administrative Detention Upon enactment of the act, FDA obtained the authority to detain food imports under certain conditions. FDA procedures for making detention were issued on June 4, 2004 (21 CFR 1.377 to 1.406). To use the authority, the agency must show credible evidence that a shipment presents a serious health threat. Food may be detained for 20 days and up to 30 days, if necessary. The owners must pay the expense of moving any detained food to secure storage. Perishable foods (e.g., fruits, vegetables, and seafood) are to receive expedited review. Maintenance of Records FDA published a proposed rule for record-keeping on May 9, 2003, and issued a corrected final rule on February 23, 2005 (21 CFR 1.363 to 1.368). People or companies that manufacture, process, pack, transport, distribute, receive, hold, or import food (with the exception of farms, restaurants and certain others) must establish and maintain records for up to two years. In the event of a suspected food safety problem, the regulation provides FDA access to records including the facility's immediate supplier, and the immediate customer. Companies can keep the information in any form and use existing records. The rule limits access to records that may contain trade secrets and prevent disclosure of such confidential information if records are reviewed. FDA is allowed to reduce the record-keeping requirements for small businesses and to exempt farms, restaurants, and fishing vessels not engaged in processing. Tighter Security for Biological Agents and Toxins In December 2002, the USDA Animal and Plant Health Inspection Service (APHIS) issued regulations to reduce the threat that certain biological agents and toxins could be used in domestic or international terrorism. APHIS determined that the "select agents" on the list have the potential to pose a severe threat to agricultural production or food products. The select agent regulations (9 CFR 121 for animals, 7 CFR 331 for plants) establish the requirements for possession, use, and transfer of the listed pathogens. The rules affect many research institutions including federal, state, university, and private laboratories, as well as firms that transport such materials. The laboratories have had to assess security vulnerabilities and upgrade physical security, often without additional financial resources. Some have been concerned that certain research programs may be discontinued or avoided because of regulatory difficulties in handling the select agents. Extensive registration and background checks of both facilities and personnel were to be conducted in 2003. However, due to delays at the FBI in processing security clearance paperwork, provisional registrations were issued to laboratories that had submitted paperwork by established deadlines. Homeland Security Act (P.L. 107-296) The main purpose of the Homeland Security Act of 2002 ( P.L. 107-296 , November 25, 2002) was to create the Department of Homeland Security (DHS), primarily by transferring parts or all of many agencies throughout the federal government into the new cabinet-level department. In doing so, the law made two major changes to the facilities and functions of the U.S. Department of Agriculture. The Homeland Security Act transferred: personnel and responsibility for agricultural border inspections from USDA to DHS (specifically, from the USDA Animal and Plant Health Inspection Service (APHIS) to DHS Customs and Border Protection (CBP)), and possession of the Plum Island Animal Disease Center in New York from USDA to DHS. Transferring Agricultural Border Inspections Section 421 of the Homeland Security Act authorized the transfer of up to 3,200 APHIS border inspection personnel to DHS. As of March 1, 2003, approximately 2,680 APHIS inspectors became employees of DHS in the Bureau of Customs and Border Inspection (CBP). Because of its scientific expertise, USDA retains a significant presence in border inspection, as described below. Historically, the APHIS Agricultural Quarantine Inspection (AQI) program was considered the most significant and prominent of agricultural and food inspections at the border. Because of this prominence, AQI was one of the many programs selected for inclusion when DHS was created. Some drafts of the bill creating the new department would have transferred all of APHIS (including, for example, animal welfare and disease eradication) to DHS. Concerns from many farm interest groups about the impact this might have on diagnosis and treatment of naturally occurring plant and animal diseases prompted a legislative compromise that transferred only the border inspection function and left other activities under USDA. DHS-CBP personnel now inspect international conveyances and the baggage of passengers for plant, animal, and related products that could harbor pests or disease organisms. They also inspect ship and air cargo, rail and truck freight, and package mail from foreign countries. Although the border inspection functions were transferred to DHS, the USDA retains a significant presence in border activities. APHIS employees who were not transferred continue to pre-clear certain commodities, inspect all plant propagative materials, and check animals in quarantine. APHIS personnel continue to set agricultural inspection policies to be carried out by DHS border inspectors, and negotiate memoranda of understanding to assure that necessary inspections are conducted. APHIS manages the data collected during the inspections process, and monitors smuggling and trade compliance. USDA is also statutorily charged in section 421(e)(2)(A) of P.L. 107-296 to "supervise" the training of CBP inspectors in consultation with DHS. This separation of duties is designed to allow for consolidated border inspections for intelligence and security goals, but preserve USDA's expertise and historical mission to set agricultural import policies. Adding Agriculture Specialists Under the CBP cross-training initiative in 2003 (also known as "One Face at the Border"), CBP inspectors from the former customs, immigration, and agriculture agencies were to be trained to perform inspections in all three areas equally, without specialization,—customs, immigration, and agriculture. However, due to criticism from USDA, inspection unions, and the agricultural industry, DHS created another class of inspectors called "agriculture specialists." Agriculture specialists work mainly in secondary inspection stations in passenger terminals and are deployed at cargo terminals. The cadre of agriculture specialists include former APHIS inspectors who decided not to convert to CBP generalist inspectors plus new graduates from the agricultural specialist training program. Before DHS was created, APHIS trained its inspectors in a nine-week course that had science prerequisites. The initial DHS cross-training program announced in 2003 had only 12-16 hours for agriculture in a 71-day course covering customs, immigration, and agriculture. This difference in training was one of the reasons DHS was forced to add the agricultural specialist position. DHS now has an eight-week (43-day) training program for agriculture specialists. The course is taught by CBP and APHIS instructors at a USDA training facility in Frederick, Maryland. Agriculture specialists also receive two weeks of law enforcement training, and can exercise law enforcement authority similar to regular CBP officers. However, CBP does not necessarily allow agriculture specialists to use the full extent of their law enforcement powers. The first class of agriculture specialists graduated in July 2004. Regular CBP officers receive about 12-16 hours of agricultural training during their multi-week program at the Federal Law Enforcement Training Center (FLETC) in Georgia. The agriculture module was developed by APHIS and provided to DHS. Although DHS is training new agriculture specialists, the future size of the agricultural specialist corps is not certain, given the eventual attrition of former APHIS inspectors. Also, details are not available as to how these inspectors will be deployed and how many ports of entry will be staffed with agriculture specialists (compared with the APHIS deployment prior to DHS). Without agriculture specialists, primary agricultural inspections—the first line of defense for agricultural security—may be conducted by cross-trained inspectors with limited agricultural training. Congressional agriculture committees have been concerned about whether enough attention will be devoted to agricultural inspections by DHS, and whether the United States will be as safe from the introduction of foreign pests as it was under the previous inspection system. Inspection statistics from the fall of 2003 indicate that 32% fewer insect infestations were found (under DHS) than in the previous year (under APHIS). APHIS officials cite unfilled agricultural inspector positions and difficulty in adequately cross-training former customs and immigration officers to conduct agricultural inspections. The FY2007 DHS appropriations act supports the cross-training initiative under One Face at the Border ( H.Rept. 109-699 ): The conferees recognize the benefits of cross-training legacy customs, immigration, and agricultural inspection officers as part of CBP's 'One Face at the Border Initiative' and direct CBP to ensure that all personnel assigned to primary and secondary inspection duties at ports of entry have received adequate training in all relevant inspection functions. A report by the Government Accountability Office in May 2006 found that only 21% of agricultural specialists always receive urgent alerts for agricultural inspection priorities in a timely manner. Moreover the number of canine units (inspection dogs, "beagle brigade") has declined from 140 to 80 since the transfer to DHS, and 60% of 43 canine teams that were tested failed a proficiency test. In a follow-up memorandum, the GAO analyzed a survey of morale among agricultural specialists and found many more negative responses than positive comments. (See " GAO Studies ," below.) For more information about inspection statistics and the new border inspection arrangement that combines the previously separate customs, immigration, and agriculture inspections, please see CRS Report RL32399, Border Security: Inspections Practices, Policies, and Issues . Plum Island Animal Disease Center Section 310 of the Homeland Security Act transferred the Plum Island Animal Disease Center to DHS. Prior to June 1, 2003, Plum Island was a USDA facility jointly operated by APHIS and ARS (Agricultural Research Service). This transfer includes only the property and facilities of Plum Island; both APHIS and ARS personnel continue to perform research and diagnostic work at the facility, but DHS also may conduct other research at the facility as well. Plum Island and DHS's plans for a new National Bio and Agro-Defense Facility are discussed later in this report under " Laboratories and Research Centers ." Animal Enterprise Terrorism Act (P.L. 109-374) The Animal Enterprise Terrorism Act ( P.L. 109-374 , Nov. 27, 2006) was enacted to expand criminal consequences for damaging or interfering with the operations of an animal enterprise. The Bioterrorism Preparedness Act ( P.L. 107-188 , Sec. 336) contained less extensive penalties for animal enterprise terrorism. P.L. 109-374 prescribes penalties and restitution in Title 18 of the U.S. Code for varying levels of economic damage and personal injury involving threats, acts of vandalism, property damage, criminal trespass, harassment, or intimidation. The act covers enterprises that use, sell, or raise animals (or animal products) for profit or educational purposes. With this broad definition, the law applies to both bioterrorism (from foreign sources) and eco-terrorism (from domestic animal rights activist groups). GAO Studies Since 2002, six reports from GAO have found gaps in federal controls for protecting agriculture and food. Findings from the first four reports are summarized in testimony for the Senate hearing on agroterrorism on November 19, 2003. In the first report, following the European outbreak of foot and mouth disease in 2001, a 2002 GAO study found insufficient guidance for border inspectors and an overwhelming volume of passengers and cargo for inspectors to process. Regarding prevention of BSE ("mad cow disease"), a 2002 GAO report found shortcomings in documentation for imports and enforcement of federal feed ingredient bans. A 2003 GAO study on security improvements at food processing companies found that federal agencies, particularly the Food and Drug Administration (FDA), did not have authority to impose requirements or assess security flaws. Regarding livestock disease research at USDA's Plum Island lab in New York, a 2003 GAO report found that people without adequate background checks had access to secure areas, and that security personnel on the island had limited authority. In response to GAO's security concerns about Plum Island, DHS announced that armed Federal Protective Service personnel would supplement security on the island beginning in June 2004. A 2005 GAO report summarized the issues of agroterrorism and what federal agencies are doing to prepare. It found numerous vulnerability assessments and working groups had been prepared to prioritize and oversee activities. Efforts at interagency coordination were also underway, but some were seen to be in the early stages with more coordination necessary. The report also cited a lack of veterinarians trained in foreign animal diseases and response capacity, lack of rapid diagnostic tools, and lack of rapid vaccine deployment and protocols. In the conference agreement for the FY2005 Consolidated Appropriations Act ( P.L. 108-447 , H.Rept. 108-792 ), conferees expressed concern over agricultural border inspections and research at Plum Island following the transfer of these activities in 2003 from USDA to DHS. They requested a GAO report on interagency coordination between USDA and DHS regarding agriculture inspections. The conferees are aware of ongoing concerns within the agriculture sector that the transfer of these responsibilities [border inspection and research] may shift the focus away from agriculture to other priority areas of DHS. In order to ensure that the interests of U.S. agriculture are protected ... the conferees request the Government Accountability Office to provide a report ... on the coordination between USDA and DHS ( H.Rept. 108-792 ). Accomplishments in interagency coordination that GAO cited in the 2006 report include training of both agricultural specialists and cross-training of regular border protection officers. Agriculture specialists now have access to classified data systems, allowing better targeting of agriculture inspections. DHS also created "agriculture liaisons" in district field offices to assure agriculture issues are heard, and improve operations at ports of entry. However, problems in coordination or inspection performance were cited in several areas. DHS had not developed performance measures for agriculture inspections, but was still using USDA-APHIS measures which did not reflect all DHS activities. Staffing and related staffing performance measures were also lacking. Agriculture specialists are not always notified of urgent inspection alerts issued by APHIS; a survey suggests only 21% of agriculture specialists always receive alerts in a timely manner. The number of canine units (inspection dogs, "beagle brigade") has declined from 140 to 80 since the transfer to DHS, and 60% of 43 canine teams that were tested failed an APHIS proficiency test. Several financial management issues also were problematic. While user fees were less than program costs, DHS was unable to provide APHIS with information of actual costs by type of activity, and USDA was sometimes slow to transfer user fees to DHS. In a follow-up memorandum, GAO analyzed a the open-ended questions in survey of morale among agricultural specialists. GAO found many more negative responses than positive comments. About 60% of agricultural specialists surveyed thought they were doing fewer inspections than before the transfer to DHS, and 29% were concerned that the agricultural mission is declining. An estimated 64% thought their DHS managers did not respect their work, and 29% expressed concern about working relationships with non-agriculture inspectors. Executive Branch Responses Shortly after September 11, 2001, USDA created a Homeland Security Staff in the Office of the Secretary to develop a department-wide plan to coordinate agroterrorism preparedness plans among all USDA agencies and offices. Efforts have been focused on three areas: food supply and agricultural production, USDA facilities, and USDA staff and emergency preparedness. The Homeland Security Staff also has become the department's liaison with Congress, the Department of Homeland Security (DHS), and other governmental agencies on terrorism issues. The White House's National Security Council weapons of mass destruction (WMD) preparedness group, formed by Presidential Decision Directive 62 (PDD-62) in 1998, included agriculture, especially in terms of combating terrorism. Many observers note that, as a latecomer to the national security table, USDA has been invariably overshadowed by other agencies. In addition to the following Presidential directives and actions, many departments and agencies in the executive branch have undertaken efforts to improve preparedness for agroterrorism. Many of these actions are discussed later in this report under "Countering the Threat." HSPD-7 (Protecting Critical Infrastructure) In terms of protecting critical infrastructure, agriculture was added to the list in December 2003 by Homeland Security Presidential Directive 7 (HSPD-7), "Critical Infrastructure Identification, Prioritization, and Protection." This directive replaces the 1998 Presidential Decision Directive 63 (PDD-63) that omitted agriculture and food. Both of these critical infrastructure directives designate the physical systems that are vulnerable to terrorist attack and are essential for the minimal operation of the economy and the government. These directives instruct agencies to develop plans to prepare for and counter the terrorist threat. HSPD-7 mentions the following industries: agriculture and food; banking and finance; transportation (air, sea, and land, including mass transit, rail, and pipelines); energy (electricity, oil, and gas); telecommunications; public health; emergency services; drinking water; and water treatment. HSPD-9 (Defending Agriculture and Food) More significant recognition came on January 30, 2004, when the White House released Homeland Security Presidential Directive 9 (HSPD-9), "Defense of United States Agriculture and Food." This directive establishes a national policy to protect against terrorist attacks on agriculture and food systems. HSPD-9 generally instructs the Secretaries of Homeland Security (DHS), Agriculture (USDA), and Health and Human Services (HHS), the Administrator of the Environmental Protection Agency (EPA), the Attorney General, and the Director of Central Intelligence to coordinate their efforts to prepare for, protect against, respond to, and recover from an agroterrorist attack. In some cases, one department is assigned primary responsibility, particularly when the intelligence community is involved. In other cases, only USDA, HHS, and/or EPA are involved regarding industry or scientific expertise. The directive instructs agencies to develop awareness and warning systems to monitor plant and animal diseases, food quality, and public health through an integrated diagnostic system. Animal and commodity tracking systems are included, as is gathering and analyzing international intelligence. Vulnerability assessments throughout the sector help prioritize mitigation strategies at critical stages of production or processing, including inspection of imported agricultural products. Response and recovery plans are to be coordinated across the federal, state, and local levels. A National Veterinary Stockpiles (NVS) of vaccine, antiviral, and therapeutic products is to be developed for deployment within 24 hours of an attack. A National Plant Disease Recovery System (NPDRS) is to develop disease and pest resistant varieties within one growing season of an attack in order to resume production of certain crops. The Secretary of Agriculture is to make recommendations for risk management tools to encourage self-protection for agriculture and food enterprises vulnerable to losses from terrorism. HSPD-9 encourages USDA and HHS to promote higher education programs that specifically address the protection of animal, plant, and public health. It suggests capacity-building grants for universities, and internships, fellowships and post-graduate opportunities. HSPD-9 also formally incorporates USDA and agriculture into the ongoing DHS research program of university-based "centers of excellence." As a presidential directive, HSPD-9 addresses the internal management of the executive branch and does not create enforceable laws. Moreover, it is subject to change without Congressional consent. While Congress has oversight authority of federal agencies and may ask questions about implementation of the directive, a public law outlining an agroterrorism preparedness plan would establish the statutory parameters for such a plan, and, as a practical matter, might result in enhanced oversight by specifically identifying executive branch entities responsible for carrying out particular components of such a plan. In implementing HSPD-9, the USDA Homeland Security Staff and other agencies are drawing upon HSPD-5 (regarding the national response plan) and HSPD-8 (regarding preparedness). Implementing many of the HSPD-9 directives depends on the executive branch having sufficient appropriations for those activities. National Response Plan (NRP) Homeland Security Presidential Directive 5 (HSPD-5) called for a National Response Plan (NRP) to coordinate federal bureaucracies, capabilities, and resources into a unified, all-discipline, and all-hazards approach to manage domestic incidents, both for terrorism and natural disasters. The National Response Plan, developed by DHS, was unveiled in December 2004. The NRP addresses agriculture and food in two annexes at the end of the plan. The first is in terms of emergency support. The Emergency Support Function (ESF) annexes to the NRP seek to coordinate federal interagency support by describing the roles and responsibilities of departments and agencies. USDA is the coordinator and primary responding agency for ESF #11, the "Agriculture and Natural Resources Annex," which addresses: Provision of nutrition assistance by determining nutrition assistance needs in disaster areas, obtaining appropriate food supplies, arranging for delivery of the supplies, and authorizing disaster food stamps, Control and eradication of animal and plant pests and diseases, Assurance of food safety and food security, including food safety inspection at processing plants, distribution, retail sites, and ports of entry; laboratory analysis of food samples; food borne disease surveillance; and field investigations, and Protection of natural and cultural resources and historic properties. The NRP also contains "incident annexes" that more specifically address hazard situations requiring special attention. The incident annexes describe the overarching policies, situations, general operating procedures, and responsibilities most relevant when responding to a particular type of incident. The 10-page "Food and Agriculture Incident Annex" was first published in July 2006, about 18 months after the NRP was first released. The annex identifies roles for federal involvement, particularly when first responders at the state and local levels are overwhelmed by multiple incidents, for example. It establishes USDA and HHS as the primary agencies for coordination and notification when incidents and outbreaks affect food and agriculture, but law enforcement agencies are to be notified immediately through the FBI if the incident appears to be intentional. HHS is the coordinating agency for food inspected by the FDA beyond the farm gate (all domestic and imported food except meat, poultry and egg products), animal feed, and animal drugs. USDA is the coordinating agency for food inspected by the Food Safety Inspection Service (FSIS) such as processed meat, poultry and egg products, and for coordinating the response to animal and plant diseases and pests. EPA is identified in the annex to provide expedited assistance for approving particular types of pesticide applications, and to provide technical assistance for decontamination and disposal efforts. DHS appears to be involved to the extent that other parts of the NRP are activated by the agriculture and food incident, especially when law enforcement, investigative, or border inspection activities are involved. The annex mentions the importance of laboratory networks for detection, diagnosis, confirmation, and investigation of an incident, particularly through the DHS Integrated Consortium of Laboratory Networks (ICLN). The "capacity of the ICLN derives from ... established laboratory networks such as Food Emergency Response Network (FERN), the Laboratory Response Network (LRN), the National Animal Health Laboratory Network (NAHLN), and the National Plant Diagnostic Network (NPDN)." Each of these networks, discussed later in this section, feeds its industry- and sector-specific information into the general homeland security network for analysis and data sharing. Specific response plans below the level of the NRP annex rest with USDA, HHS, and state and local governments. Public-Private Partnerships National Infrastructure Protection Plan (NIPP) The National Infrastructure Protection Plan was developed to unify and enhance the protection of critical infrastructure through public-private partnerships. It provides a coordinated approach to establish national priorities and goals. The sector partnership model encourages formation of Sector Coordinating Councils (SCCs) and Government Coordinating Councils (GCCs). DHS provides guidance, tools, and support so that these groups can work together to develop and coordinate a wide range of infrastructure protection activities. Sector Coordinating Councils are self-organized, self-run, and self-governed organizations of key stakeholders within a sector, serving as the government's principal point of entry into each sector. A Government Coordinating Council is the government counterpart to a SCC, comprised of federal, state and local representatives, enabling coordinating across government agencies and jurisdictions. The Food and Agriculture Sector Coordinating Council (FASCC) has seven sub-councils with representatives from private corporations and associations, including: Agricultural production inputs and services Animal producers Plant producers Processors and manufacturers Restaurants and food service Retail Warehousing and logistics The agriculture SCC has been successful among the early SCC's, and is used by DHS as a model for developing other sector councils. The FASCC's recent accomplishments include reviewing and commenting on drafts of the National Infrastructure Protection Plan, developing a Food and Agriculture Sector Specific Plan (SSP), sharing best practices, identifying gaps in security or preparedness, and striving to improve communications and information sharing capabilities among companies and government. Strategic Partnership Program Agroterrorism (SPAA) The Strategic Partnership Program Agroterrorism initiative is another public-private partnership to assess vulnerabilities in the agriculture and food industry. Four government agencies including DHS, USDA, FDA, and FBI collaborate with private industry and states to conduct site surveys of specific private industries within the agriculture industry. The intent is to: Determine critical points in the food and agriculture system that may be the target of a terrorist attack, Identify early indicators and warnings that would signify planning and/or preparation for an attack, Develop a focus for intelligence collection strategies around these indicators and warnings, and Develop mitigation strategies for early detection, deterrence, disruption, interdiction, and prevention. In 2005, the SPPA began working with the Food and Agriculture Sector Coordinating Council and the Government Coordinating Council to identify about 50 sites to visit in 2006-2007. The sites are to span the entire food production cycle. Information Sharing and Analysis Center (ISAC) An Information Sharing and Analysis Center is an industry contact point to federal law enforcement and intelligence community (including the Federal Bureau of Investigation, Central Intelligence Agency, and National Security Agency). The objective to detect potential threats, assess, prevent attacks, and investigate and respond to attacks against critical infrastructure. The Food and Agriculture ISAC was created in February 2002. Members generate information on many of food safety and bio-security related topics such as security threats, food system vulnerabilities, product contamination, microbial isolates, and reports of consumer illness from food. The information is shared confidentially with the law enforcement and intelligence community, with the expectation that relevant intelligence will returned to the industry. The ISAC network is similar to an FBI program for public-private information sharing called Infragard. In 2005, a new FBI program called AgGard was created to encourage members of the agricultural community to use a secure internet connection to share information and alert each other, state and local law enforcement, and the FBI of suspicious activity. Laboratories and Research Centers Since September 11, 2001, and the ensuing recognition of agroterrorism as a threat to critical infrastructure, the United States has expanded its agricultural laboratory and diagnostic infrastructure. New federal laboratories have been completed, existing facilities have been upgraded, and networks of federal, state and university laboratories have been created to share information and process samples. National Bio and Agro-Defense Facility (NBAF) The Department of Homeland Security is proceeding with plans to replace the aging Plum Island Animal Disease Center with a new "National Bio and Agro-Defense Facility" for research on high consequence foreign animal diseases. Congress has appropriated funds for planning and site selection. DHS is beginning the conceptual design process, and has reviewed submissions from universities and other locations interested in hosting the new facility. In August 2006, it selected a long list of 18 sites in 11 states for further consideration. Currently, the premier U.S. facility for research on foreign animal diseases is the Plum Island Animal Disease Center, located on an island off the northeastern tip of Long Island, NY. The property of Plum Island was transferred from USDA to DHS in the Homeland Security Act ( P.L. 107-296 ), although personnel from both USDA and DHS still conduct research there. Built in the 1950s, many experts agree that the 50-year old Plum Island facility is nearing the end of its useful life and unable to provide the necessary capacity for current biosecurity research. Plum Island is the only facility in the United States that is currently approved to study high-consequence foreign livestock diseases, such as foot-and-mouth disease (FMD), because its laboratory has been equipped with a specially designed BSL-3 bio-containment area for large animals that meets specific safety measures. Live FMD virus may be used only at coastal islands such as Plum Island, unless the Secretary of Agriculture specifically authorizes the use of the virus on the U.S. mainland (21U.S.C. 113a). Because of this geographical restriction in statute, some observers question whether the proposed NBAF should be built on the mainland or on an island similar to Plum Island. Locating the facility in regions where cattle or other livestock are raised may pose too great a risk if security features are breached by terrorism, critics say. Biosafety levels (BSLs) are combinations of laboratory facilities, safety equipment, and laboratory practices. The four levels are designated in ascending order, by degree of protection provided to personnel, the environment, and the community. BSL-1 laboratories handle pathogens of minimal hazard. The highest level laboratories, BSL-4, handle high-risk, life-threatening diseases with a high risk of aerosol transmission. Only a handful of BSL-4 labs exist in the U.S., including a CDC lab in Athens, Georgia, and an Army lab in Ft. Dietrick, Maryland. Agricultural BSL labs can house large animals for experiments, and thus are less common than regular BSL laboratories. The Plum Island Animal Disease Center and the USDA National Veterinary Services Laboratories (NVSL) in Ames, IA, are the only BSL-3 agriculture facilities in the United States. As the number and importance of zoonotic diseases increase (such as with the recent discovery of Nipah and Hendra viruses, and the ongoing concern over foot and mouth disease), scientists increasingly need BSL-4 laboratories to study zoonotic pathogens and BSL-4 agriculture facilities to work with those pathogens in host animals. The U.S. currently has no BSL-4 agricultural facility; instead, scientists must conduct experiments at facilities in Winnipeg, Canada, or Australia. The concept for the NBAF was first outlined in the FY2006 budget request for DHS. At that time, the estimated design and construction cost was $451 million. The current time line calls for construction to be completed in FY2013. DHS began the process in FY2005 by using $3 million for a planning and feasibility study. In FY2006, Congress appropriated $23 million specifically for the NBAF in the DHS appropriations act ( P.L. 109-90 ). The FY2007 DHS appropriation ( P.L. 109-295 ) furthers that commitment with a second installment of $23 million for pre-construction activities. With the FY2006 appropriation, DHS issued a request for "Expressions of Interest" (EOI) in January 2006. Parties interested in hosting the facility (such as federal agencies, State and local governments, private industry, and universities) were invited to reply by March 31, 2006. Evaluation criteria for site selection include capacity for research, workforce availability, construction and operation, and community acceptance. DHS received 29 expressions of interest from 20 states and the District of Columbia. In August 2006, DHS released a subset of 18 sites in 11 states that will be considered further. By the end of 2006, DHS expects to narrow the list further and initiate an Environmental Impact Statement (EIS) analysis. A final location will be chosen early in 2008. Conceptual design began in April 2006 by soliciting architect and engineering firms. DHS plans to award this contract later in 2006, with conceptual design to begin shortly thereafter. This level of design is not site specific and can proceed concurrently with site selection and environmental impact statements. The conceptual design process may update the current projected total cost of $451 million. Construction is scheduled to begin in FY2010 and be completed in FY2013. USDA Laboratories Within USDA, several agencies have upgraded their facilities to respond better to the threat of agroterrorism by expanding laboratory capacity and adding physical security. These programs include the ARS research on foreign animal diseases at the Plum Island Animal Disease Center in New York (the physical facility is now managed and operated by DHS) and the ARS Southeast Poultry Research Lab in Athens, Georgia. Three major USDA laboratories are consolidating operations in a new BSL-3 agriculture facility in Ames, Iowa, called the National Centers for Animal Health. These include the ARS National Animal Disease Center (NADC), the APHIS National Veterinary Services Laboratories (NVSL), and the APHIS Center for Veterinary Biologics (CVB). The complex will be USDA's largest animal health center for research, diagnosis and product evaluation. The NVSL is especially visible because it makes the final, official determination for the presence of most animal diseases when samples are submitted for testing. USDA also cooperates with other federal agencies on counterterrorism research and preparedness, including the ARS and APHIS partnership with the U.S. Army Medical Research Institute for Infectious Diseases at Ft. Dietrick, Maryland. The Ft. Dietrick site offers USDA access to additional high-level biosecurity laboratories, including a BSL-4 laboratory. In the recent past, USDA has conducted research on soybean rust at Ft. Dietrick. Laboratory Networks Several laboratory networks have been created for animal, plant, food, and general bioterrorism issues. The primary goals of these networks are to improve the diagnosis and detection of a deliberate or accidental disease outbreak. Primary examples are the CDC-led Laboratory Response Network (LRN), the USDA-funded National Plant Diagnostic Network (NPDN) and its sister group the National Animal Health Laboratory Network (NAHLN), and the joint FDA/FSIS Food Emergency Response Network (FERN). Laboratory Response Network (LRN). The Laboratory Response Network, created by CDC, is a national and international network of about 140 laboratories equipped to respond quickly to acts of chemical or biological terrorism, emerging infectious diseases, and other public health threats and emergencies. The network includes federal labs (CDC, USDA, FDA), state and local public health labs, military labs, food labs, environmental labs, veterinary labs, and international labs in Canada, the United Kingdom, and Australia. National Plant Diagnostic Network (NPDN) . The National Plant Diagnostic Network is a collective of land grant university plant disease and pest diagnostic facilities organized by USDA. The national network is led by five regional labs (Cornell, Florida, Michigan State, Kansas State, and California at Davis) and one support lab (Texas Tech). The NPDN facilitates the initial detection, positive identification, national notification, and coordinated response to pests and pathogens by intentional, accidental, or natural means. By using common communications and laboratory testing protocols, the network allows efficient, timely, and secure exchange of plant disease information. National Animal Health Laboratory Network (NAHLN). This network, created by USDA and the American Association of Veterinary Laboratory Diagnosticians, augments federal resources with extensive state and university laboratories to allow better detection and response to animal health emergencies. These labs provide timely and consistent methods, and meet epidemiological reporting standards. The USDA National Veterinary Services Laboratory (NVSL) serves as the central reference laboratory. State and university labs perform non-emergency surveillance testing, provide surge capacity during outbreaks, assist with epidemiologic investigations, and conducting follow-up surveillance. Food Emergency Response Network (FERN). The Food Emergency Response Network was established jointly by the Food and Drug Administration (FDA) and the Food Safety and Inspection Service (FSIS), and integrates at least 72 state and federal laboratories that analyze food samples implicated in threats, terrorist events, or contamination. It links local, state, and federal information to allow officials to prevent or respond to incidents of contaminated food. Another important network, albeit not a laboratory network, is the Extension Disaster Education Network (EDEN) . EDEN is sponsored by USDA, and links extension educators from various states and disciplines to share resources. EDEN helps extension agents build relationships with local and state emergency management networks, provide educational programs on disaster preparation and mitigation to citizens and local leaders, train extension personnel for appropriate roles during disasters, and collaborates during recovery. DHS Centers of Excellence In April 2004, the DHS Science and Technology Directorate announced the department's first university research grants for agriculture as part of its "centers for excellence" program. The University of Minnesota and Texas A&M will share $33 million over three years. Texas A&M's new Center for Foreign Animal and Zoonotic Disease Research will study high consequence animal diseases. The University of Minnesota's new Center for Post-Harvest Food Protection and Defense will establish best practices for the management of and response to food contamination events. Texas A&M is partnering with four universities and will receive $18 million; Minnesota is partnering with ten universities and will receive $15 million. The House Appropriations Committee addressed agroterrorism research in report language for the FY2004 homeland security appropriations bill. The "centers for excellence" program appears to fit the type of research the committee suggested. Agro-terrorism research. The Committee is familiar with potential agro/bioterrorism vulnerabilities, from animal and plant diseases to food chain introductions. While some agro-terrorism research is already being done by the Department of Agriculture, the Committee is aware of the need for more such research, particularly in the areas of threats to field crops, farm animals, and food in the processing and distribution chain. The Homeland Security Act of 2002 provides for coordination of research between the Department of Homeland Security (DHS) and other relevant federal agencies in various areas of research. Because the Department of Agriculture (USDA) already possesses mechanisms, authorities, and personnel to carry out needed agro/bioterrorism research, the Committee expects to see effective coordination between the USDA and the DHS to move such research forward in an effective and expeditious fashion. The Committee expects USDA to coordinate with DHS to identify research gaps and develop a plan, to include research priorities, for proceeding to fill such gaps. Further, the Committee expects that non-government entities selected to carry out research will be ones with proven expertise in agriculture research, and strong familiarity with USDA animal and plant diagnostic laboratories and practices ( H.Rept. 108-193 ). Federal Funding to Respond to Agroterrorism This report treats federal funding for agroterrorism preparedness broadly, including appropriations and user fees , both within USDA and DHS. However some general activities that support agroterrorism preparedness, such as certain intelligence and warning functions performed by the FBI and CIA, often cannot be identified exclusively as agriculture spending, and thus cannot be included in this report. However, items that can be identified specifically to agroterrorism preparedness within the budgets of USDA and DHS are included. The President's annual budget request to Congress includes a government-wide cross-cutting budget analysis of homeland security issues, as mandated by the Homeland Security Act of 2002 ( P.L. 107-296 , section 889). The budget request includes details on the most recently passed appropriations law and the previous fiscal year. Comprehensive details on agroterrorism funding are difficult, if not impossible, to compute while appropriations bills are being debated in the House and Senate. Legislative language rarely mentions specific amounts for agroterrorism, and report language usually mentions only a few agroterrorism related items that the appropriations committees wish to highlight. For a comprehensive accounting, analysts must wait until the President's budget is released. In USDA, five agencies and three offices receive homeland security funding: Agricultural Research Service (ARS) Animal and Plant Health Inspection (APHIS) Cooperative State Research, Education, and Extension Service (CSREES) Food Safety and Inspection Service (FSIS) Economic Research Service (ERS) Departmental Administration and Executive Operations (including Office of the Secretary, Homeland Security Staff (HSS), and Office of Chief Information Officer (OCIO)). In the DHS, two directorates receive funding related to agroterrorism: Customs and Border Protection Science and Technology Classifying spending on agroterrorism and homeland security requires judgments about which programs are relevant, especially when some have dual purposes. This subjectivity introduces discrepancies when agencies refine criteria or definitions, or change the way activities are characterized in their homeland security mission. In such cases, the most recently available data are used to update prior year data. Examples of dual-use programs for agricultural homeland security are animal and plant health programs. These programs, such as border inspection and disease surveillance existed before September 11, 2001, and would be needed at some level due to natural and accidental disease outbreaks. However, the scale and scope of these programs have been expanded primarily due to agroterrorism. For budget and accounting purposes, all or part of dual-use activities may be counted as homeland security spending, depending on each agency's criteria. For example, GAO reports that the Animal and Plant Health Inspection Service (APHIS) attributes 100% of an activity's budget authority to homeland security if any of the following questions apply: Is this a new activity or program focus as a result of 9/11? Has the bulk of the program activity changed as a result of 9/11? Does the activity address international pest or disease outbreaks or other acts of agro-bioterrorism? Was the activity initiated with homeland security supplemental funds? Did APHIS receive enhanced homeland security funds for the activity? Is the activity needed in order to comply with one or more Homeland Security Presidential Directives or the Bioterrorism Act of 2002? By Year and Source Prior to September 11, 2001, USDA spent between $45-60 million in regular annual appropriations to combat terrorism, primarily through border inspections and research. User fees for border inspection added about $180 million in FY2002, bringing the total funding (regular appropriations plus user fees) to about $225-240 million in FY2002. This range can be considered the starting baseline for homeland security funding for agriculture (the regular FY2002 agriculture appropriations bill was outlined prior to September 11, 2001, even though it was enacted about two months later.) Appropriations Appropriations and user fees for agriculture-related homeland security activities in USDA and DHS have more than tripled from the $225 million "pre-September 11" baseline to $818 million in FY2007. Counting the supplemental appropriations in FY2002-FY2003, and regular annual appropriations and user fees for both USDA and DHS, homeland security funding for agriculture has grown by 48% over five years, from $552 million in FY2002 to $818 million in FY2007. As a percentage of non-defense budget authority for homeland security, agriculture receives about 2.1% of the total. In FY2002, the ratio was 2%, which fell to 1.4% in 2003, and has since risen to between 2.1% and 2.3% currently ( Table 1 ). The regular appropriation devoted to preparing for agroterrorism has grown significantly since FY2002, and supplanted the need for further supplemental funding ( Figure 6 ). Regular annual appropriations for homeland security in USDA increased more than three-fold from FY2002 to FY2003, and by 60% in each of FY2004 and FY2005. In FY2006, the regular appropriation to USDA for homeland security dropped by about 9%, and the estimate for FY2007 is another 19% decrease. The Administration's request for FY2008 calls for a 54% increase to make up for these losses and to increase preparedness efforts even more. Regular annual appropriations for agriculture in DHS are irregular and tied to particular initiatives, such as university research grants or facility construction. Supplemental Appropriations Supplemental appropriations acts in 2002 and 2003, ( P.L. 107-117 and P.L. 108-11 ) augmented the regular appropriations acts, providing significant additional funds to rapidly increase the response to agroterrorism vulnerabilities ($328 million and $100 million, respectively). User fees User fees to support agricultural border inspection have grown with passenger and cargo volume, particularly in the immediate years following September 11, 2001, when passenger volume dropped due to public concerns. In FY2002, user fees for agricultural border inspections totaled $181 million. By FY2005, that amount grew by 87% to $339 million, and another 24% into FY2006. User fees fund about half of the total amount available in FY2007 for homeland security in agriculture. By Agency Figure 7 presents homeland security funding for agriculture by agencies in USDA and DHS. APHIS (USDA) and CBP (DHS) conduct most of the activities related to homeland security in agriculture. In FY2007, APHIS is expected to account for 51% of homeland security spending on agriculture, and CBP about 33%. Research agencies in USDA (ARS and CSREES) account for nearly 10%. Much of the APHIS activity (about 43%) and all of the CBP activity in the agriculture homeland security area have been for border inspections, predominantly funded through user fees rather than appropriations. APHIS retains about 39% of the total user fees collected each year, and transfers the rest to DHS for its Customs and Border Patrol agency ( Table 2 ). By Function for Homeland Security For the President's annual budget request, agencies throughout the federal government categorize their funding based on six mission areas (functions), as defined in the National Strategy for Homeland Security: Intelligence and warning Border and transportation security Domestic counterterrorism Protecting critical infrastructure and key assets Defending against catastrophic threats Emergency preparedness and response Figure 8 and Table 3 present the funding information by homeland security function. As in every year since 2002, border inspections are the largest homeland security activity for agriculture in FY2007, conducted jointly by USDA-APHIS and DHS-CBP. Defending against catastrophic threats is the next largest activity, particularly in APHIS, which includes monitoring, surveillance and laboratory response capacity. Protecting critical infrastructure has been another large activity. Emergency preparedness and intelligence have received relatively less funding. Primary intelligence gathering is viewed more appropriately as the responsibility of other federal agencies such as the FBI and CIA. These agencies track and act upon bioterrorism information, sharing relevant information with USDA, DHS, and other agencies. Chronology of Appropriations The following list outlines appropriations acts that have provided funds for homeland security related to agriculture and food since September 11, 2001. Emergency Supplemental Appropriations for FY2001 ( P.L. 107-38 ; September 18, 2001). Within days of September 11, Congress approved $40 billion in emergency supplemental appropriations partitioned over three time periods. USDA received no money for domestic homeland security programs in the first two installments, but did receive an allocation in the final installment for FY2002 (see FY2002 Emergency Supplemental Act below). FY2002 Agriculture Appropriations Act ( P.L. 107-76 ; November 28, 2001). This regular annual appropriations act was outlined prior to September 11, 2001, and provides the baseline amount for homeland security functions in agriculture, without any particular discussion of agroterrorism. The appropriation for homeland security was not clearly defined, but was approximately $45-60 million. Together with user fees, the baseline for homeland security for agriculture was about $225-240 million. FY2002 Emergency Supplemental Act ( P.L. 107-117 ; January 10, 2002). Congress made the final $20 billion installment from the FY2001 supplemental in Division B of the FY2002 Defense Department Appropriation ("Transfers from the Emergency Response Fund [ERF] Pursuant to P.L. 107-38 "). USDA received $328 million for homeland security programs. This supplemental appropriation, however, preceded the creation of the Department of Homeland Security, which resulted in some of the funds being moved to DHS when border inspections and the Plum Island Animal Disease Center were transferred DHS. USDA documents suggest about $220 million were for functions transferred to DHS. FY2002 Supplemental Appropriations Act for Further Recovery ( P.L. 107-206 ; August 2, 2002). In this $28 billion supplemental appropriation, Congress included about $123 million for USDA programs related to homeland security. These amounts, however, were designated among $5.1 billion of "contingent emergency spending" that President Bush chose not to use, and thus the funds were not available to USDA and other departments (see CRS Report RL31406, Supplemental Appropriations for FY2002: Combating Terrorism and Other Issues . FY2003 Omnibus Appropriations Act ( P.L. 108-7 ; February 20, 2003). This regular annual appropriations act provided $181 million to USDA for homeland security activities. FY2003 Emergency Wartime Supplemental Appropriations Act ( P.L. 108-11 ; April 16, 2003). Congress appropriated $110 million to the Agricultural Research Service "for continued modernization of facilities in Ames, Iowa, which will provide a laboratory building, fixed equipment, and associated infrastructure" ( H.Rept. 108-076 ). FY2004 Consolidated Appropriations Act ( P.L. 108-199 ; January 23, 2004). This regular annual appropriations act provided $292 million for homeland security activities in USDA and $33 million in university grants for agriculture biosecurity from DHS. Conferees made the following statement about USDA's homeland security activities: "[A]s of September 30, 2003, $80,000,000 remains available to the Department from funds provided through the Emergency Response Fund (ERF) [see discussion of P.L. 107-38 and P.L. 107-117 above], of which nearly $9,000,000 is available to the Secretary. Since these funds were provided, USDA has been one of the slowest Federal agencies to obligate its ERF funds. The conferees are aware of concerns about security, [and] urge the Secretary to act promptly to address identified security needs and to advise the Committees on Appropriations of needs for which additional funds may be necessary" ( H.Rept. 108-401 ). FY2005 Consolidated Appropriations Act ( P.L. 108-447 , December 8, 2004). This regular annual appropriations act provided $465 million for homeland security activities in USDA. FY2006 Homeland Security Appropriations Act ( P.L. 109-90 , October 18, 2005). This regular annual appropriations act for DHS (1) provides $23 million within Science and Technology directorate: "to select a site for the National Bio and Agrodefense Facility [NBAF] and perform other pre-construction activities...to protect animal and public health from high consequence animal and zoonotic diseases." (2) Conferees also encourage the DHS: "to work in conjunction with USDA and HHS and other organizations on agroterrorism and animal-based bioterrorism, including the development and stockpiling of veterinary vaccines ... [and with] one or more states to develop a model integrated agricultural response system, utilizing geographic information systems that identify critical agricultural infrastructure." (3) Conferees also directed that DHS coordinate with USDA to submit a report "which details the specific actions each agency will take, or has already taken, to address the apparent 32% reduction in agriculture inspections and the lack of coordination between [DHS and USDA]" ( H.Rept. 109-241 ). FY2006 Agriculture Appropriations Act ( P.L. 109-97 , November 10, 2005). This regular annual appropriations act provided $420 million for homeland security activities in USDA. FY2007 Homeland Security Appropriations Act ( P.L. 109-295 , October 4, 2006). This regular annual appropriations act for DHS (1) provided a second installment of $23 million for the National Bio and Agro-defense Facility, (2) instructed DHS to prepare a report describing improvements in the targeting of agricultural inspections and coordination for inspections with the Department of Agriculture. ( H.Rept. 109-699 ). FY2007 Revised Continuing Appropriations Resolution ( P.L. 110-5 , February 15, 2007). The year-long continuing resolution for FY2007 generally funds USDA (and other federal departments with the exception of DHS and the Department of Defense) at FY2006 levels with minor adjustments. FY2008 Budget Request FY2008 USDA "Food and Agriculture Defense Initiative" In its annual budget request, USDA highlights several programs in a "Food and Agriculture Defense Initiative." The initiative does not include all homeland security programs for agriculture, but is rather a list of priority programs that USDA wishes to highlight during the appropriations process. The initiative was first mentioned in the FY2005 budget request. For example, border security activities have not been included in the initiative, even though they are included in the broader measure of homeland security funding presented on previous pages. For FY2006, appropriations for the Food and Agriculture Defense Initiative totaled $247 million, but total USDA homeland security appropriations as reported by OMB were $420 million (excluding user fees). USDA's budget for FY2008 calls for significantly increased spending on several agroterrorism preparedness programs. The Food and Agriculture Defense Initiative requests an FY2008 appropriation of $340 million, nearly double the $177 estimated for items in the initiative for FY2007 ( Table 4 ). Using OMB's more comprehensive analysis of homeland security funding for agriculture cited on previous pages, the requested FY2008 increase in homeland security funding for agriculture is 54%, up from $340 million estimated for FY2007 to $524 million requested for FY2008 ( Table 2 ). The largest item in the initiative for FY2007 is enhanced surveillance by APHIS of animal and plant health. The initiative includes a new $16 million request to begin construction for a new poultry research laboratory in Athens, Georgia. Many of the initiative's programs would improve the Federal government's ability to more quickly identify and characterize an agroterrorist attack through surveillance and monitoring. In its justification for the initiative, USDA says these activities will promote data sharing and joint analysis among federal, state and local levels. An example of such coordination is the Food Emergency Response Network (FERN) of laboratories. These computer networks allow labs to improve information sharing, rapid identification, and consistent diagnostic methods for contaminated foods. Another preparedness effort in the initiative is the National Veterinary Vaccine Bank and the National Plant Disease Recovery System (both of which are mentioned in HSPD-9). FY2008 DHS Budget Initiative The FY2008 DHS budget request does not include any individual line items for agriculture. Ongoing border inspection and science and technology activities are mentioned, but no specific allocations or requests are mentioned. Possible Pathogens in an Agroterrorist Attack Of the hundreds of animal and plant pathogens and pests available to an agroterrorist, perhaps fewer than a couple of dozen represent significant economic threats. Determinants of this level of threat are the agent's contagiousness and potential for rapid spread, and its international status as a "reportable" pest or disease (i.e., subject to international quarantine) under rules of the World Organization for Animal Health (also commonly known as the OIE, the Office International des Epizooties). A widely accepted view among scientists is that livestock are more susceptible to agroterrorism than cultivated plants. Much of this has to do with the success of efforts to systematically eliminate animals diseases from U.S. herds, which leaves current herds either unvaccinated or relatively unmonitored for such diseases by farmers and some local veterinarians. Once infected, livestock can often act as the vector for continuing to transmit the disease, facilitating an outbreak's spread, especially when live animals are transported. Certain animal diseases may be more attractive to terrorists because they can be zoonotic, or transmissible to humans. In contrast, a number of plant pathogens continue to exist in small areas of the U.S. and continue to infect limited areas of plants each year, making outbreaks and control efforts more routine. Moreover, plant pathogens generally are more difficult to manipulate from a technical perspective. Some plant pathogens require particular environmental conditions of humidity, temperature, or wind to take hold or spread. Other plant diseases may take a longer time than an animal disease to become established or achieve a level of destruction that a terrorist may desire. Animal Pathogens The Agricultural Bioterrorism Protection Act of 2002 (Subtitle B of P.L. 107-188 , the Public Health Security and Bioterrorism Preparedness and Response Act) created the current, official list of animal pathogens that are of greatest concern for agroterrorism. The list is specified in the select agent rules implemented by USDA-APHIS and the Centers for Disease Control and Prevention (CDC) of the Department of Health and Human Services (HHS). The act requires that these lists ( Table 5 ) be reviewed at least every two years. The select agent list for animal pathogens draws heavily from the enduring and highly respected OIE lists of high-concern pathogens. The select agent list is comprised of an APHIS-only list (of concern to animals) and an overlap list of agents selected both by APHIS and CDC (of concern to both animals and humans). OIE List Prior to the Agricultural Bioterrorism Protection Act, the commonly accepted animal diseases of concern were all of the OIE's "List A" diseases and some of the "List B" diseases. In 2004, the OIE replaced its Lists A and B with a single list that is more compatible with the Sanitary and Phytosanitary Agreement (SPS) of the World Trade Organization (WTO). The new OIE list classifies diseases equally, giving each the same degree of importance in international trade. Many of these OIE-listed diseases are included in the select agent list ( Table 5 ). The OIE's List A diseases were transmissible animal diseases that had the potential for very serious and rapid spread, irrespective of national borders. List A diseases had serious socioeconomic or public health consequences and were of major importance in international trade. List B diseases were transmissible diseases considered to be of socioeconomic or public health importance within countries and significant in international trade. In creating the new list, OIE reviewed its criteria for including a disease, and the disease or epidemiological events that require member countries to file reports. Nearly all of the former List A and List B diseases are included in the new single OIE list. Select Agents List The regulations establishing the select agent list for animals (9 CFR 121) set forth the requirements for possession, use and transfer of these biological agents or toxins. They are intended to ensure safe handling and for security to protect the agents from use in domestic or international terrorism. APHIS and CDC determined that the biological agents and toxins on the list have the potential to pose a severe threat to agricultural production or food products. The 23 animal diseases listed exclusively by APHIS in 9 CFR 121.3—the left column of Table 5 —include 20 of the OIE-listed diseases and three other disease agents (Akabane, Camel pox, and Menangle) considered to be emerging animal health risks for terrorism. The much larger OIE list includes other diseases that are not listed as "select agents." However, the select agent list was created to account for the additional risks perceived to be posed by terrorism. The 20 diseases and overlap agents/toxins included by both APHIS and CDC in 9 CFR 121.4—the right column of Table 5 —pose a risk to both human and animal health. The overlap list includes ten OIE-listed diseases, including anthrax, brucellosis of cattle, brucellosis of sheep, brucellosis of swine, glanders, Rift Valley fever, Q fever, Eastern equine encephalitis, tularemia, and Venezuelan equine encephalitis. Analysis The select agent list designates and regulates pathogens, not diseases, by regulating access to and handling of high-consequence pathogens. The overlap list is more comprehensive than a disease-only list, because certain pathogens may not cause a disease, per se , but may cause symptoms such as food poisoning or central nervous systems responses. Some of select agent pathogens receive more attention than others. For example, foot and mouth disease (FMD) is probably the most frequently mentioned disease when agroterrorism is discussed, due to its ease of use, ability to spread rapidly, and potential for great economic damage. In testimony before the Senate Governmental Affairs Committee on November 19, 2003, Dr. Thomas McGinn of the North Carolina Department of Agriculture described a simulation of an FMD attack by a terrorist at a single location. Only after the 5 th day of the attack would the disease be detected, by which time it may have spread to 23 states. By the 8 th day, 23 million animals may need to be destroyed in 29 states. On the other hand, the causative agent of bovine spongiform encephalopathy (BSE, or "mad cow disease") is considered dangerous enough to be a select agent, even though mad cow disease is less likely to be a terrorist's choice than other diseases. With BSE, infection is not certain, symptoms take years to manifest, and the disease may not be detected—all making credit for an attack more doubtful. Widespread animal diseases like brucellosis, influenza, or tuberculosis receive relatively less attention than FMD, hog cholera, or Newcastle disease. However, emerging diseases such as Nipah virus, Hendra virus, and the H5N1 strain of avian influenza (zoonotic diseases that have infected people, mostly in Asia) can be lethal since vaccines are elusive or have not been developed. Plant Pathogens The Agricultural Bioterrorism Protection Act of 2002 (Subtitle B of P.L. 107-188 ) also instructed APHIS and CDC to create the current official list of potential plant pathogens. The Federal government lists biological agents and toxins for plants in 7 CFR 331.3 ( Table 6 ). The act requires that these lists be reviewed at least every two years, and revised as necessary. Prior to the act, there was not a commonly recognized list of the most dangerous plant pathogens, although several diseases were usually mentioned and are now included in the APHIS select agent list. The list of seven biological agents and toxins in 7 CFR 331.3 was compiled by the Plant Protection and Quarantine (PPQ) program in APHIS, in consultation with USDA's Agricultural Research Service; Forest Service; Cooperative State Research, Education, and Extension Service; and the American Phytopathological Society. The listed agents and toxins are viruses, bacteria, or fungi that can pose a severe threat to a number of important crops, including potatoes, rice, corn, and citrus. Because the pathogens can cause widespread crop losses and economic damage, they could potentially be used by terrorists. Other plant pathogens not included in the select agent list possibly could be used against certain crops or geographic regions. Examples include Karnal bunt, citrus canker, and soybean rust, all of which currently exist in the U.S. in regions quarantined or under surveillance by USDA. As with other agents, the effectiveness of an attack to spread such a disease may be dependent on environmental conditions and difficult to achieve. Countering the Threat The goal of the U.S. animal and plant health safeguarding system is to prevent the introduction and establishment of exotic pests and diseases, to mitigate their effects when present, and to eradicate them when feasible. In the past, introductions of pests and pathogens were presumed to be unintentional and occurred through natural migration across borders or accidental movement by international commerce (passengers, conveyance, or cargo). However, a system designed for accidental or natural outbreaks is not sufficient for defending against intentional attack. Consequently, the U.S. system is being upgraded to address the reality of agroterrorism. Different analysts and agencies have various ways to outline a response for agroterrorism. The National Research Council outlines a three-pronged strategy for countering the threat of agroterrorism: Deterrence and prevention Detection and response Recovery and management Even though no foreign terrorist attacks on crops or livestock have occurred in the United States, government agencies and private businesses have not taken the threat lightly. Biosecurity is an increasingly prominent among food manufacturers, merchandisers, retailers, and commercial farmers. Many agribusinesses have prepared response plans or added security measures to protect their product and brand names, ranging from input sources to processing and retail distribution networks. Deterrence and Prevention Primary prevention and deterrence interventions for foreign pests and diseases include international treaties and standards (such as the International Plant Protection Convention, and those of the OIE/World Organization for Animal Health), bilateral and multilateral cooperative efforts, off-shore activities in host countries, port-of-entry inspections, quarantine, treatment, and post-import tracking of plants, animals and their products. Every link in the agricultural production chain is susceptible to attack with a biological weapon. Traditionally the first defense against a foreign animal or plant disease has been to try to keep it out of the country. Agricultural inspectors at foreign pre-clearance inspections and at the U.S. borders are the first line of defense. Smuggling interdiction efforts can act as deterrents before biological agents reach their target. DHS and USDA already conduct such inspection and quarantine practices, but continued oversight is necessary to determine which preparedness activities and threats need more attention. Off-shore activities include pre-clearance inspection by APHIS of U.S. imports before products leave their port of origin. APHIS has personnel in at least 27 host countries. Although many of these inspections programs were built to target unintentional threats, they are being augmented with personnel and technology to look for intentional threats. Various U.S. intelligence and law enforcement agencies collect information about biological weapons that could be used against U.S. agriculture. Building and maintaining a climate of information sharing between USDA, DHS, and the intelligence community is necessary, especially so that agriculture is not overlooked compared to other infrastructure and human targets. Once inside the U.S., many parts of the food production chain may be susceptible to attack with a biological weapon. For example, terrorists may have unmonitored access to geographically remote crop fields and livestock feedlots. Diseases may infect herds more rapidly in modern concentrated confinement livestock operations than in open pastures. An undetected disease may spread rapidly because livestock are transported more frequently and over greater distances between farms, and to processing plants. Processing plants and shipping containers need to be secured and/or tracked to prevent tampering. An important line of defense is biosecurity—the use of preventive security measures against pathogens. On farms, biosecurity includes farm management practices that both protect animals and crops from the introduction of infectious agents and contain a disease to prevent its rapid spread within a herd or to other farms. Biosecurity practices include structural enclosures to limit outside exposure to people and wild animals, and the cleaning and disinfection of people, clothing, vehicles, equipment, and supplies entering the farm. USDA promotes such practices for poultry in a program called "Biosecurity for the Birds." Most farm specialists agree that livestock farmers are increasingly aware of the importance of biosecurity measures, particularly since the FMD outbreaks in European cattle and the avian flu and exotic Newcastle infections in U.S. poultry. More farm operators are restricting visitors or requiring them to wear boot covers or other protective clothing to guard against bringing in disease. Regardless of the reason for following biosecurity measures (terrorism or accidents), these precautions help prepare farms against diseases. Detection and Response In the FY2004 Consolidated Appropriations Act ( P.L. 108-199 ), the conference committee made the following observation about agroterrorism preparedness: "The conferees agree that emergency preparedness related to field crops, farm animals and food processing and distribution is of critical importance, and that the agriculture and food sectors are part of the critical infrastructure requiring heightened attention and protection. Given the integral roles of state and local governments and the private sector in detecting, deterring and responding to acts of agro-terrorism, the conferees expect the Department of Agriculture and the Department of Homeland Security to coordinate efforts in assisting states, particularly by providing financial and technical support to initiatives oriented toward interstate cooperation in joint preparedness initiatives. The conferees are particularly interested in those states that have developed or are currently developing coordinated interstate initiatives" ( H.Rept. 108-401 for P.L. 108-199 ). Because biological attacks on crops and livestock may not be immediately apparent, existing frameworks for detecting, identifying, reporting, tracking, and managing natural and accidental disease outbreaks need to be upgraded to combat agroterrorism. Appropriate responses are being developed based on specific pathogens, targets, and other circumstances that may surround an attack. The exact methods for control and eradication operations are difficult to predict. Past experience and simulations have shown that day-to-day decisions would be made using "decision trees" that include factors such as the geographical spread, rates of infestation, available personnel, public sentiment, and industry cooperation. Response procedures are outlined in the APHIS Plant Protection and Quarantine (PPQ) Emergency Programs Manual and the APHIS Veterinary Services (VS) Federal Emergency Response Plan for an Outbreak of Foot-and-Mouth Disease or Other Highly Contagious Diseases . The National Response Plan (NRP) also discusses USDA's role in responding to terrorist attacks or other disasters. In an outbreak, damage is proportional to the time it takes to first detect the disease. If a foreign disease is introduced, responsibility for recognizing initial symptoms rests with farmers, producers, veterinarians, plant pathologists and entomologists. But farmers sometimes are reluctant to voluntarily test crops or livestock for fear of economic loss or professional stature. Cooperative Extension Service agents at state universities are receiving additional training on recognizing the likely symptoms of an agroterrorism attack. Effective detection depends on a heightened sense of awareness, and on the ability to rapidly determine the level of threat (e.g., developing and deploying rapid disease diagnostic tools). Lessons from disease outbreaks, including the 2001FMD outbreaks in Europe and 2003-06 spread of H5N1 avian flu globally, show that the speed of detection, diagnosis, and control spell the difference between an isolated incident and an economic and public health disaster. The capacity to respond, however, is not always as strong as desired. In recent years, the number of veterinarians with experience to recognize many foreign animal diseases has declined. Success in eradicating many animal diseases in the United States has reduced the "opportunity" for new veterinarians to see such diseases. Also, the number of large animal veterinarians in private practice and within APHIS has declined. The American Veterinary Medical Association predicts that 7% of USDA positions for large animal veterinarians may go unfilled, and 4-5% of such positions nationwide. In light of this trend, APHIS has initiated efforts to increase training for foreign animal diseases and create registries of veterinarians with appropriate experience. The National Veterinary Medical Service Act, P.L. 108-161 , provides new veterinarians with loan repayment assistance in exchange for practicing areas with veterinary shortages and for being tasked by the government in emergency situations. DHS and USDA have worked to improve the coordination of their response plans to secure the food supply, particularly following the announcement of HSPD-9. The departments are cooperating on research funding, detection technology, surveillance, partnerships with private industry, and state and local response coordination. Examples of the public-private partnerships for detection include the food and agriculture Information Sharing and Analysis Center (ISAC) and the food and agriculture Sector Coordinating Council (SCC)—both discussed earlier in this report. Numerous simulation ("table top") exercises have been conducted by both federal, state and local authorities to test the response and coordination efforts of a agroterrorism attack. Examples of such simulations include the Silent Prairie exercise in Washington (February 11, 2003), the Silent Farmland exercise in North Carolina (August 5, 2003), and Exercise High Stakes in Kansas (June 18, 2003). The last line of defense, and the costliest, is the isolation, control, and eradication of an epidemic. The more geographically widespread a disease outbreak, the costlier and more drastic the control measures become. Officials gained valuable experience from recent agricultural disease outbreaks such as avian influenza in the U.S., Canada, and Asia; FMD in the UK; and citrus canker in Florida. Each one of these epidemics has required the depopulation and destruction of livestock and crops in quarantine areas, indemnity payments to farmers, and immediate suspension of international trade. Of all lines of defense, mass eradication is the most politically sensitive and difficult. Actions taken in each of these outbreaks have met with varying degrees of resistance from groups opposed to mass slaughter of animals, citizens concerned about environmental impacts of destroying carcasses, or from farmers who fear the loss of their livelihood. During the 2001 outbreak of FMD in the United Kingdom, the public was clearly opposed to the large pyres of burning carcasses. The disposal of millions of chicken carcasses in British Columbia, Canada, during 2004 also caused a significant public debate. Thus, scientific alternatives are needed for mass slaughter and carcass disposal. Judicial roadblocks also can interfere with eradication and control efforts. For example, science-based measures (tree removal within certain perimeters) to eradicate citrus canker in Florida's residential neighborhoods were challenged and delayed in the courts. The disease continued to spread and, before it could be eradicated, was spread very widely by hurricanes in 2005. Federal Authorities When a foreign animal disease is discovered, whether accidentally or intentionally introduced, the Secretary of Agriculture has broad authority to eradicate it or prevent it from entering the country. The use of these authorities is fairly common, as shown recently by the import restrictions placed on H5N1 avian flu-infected countries. Federal quarantines and restrictions on interstate movement within the U.S. are also common for certain pest and disease outbreaks, such as for sudden oak death in California and citrus canker in Florida. In addition to federal authorities, most states have similar authorities, at least for quarantine and import restrictions. In fact, the initial response to many outbreaks is at the state or local level. If an outbreak spreads across state lines or if state and local efforts are inadequate, federal involvement quickly follows. State and local officials usually consult with federal authorities and often seek federal assistance. If an animal disease outbreak is found in the United States, the Secretary of Agriculture is authorized, among other things, to: Stop imports of animals and animal products into the U.S. from suspected countries (7 U.S.C. 8303); Stop animal exports (7 U.S.C. 8304) and interstate transport of diseased or suspected animals (7 U.S.C. 8305); Seize, quarantine, and dispose of infected livestock to prevent dissemination of the disease (7 U.S.C. 8306); Compensate owners for the fair market value of animals destroyed by the Secretary's orders (7 U.S.C. 8306(d)); and Transfer the necessary funding from USDA's Commodity Credit Corporation (CCC) to cover costs of eradication, quarantine, and compensation programs (7 U.S.C. 8316). Similar authorities cover plant pests and diseases (7 U.S.C. 7701-7772). However, the capacity of local law enforcement may be stretched too thin in a full-scale agroterrorist attack. A study by the U.S. Department of Justice says that agroterrorism events are more likely to be handled as a crime scene investigation with law enforcement having primary responsibility, rather than a public health response. Quarantines of a 6-mile radius, combined with statewide roadblocks to enforce stop-movement orders, would require many officers and much equipment to be redeployed from other assignments and coordinated among many jurisdictions of different levels. National Veterinary Stockpiles (NVS) HSPD-9 calls for a National Veterinary Stockpile (NVS) "containing sufficient amounts of animal vaccine, antiviral, or therapeutic products to appropriately respond to the most damaging animal diseases affecting human health and the economy and that will be capable of deployment within 24 hours of an outbreak." At a Senate agriculture committee hearing in 2005, Dr. James Roth, veterinary professor at Iowa State University, highlighted Rift Valley fever, Nipah virus, and avian influenza as candidates for the stockpile because the agents are contagious and can cause serious illness or death in humans. "Safe and effective vaccines for these three diseases can be developed in a short time frame. This preventive measure would effectively reduce the serious threat these diseases pose to both public health and animal agriculture. Animal vaccines can be developed for a small fraction of the cost of developing human vaccines. Vaccinating animals for zoonotic diseases effectively protects the human population from infection, and reduces the need to vaccinate people." The NVS received $3 million in FY2005 and $3 million in FY2006. The Administration requests $8 million for FY2007 as part of the Food and Agriculture Defense Initiative. Recovery and Management Some activities, such as confinement and eradication, start in the response phase but continue throughout the recovery and management phase. Long-term economic recovery includes resuming the husbandry of animals and plants in the affected areas, introducing new genetic traits that may be necessary in response to the pest or disease, rebuilding public confidence in domestic markets, and regaining international market share. Confidence in food markets, by both domestic and international customers, depends on continuing surveillance after the threat is controlled or eradicated. Communication and education programs would need to inform growers directly affected by the outbreak, and inform consumers about the source and safety of their food. The social sciences and public health institutions play a complementary role to the agricultural sciences in responding to and recovering from agroterrorism. If eradication of the pest or disease is not possible, an endemic infestation would result in a lower equilibrium level of production and/or product quality. Resources would be devoted to acquiring plant varieties with resistance characteristics and breeds of animals more suitable to the new environment. This is the goal of the National Plant Disease Recovery System (NPDRS) mentioned in HSPD-9 and being initiated by APHIS. National Plant Disease Recovery System (NPDRS) HSPD-9 calls for a National Plant Disease Recovery System (NPDRS) "capable of responding to a high-consequence plant disease with pest control measures and the use of resistant seed varieties within a single growing season to sustain a reasonable level of production for economically important crops." The primary resources for this recovery system are the U.S. National Plant Germplasm System in conjunction with federal, state, university, extension, and industry scientists. Planning includes finding or developing seed varieties that resistant to certain diseases, and pesticide control measures that prevent, slow, or stop high-consequence plant diseases from spreading. The NPDRS received $2 million in FY2005 and $2 million in FY2006. The Administration requests $6 million for FY2007 as part of the Food and Agriculture Defense Initiative. Issues for Congress Appropriations The annual appropriations process provides an opportunity for legislators to influence homeland security activities separate from writing authorizing legislation or conducting oversight hearings. In addition to the primary purpose of appropriations laws—providing or limiting funding—appropriators may also use committee report language to request reports from federal agencies or make statements and stipulations about future counterterrorism activities. USDA's budget request for FY2008 calls for significantly increased spending on several agroterrorism preparedness programs. The Food and Agriculture Defense Initiative requests an FY2008 appropriation of $340 million, nearly double the $177 estimated for items in the initiative for FY2007 ( Table 4 ). Using OMB's more comprehensive analysis of homeland security funding for agriculture cited on previous pages, the requested FY2008 increase in homeland security funding for agriculture is 54%, up from $340 million estimated for FY2007 to $524 million requested for FY2008 ( Table 2 ). The FY2008 DHS budget request does not include any individual line items for agriculture. Ongoing border inspection and science and technology activities are mentioned, but no specific allocations or requests are mentioned. These budget issues and past appropriations for agroterrorism are discussed earlier in this report under the heading " Federal Funding to Respond to Agroterrorism ." Legislation Increasing the level of terrorism preparedness remains a concern, not only for agroterrorism, but also for other forms of terrorism. Several bills were introduced in the 109 th Congress to authorize funding or otherwise improve the level of preparedness or coordination of response to an agroterrorist attack. These bill are listed in Table 7 and discussed in the context of several issues below. The 110 th Congress may consider similar bills regarding coordination and response activities. Context from the 109th Congress Two complementary bills addressing agroterrorism preparedness were introduced by Senator Akaka: S. 572 (the Homeland Security Food and Agriculture Act, 109 th Congress) and S. 573 (the Agricultural Security Assistance Act, 109 th Congress). Versions of both bills were introduced in the 108 th Congress. Both bills addressed different aspects of agroterrorism preparedness and coordination. S. 572 would have amended the Homeland Security Act of 2002 by giving additional responsibilities to the Department of Homeland Security for agroterrorism preparedness. S. 573 (which subsequently was incorporated into Project Bioshield II, S. 975 , 109 th Congress) would have tasked the Secretary of Agriculture with various studies and programs, and authorized funding for state and local preparedness, public awareness programs, and biosecurity grants for farmers. S. 573 / S. 975 also would have established agriculture liaison position in the Department of Homeland Security and Department of Health and Human Services. Another agroterrorism preparedness bill, S. 1532 (the Agroterrorism Prevention Act, 109 th Congress) was introduced by Senator Specter. It would have authorized funding for public awareness, on-farm biosecurity guidelines, and state and local preparedness assistance, and bolstered laboratory and other response capacity. S. 1532 also would have addressed criminal penalties for agroterrorism, and coordination for agricultural issues in the intelligence community. S. 3898 / H.R. 6086 (National Reportable Conditions Act, 109 th Congress) would have directed DHS, in coordination with USDA and several other agencies, to develop a list of diseases, conditions, and events that represent a threat to humans, animals, food production, and the water supply. A commission of public health professionals, veterinarians, animal and food specialists, and environmental, and utility, and laboratory workers would have advised the Secretary. The bill would have created a coordinated notification system to a single government agency. P.L. 109-374 (the Animal Enterprise Terrorism Act) was enacted in 2006 to enhance criminal penalties for terrorism against animal enterprises, not only for agroterrorism as discussed in this report, but also for what is sometimes called "eco-terrorism" against animal research facilities or types of livestock production. The law prescribes penalties and restitution in Title 18 of the U.S. Code for varying levels of economic damage and personal injury involving threats, acts of vandalism, property damage, criminal trespass, harassment, or intimidation. In terms of preparedness and coordination, the bills from the 109 th Congress sought to provide more concrete Congressional instructions and budget authorizations for agroterrorism preparedness. However, similar results could occur if the presidential directive HSPD-9 is implemented successfully. The presidential directives facilitating agroterrorism preparedness, and subsequent administrative actions, did not exist when Senator Akaka's bills were introduced in the 108 th Congress. While Congress certainly has oversight authority of federal agencies and may ask questions about implementation of HSPD-9, a public law outlining and directing the implementation of an agroterrorism preparedness plan would establish the statutory parameters for such a plan, and, as a practical matter, might result in enhanced oversight by specifically identifying executive branch entities responsible for carrying out particular components of such a plan. USDA Programs to Bolster Preparedness In the 109 th Congress, S. 573 was referred to the Agriculture Committee, but the most of the text was incorporated subsequently into Title 27 of S. 975 (Project Bioshield II, 109 th Congress) which is referred to the Health, Education, Labor, and Pensions Committee. The bills would have authorized such sums as necessary, subject to annual appropriations, for state and local vulnerability assessments, emergency response plans, geographic information systems, and grants to State and local agriculture health officials. The bills also would have created awareness programs and grants for farm-level producers to improve biosecurity measures. These farm-level activities would have included development and dissemination of on-farm biosecurity guidelines, and on-farm biosecurity improvement grants (up to $10,000 per farm). S. 1532 (the Agroterrorism Prevention Act, 109 th Congress) would have authorized funding for USDA and DHS-FEMA to assist states in developing response plans. It also would have authorized funding for public awareness, the dissemination of farm-level biosecurity guidelines, and mandated further development of a National Veterinary Stockpile and a National Plant Disease Recovery System, largely as mentioned in HSPD-9. Responsibilities of DHS The Homeland Security Food and Agriculture Act ( S. 572 , S.Rept. 109-209 , 109 th Congress) would have amended the Homeland Security Act of 2002 ( P.L. 107-296 ) by giving additional biosecurity responsibilities to the Department of Homeland Security. The bill was reported favorably by the Homeland Security and Governmental Affairs Committee in September 2005. It would have given a leadership role to DHS for agriculture security preparedness and disaster response. S. 572 (109 th Congress) would have authorized an agriculture security program in DHS that would advise and consult with federal, State, local, and other agriculture officials regarding agroterrorism preparedness. It would have given the Secretary of DHS authority to execute responsibilities mentioned in HSPD-7 and HSPD-9, and tasked DHS with coordinating much of an agroterrorism response by communicating, equipping, and otherwise facilitating emergency response providers. DHS also would have become the lead responder by coordinating with the Department of Transportation, the Environmental Protection Agency, Department of Agriculture, and Department of State. DHS would have coordinated task forces to identify and recommend best practices for State response plans. The bill also would have created a grant program to help State and local agricultural specialists prepare for agroterrorism by funding conferences and agroterrorism response exercises. The Congressional Budget Office estimated that implementing S. 572 would cost $8 million in 2006 and $53 million over a five-year period. Of this total, $48 million would fund additional staff and expenses in the current DHS Directorate for Preparedness, and $5 million would be for grants to State and local agriculture officials. Inter-agency Coordination Shortly following enactment of the Homeland Security Act and the 2003 transfer from USDA to DHS of agricultural border inspections and the Plum Island agricultural research facility, concerns over DHS dedication to these agricultural functions began rising. Moreover, concern over coordination between established agencies and DHS is not unique to agriculture. Nonetheless, the issue of improved coordination between federal agencies with various jurisdictions, which agency has primary responsibility, and encouraging agencies to seeking adequate consultation from other stakeholders has been raised in many venues and proposed legislation. For example, the Agricultural Security Assistance Act ( S. 573 , 109 th Congress) would have established agriculture liaison position in the Department of Homeland Security (specifically with the Federal Emergency Management Agency, FEMA), and in the Department of Health and Human Services. The bill, among other things, would have given leadership roles for preparedness and response, particularly with first responders, to DHS. S. 1532 (the Agroterrorism Prevention Act, 109 th Congress) would have instructed DHS, HHS, USDA, intelligence agencies, Interior, EPA, and other agencies to coordinate response plans, conduct vulnerability assessments, and expand monitoring and surveillance for agroterrorism. The bill also mentioned enhanced intelligence systems and cooperation, tracking systems for agricultural products, laboratory networks, and border inspection training. The bill would have directed DHS, in coordination with other agencies, to assess the need for modernizing or replacing BL-3 and BL-4 laboratories with agricultural capacity. Project Bioshield II ( S. 975 , 109 th Congress) would have established a working group spanning USDA, DHS, HHS, and FDA to identify and recommend specific actions, capacities, and limitations regarding agroterrorism preparedness. Section 2708 of S. 975 (109 th Congress) would have compelled DHS to cooperate with USDA and other intelligence agencies to improve the targeting of agricultural border inspections. While the agencies are working together already toward this goal, such legislation would further compel the coordination of the departments. S. 3898 / H.R. 6086 (National Reportable Conditions Act, 109 th Congress) would have created a coordinated notification system to a single government agency for a specific list of diseases, conditions, and events deemed to be a threat to human or animal health, or the safety of the food and water supply. Border Inspections Once agricultural border inspectors were transferred from USDA to DHS, some Members and industry groups expressed concerns that DHS would concentrate on more immediate or catastrophic homeland security issues such as immigration or radiological threats, and neglect agricultural functions. Some were also concerned that personnel and resources formerly devoted to agriculture would be shifted to other DHS areas (for more background, see the earlier section on the Homeland Security Act). Coordination over agricultural border inspections was raised in the conference report for the FY2007 DHS appropriations act ( P.L. 109-295 ). Appropriators directed DHS to report on activities to target agricultural inspections, adjust to new agricultural threats, improve training, generally coordinate with USDA and state governments regarding agricultural inspections. The conferees are concerned with the steps the Department is taking to improve the targeting of agricultural inspections and direct the Secretary to submit a report consistent with section 541 of the Senate bill. ( H.Rept. 109-699 ) Sec. 541. The Secretary of Homeland Security shall submit a report to the Committees on Appropriations of the Senate and the House of Representatives, not later than February 8, 2007, that—(1) identifies activities being carried out by the Department of Homeland Security to improve—(A) the targeting of agricultural inspections; (B) the ability of United States Customs and Border Protection to adjust to new agricultural threats; and (C) the in-service training for interception of prohibited plant and animal products and agricultural pests under the agriculture quarantine inspection monitoring program of the Animal and Plant Health Inspection Service; and (2) describes the manner in which the Secretary of Homeland Security will coordinate with the Secretary of Agriculture and State and local governments in carrying out the activities described in paragraph (1). ( H.R. 5441 , 109 th Congress) The coordination issue was previously raised FY2005 Consolidated Appropriations Act ( P.L. 108-447 , H.Rept. 108-792 ). Conferees expressed their concern over two agricultural functions transferred to DHS, and requested a GAO study of coordination between DHS and USDA. The conferees are aware of ongoing concerns within the agriculture sector that the transfer of these responsibilities [border inspection and research] may shift the focus away from agriculture to other priority areas of DHS. In order to ensure that the interests of U.S. agriculture are protected and that the intent of the Homeland Security Act of 2002 is being fully met, including the proper allocation of AQI [Agricultural Quarantine Inspection] and other funds, the conferees request the Government Accountability Office to provide a report, no later than March 1, 2005, on the coordination between USDA and DHS in protecting the U.S. agriculture sector, including a description of the long-term objectives of joint activities at Plum Island and the effectiveness of AQI and other inspection activities ( H.Rept. 108-792 ). This was the impetus for the 2006 GAO study, Management and Coordination Problems Increase the Vulnerability of U.S. Agriculture to Foreign Pests and Disease (GAO-06-644), discussed earlier in this report, which identified several problems concerning inter-agency coordination and inspection performance. Judicial Issues Both S. 573 (109 th Congress) and S. 975 (109 th Congress) would have instructed the Attorney General to review State and local laws relating to agroterrorism to determine whether any such laws would facilitate (or impede) the implementation of agroterrorism response plans and whether a State court could delay the implementation of such federal response plans. S. 1532 (109 th Congress) would have criminalized acts of agroterrorism by amending Title 18 of the U.S. Code to define agroterrorist acts and prescribing penalties of fines, imprisonment, or death. The Animal Enterprise Terrorism Act ( P.L. 109-374 ) enhanced the authority of the Department of Justice to prosecute and convict individuals committing terrorism against animal enterprises. The act defines such acts and prescribes penalties. It applies not only to international actors committing agroterrorism in the United States, but also to acts commonly considered "eco-terrorism" that are conducted by parties within the United States against locations such as animal research facilities or confinement livestock operations.

The potential for terrorist attacks against agricultural targets (agroterrorism) is increasingly recognized as a national security threat, especially after the events of September 11, 2001. Agroterrorism is a subset of bioterrorism, and is defined as the deliberate introduction of an animal or plant disease with the goal of generating fear, causing economic losses, and/or undermining social stability. The goal of agroterrorism is not to kill cows or plants. These are the means to the end of causing economic damage, social unrest, and loss of confidence in government. Human health could be at risk if contaminated food reaches the table or if an animal pathogen is transmissible to humans (zoonotic). While agriculture may not be a terrorist's first choice because it lacks the "shock factor" of more traditional terrorist targets, many analysts consider it a viable secondary target. Agriculture has several characteristics that pose unique vulnerabilities. Farms are geographically disbursed in unsecured environments. Livestock are frequently concentrated in confined locations, and transported or commingled with other herds. Many agricultural diseases can be obtained, handled, and distributed easily. International trade in food products often is tied to disease-free status, which could be jeopardized by an attack. Many veterinarians lack experience with foreign animal diseases that are eradicated domestically but remain endemic in foreign countries. In the past five years, "food defense" has received increasing attention in the counterterrorism and bioterrorism communities. Laboratory and response capacity are being upgraded to address the reality of agroterrorism, and national response plans now incorporate agroterrorism. Congress has held hearings on agroterrorism and enacted laws and appropriations with agroterrorism-related provisions. The executive branch has responded by implementing the new laws, issuing several presidential directives, and creating liaison and coordination offices. The Government Accountability Office (GAO) has studied several issues related to agroterrorism. Appropriations and user fees for agriculture-related homeland security activities in USDA and DHS have more than tripled from a $225 million "pre-September 11" baseline in FY2002 to $818 million in FY2007. Agriculture now receives about 2.1% of the total non-defense budget authority for homeland security. Increasing the level of agroterrorism preparedness remains a concern, as do interagency coordination and adequate border inspections. The 110th Congress may consider bills or oversight hearings to address funding and the level of preparedness or coordination to respond to an agroterrorist attack. This report will be updated as events warrant.

Introduction The 2011 National Security Space Strategy declared, "Space is vital to U.S. national security and our ability to understand emerging threats, project power globally, conduct operations, support diplomatic efforts, and enable global economic viability." Maintaining the benefits afforded by space is central to a wide range of U.S. national interests. These include significant government (military, intelligence, and civil ) and commercial interests. In recent years, recognition has been growing among space-faring nations and the international scientific community that the mass of man-made debris in Low-Earth Orbit (LEO) has reached a critical density that will lead to a slow but unstoppable growth of space debris that could have profound implications for those interests. Significant debris-generating events in the past decade have heightened the issue, and a number of national and international studies confirm that the amount of current LEO debris is both unstable and increasing. This instability in the space environment presents a threat to U.S. national interests in space. U.S. Deputy Secretary of Defense William J. Lynn, III, summarized the national security implications of interference with our satellites and space capabilities: "Space systems enable our modern way of war. They allow our warfighters to strike with precision, to navigate with accuracy, to communicate with certainty, and to see the battlefield with clarity. Without them, many of our most important military advantages evaporate." Although space debris is not the sole threat to U.S. space assets, this report focuses on the threat posed by orbital debris, the steps that have been taken thus far to mitigate it, and what might be done to ensure the long-term sustainability of the space environment. Although Congress may not need to make key decisions immediately, Congress may want to begin to focus on measures the United States may take to mitigate the threat associated with orbital debris. Defining the Threat What Is Orbital Debris and What Are Its Sources? Decades of human space flight—primarily U.S. and Russian space activities—have littered the Earth's orbit with debris. NASA defines orbital debris as "all man-made objects in orbit about the Earth which no longer serve a useful purpose." Examples include derelict spacecraft, abandoned space launch vehicle stages, mission-related debris, and fragments created as a result of explosions or collisions. The U.S. Space Surveillance Network is the leading space object tracking system in the world and catalogues objects as small as about 10 cm (softball size) in LEO and as small as 1 meter in Geosynchronous Orbit. Today, the Space Surveillance Network tracks more than 23,000 objects 10 cm in diameter or larger in orbit around the Earth. Of those, only about 1,100 (5%) are active satellites. The rest is orbital debris. In addition to the debris tracked by the Space Surveillance Network, there are hundreds of thousands of pieces of debris smaller than 10 cm, which are considered too small to track or catalogue, but are still capable of damaging satellites and the International Space Station. Prior to 2007, the principal source of space debris was the explosion of old launch vehicle upper stages that had been left in orbit with unspent energy sources. Explosions of this type were prevalent in the 1970s and 1980s but have since slowed due to increased mitigation techniques practiced worldwide. Since 2007, two significant debris-generating events have greatly increased the amount of debris in orbit. On January 11, 2007, the Chinese government launched an interceptor missile in an anti-satellite weapon test that destroyed their decommissioned Fengyun-1C weather satellite. This intentionally destructive event created the most severe orbital debris cloud in space flight history, generating more than 3,000 pieces of debris larger than 10 cm and an additional 150,000 pieces larger than 1 cm. The majority of debris particles were thrown into long-duration orbits, and remnants of this event will likely remain in orbit for at least a century. One expert reported it likely that debris from the Chinese ASAT test damaged a small Russian satellite six years later in 2013. But the Pentagon later reported that this Russian satellite most likely broke apart for different reasons and not from debris from the Chinese ASAT test. Another space expert suggested, however, it was more likely the satellite did not break up on its own and may have been hit by debris too small to be tracked and identified by the U.S. Space Surveillance Network. Two years after this incident, the first accidental hypervelocity collision occurred between two intact spacecraft. On February 10, 2009, an operational U.S. Iridium communications satellite collided at a near right angle with a defunct Russian Cosmos satellite. The collision resulted in roughly 2,100 new pieces of debris larger than 10 cm. Collision probability reports calculated by the Center for Space Standards & Innovation had predicted a "close approach" between the satellites on the day of the event. This did not cause particular alarm, however, because the approach of these two satellites was not the top predicted close approach that day, nor even the top predicted close approach of any of Iridium's satellites for the coming week. Nevertheless, at the time the approach was predicted to occur, Iridium abruptly lost contact with its spacecraft and the U.S. Space Surveillance Network began detecting debris, confirming that an actual collision had occurred. These two events increased the amount of objects in Earth orbit cataloged by the Space Surveillance Network by one-third. These collisions alone have been described as essentially negating the results of more than 20 years of international compliance with debris mitigation guidelines. As shown in Figure 1 , following these two events, the amount of cataloged fragmentation debris in orbit more than doubled after having remained nearly constant for more than 20 years. What About Missile Defense Tests in Space? Since the 1960s, the United States and Russia have conducted a significant number of ballistic missile defense (BMD) tests in space resulting in varying amounts of debris. It appears, however, that the debris created by launching targets and interceptors into space, together with any resultant orbital debris from those tests and intercepts, is unlikely to be consequential in the context of this report. This is especially true of current missile defense testing. Although the 1963 Limited Test Ban Treaty banned nuclear testing in space, the United States conducted a number of BMD tests in the late 1960s and early 1970s to validate the effectiveness of a nuclear-tipped BMD system deployed briefly in 1975-1976. There are no available data on how much these tests may have contributed, if at all, to the amount of existing space debris. Since the early 1980s, the United States has conducted a number of hit-to-kill BMD flight and intercept tests outside the Earth's atmosphere in space. In February 2008, a BMD-capable Aegis cruiser used a modified version of the Aegis BMD system to successfully shoot down an inoperable U.S. surveillance satellite that was in a deteriorating orbit. According to the Missile Defense Agency (MDA) "nearly 100 percent of the debris safely burned-up during reentry within 48 hours and the remainder safely re-entered within the next few days." Currently, MDA plans and designs flight tests to mitigate and minimize any potential hazards. According to MDA, debris modeling predicts that almost half of the mass would be vaporized during the intercept collision and about a quarter of the mass would be dispersed into fine particles with masses of less than a few tens of grams that then burn up on reentry. The remaining mass is predicted to be in pieces large enough to survive reentry and reach the ground. It is not known how long any of this debris remains in orbit before it reenters the atmosphere. It should be pointed out, however, that of the 10 most significant events that generated space debris, none are attributed to any U.S. BMD tests. Why Is Orbital Debris a Threat? Orbital debris can instantly destroy or disable space-based resources. A collision with a 10 cm object would catastrophically damage a typical satellite, a 1 cm object would likely disable a spacecraft or penetrate the shields of the International Space Station, and a 1 mm object could destroy satellite sub-systems. Once a risk of collision has been identified, the only effective way to mitigate the risk is to move the spacecraft out of the way. Moving a satellite, however, entails costs. Avoidance maneuvers cost fuel, shorten a spacecraft's lifetime, and may disrupt data and service continuity. A 2013 European Commission Memorandum reported that some European space agencies operating satellites carry out one satellite collision avoidance maneuver each month on average. It is important to note, however, that most objects in space are not under control, and their orbital paths cannot be altered. This means that the majority of potential collisions cannot be avoided using evasive maneuvers. In 2011, U.S. Deputy Secretary of Defense William J. Lynn, III, summarized the threat from orbital debris: "Whether or not we can see it, the debris is there. The danger is that each collision exponentially raises the potential for another, such that a debris cascade could someday render entire orbits unusable." But this danger has been known since the late 1970s. Current research suggests that the current LEO debris environment is unstable: The amount of orbital debris will continue to grow, in spite of debris mitigation measures, because collisions will generate new debris faster than it is removed by natural forces. A number of studies, both national and international, have concluded that orbital debris has already reached a "tipping point." A 2011 study by the National Research Council of the National Academies reported that NASA's models showed the orbital debris population would continue to increase as a result of random collisions involving non-operational intact debris. The study concluded that the amount of debris currently in orbit will continually collide with itself, leading to the growth rate of debris and increases in spacecraft failures. The study noted that the debris increase thus far has occurred most rapidly in LEO, but Geosynchronous Orbit may potentially suffer the same fate over a longer time period. In 2013, the Inter-Agency Space Debris Coordination Committee (IADC) reported the results of a NASA-led comparison study on the space debris environment. The study suggests that the orbital debris mitigation measures commonly adopted by the international space community are insufficient to stabilize the orbital debris environment. According to the report, simulations show that the current population of man-made objects in LEO has reached a critical density that will lead to a slow but unstoppable cascading effect of mutual collisions. In the study, each participating space agency used its own model to simulate the future space debris environment through 2209. The six model predictions were consistent with one another and found that even with 90% compliance with commonly adopted mitigation measures, LEO debris is expected to increase an average of 30% in the next 200 years. The population growth will be primarily driven by catastrophic collisions that are likely to occur every five to nine years. Mitigation What Mitigation Efforts Have Been Taken? In the context of orbital debris, "mitigation" refers to operational and design measures that limit the generation of debris by space launches and spacecraft that are under control. Since 1988, the official policy of the United States has been to minimize the creation of new orbital debris. NASA and DOD have requirements governing the design and operation of spacecraft and upper rocket stages to mitigate the growth of orbital debris. NASA's current orbital debris programs are recognized as models both nationally and internationally. Most relevant federal agencies accept all or some of the components of NASA's orbital debris mitigation and prevention guidelines. The Federal Aviation Administration, the National Oceanic and Atmospheric Administration, and the Federal Communications Commission also consider orbital debris issues as factors in the licensing process for spacecraft and upper stage rocket engines under their auspices. The United States continues to lead the development and adoption of international and industry standards and policies to minimize debris, such as the United Nations Space Debris Mitigation Guidelines. The United States also pursues efforts to prevent future collisions in space. The National Space Policy directs the government to improve its ability to rapidly detect, warn of, characterize, and attribute potential disturbances to space systems, whether natural or man-made. This ability to detect, track, identify, and catalog objects in outer space is known as "Space Situational Awareness." The State Department reported that, as of May 7, 2013, U.S. Strategic Command has concluded 37 Space Situational Awareness agreements with commercial satellite owners and operators to improve cooperation in this area. The State Department also actively supports efforts to establish two-way information exchanges with foreign satellite operators to facilitate urgent transmission of notifications of potential space hazards. DOD provides notifications to other governments and commercial satellite operators of potentially hazardous conjunctions between orbiting objects. The United States is currently reaching out to all space-faring nations and organizations to ensure that the Joint Space Operations Center has current contact information for both government and private sector satellite operations centers to facilitate notifications. In 2011 alone, the United States provided over 1,100 notifications to nations around the world, including to Russia and China. In addition, the United States is pursuing bilateral "Space Security Dialogues" as part of the pursuit of transparency and confidence-building measures (TCBMs) to help prevent mishaps, misperceptions, and mistrust in space. The purpose of TCBMs is to encourage responsible actions and peaceful use of space, and to increase familiarity and trust among space actors. The United States believes that space TCBMs should be pragmatic, voluntary, near-term actions. Examples include establishing "best practice" guidelines or a "code of conduct," enhancing the transparency of national security space policies, strategies, activities and experiments, and providing prior notification of launches of space launch vehicles. The United States is also involved in U.N. efforts to develop a list of voluntary and pragmatic space TCBMs and takes an active role in the United Nations Committee on the Peaceful Uses of Outer Space (UN COPUOS) working group aimed at developing voluntary best practices guidelines for enhancing safety and sustainability of space activities. What Additional Mitigation Measures May Be Pursued? Many experts believe that the need for increased international compliance with debris mitigation standards cannot be emphasized enough. Compliance with debris mitigation measures, such as the "25-year" rule, is the first defense against the increase of orbital debris. The 25-year rule is an international understanding related to post-mission disposal. It stipulates that nations should not launch an object whose lifetime in space will exceed 25 years after the completion of its mission. Adherence to the 25-year rule is a U.S. Orbital Debris Mitigation Standard Practice. Increased compliance with this and other mitigation standards is viewed as necessary because the studies predicting the growth of orbital debris used highly favorable compliance assumptions in their environmental models. If the international space community does not reach those higher levels of compliance soon, the growth of the future debris will likely be worse than predicted. In addition, some believe that perhaps one of the most beneficial TCBMs for ensuring sustainability and security in space could be the adoption of best practice guidelines or a code of conduct to promote responsible behavior in space. The European Union has a draft Code of Conduct that includes provisions on space debris mitigation. The Stimson Center, co-founded by Michael Krepon (a long-time proponent of a code for space-faring nations), also promotes a model Code of Conduct it drafted with international NGO partners. On January 17, 2012, the United States announced its decision to initiate consultations and negotiations with the European Union and other space-faring nations to develop a non-legally binding International Code of Conduct for Outer Space Activities. The United States views the EU Code as a good foundation for developing a legally non-binding International Code of Conduct. The United States has been consulting closely with the EU and others and will continue to shape a voluntary, non-legally binding International Code. The State Department reportedly affirms that the code of conduct "is not a legally binding treaty or international agreement that would impose legal obligations on the United States." Some in Congress have expressed various concerns about an international code of conduct for space. Some of these include concerns that such agreements may not be in the national security interest of the United States, or that a less formal code of conduct could evolve into a more formal treaty without sufficient oversight from Congress. Although executive branch officials have agreed to continue to consult with Congress, congressional support or opposition will likely depend on the final details of any international agreement that may be reached. In addition to these various voluntary efforts, more formal treaty efforts have also been proffered. The National Space Policy directs that the United States "will consider proposals and concepts for arms control measures if they are equitable, effectively verifiable, and enhance the national security of the United States and its allies." State Department officials have stated, however, that they have not yet seen a proposal that meets these criteria, and it specifically rejected the 2008 Chinese-Russian "Prevention of Placement of Weapons in Outer Space Treaty" on those grounds. For a list of existing space treaties, conventions, codes, and proposals, see the Stimson Center's Space Norms Matrix. The United States also plans to upgrade the Space Surveillance Network in the coming years. The new Air Force Space Fence is due to begin operation by the end the decade and be fully capable within the next. This radar system will operate in the S-band frequency range and is designed to detect objects in LEO as small as about 2 cm. Although this will increase the amount of debris that can be tracked, there will still be potentially lethal objects too small to be tracked by the Space Surveillance Network. Is Mitigation Enough? Although international compliance with common mitigation measures is widely accepted as necessary, as mentioned earlier there is a growing view within international space agencies and the scientific community that mitigation alone is no longer sufficient to prevent the continual increase of space debris. According to many experts, more aggressive measures, such as active debris removal, should be considered to stabilize the future LEO environment. Remediation "Remediation" of the space environment denotes taking action with respect to inactive objects in space. Remediation is complex and would likely require significant resources, technological advances, and international cooperation. The 2013 IADC comparison study recommended that the international community "initiate an effort to investigate the benefits of environment remediation, explore various options, and support the development of the most cost-effective technologies in preparation for actions to better preserve the near-Earth environment for future generations." Active Debris Removal Active Debris Removal is a form of remediation and, as the name suggests, involves the deliberate removal of debris objects from orbit. Various studies have asserted that the removal of orbital debris should be considered to stabilize the LEO environment. The National Space Policy directs that the United States will "[p]ursue research and development of technologies and techniques ... to mitigate and remove on-orbit debris...." According to simulations based on NASA's current long-term orbital debris projection model, the LEO environment can be stabilized in the next 200 years if at least five large, intact objects are removed per year over the next 100 years. This assumes, however, that 90% of future launches follow NASA's current mitigation guidelines and that no further explosions or other major debris releases occur. If international compliance with the 25-year rule does not reach the 90% level, the number of intact objects required to be removed each year could be higher. In December 2009, the Defense Advanced Research Projects Agency (DARPA) and NASA sponsored an international conference that identified many possible technologies for debris removal. However, all of the technologies required further development and none had been fully tested or tried in the operating environment. Additionally, another key issue with debris removal technologies is that they are "dual use" capabilities that can be used to support anti-satellite programs. This is a concern for the United States. In 2011, DARPA released the final report of their "Catcher's Mitt" study that focused on the technical challenges of the orbital debris removal problem. The study found that active debris removal would be required at some point to maintain an acceptable level of operational risk and outlined several reasons to begin development of a solution today. A central finding of the study was that "the development of debris removal solutions should concentrate on pre-emptive removal of large debris in both Low Earth Orbit and Geosynchronous Orbit." It was noted that the greatest threat to operational spacecraft actually stems from medium-sized debris (defined as 5 mm–10 cm), but no reasonable solution was found to effectively remove that size of debris. For this reason, proposals for active debris removal generally focus on large space debris objects. Proposals for active debris removal face significant technical challenges, but various concepts for removing large debris were discussed in the DARPA study, which captured some of the large number of technical approaches outlined in the scientific community. The DARPA study found that the removal of large objects generally employs advanced rendezvous and proximity operations and sophisticated grappling techniques. Various methods of capturing large objects were proposed involving a net, inflatable longeron, tethered harpoon, articulated tether/lasso, and an electrostatic/adhesive blanket. Some solutions attached or used an active thrust device, while others made use of natural forces found in the space environment to impart a force on the debris to relocate it. Legal Issues The 2010 National Space Policy currently limits debris removal activities to research and development of technologies and techniques. The actual cleanup and removal of orbital debris would raise some major legal issues. First, it should be noted that there is no international consensus on the legal definition of "space debris." The current space law treaty regime defines "space object," but there is no agreement on a definition of space debris as a subset of that term. The most prominent legal issue associated with debris removal relates to the ownership of objects in space. Article VIII of the 1967 Outer Space Treaty declares that space objects continue to belong to the country or countries that launched them. The launching state retains "jurisdiction and control" for a space object while it is in outer space, on a celestial body, and upon its return to Earth. The launching state never loses authority over the object, and no other nation has the legal authority to remove or otherwise interfere with it without authorization from the state of registry. This is true even if the space object is nonfunctioning or fragmented. "There is no right of salvage analogous to the right found in maritime law, which means that even though a satellite or some other space object may not be functioning, it does not imply that it has been abandoned by the nation that launched it." In addition, "international space law deems fragments and components from space objects as individual space objects in and of themselves, which would require identification to determine the owner and either individual or blanket consent to remove it from orbit." Absent some form of consent or international agreement, the United States would be limited to retrieving and removing objects only from its own registry. Second, active debris removal raises significant questions of liability. Under the current space law treaty regime, damage caused by spacecraft is covered by the 1972 Convention on International Liability for Damage Caused by Space Objects (Liability Convention). Article II of the Liability Convention states that the launching state is absolutely liable for damage caused by its space object on the surface of the Earth or to aircraft flight. When space objects cause damage in outer space, however, a fault standard is applied. If one spacecraft collides with another in space there is only liability if negligence can be proved. This could lead to extremely complicated fault assessments if damage or fragmentation occurred during removal operations, particularly operations involving multiple governments. Additional considerations arise from the exchange of technical information that would be required as part of the debris removal process. Successfully approaching and removing an object from space necessitates a detailed knowledge of that object. This could require the exchange of confidential or proprietary technical information, which might require the negotiation of licensing and nondisclosure agreements. For spacecraft with U.S. content, export control regulations could apply if removal involved a foreign government taking control of the debris, especially if exporting technical data was involved. These issues demonstrate that, even if there were a consensus about the need for orbital debris removal, the necessary economic, legal, political, and technical considerations have not yet been fully examined. Issues for Congress Congress briefly addressed space debris issues in the 1990 NASA Authorization Act and more recently in the 2010 NASA Authorization Act. In the 2010 Act, Congress acknowledged that "national and international effort is needed to develop a coordinated approach towards the prevention, negation, and removal of orbital debris." A few hearings in recent years have touched on orbital debris issues, but Congress might consider additional hearings from major stakeholders in the military, intelligence, civil, and commercial sector on whether proposed mitigation measures are in the national interests of the United States. Possible questions could focus on the perceived severity of the problem, whether mitigation efforts to date are adequate, and whether there should be any commitment to pursue remediation in earnest. Congress might also consider requiring DOD and NASA to develop a roadmap outlining a range of possible remediation programs to consider. Regarding possible appropriations considerations, the 2011 National Research Council study found that new resources would be required if NASA is to pursue the 2010 National Space Policy goals of research and development of technologies and techniques to mitigate and remove on-orbit debris. If the technologies to remove on-orbit debris are developed and implemented, the management requirements on NASA may become as significant as those associated with any major NASA program. Congress might find it useful to begin investigating those potential budgetary costs, and whether funding should borne wholly by NASA or by DOD or some combination. Conclusion Some observers have noted that the danger posed by orbital debris should be thought of fundamentally as a long-term environmental problem. Others perceive the danger as potentially affecting U.S. security interests, especially in its ability to interfere with consistent satellite support to U.S. military and intelligence organizations. However the issue is characterized, the space debris population, particularly in LEO, may have reached a tipping point. Catastrophic collisions are likely to continue to drive its growth, and the threat posed by orbital debris may be exacerbated by accidental or intentional debris-generating events. International compliance with mitigation measures is widely seen as critically important, but many experts believe that mitigation efforts alone are insufficient. For this reason, more aggressive measures, such as active debris removal, could be considered to protect U.S. national security interests in space and the long-term sustainability of the space environment.

After decades of activities in space, Earth's orbit is littered with man-made objects that no longer serve a useful purpose. This includes roughly 22,000 objects larger than the size of a softball and hundreds of thousands of smaller fragments. This population of space debris potentially threatens U.S. national security interests in space, both governmental (military, intelligence, and civil) and commercial. Congress has broadly supported the full range of these national security interests and has a vested concern in ensuring a strong and continued U.S. presence in space. Two events in recent years dramatically increased the amount of fragmentation debris in orbit. One was the 2007 Chinese anti-satellite test and, in 2009, an active U.S. commercial satellite accidentally collided with a defunct Russian satellite. Although the 2013 movie Gravity exaggerated the issue and took certain artistic liberties, the film graphically depicted and drew the public's attention to the potential destruction of operational satellites and other platforms in space from collisions with orbital debris. Some experts maintain the population growth of debris in space will be primarily driven by catastrophic collisions that are likely to occur every five to nine years. For decades, the United States has worked to minimize the amount of orbital debris left from its space launches and inactive satellites. Many space-faring nations have adopted similar mitigation measures, and additional voluntary international codes of conduct are being pursued. Many experts now believe that mitigation efforts alone are insufficient to prevent the continual increase of space debris. A growing view among experts holds that some level of active removal of debris from the space environment is necessary. Nevertheless, such efforts are technologically immature and face significant budgetary and legal obstacles. Congress has an opportunity to explore these issues through hearings, for instance with major stakeholders in the U.S. national security and civil space communities, and the commercial sector. Efforts to find international agreement on mitigation may involve congressional prerogatives on advice and consent, and any program to pursue remediation will likely entail appropriations support from Congress.

Background In the wake of the 2008 financial crisis and the perception that the unregulated over-the-counter (OTC) derivatives market contributed to systemic risk, the Dodd-Frank Act ( P.L. 111-203 ) sought to remake the OTC market in the image of the regulated futures exchanges. Derivative contracts are an array of financial instruments with one feature in common: their value is linked to, or derives from, changes in some underlying variable, such as the price of a physical commodity, a stock index, or an interest rate. Derivatives contracts—futures contracts, options, and swaps —gain or lose value as the underlying rates or prices change, even though the holder may not actually own the underlying asset. In the Dodd-Frank Act, some of the crucial reforms included a requirement that swap contracts be cleared through a central counterparty regulated by one or more federal agencies. Clearinghouses require traders to put down cash (called initial margin) at the time they open a contract to cover potential losses, and they require subsequent deposits (called maintenance margin) to cover actual losses to the position. The intended effect of margin requirements is to eliminate the possibility that any firm can build up an uncapitalized exposure so large that default would have systemic consequences. One well-known example of such an uncapitalized exposure includes the case of AIG, which sold about $1.8 trillion worth of credit default swaps guaranteeing payment if certain mortgage-backed securities defaulted or experienced other "credit events." When derivatives are cleared, the size of a cleared position is limited by the firm's ability to post capital to cover its potential losses. That capital protects its trading partners and the system as a whole. While the clearing of derivatives helps to address systemic concerns, it also imposes the cost of posting margin on those who trade derivatives. For example, if a grain farmer uses a futures position to hedge against the possibility that grain prices might eventually fall, then for the duration of the time that his futures position is open, he may be required to post additional cash or liquid securities to cover unrealized losses in that position. This is true even if the futures position ultimately makes him a profit when it is closed out. In this case, any excess margin is returned to the grain farmer—but he still incurs temporary borrowing costs in order to come up with margin, and these costs can potentially be high. Many nonfinancial firms complained during the debate over the Dodd-Frank Act that their use of derivatives posed no systemic threat and thus they should not be subjected to the cost of clearing these OTC derivatives. This particular debate came to be known as "the end user debate," as it referred to so-called "end users" of derivatives. As a result of these concerns, the Dodd-Frank Act in Section 723 includes a broad exemption from the clearing requirement for firms that are primarily nonfinancial in nature. Nevertheless, such firms have continued to be concerned that the act could impose indirect costs on them, or that the rulemaking process by the Commodity Futures Trading Commission (CFTC) and Securities and Exchange Commission (SEC) could do so. Thus, some of the bills in the 112 th Congress discussed below try to address these "end user" concerns. In addition, under the Dodd-Frank Act swap dealers and major swap participants—firms with substantial derivatives positions—are subject to margin and capital requirements above and beyond what the clearinghouses mandate. Swaps that are cleared are also subject to trading on an exchange, or an exchange-like "swap execution facility" (SEF) regulated by either the CFTC or the SEC, in the case of security-based swaps. All trades must be reported to data repositories so that regulators will have complete information about all derivatives positions. Data on swap prices and trading volumes must be made public. Some bills in the 112 th Congress, discussed below, seek to expand the definition of what would constitute an SEF. In addition, concern about derivatives has been fueled by sharp rises in commodity prices—particularly oil—in 2008 and early 2011. Such steep jumps, along with unexplained price volatility in a range of commodities, have fostered apprehension that financial speculation in derivatives might be creating such volatility in commodity prices. For instance, during the course of 2008 oil prices doubled to more than $145 per barrel and then fell by 80%, before rebounding again, while there was little actual interruption of physical supplies. In early 2011, there was again a run-up of about 20%, sending gasoline prices to near 2008 highs. Such severe fluctuations tend to anger consumers and thus are relevant for Congress. Indeed, the role of speculators in oil and other commodity markets has attracted congressional interest. For example, in 2009 the staff of the Permanent Subcommittee on Investigations of the Senate Committee on Homeland Security and Government Affairs found that excessive speculation has had "undue" influence on wheat price movements and in the natural gas market. A 2011 report by the minority staff of the House Committee on Oversight and Government Reform argued that "addressing excessive speculation offers the single most significant opportunity to reduce the price of gas for American consumers." In the 112 th Congress, several bills, discussed below, address the impact of financial speculation and derivatives on spot commodity prices. Bills on Dodd-Frank Act Title VII Implementation End-User Concerns A number of bills propose to clarify or expand the exemptions provided in Dodd-Frank for commercial end users, primarily nonfinancial firms that use swaps to hedge business risk. H.R. 1610 ( Representative Grimm) and S. 947 ( Senator Johanns) would create an exemption to the requirements that regulators impose margin and capital requirements on swap dealers, security-based swap dealers, major swap participants, and major security-based swap participants. Those requirements would not apply to contracts where one of the counterparties was not a swap dealer or major swap participant (or the security-based swap equivalents), an issuer of equity securities to more than five unaffiliated persons, a hedge fund, an entity that invests primarily in physical assets, a commodity pool, or Fannie Mae or Freddie Mac. Similar provisions are contained in S.Amdt. 814 to H.R. 2112 ( Senator Crapo) and S. 1650 ( Senator Crapo) . H.R. 2682 ( Representative Grimm) would exempt swap and security-based swap transactions in which one of the counterparties was a nonfinancial end user from the requirements that regulators impose capital and margin requirements on the uncleared swap positions of dealers and major swap participants. Inter-Affiliate Transactions H.R. 2779 ( Representative Stivers) would exempt from the definition of "swap" any contract between a counterparty that controls, is controlled by, or is under common control with the other counterparty. Such contracts would be exempt from all the regulatory requirements that apply to swaps, except that they would still be required to be reported to a swap data repository or to the CFTC. The bill was marked up and referred to the full Committee on Financial Services by the Subcommittee on Capital Markets and Government Sponsored Enterprises on November 15, 2011. S. 1650 ( Senator Crapo) would exempt swaps between affiliates from the margin and capital requirements that apply to swap dealers and major swap participants. How Swaps Are Traded and What Duties Are Owed H.R. 2586 ( Representative Garrett) amends the definitions of "swap execution facility" (SEF) and "security-based swap execution facility" (SBSEF). The bill addresses several features of proposed agency rules setting out the requirements for these trading facilities that some market participants find onerous. Under the bill, SEFs and SBSEFs could not require (1) that bids and offers be made available to any minimum number of traders, (2) that bids or offers be displayed or delayed for any particular period of time, (3) that all bids and offers be available on multiple trading facilities operated by the same SEF or SBSEF, and (4) would have to permit bids and offers to be transmitted and executed by "any means of interstate commerce." For more on the SEF issue, see the CFTC's proposed rule "Core Principles and Other Requirements for Swap Execution Facilities," issued on January 7, 2011, which is available together with comments received on the CFTC's website ( http://www.cftc.gov ). H.R. 3045 ( Representative Canseco) amends the provision of Dodd-Frank that defines certain counterparties as "special entities," to whom swap dealers, security-based swap dealers, major swap participants, and major security-based swap participants owe a higher standard of care. Special entities include units of government (federal, state, and municipal), employee benefit plans, and endowments. H.R. 3045 would remove ERISA plans from the definition of special entity, and it specifies that the duty of a swap dealer to act in the best interests of a special entity shall not be construed as a fiduciary duty. Controlling Speculation A number of bills seek to reduce excessive speculation in commodities, which is thought to harm consumers by causing price fluctuations that are not justified by the fundamental forces of supply and demand. (For more on speculation, see CRS Report R41986, Speculation, Fundamentals, and Oil Prices , by [author name scrubbed], [author name scrubbed], and [author name scrubbed]; and CRS Report R41902, Hedge Fund Speculation and Oil Prices , by [author name scrubbed] and [author name scrubbed].) H.R. 2328 ( Representative Hinchey) and S. 1200 ( Senator Sanders) include a number of measures intended to reduce speculation in crude oil, gasoline, diesel fuel, jet fuel, and heating oil. The bill directs the CFTC to impose limits on the size of speculative positions in those commodities, to apply to both swaps and futures markets. The CFTC is also directed to impose a margin requirement of 12% for those commodities. Margin is the amount of cash required to be deposited with one's broker to open a futures or swaps position. The current margin for crude oil futures is about 8%. The increase represents a rise in trading costs, which would be expected to reduce the volume of trading. The provisions of the bill will expire when the CFTC establishes position limits for commodities in accordance with the Dodd-Frank Act. H.R. 3006 ( Representative Welch) and S. 1598 ( Senator Nelson of Florida) create a presumption that excessive speculation is occurring if the volume of speculative trading exceeds by more than 10% the average over the past 25 years. The CFTC is then directed to establish limits on the aggregate percentage of all energy commodity contracts that are held by speculators as a class—the limits must be no higher than the average over the previous 25 years. The bills also require foreign futures exchanges whose contracts are available for trading electronically in the United States to have rules to control excessive speculation. Several other bills seek to reduce speculation by imposing taxes on speculators' trades. H.R. 2003 ( Representative DeFazio) would impose a tax of 0.01% of the value of each oil future, option, and swap contract traded. Commercial traders (those who use derivatives to hedge the risk of their physical commodity business) and financial institutions trading on behalf of commercial traders would be exempt from the tax. Monies collected would be dedicated to the cost of federal regulation of these markets, that is, the CFTC's budget. Two other bills— H.R. 3313 ( Representative DeFazio) and S. 1787 ( Senator Harkin) —would impose a tax on a broad range of financial transactions, including derivatives trades. International Aspects H.R. 3283 ( Representative Himes) limits the extraterritorial reach of Dodd-Frank by exempting swaps and security-based swaps between U.S. and non-U.S. persons (except from reporting requirements). Foreign registrants as swap or security-based swap dealers will only be subject to the requirements of Title VII with respect to contracts with nonaffiliated U.S. counterparties. Repeal of Dodd-Frank Several bills would repeal Dodd-Frank in its entirety, which would have the effect of returning swap regulation to the Commodity Futures Modernization Act (CFMA) of 2000, which exempts swaps from most of the provisions of federal commodities laws. The repeal bills include H.R. 87 ( Representative Bachmann) , S. 712 ( Senator DeMint) , S. 746 ( Senator Shelby) , S. 1720 ( Senator McCain) , and S.Amdt. 394 to S. 782 ( Senator DeMint) . Postponing Effective Dates Several bills would delay implementation of Title VII of Dodd-Frank and require regulators to conduct studies, public hearings, or roundtables before issuing final rules. Under H.R. 1573 ( Representative Lucas, et. al.) , reported by the House Financial Services and Agriculture committees on June 16, 2011, the provisions of Title VII and any implementing regulations would not take effect earlier than December 31, 2012, with the exception of provisions and rules relating to (1) swap reporting and data repositories, (2) certain clearing provisions, (3) authorities relating to speculation, and (4) the prohibition on federal bailouts of swap dealers contained in Dodd-Frank Section 716. H.R. 1573 also requires the CFTC and SEC to conduct public hearings to determine the amount of time and resources that would be needed by market participants to comply with proposed or contemplated regulations, and to consider alternate regulatory approaches. Finally, the bill authorizes U.S. regulators to exempt persons who are subject to foreign regulation that is comparable to U.S. regulation. H.Amdt. 465 to H.R. 2112 ( Representative Garrett) would postpone the effective date of rules pursuant to Dodd-Frank Section 727, which deals with public reporting of swap trading data, until 12 months after the adoption of such rules. This amendment was approved by the House on June 16, 2011, but was not included in the enacted version of H.R. 2112 , the Consolidated and Further Continuing Appropriations Act, 2012 ( P.L. 112-55 ). S.Amdt. 814 to H.R. 2112 ( Senator Crapo) would require the CFTC, before adopting final rules under Title VII of Dodd-Frank, to adopt an implementation schedule and to complete and submit to Congress a study of the effects of Title VII on (1) U.S. economic growth and job creation, (2) the international competitiveness of U.S. financial markets, (3) derivatives market depth and liquidity, as well as an assessment of the degree of harmonization among U.S. regulators and an analysis of the progress of members of the Group of 20 and other countries toward implementing derivatives regulatory reform. The amendment was withdrawn during Senate floor consideration of H.R. 2112 . S. 1650 ( Senator Crapo) extends the Title VII rulemaking deadline for one year, meaning that most rules are due in July 2012 rather than July 2011. The bill requires the CFTC and SEC to adopt an orderly implementation schedule by December 31, 2011, taking into account the impact on U.S. economic growth, the international competitiveness of U.S. financial markets, the effect on derivatives market depth and liquidity, and the degree of cooperation among U.S. regulators. Cost-Benefit Analysis H.R. 1840 ( Representative Conaway) amends the section of the Commodity Exchange Act that requires the CFTC to consider the costs and benefits of its regulations. Under the bill, the CFTC would be permitted to propose or adopt a regulation only on a reasoned determination that the benefits of the intended regulation justify the costs. The bill sets out a number of factors the CFTC must consider, such as the impact on the efficiency, competitiveness, and financial integrity of futures and swaps markets, and whether, consistent with obtaining regulatory objectives, the regulation is tailored to impose the least burden on society. Other Dodd-Frank Amendments H.R. 1838 ( Representative Hayworth) would repeal Section 716 of Dodd-Frank, which contains restrictions on certain forms of federal assistance to "swaps entities," or swap dealers, security-based swap dealers, major swap participants, and major security-based swap participants. Section 716 also sets certain limitations on insured depository institutions' swap dealings and requires that any FDIC-insured swaps entities that become insolvent due to swaps activities must be liquidated. The bill was marked up and referred to the full Committee on Financial Services by the Subcommittee on Capital Markets and Government Sponsored Enterprises on November 15, 2011. H.R. 2483 ( Representative Grimm, et. al.) amends the Dodd-Frank whistleblower provisions that apply to both the CFTC and SEC. Under Dodd-Frank, the agencies are required to establish reward programs for whistleblowers who provide information that leads to enforcement actions resulting in recovery of ill-gotten gains from securities or commodities fraud. H.R. 2483 , among other things, would require whistleblowers to report violations internally (to their employers) before reporting to regulators, in order to be eligible for an award. The bill also eliminates the minimum award provisions of Dodd-Frank, leaving the size of the whistleblower payment to the discretion of the agencies.

In the wake of the 2008 financial crisis, amid the perception that the unregulated over-the-counter (OTC) derivatives market contributed to systemic risk, the Dodd-Frank Act (P.L. 111-203) sought to remake the OTC market in the image of the regulated futures exchanges. Reforms included a requirement that swap contracts be cleared through a clearinghouse regulated by one or more federal agencies. Clearinghouses require traders to put down cash (called initial margin) at the time they open a contract to cover potential losses, and they require subsequent deposits (called maintenance margin) to cover actual losses to the position. The intended effect of margin requirements is to prevent firms from building up uncapitalized exposures so large that default would have systemic consequences. While addressing systemic concerns, the clearing of derivatives also imposes the cost of posting margin on those trading derivatives. Many nonfinancial firms argued during the debate over the Dodd-Frank Act that their use of derivatives posed no systemic threat and thus they should not be subjected to the cost of clearing these OTC derivatives. This particular debate came to be known as "the end user debate." As a result of these concerns, the Dodd-Frank Act included a broad exemption from the clearing requirement for firms that are primarily nonfinancial in nature. Nevertheless, such firms have continued to be concerned that Dodd-Frank could impose indirect costs on them, or that the rulemaking process by the Commodity Futures Trading Commission (CFTC) and the Securities Exchange Commission (SEC) could do so. As such, some legislation in the 112th Congress, such as H.R. 1610, S. 947, S.Amdt. 814 to H.R. 2112, S. 1650, H.R. 2779, and H.R. 2682, addresses potential indirect costs to "end users." In addition, concern about derivatives has been fueled by sharp rises in commodity prices—particularly oil—in 2008 and early 2011. Such steep jumps, along with high price volatility in a range of commodities, have fostered apprehension that financial speculation in derivatives might be creating such volatility in commodity prices. For instance, during the course of 2008, oil prices doubled to more than $145 per barrel and then fell by 80% before rebounding, while there was little evidence suggesting disruption of physical supplies. In early 2011, there was again a run-up of about 20%, sending gasoline prices to near 2008 highs. Such severe fluctuations tend to anger consumers, and thus can become an issue for Congress. In the 112th Congress, a number of bills, such as H.R. 2328, S. 1200, H.R. 3006, S. 1598, H.R. 2003, H.R. 3313, and S. 1787 seek to address the impact financial speculation and derivatives may have on spot commodity prices. Other bills introduced in the 112th Congress aim to either tighten or loosen other aspects of derivatives regulation, in the wake of the Dodd-Frank Act, such as H.R. 2586, H.R. 3045, H.R. 3283, and H.R. 1573. This report focuses primarily on legislation introduced in the 112th Congress. Additional background on how derivatives work, their role in the financial crisis, and the impact of the Dodd-Frank Act on their regulation can be found in another CRS report cited below. This report will be updated as events warrant.